Appreciate it. Columbia Banking is a regional bank operating across large, attractive western markets with a strategy focused on deepening its Northwest presence, strengthening its competitive position in California, and expanding across other western markets. Its commercial banking model supports a granular, low-cost deposit franchise with total deposit costs of just 1.29% last quarter. The company has also continued to expand through M&A, including last year's acquisition of Pacific Premier. Joining us today is Clint Stein, Chairman, President, and CEO of Columbia Banking System. Clint has been with Columbia since 2005, serving in several key leadership roles before becoming CEO in 2020 and helping guide the company through multiple transformational mergers. To his left is Tory Nixon, President of Columbia Bank since March of 2023, and then earlier this week, those that saw an 8-K may have noticed that he is transitioning to a senior advisor role later next year.
Far right there is Ivan Seda, who is the Chief Financial Officer, a role he's held since late 2025. So, typical, as the other presentations, I'll kick off the Q&A and then open it up to the floor. First one, if we go back five years, Columbia was embarking on a significant transformation. Today, after two major acquisitions and several years of integration and optimization work, how would you describe the franchise Columbia has today?
Well, thanks for having us, and thank you for sticking it out here. I think we're the last one of the day, and so we'll try to make it entertaining if we can. I think that our franchise is the crown jewel of the West. Not that there aren't other good banks and good franchises in our markets, but when I look at our market position, I look at, between especially banks between $50 billion and $100 billion, we stand out. It's the density that we have up and down the coast from the Canadian border to the Mexican border. It's what we're building and have built over the years in the Intermountain States. We're just in a sweet spot. As Tory likes to call it's kind of the Goldilocks syndrome.
Thanks. Just sticking with that theme, Columbia is now one of the largest banks in the West, and just beyond higher hold limits, what opportunities does that scale create that would have been more difficult, call it, five years ago?
I mean, higher hold limits are one thing. It gives us the ability to continue to grow with our customers as they grow. More importantly, it gives our customers the confidence that they can continue to bank with us, they can continue to expand their business, and we're going to be there for them. Obviously, there's the benefits of technology, being able to spread that over a larger customer base, our market position when it comes to recruiting talent. There's a lot of benefit to what we've created.
Let me add to that. I would just say that success breeds success, and talent likes to follow talent. I think a big part of it can be the fact that, as we've gotten bigger and we have developed more capabilities, we're attracting a kind of a different class of talent in the company. Some highly sophisticated, very talented bankers that are coming to us today, which is different from five, six, seven years ago, which is great.
The only other thing I would add is just diversification of the business model. It's very different than it was five years ago, kind of prior to the MOE and prior to the PPBI deal. We track a sheet of what we call wins and losses. Anything above $10 million of TCE, we look at every single quarter. The thing that I like to see on it is the diversification, both in terms of the industries that we're supporting, the types of products that we're leveraging, and then the geographic diversity is up and down the eight western states that we now serve.
Maybe sticking with products, what role do treasury management, payments, wealth management, and other fee-based capabilities kind of play in strengthening that consumer relationship and kind of driving long-term value and growth?
Yeah, maybe I take that one. If you think about the business, a loan sometimes is an entrée into the customer, the customer into the bank. A loan can be more and more commoditized. It can be very transactional. It is the fee-based products, the treasury management, the commercial card, merchant services, international banking. All of those things are the true, I think, foundation of a really good core relationship with a customer. That is kind of where you make a transition from being a lender to an actual participant and an advisor for a company. That is incredibly important for us as a company as we deepen existing relationships and then as we bring new relationships into the bank.
It is a full service, how do we lend you money if you need it, but then how do we do all these other things that are part of your working capital that give us this true core relationship with our customers? It is pretty powerful.
Maybe Ivan could just add from a financial perspective, how do you finance that growth, and what are some of the products that can really drive ROE improvement?
Yeah, in general, Tory and I were having a conversation yesterday. From a commercial perspective and a business perspective, there is really no product gap that we have that we need to go out and acquire or fill or build in regard to that.
There are some things that we're doing on the consumer side to make it a little bit easier to come on board with Columbia, so we'll be rolling some of that out in the first half of next year. In terms of how we finance that, we're a very disciplined company overall in terms of expense management. We had an opportunity with PPBI coming on board this year to really think about operating leverage in a very powerful way. We closed the PPBI deal last fall, and it was a unique opportunity where, given the treasure trove of capital that they had within the bank, our capital ratios actually increased. So you had a situation where capital ratios were coming up.
