COLUMBIA BANKING SYSTEM, INC. 10-Qquarter ended 2026-06-30
Cybersecurity incidentRestructuring
Pacific Premier conversion is complete; Columbia is shifting from brokered deposits and transactional loans to customer-funded relationship lending.
Filed 2026-08-04 17:29 ET
Key figures · Q2 FY2026 · period ended 2026-06-30
- Net revenue$677.0M1YoY +32.5%QoQ 0.0%
How net revenue adds up Net interest income $589M + Total non-interest income $88M Net revenue $677M Lines as the filer presents them on its income statement.
- Net income$208.0MYoY +36.8%QoQ +8.3%
- Total assets$65.4BYoY +26.0%QoQ −1.0%
- Total debt$4.7B2YoY +23.9%QoQ +22.3%
How total debt adds up Junior and other subordinated debentures, at amortized cost $97M + Borrowings $4,250M + Junior subordinated debentures, at fair value $339M Total debt $4,686M Lines as the filer presents them on its balance sheet.
- Shareholders' equity$7.6BYoY +41.4%QoQ −1.5%
- Tangible book value$5.4BYoY +40.0%QoQ −1.3%
Notes (2)
- Net revenue: Net interest income plus non-interest income, as the filer presents them.
- Total debt: Includes both junior subordinated debenture lines, at fair value and at amortized cost (the latter this filer's own balance-sheet line, not a standard concept), and the Borrowings line, mostly FHLB advances. Excludes deposits, repurchase agreements, federal funds purchased and securities loaned. About the summary: The summary's $4.25B is the Borrowings line, one of the 3 lines that make up total debt (see ⓘ).
How this filing reads
- Health+0.3Available liquidity of $25.6B exceeds $4.3B in 2026 advances, though deposits fell $2.16B.
- Momentum+0.2H1 EPS rose 21% to $1.38; Q2 EPS was flat year over year.
- Outlook0.0Savings are realized with further benefits expected, while $4.3B in advances mature during 2026.
Executive Summary
Columbia Banking System’s reported growth in Q2 2026 reflects a larger bank following its August 2025 acquisition of Pacific Premier, rather than a clean comparison with the prior year. Revenue rose 32% Y/Y and net income rose 37%, but diluted EPS was flat as the acquisition expanded the share base; Q2 net income also fell below the illustrative 2025 pro forma result. Management has completed Pacific Premier’s systems conversion and is shifting from transactional loans and brokered deposits toward relationship lending and customer funding. The investment case now depends on converting integration savings into durable per-share growth while containing worsening problem-loan indicators and replacing wholesale funding that matures this year.
Key Financial Highlights
| Metric | Q2 2026; H1 2026 where reported | Investor interpretation |
|---|---|---|
| Revenue, net interest income plus non-interest income | $677M, +32% Y/Y; H1 $1.35B, +35% | Acquisition-driven scale and higher fee income lifted reported revenue. |
| Net interest income | $589M, +32% Y/Y; H1 $1.18B, +36% | Q2 slipped from Q1 despite lower deposit costs. |
| GAAP net income | $208M, +37% Y/Y; H1 $400M, +67% | Illustrative Q2 2025 pro forma net income was $217M, tempering the reported comparison. |
| Diluted EPS | $0.73, flat Y/Y; H1 $1.38 vs $1.14 | More diluted shares absorbed Q2 earnings growth. |
| Total assets | $65.4B vs $66.8B at 12/31/2025 | Balance-sheet optimization reduced size. |
| Total equity | $7.55B vs $7.84B | Repurchases, dividends and securities-related comprehensive losses weighed on equity. |
| Tangible common equity | $5.44B vs $5.65B | Tangible common equity to tangible assets declined to 8.59% from 8.73%. |
| OCF; FCF | H1 $789M; $765M | Cash flow exceeded H1 net income; FCF deducts $24M of net premises and equipment purchases. |
- Revenue mix: Q2 non-interest income rose to $88M from $65M Y/Y. H1 financial-services and trust revenue reached $30M from $11M, reflecting Pacific Premier’s wealth and custodial-trust businesses.
