Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no market existslimited markets exist for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
|
| | | | | | | | | | | | | | | | | | | | |
| December 31, 2017 |
| December 31, 2016 |
| Before Tax |
| Tax Effect |
| After Tax |
| Before Tax |
| Tax Effect |
| After Tax |
| (In thousands) |
Components of Other Comprehensive Income (Loss): |
|
|
|
|
| |
|
|
|
|
|
Unrealized gains on securities available for sale: |
|
|
|
|
| |
|
|
|
|
|
Net losses arising during the period | $ | (2,892 | ) |
| (147 | ) |
| (3,039 | ) | | (23,624 | ) |
| 8,417 |
|
| $ | (15,207 | ) |
Accretion of unrealized loss on securities reclassified as held-to-maturity | (2 | ) |
| (56 | ) |
| (58 | ) | | — |
|
| — |
|
| — |
|
Reclassification adjustment for (losses) gains included in net income | (60 | ) | 94 |
| 13 |
|
| (47 | ) | | 411 |
|
| (147 | ) |
| 264 |
|
| (2,954 | ) |
| (190 | ) |
| (3,144 | ) | | (23,213 | ) |
| 8,270 |
|
| (14,943 | ) |
|
|
|
|
|
| |
|
|
|
|
|
Unrealized gain (loss) on swap contract | 192 |
|
| (28 | ) |
| 164 |
| | — |
|
| — |
|
| — |
|
|
|
|
|
|
| |
|
|
|
|
|
Employee benefit plans: |
|
|
|
|
| |
|
|
|
|
|
Amortization of prior service cost included in net income | (24 | ) |
| (19 | ) |
| (43 | ) | | (28 | ) |
| 10 |
|
| (18 | ) |
Reclassification adjustment of actuarial net (loss) gain included in net income | (9 | ) |
| (94 | ) |
| (103 | ) | | 7 |
|
| (2 | ) |
| 5 |
|
Change in funded status of retirement obligations | (9,024 | ) |
| 3,354 |
|
| (5,670 | ) | | 20 |
|
| 132 |
|
| 152 |
|
Tax effects resulting from the adoption of ASU No. 2018-02 | — |
|
| (10,434 | ) |
| (10,434 | ) | | — |
| | — |
| | — |
|
| (9,057 | ) |
| (7,193 | ) |
| (16,250 | ) | | (1 | ) |
| 140 |
|
| 139 |
|
Total other comprehensive loss | $ | (11,819 | ) |
| (7,411 | ) |
| (19,230 | ) | | (23,214 | ) |
| 8,410 |
|
| $ | (14,804 | ) |
COLUMBIA FINANCIAL, INC. AND SUSIDIARIES
(A Wholly-owned Subsidiary of Columbia Bank MHC)SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
15.Other Comprehensive Income (Loss) (continued)
The Company, in accordance with ASU No. 2018-02, has elected | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Nine Months Ended September 30, | |
| 2023 | | 2022 | |
| Before Tax | | Tax Effect | | After Tax | | Before Tax | | Tax Effect | | After Tax | |
| (In thousands) | |
Components of other comprehensive income (loss): | | | | | | | | | | | | |
Unrealized (loss) on debt securities available for sale: | $ | (6,235) | | | $ | 2,251 | | | $ | (3,984) | | | $ | (198,171) | | | $ | 55,528 | | | $ | (142,643) | | |
Accretion of unrealized (loss) on debt securities reclassified as held to maturity | (14) | | | 5 | | | (9) | | | (28) | | | 7 | | | (21) | | |
Reclassification adjustment for (loss) gain included in net income | (10,847) | | | 3,068 | | | (7,779) | | | 210 | | | (59) | | | 151 | | |
| (17,096) | | | 5,324 | | | (11,772) | | | (197,989) | | | 55,476 | | | (142,513) | | |
Derivatives: | | | | | | | | | | | | |
Unrealized gain on swap contracts accounted for as cash flow hedges | 5,390 | | | (1,527) | | | 3,863 | | | 7,171 | | | (2,004) | | | 5,167 | | |
| 5,390 | | | (1,527) | | | 3,863 | | | 7,171 | | | (2,004) | | | 5,167 | | |
| | | | | | | | | | | | |
Employee benefit plans: | | | | | | | | | | | | |
Amortization of prior service cost included in net income | (42) | | | 12 | | | (30) | | | (42) | | | 11 | | | (31) | | |
Reclassification adjustment of actuarial net gain (loss) included in net income | 3 | | | (1) | | | 2 | | | (1,017) | | | 285 | | | (732) | | |
Change in funded status of retirement obligations | 3,534 | | | (839) | | | 2,695 | | | (23,851) | | | 6,730 | | | (17,121) | | |
| 3,495 | | | (828) | | | 2,667 | | | (24,910) | | | 7,026 | | | (17,884) | | |
Total other comprehensive (loss) | $ | (8,211) | | | $ | 2,969 | | | $ | (5,242) | | | $ | (215,728) | | | $ | 60,498 | | | $ | (155,230) | | |
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to reclassify the income tax effects of the Tax Act from accumulated other comprehensive (loss) income to retained earnings for the three months ended December 31, 2017.Unaudited Consolidated Financial Statements
15.Other Comprehensive Income (Loss) (continued)
The following tables present the changes in the components of accumulated other comprehensive income (loss), net of tax, for the three and nine months ended December 31, 2017September 30, 2023 and 2016:2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Three Months Ended September 30, |