It allowed us to be a more profitable institution in general, and then we had the cost synergies, which were going out of the company over the first half of this year. So we had revenues going up, expenses coming down, and that's been a fantastic part of the engine this year to drive that profitability profile that we have.
Maybe just sticking with the kind of the strategy side, you often describe yourself as relationship banking as the core differentiator, which a lot of banks, to be clear, kind of use that. How important is that to you? How do you execute on that, and how does that support growth?
I mean, that's how we differentiate ourselves, and we've been relationship-oriented for the entire 33-year history of our company. Tory mentioned being an advisor to our clients, and we think about that trusted advisor, and you can't earn that without building those relationships. So we think with our business customers, they have their advisory network, their attorneys, their accountants. We fit into that as their banker. I actually offended somebody a few weeks ago. I was at a lunch, and I was explaining how we differentiate ourselves in that trusted advisory capacity, and he's in the insurance industry, and he says, "Everybody always forgets about the insurance broker." So, if there's anybody that thinks that insurance is there, I think it's a necessary evil, but for those insurance brokers, they're part of that as well.
Great. Shifting over, just a question on deposits. As customers have become more rate-conscious, face fewer barriers to moving funds around, how are you winning deposit relationships today?
Again, our value proposition has never been rate. We do not compete on rate. I mean, it is important. You have to be in the ballpark on that. But, going back to my previous comment, if you are part of that trusted advisory network, you can be a little lower on deposit pricing, you can be a little higher on loan pricing, and I think that is where, in particular, a lot of the smaller banks get it wrong, is they do not fully understand their value proposition. They start to compete on rate, and once you do that, you have already lost. I do not know, Tory, if you want to add.
Yeah. We look at pricing in a very holistic way, so a full relationship pricing, and it is a combination of on the loan side and the deposit side and the fee income part of the business, and look at it that way, as that is how we price, and there is a bunch of different levers to pull. I think that is one way, to Clint's point, you get somebody in the company and you have them as part of your customer base, you have multiple products and services that you are negotiating all the time on price. Deposits seem to be one piece of it. It becomes less sensitive when you have a bunch of other things that you are working on with them versus just focusing on just deposit pricing.
And I think we have done a really good job looking at a holistic view of the value we bring and the value that we want from a customer.
We'll touch on AI later, but AI agents, what is the risk to COLB and the banking industry in terms of moving low-cost funds into higher-yielding products?
On Monday, I was at a function that we hosted for some of our family-owned businesses, and I asked them a question about, did they ever see a day where they would trust AI to move their money around, either personally or with their business? And without exception, they were absolutely not. I think it's a real thing. We joke around, kind of half-joking, for those of you that are familiar with us and know our Chief Strategy Officer, Aaron Deer. Aaron will be the one on our team that he's probably working on building an agent right now to move his money around between his 27 bank accounts to get that extra 3 basis points. He claims it's for R&D purposes to see what other people are doing.
Everyone has hobbies.
Yeah. But, in all seriousness, I don't want to diminish the potential for that, but I think that we're better situated than most because we're a Main Street commercial-first bank. And while we have roughly 40% of our deposits are consumer-oriented, I don't think that our customer base is going to be a fast adopter of using AI to manage their money flows. But like everything else, same thing with stablecoin and tokenized deposits, we don't see a demand or a need from our customers. That doesn't mean that we're not studying it, that we're not staying abreast of the developments there, so that if it does become something that's important, that we're able to capitalize on that.
Yeah, my personal view, just to add on top of that, is that if there is a risk of that in the industry, it's going to be in the more rate-sensitive and digitally native deposit bases, which really as you get to know our companies, is not how you would describe our deposit base. I would describe ours as, again, diverse geographically, diverse between consumers, small businesses, and commercial, and tends to be much more of a Main Street-style banking model. That's my personal view.
When you're traveling across your footprint, meeting with customers, what are you hearing from business leaders?
A lot of optimism. I'll say cautiously optimistic. There's a lot of volatility, but for the last six, seven years, there's been one thing after another that they've had to navigate. We strive to bank the best operators in any industry that we're in, and the good operators tend to find a way to navigate through uncertainty and actually benefit from it. I mean, that's, I guess, that cautiously optimistic is how I would characterize it broadly. Tory Nixon, you spend as much time on the road as I do.
Yeah.
I don't know if you have anything else to add.
