Can Columbia Banking's Q2 Earnings Beat Outweigh Rising Credit Risks?

COLB’s Earnings Beat Came With Revenue Strength

Total revenues increased 32.5% year over year to $677 million, supported by the larger balance sheet following the Pacific Premier acquisition. Net interest income rose 32.1% to $589 million.

Still, revenues fell short of the Zacks Consensus Estimate of $688.4 million. That miss limits the strength of the earnings beat because the upside came with less top-line support than analysts expected.

Columbia Banking Benefited From Lower Funding Costs

COLB’s NII was $589 million, up 32.1% from the second quarter of 2025. The increase reflected the larger balance sheet following the Pacific Premier acquisition. The net interest margin (NIM) expanded 18 basis points year over year to 3.93%. The cost of interest-bearing deposits declined 56 basis points to 1.96%, while the cost of total deposits fell to 1.32% from 1.73%.

Management expects the margin to reach or exceed 4% in the third quarter. Continued loan repricing, a shift toward higher-return relationship lending and reductions in higher-cost funding are expected to support that improvement.

East West Bancorp EWBC is a key peer with a Zacks Rank #3 at present. In the second quarter of 2026, its NIM expanded eight basis points (bps) to 3.43%.  Supported by robust loan demand, lower deposit beta and stabilizing funding costs alongside balance sheet hedging, EWBC’s NIM growth is expected to continue in the near term.

Zions Bancorporation ZION is another close peer with a Zacks Rank #3. ZION has been witnessing a rise in NIM for the last several quarters as funding costs declined. In the second quarter 2026, NIM expanded 10 basis points (bps) year over year to 3.27% In the near-term, the company’s NIM is likely to be positively impacted, driven by stabilizing deposit costs and asset yield repricing.

COLB’s Fee Businesses Added Greater Diversification

Non-interest income increased 35.4% year over year to $88 million. Service charges on deposits rose 15%, card-based fees gained 21% and financial services and trust revenues climbed to $15 million from $6 million.

Pacific Premier added custodial trust, homeowners’ association banking, escrow and 1031 exchange capabilities. Those platforms and broader cross-selling could help support earnings while total loans contract through the planned runoff of transactional credits.

Columbia Banking’s Expenses Diluted the Progress

Non-interest expenses rose 34.9% year over year to $375 million. Salaries and employee benefits increased 26.5%, occupancy and equipment costs climbed 38.3% and intangible amortization advanced 46.2%.

Management expects third-quarter non-interest expenses, excluding core deposit intangible amortization, of $330-$335 million. Banner Corporation (BANR), another western regional bank, also operates a relationship-focused franchise, making expense discipline and funding quality important competitive benchmarks across the region.

COLB’s Credit Trends Create the Main Earnings Risk

The provision for credit losses declined 10% year over year to $27 million, while net charge-offs improved to 0.25% of average loans and leases from 0.31%. Those figures point to manageable current loss absorption.

The risk is in problem-asset migration. Non-performing assets jumped 51.7% year over year to $273 million, while FinPac charge-offs were $15 million. Commercial real estate migration and changes in economic forecasts could keep credit costs uneven.

COLB’s Weak Ratings Temper the Earnings Beat

The earnings beat shows that lower funding costs and broader fee income can offset some pressure from balance-sheet contraction. Rising non-performing assets and a larger expense base, however, leave little room for execution setbacks.

Columbia Banking currently carries a Zacks Rank #5 (Strong Sell), signaling unfavorable near-term earnings estimate revisions. 

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Over the past six months, COLB shares have gained 3.5%, only modestly outperforming the industry's 2.5% rise. The limited relative outperformance indicates that the earnings beat has not been sufficient to meaningfully improve investor sentiment, as concerns over credit quality and expense pressures continue to weigh on the stock's outlook.

Price Performance

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Its Value Score of C is neutral, while the Growth Score of D, Momentum Score of D and VGM Score of D indicate weaker growth, price-trend and combined style characteristics.  These ratings temper the benefit of improving revenue drivers and keep expense control and credit quality in focus.

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This article originally published on Zacks Investment Research (zacks.com).

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