COLUMBIA BANKING SYSTEM, INC. COLB

Columbia Banking System is actively reshaping its balance sheet to enhance long-term profitability and earnings quality. This involves a strategic remixing of the loan portfolio towards higher-return commercial loans, which now represent 42% of the total portfolio. While commercial loan production was solid, total loans declined from $47.7 billion to $47.2 billion due to elevated CRE payoff activity and intentional runoff in the transactional loan book. The company maintains pricing discipline, refusing to chase irrational market structures.

The company successfully completed the Pac Premier acquisition integration, exceeding its initial cost savings target by $5 million. This achievement reflects disciplined expense management and ongoing efforts to identify targeted efficiency opportunities across the organization. The operating noninterest expense run rate, excluding CDI amortization, was $328 million, below the guided range, demonstrating effective cost control while continuing to fund franchise investments.

Columbia returned over $300 million to shareholders during Q2 FY26 through regular dividends and the repurchase of 6.6 million common shares for approximately $200 million. The company has $200 million remaining in its current repurchase authorization and believes that investing in its own stock remains the best allocation of capital. Management highlighted having $530 million of excess capital above long-term target ratios, positioning them for continued capital returns.

Despite seasonal tax-related outflows and increasing competition, Columbia maintained pricing discipline, resulting in a 4 basis point decline in the spot cost of interest-bearing deposits to 1.94% as of June 30. Deposit campaigns have successfully generated nearly $1.5 billion in new deposits year-to-date through July, driven by banker engagement and customer outreach. However, management anticipates deposit costs may bottom out or even trickle up due to aggressive market offers.

Noninterest income on an operating basis reached $91 million, surpassing the guided range. This strong performance was broad-based, with treasury management, international banking, commercial and merchant cards, and wealth management all showing significant year-over-year growth. Commercial card spend exceeded $100 million in June, up 14% year-over-year, underscoring the success of relationship-based business generation in diversifying revenue streams.

The company continues to invest in its franchise by opening new branches, including a second in Colorado and a financial hub in Las Vegas, with two more planned. Strategic hires across the footprint, particularly in the Pacific Northwest, Utah, and California, are enhancing capabilities and supporting business development. These efforts aim to deepen market presence and leverage veteran bankers' community connections to drive new business.