Not much, but we do a survey every year, a Business Barometer, about 1,200 small, medium, and probably up to half a billion in revenue businesses across the country, and there's 60 questions. We get the results back in April, and it was very, surprisingly optimistic from that group. I've had a follow-up with a few people involved in it, and to your point on the advisory group, the optimism has waned a bit over the last several months, I think because of a lot of things going, obviously some things going on in the macroeconomic world, but still optimistic, still surprisingly so. You got a lot of customers who have pent-up demand to do something. They want to make an investment. They've been on the sidelines for a bit. They're ready to go. At some point, I think that kind of can be unleashed.
But I think they're, to your point, they're still cautiously kind of sitting on the sidelines and optimistic that they'll get that chance in the near future.
Then maybe sticking with you, Tory, you mentioned talent. What are you doing to retain, develop, and add talent and bankers?
I mean, it's a full-time, all-out assault. I mean, it starts with the story of the bank. I mean, we tell the story of being a large enough company to matter, where we have the capabilities, we have a balance sheet, and we have the services to kind of compete with anybody, but we combine that with a community bank service model. So we kind of look at it as we're big enough to matter, small enough to care kind of mentality. When you tell that story to bankers in all of our markets, it's a very attractive story. Nothing against big money center banks, but sometimes you can't, you work for a place like that, you don't move the needle much. At Columbia Bank, you can move the needle, and you can be very powerful part of the success of the company.
That's attractive to a lot of people. Part of it just is that itself. I said earlier, talent attracts talent. When you've got talent in the company and they see the people that we have and they're like, "I want to be a part of that team," at the end of the day, the team with the best people usually wins most of the time. So that's kind of the mentality around it.
Okay. Obviously, years of significant interest rate volatility, how do you approach balance sheet positioning and franchise optimization? How's that evolved?
I'll jump in on that one. From a balance sheet perspective, what we strive for is neutrality, right? I think it's anyone's guess what's going to happen in terms of interest rates. I think if you go back 12 months ago, everyone was probably sitting in the room here expecting a rate cut in December and probably two more over the course of 2026, and here we stand with a rate increase last, I guess, two months ago now, and potentially another one coming in December. If you look at the ALM posture that we have, it's generally around neutrality, right? I think we do a good job of managing to that within a reasonable range in a first-year effect. We are going through a balance sheet transformation, and so I'll take it back to about a year ago, as we put PPBI into the company.
We had about $8 billion of our $48 billion loan portfolio that is transactional in nature. This really came from, think of legacy multifamily, legacy mortgage assets, long duration, low yield, about $8 billion that was yielding just north of 4% coupon. We have been evaluating that and working that off over the course of the last year. There are no credit concerns. It is not a good bank, bad bank type concept. It is just that we have got about $600 million of our capital base stuck within loans where there is no other relationship with those borrowers outside of the credit itself. It is just not part of our business model going forward. As that has been coming down off the balance sheet to the tune of about $250 million per quarter, we are replacing that with core relationship lending. It is about a 200 basis point yield pickup.
It comes with the deposits, the core fee income, what Tory Nixon talked about earlier, merchant, card, all the different services that we want to wrap around our clients in regard to that. That has really allowed us to continue to move the needle from a net interest margin perspective. We have added approximately 25 basis points to our NIM, so we are operating just north of 4% today, and we expect that story to continue as we go into 2027. On the flip side, we talked about deposits earlier. I think everything has to come in tandem. From a deposit perspective, low to mid single digit core deposit growth has allowed us to continue to optimize the funding stack as well.
We still have about $5 billion of what I consider wholesale funding costs that are higher, and so we look to continue to whittle away at that over the course of several years. Then finally, the third part of our balance sheet that is moving has been around capital, strong capital position. We go through a capital stress test every single quarter as part of our processes, and so that has allowed us to unlock the share repurchase program that we announced a year ago. We just completed our first year of that and announced a few weeks ago as part of our earnings call that we will be continuing that story going into Q4 in 2027.
Maybe one more for me, and then I will open it up. The margin, net interest margin in Q3 exceeded expectations. Was that a function of you being conservative as you thought about the quarter, or was there some positive underlying trends that drove that outperformance? Continuing that theme, as you think about your comments on fourth quarter and first quarter, do you feel like you are being conservative there as well?
It's a great question. There were a couple different things that factored into it. The printed number is 4.11% margin in Q3. Included within that, we will disclose if there's a discount recognition on a loan that pays off early. We had two loans that paid off, which contributed about 3 basis points of that. I see that as kind of a short-term pop in the net interest margin for Q3 that we don't expect to repeat in Q4. The core of it was just the strength of the funding stack. We put up a quarter where we had $1.2 billion of core client deposits. We outperformed what we had expected in terms of maintenance of the deposit costs, and so we actually had deposit costs decrease over the course of Q3, which I think was very strong and positive in regard to that.
