Is Columbia Banking Worth Buying as Costs Offset Strong Margin Gains?

COLB’s Margin Recovery Supports Core Earnings

NIM reached 3.93% in the second quarter of 2026, up 18 basis points year over year. The cost of interest-bearing deposits fell 56 basis points to 1.96%, while the cost of total deposits declined to 1.32%.

Management expects the margin to reach or exceed 4% in the third quarter. Lower funding costs, asset repricing and a shift toward higher-return relationship loans should support core earnings, although competitive deposit pricing could limit further improvement.

Columbia Banking Faces a Larger Cost Base

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

Pacific Premier acquisition synergies were essentially complete by June 30, with savings exceeding the original target by $5 million. Even so, management expects third-quarter expenses excluding core deposit intangible amortization of $330-$335 million. Faster operating leverage depends on those savings outpacing ongoing compensation, occupancy and reinvestment costs.

COLB’s Loan Remix Trades Growth for Quality

Columbia is running off inherited transactional loans rather than rebuilding that portfolio. Balances declined by about $270 million in the second quarter, and management expects reductions of roughly $250 million or slightly more per quarter over the next several quarters.

Capital is being redirected toward commercial and industrial loans and owner-occupied commercial real estate, which can generate deposits and fee income. Commercial loans, including owner-occupied real estate, grew at a 5% annualized rate. The trade-off is restrained total loan growth until around mid-2027.

Columbia Banking’s Valuation Offers a Mixed Signal

COLB trades at 9.96X forward 12-month price-to-earnings, below the industry’s 10.66X but above its five-year median of 9.11X. The discount is modest rather than decisive, especially with the 2026 earnings estimate recently revised lower.

Price-to-Earnings F12M

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COLB trades at a discount to its peer, East West Bancorp EWBC based on its P/E multiple of 12.05X, while trading at a slight premium to Zions Bancorporation ZION, which has a P/E multiple of 9.95X.

COLB’s Capital Returns Strengthen the Case

Capital remains a clear support. Columbia ended June 30, 2026 with a common equity Tier 1 ratio of 11.6% and a total risk-based capital ratio of 13.4%. The company pays quarterly dividend of 37 cents per share. In the past five years, COLB hiked its dividend three times and has a dividend yield of 4.7%. East West Bancorp has a dividend yield of 2.4% while Zions Bancorporation has a dividend yield of 2.6%.

The company also repurchased 6.6 million shares for $199 million in the second quarter and guided to $150-$200 million of third-quarter buybacks. Those returns improve per-share economics, but preserving flexibility matters if credit costs or post-integration pressures stay elevated.

COLB’s Weak Ratings Favor a Wait-and-See Approach

The bottom line is that margin recovery, fee growth and capital returns improve the longer-term case, but the expense burden, loan runoff and competitive pricing limit near-term upside.

Over the past six months, COLB shares gained 3.4%, lagging the S&P 500 as well as East West Bancorp and Zions Bancorporation.

Price Performance

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COLB currently carries a Zacks Rank #5 (Strong Sell). Its Value Score of C suggests the valuation is only middle-of-the-pack, while the Growth Score of D, Momentum Score of D and VGM Score of D point to weak near-term support across key investment styles. The combination favors a wait-and-see approach until earnings revisions and operating leverage improve.

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

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

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