- Expense and margin: Q2 non-interest expense was $375M vs $278M Y/Y, but fell from $394M in Q1 as merger and restructuring costs eased. The fully tax-equivalent net interest margin edged down to 3.93% from 3.96% Q/Q as interest-income reversals and lower average earning assets offset cheaper deposits.
- Cash conversion and capital return: H1 OCF of $789M vs net income of $400M benefited in part from noncash intangible amortization of $79M. Columbia repurchased 13.1M shares for $398M and paid $212M in dividends; outstanding shares declined 12.6M, from 295.4M to 282.8M, net of issuance.
- Funding: Deposits declined $2.16B to $52.1B, including a reduction in brokered deposits to $978M from $2.36B. Borrowings increased $1.05B to $4.25B, partly replacing brokered funding at a more favorable cost.
- Credit estimate: A Q2 allowance-methodology change increased the quantitative allowance by $34M and reduced qualitative adjustments by $30M, a net $4M reserve increase. That estimate change is not operating improvement.
Business Developments
Columbia completed Pacific Premier’s systems conversion and consolidated nine branches in H1. Management says the previously disclosed acquisition cost savings had been realized by 6/30/2026, with further benefit expected. The acquisition also brought wealth and trust capabilities, supporting management’s stated goal of growing recurring fees; their contribution makes reported Y/Y growth less representative of organic performance.
Management is deliberately allowing below-market transactional loans and some commercial real estate balances to run off while growing relationship-based commercial loans. Commercial loans and leases rose to $12.4B from $12.0B at year-end, while commercial real estate loans fell to $27.0B from $27.9B. This reallocates lending capacity, but the simultaneous deposit decline raised the loan-to-deposit ratio to 91% from 88%.
Risk Assessment
- Credit deterioration: Non-performing assets rose to $273M from $200M at year-end, primarily reflecting one troubled agricultural relationship; higher commercial real estate non-accruals and modified-loan defaults add risk that the $475M total allowance will need to rise.
- Property concentration: Real-estate-related lending represents ≈75% of loans, including 24% in multifamily and 8% in office; weaker property cash flows or refinancing conditions could produce further losses.
- Funding and maturities: Deposits fell $2.16B while Federal Home Loan Bank advances rose to $4.3B, all maturing in 2026; Columbia has $25.6B of available liquidity, but deposit retention and replacement-funding costs remain consequential.
- Securities and rate valuation: Available-for-sale securities carried $433M of gross unrealized losses, up from $380M; a modeled 300 bp rate increase reduces economic value of equity by 7.0%, notwithstanding limited modeled first-year net interest income exposure.
- Litigation and customer data: Investors in iCap-related litigation allege ≈$290M of losses, while a vendor incident exposed identifying information of ≈429,000 customers; adverse legal outcomes could affect an individual reporting period.
This 10-Q lists no risk factors of its own and refers to the annual report. The risks above come from the rest of this filing. Full list: FY2025 10-K.
Strategic Outlook and Investor Actionables
Integration is largely complete, shifting the near-term test from executing the acquisition to proving that fee growth, expense savings and relationship banking can outweigh runoff and credit costs. Watch:
- Organic returns: Q2 EPS and the fully tax-equivalent net interest margin; sustained improvement would better substantiate the integration thesis than acquisition-inflated Y/Y revenue.
- Credit migration: Non-performing loans, modified-loan defaults, net charge-offs and allowance coverage, especially in agriculture and commercial real estate.
- Funding substitution: Customer-deposit growth, brokered deposits, borrowing costs and refinancing of the $4.3B in 2026 Federal Home Loan Bank maturities.
Figures are computed from the filing's XBRL data; the summary and scores are written by an AI model reading the filing.
Model 005 · prompt 2f55f1cc1a