As we go into Q4, one of the factors that we talked about during our earnings call is we've got a little bit of excess debt on our balance sheet over the course of the quarter. What we're doing there is, we raised exactly $250 million of 10 non-call five sub-debt in September, mid-September of last quarter. The purpose of that is not to bolster our capital ratios. It's basically a refinancing of our Tier 2 capital. So we have, I want to say, 23 tranches of trust preferred securities, of which about 17 of them we're going to work through and redeem over the course of this quarter. What that does is we'll have a slightly higher cost associated with our term debt over the course of Q4, and that'll contribute about 3 or 4 basis points of pressure.
The way I would describe it is I think it's going to take a breather kind of where it's at, steady state, within a few basis point range of that adjusted Q3 NIM. Then as we get into next year, we do expect to continue to see that NIM story continue as we optimize the balance sheet, like I talked about earlier.
Perfect. See if there's any questions in the audience.
Hi. Brent Erensel, and I know how to pronounce Spokane. I was just wondering, how do you measure gaining market share against the big guys, Bank of America with Seafirst and JP that bought WaMu? You mentioned you are big enough to matter but small enough to care. Can you give us some war stories about how you beat them in the market share game?
The question is, do you know how to pronounce Puyallup? That is where it gets a little bit more difficult.
It is very difficult. Yeah. Puyallup.
I will start, and then Tory and Ivan can jump in. Columbia Bank was founded 33, a little over 33 years ago, and it was after KeyBank acquired Puget Sound National Bank. The reason I am kind of going back to that point in time is, that is where the CEO, former CEO of Puget Sound National Bank partnered with somebody else and did an IPO and started Columbia Banking System, because he was not ready to be done, and his bank got sold out from under him. Our market share is just about double KeyBank's in the Northwest. I think that is kind of an important thing over the last 30 years that they started with something, right? They started within the Northwest, the Puget Sound National Bank franchise.
We started from, they put a couple of bank charters together, a couple hundred million in assets, to the point where now we're fifth. We have Wells, it's a little bit ahead of us. Chase sits a little bit ahead of us. U.S. and then B of A. That's in deposit market share. That's the easiest thing that we can track. The other thing is, we look at where we're attracting talent from. We're attracting talent from all of those banks. We look at customers. I was in Oregon on Monday, and I had breakfast with somebody that's part of a Fortune 500 company, and he said all of their deposits in Oregon are at Wells Fargo, and they're getting terrible service. All of their deposits in Washington are at U.S. Bank, and they're getting terrible service. It's about $300 million of deposits.
He goes, "We're bringing them all to Columbia." It's back to that place where we're at. I'm not trying to I don't want to be too critical of our competitors and the larger banks, but it's a matter of what Tory said, where we're big enough that we can handle all of their needs, but we're small enough that they still matter to us and small enough to care, and they get that access. Jamie Dimon's not going to go out and meet with the 45 customers I've met with in the last week. That's how we differentiate ourself, is we know where we can win.
We're very targeted in competing where we can win, and we're pretty successful at it.
Yeah. I'll give you one example. I mean, this kind of stuff happens frequently in the company, but I'll give you an example. In Arizona a couple years ago, in Phoenix, we had a new team there, kind of growing the bank there. There was a family, basically a family-owned company that had been a customer of B of A's for quite a long period of time, and they tripped a covenant. They had a rough year, tripped a covenant. The response from the bank was like, "No one is talking to us. No one, they kind of don't want us. We don't feel like we're wanted in the company anymore." We sat down with them on a couple occasions, talked about where they had been previously, what their forecast was, where they were taking the company, the shifts and the changes they were making.
We felt comfortable enough that we would provide a $50 million or $60 million credit facility to them, took them from the bank, brought them into Columbia Bank, all the deposits, every part of the relationship. It was because we sat down and spent enough time to kind of go through it and understand, okay, why did you have a little bit of a struggle, and what are you doing about it? Going back to your comment around trying to bank the best operators possible. People that have been doing their business for a long period of time, they figure out, the good ones figure out how to get through a struggle and come out the other end. It is one example. Since then, they have turned the company around completely.
They paid off the credit facility, which I am I guess I am happy that they pay us back, but also disappointed that they pay us back kind of thing. It is a forged strong relationship, and that is just one example of, I think, what happens a lot throughout our company in different footprint, different parts of the footprint.
