Where COLB's NIM Goes Next Amid Loans Remix & Easing Rates

Columbia Banking COLB exited 2025 with a cleaner funding stack, steadier spreads and a fuller Western footprint after the Pacific Premier buyout. 

Fourth-quarter 2025 net interest margin (NIM) reached 4.06%, up 42 basis points year over year, as deposit costs declined and higher-cost wholesale funding was reduced. Moreover, net interest income (NII) rose 43% year over year in the first full quarter post-merger, helped by lower funding costs and broader earning assets. 

Management expects NIM to trend higher each quarter in 2026 and ultimately surpass 4% in the second or third quarter as deposit balances rebound and balance sheet optimization continues. With deposit betas for cuts targeted around half and proactive repricing, the bank is set up to defend NIM as rates drift down.

How COLB’s Loan Remix Supports 2026 Earnings Quality

Columbia Banking is managing down about $8 billion of inherited transactional multi-family balances over roughly eight quarters that began in the third quarter of 2025. While this caps headline loan growth through 2027, it tilts the book toward relationship-driven commercial and industrial and owner-occupied commercial real estate that attach deposits and fees.

Specialty hires and healthier pipelines in the fourth quarter of 2025 point to improved, deposit-tied production in 2026. As of year-end 2025, C&I and owner-occupied CRE represented 22% and 15% of loans and leases, respectively. This position mix for better economics as cost synergies related to the Pacific Premier build.

Columbia Banking’s Fee Durability Offsets Slower Loan Growth

Treasury management and commercial card fees increased year over year in 2025, while financial services and trust and international banking revenues expanded notably. Card, financial services and trust now comprise nearly 34% of non-interest income, adding ballast as loan growth moderates at Columbia Banking.  

The Pacific Premier acquisition broadened the toolkit, with homeowners association banking, custodial trust services, escrow and 1031 exchange platforms. Since closing, COLB has generated more than 1,200 cross-sell referrals, supporting deeper relationships and higher wallet share across its 350 branches.

What to Monitor In 2026 For COLB

Expense normalization will be the key after the first-quarter system conversion. Columbia Banking anticipates operating expenses excluding amortization to be $335-$345 million in the first and second quarters, with a normalized run rate by the third quarter as all Pacific Premier savings are realized by the end of the second quarter. 

Additionally, deposit trends should be watched as competition remains intense in COLB’s markets. Large national banks and digitally native competitors have bid up rates before, and renewed pricing pressure could constrain NIM if it reaccelerates. 

Another factor to keep an eye on is credit quality. FinPac small-ticket leasing experienced higher loss content with sequentially higher fourth-quarter net charge-offs, and office loans account for 8% of total loans. Though headline credit metrics remain manageable, category losses could be uneven during Pacific Premier integration.

Columbia Banking’s Zacks Rank & Price Performance

With COLB stock at a Zacks Rank #3 (Hold), the path to sustained NIM above 4% runs through disciplined funding, continued portfolio remix and full synergy capture amid muted loan growth. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Over the past six months, shares of Columbia Banking have gained 24.4%, outperforming the industry’s rally of 14.1%.
 

Columbia Banking’s Peers to Watch

East West Bancorp EWBC is a key peer with a Zacks Rank #3 at present. EWBC’s NIM will likely be under pressure in the near-term because of interest rate cuts, while decent loan demand, lower deposit beta and funding costs, alongside balance sheet hedging, will offer support.

Zions Bancorporation ZION is a 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 near-term, the company’s NIM is likely to be positively impacted, driven by stabilizing deposit costs and asset yield repricing.

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

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