Any other questions? Up front here.
Hello. Hi. Janet Lee from TD Cowen. If you look at, given the strength or the good performance on the deposit front, and you are obviously optimizing your balance sheet, improving profitability, if I look at your prior cycle, I think your beta on the deposit was in the mid-50s. You are guiding to about 50% beta. I feel like it seems pretty conservative given that you are not rapidly growing your balance sheet. Is there some sort of conservatism baked into the 50% beta assumed on your deposits?
It's a fair question. A couple things. When you go back to the prior year, we've done a couple different things that I think have allowed us to outperform that. One is, if you go back a year ago, we had several billion dollars of brokered CDs within the deposit portfolio as well, and we've really remixed that entirely off the balance sheet, and that goes into the equation. We've also had about $450 million of the PPBI deposit portfolio that was single-service, higher-cost retail CDs that didn't fit the bill in terms of how we operate our business going forward, and that's also come off. There's been a few things within there that's allowed us to outperform that.
I still think 50% is a good expectation on a through-the-cycle basis, but as I look at Q4, I do think there's potential opportunity to outperform that just in what we're seeing in terms of initial discussions from a client perspective. But overall, through the cycle, I still expect something in the 50% ballpark to be reasonable.
Can I ask about the commercial real estate portfolio? Round numbers, it's like 40% of your loans, excluding owner-occupied. I'm curious, like, which bits of it you'd expect to be relatively more stressed if five-year rates went up or interest rates went up. Also curious on the multifamily side, which is about half of total, like, what the trends are in vacancy, supply across your footprint. Then just finally, how do you expect this portfolio to develop as a percentage of total loans over time? I think it's shrinking. Fitch actually has you on negative watch based partly on this. Is that a consideration as well? What do you think is an ideal percentage for you over time?
I can start with a few things, then you guys can jump in there. From a multifamily perspective, we really are not seeing a whole lot of pressure within that portfolio. I think we were talking about a 6 basis point overall delinquency level within the multifamily portfolio. Debt service coverage is still above 1.5, and so very comfortable from that perspective. You're absolutely right that over time, the percentage of our balance sheet that is within commercial real estate assets will continue to decline. We have an overall goal of eventually getting to 50% of what we consider to be commercial balances, so C&I as well as owner-occupied. We jumped up to, I'm going to go from memory here, I want to say it was a 315% commercial real estate concentration ratio in Q3 of last year, in part because of PPBI coming on board.
We're now below 300 and kind of in the 295 type range, and we expect that to continue to drift further south as we go through the remix that we talked about earlier. Overall, the transformation that we're doing on the loan side of the balance sheet has delevered the balance sheet by about $1 billion, and we expect that the guide for Q4 is flat to slightly down. I would expect that in Q1 and Q2, you'll hear a fairly similar guide from me, although you can wait another 85 days or so for that officially. There will reach an inflection point where we've kind of seen most of that growth headwind diminish, and then we'll start to grow again.
From a capital allocation perspective, that'll make my job a little bit more difficult in terms of balancing between the things we're doing on the share repurchase program versus consuming capital for our client needs. So that's a little bit of how I would think of it at a high level. Would you add?
Let me talk about occupancy and stuff. Most of our multifamily lending is in the western West Coast, so a lot of it in California. Occupancy is still very high in apartment complexes. The restrictions and the costs to build are significant in that part of the country. You also have a very high single family home pricing. So the demand for multifamily is still very strong in the West. The cost of rent has increased over the last several years, and the one thing that has happened is that that's kind of stalled out a bit. There's a little more concession that's being given by developers and owners of projects than there was before, but it's very slight. But you have seen kind of a stall in the actual rent that they can charge. But the performance of the loan portfolio is still very pristine.
I can't help myself. Our Director of Investor Relations, Jacque Bohlen, is here. She's going to kill me for this. But you mentioned Fitch having us on negative watch. I guess we're going to have to start bringing one of those T-shirt cannons to these things and shoot T-shirts out to the audience that says, "We're not those guys." Because whenever there's something, whether it's NDFI or anything, office-
Software
we all get painted. Yeah, software, life sciences. We all get painted with the same brush. I think that Fitch's work was a little bit lazy and incomplete, and they painted us with a broad brush. I mean, our credit metrics remain some of the best in the industry. Our underwriting standards, we've not deviated one bit from those. We pass on hundreds of millions of dollars of deal flow every quarter, simply because we don't either like the underwriting, the guarantor, or somebody else is willing to lend much, much deeper into the collateral. I'll stop my rant now, but I just, I couldn't help myself. I gave it three minutes to see if I could let it pass, and I couldn't.
The other thing that I think that we talk about with rating agencies as well is around our capital ratios. When you come out and announce a $700 million share authorization, and we've been very clear that we intended to use that, I think that that was something that we wanted to make sure was out there with them. As you look back at our capital ratios, we measure twice and cut once. I'm a very conservative person by nature, and so the remit for my treasury team is fortress balance sheet, and included within fortress balance sheet is ensuring capital and liquidity for good times and bad times. We go through that stress test piece of it.
I think as we go quarter to quarter to quarter and we continue to execute that, we've got more of a track record in terms of how we will continue to thoughtfully return capital to shareholders, diminish our share count over time, but also manage to within a fairly tight band from a regulatory capital ratio perspective. I think that that's been part of the conversation that we've had, and we do take their feedback seriously. But that's been the other factor that I suppose I would comment on.
This is an AI question, but from a very different lens. Clint and Tory Nixon talked about going from a loan is transactional, and then you move into an advisory relationship, hopefully, and getting to be a trusted advisor. But that was in a period of time when AI didn't exist in the customer's hands. You go talk to lawyers nowadays, they're finding more and more that clients are showing up fairly informed in a way that they've never been informed before about legal matters. It used to be if I was a client and had an attorney, I could go do some searching, but I couldn't connect the dots together. How do you start to deal with a customer who is bringing information to you and remain an advisor if their knowledge base is starting to get more connected and far more sharper?
What are you doing about that?
Yeah. No, that is a really good question. AI hallucinates still. I think it is a matter of they want to inform themselves, but a lot of our customers, they want to spend time on building their business, whatever that business is. If they are running a steel fabrication business, they want to build stuff. We have that relationship, so they are not lacking a resource where they have to go out and get it. I would say a differentiating factor between us and, say, an attorney is we do not bill in six-minute increments. So, our advice to a certain extent is free. It is included in the package deal of the relationship. That is a very insightful question and one that I think we will see as time goes on.
I think there is a little nuanced difference between, say, what somebody might ask us, that free advice component versus getting a $500 bill from the attorney, and I do not know if you feel any differently.
No, I think it is a potential transition evolution of multiple industries, if you will. Banking happens to be one of them. At the end of the day, we have to educate our workforce. They need the knowledge, they need the information. I will still say, today, people want to bank with people, and relationships are people-driven. That advisor role is about having a seat at the table and being a part of a solution that a business needs and wants. That is what we built this franchise on and feel that it is incredibly powerful. Does that change over time? As you said, do not know yet, really.
Hi, thanks. Timur Braziler with UBS. In 3Q, it seemed like the traditional loan book payoff slowed for the first time in a handful of quarters, given the backup in rates. I guess, what have you seen quarter to date? Has that trend continued into the fourth quarter? Then maybe a separate question, but kind of on a similar topic. Once loan growth does return, what is Columbia's ability to maintain a 4%+ margin in an environment where loans are growing? Thank you.
Yeah, I'll jump in on both of those. The first answer is yes. Not in a way that's dramatically different, but the one area that I monitor most closely is the pace of that transactional portfolio rundown. For a while, you could almost set it like a metronome, right? I mean, it was very consistent in terms of the daily reductions that we would see out of that portfolio. I think with what's happened in the bond markets over the last 90 days, you have seen CPRs diminish in regard to that. I would expect that we would see a slightly lower level of prepayments overall through the portfolio over the course of Q4. In terms of the second question, I think the answer generally would be yes, right?
I think that if you look at our balance sheet and take a step back, we still have, like I mentioned earlier, $7.1 billion worth of transactional loans that are yielding coupons of 4.25%, and we're funding it in part through $5 billion of wholesale financing that's approaching 4%. It's not a good trade. You've got $600 million of capital locked into those assets. As that continues to mature and come off, that is going to continue to be the gift that keeps on giving from a net interest margin perspective. One of the conversations we have pretty consistently is this balance between growth and optimization. Clearly, we've been on the optimization journey for the last year. We expect that to continue.
Whether that tide shifts and we reach the low ebb in May or June or July or September of next year is anyone's guess. We have obviously forecasts, and we do think that we'll reach kind of a low point at some point in 2027, and then we'll see that continue. In the meantime, we're going to continue to optimize return capital where available and see that net interest margin continue to expand.
With that, excuse me, please join me in thanking Columbia Bank. Thank you.