| 2023 | | 2022 |
| Unrealized Gains (Losses) on Debt Securities Available for Sale | | Unrealized Gains (Losses) on Swaps | | Employee Benefit Plans | | Accumulated Other Comprehensive (Loss) | | Unrealized Gains (Losses) on Debt Securities Available for Sale | | Unrealized Gains (Losses) on Swaps | | Employee Benefit Plans | | Accumulated Other Comprehensive (Loss) |
| (In thousands) |
| | | | | | | | | | | | | | | |
Balance at beginning of period | $ | (127,036) | | | $ | 2,522 | | | $ | (41,657) | | | $ | (166,171) | | | $ | (93,701) | | | $ | (932) | | | $ | (61,212) | | | $ | (155,845) | |
Current period changes in other comprehensive income (loss) | (20,218) | | | 1,845 | | | 6 | | | (18,367) | | | (47,168) | | | 1,182 | | | 682 | | | (45,304) | |
Total other comprehensive income (loss) | $ | (147,254) | | | $ | 4,367 | | | $ | (41,651) | | | $ | (184,538) | | | $ | (140,869) | | | $ | 250 | | | $ | (60,530) | | | $ | (201,149) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Nine Months Ended September 30, |
| 2023 | | 2022 |
| Unrealized Gains (Losses) on Debt Securities Available for Sale | | Unrealized Gains (Losses) on Swaps | | Employee Benefit Plans | | Accumulated Other Comprehensive (Loss) | | Unrealized Gains (Losses) on Debt Securities Available for Sale | | Unrealized Gains (Losses) on Swaps | | Employee Benefit Plans | | Accumulated Other Comprehensive (Loss) |
| (In thousands) |
| | | | | | | | | | | | | | | |
Balance at beginning of period | $ | (135,482) | | | $ | 504 | | | $ | (44,318) | | | $ | (179,296) | | | $ | 1,644 | | | $ | (4,917) | | | $ | (42,646) | | | $ | (45,919) | |
Current period changes in other comprehensive income (loss) | (11,772) | | | 3,863 | | | 2,667 | | | (5,242) | | | (142,513) | | | 5,167 | | | (17,884) | | | (155,230) | |
Total other comprehensive income (loss) | $ | (147,254) | | | $ | 4,367 | | | $ | (41,651) | | | $ | (184,538) | | | $ | (140,869) | | | $ | 250 | | | $ | (60,530) | | | $ | (201,149) | |
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
|
| | | | | | | | | | | | | |
| December 31, 2017 |
| Unrealized Gains on Securities Available for Sale |
| Employee Benefit Plans |
| Swaps | | Accumulated Other Comprehensive Loss |
|
|
|
|
|
|
|
|
| |
|
|
Balance at beginning of year | $ | (4,135 | ) |
| (42,105 | ) |
| 60 |
| | $ | (46,180 | ) |
Current period changes in other comprehensive (loss) income | (1,830 | ) |
| (5,816 | ) |
| 124 |
| | (7,522 | ) |
Reclassification of tax effects resulting from the adoption of ASU No. 2018-02 | (1,314 | ) | | (10,434 | ) | | 40 |
| | (11,708 | ) |
Total other comprehensive (loss) income | $ | (7,279 | ) |
| (58,355 | ) |
| 224 |
| | $ | (65,410 | ) |
15.Other Comprehensive Income (Loss) (continued)
|
| | | | | | | | | | | | | |
| December 31, 2016 |
| Unrealized Gains on Securities Available for Sale |
| Employee Benefit Plans |
| Swaps | | Accumulated Other Comprehensive Loss |
|
|
Balance at beginning of year | $ | 5,664 |
|
| (57,022 | ) |
| — |
| | $ | (51,358 | ) |
Current period changes in other comprehensive (loss) income | (14,943 | ) |
| 139 |
|
| — |
| | (14,804 | ) |
Total other comprehensive (loss) income | $ | (9,279 | ) |
| (56,883 | ) |
| — |
| | $ | (66,162 | ) |
The following table reflectstables reflect amounts reclassified from accumulated other comprehensive income (loss) income to the consolidated statementConsolidated Statements of incomeIncome and the affected line item in the statement where net income is presented for the three and nine months ended December 31, 2017September 30, 2023 and 2016:2022:
| | | | | | | | | | | | | | | | | | | | |
| | Accumulated Other Comprehensive Income (Loss) Components | | |
| | For the Three Months Ended September 30, | | Affected Line Items in the Consolidated Statements of Income |
| | 2023 | | 2022 | | |
| | (In thousands) | | |
| | | | | | |
| | | | | | |
Reclassification adjustment of actuarial net gain (loss) included in net income | | $ | 1 | | | $ | (339) | | | Other non-interest expense |
Total before tax | | 1 | | | (339) | | | |
Income tax benefit | | — | | | 95 | | | |
Net of tax | | $ | 1 | | | $ | (244) | | | |
| | | | | | | | | | | | | | | | | | | | |
| | Accumulated Other Comprehensive Income (Loss) Components | | |
| | For the Nine Months Ended September 30, | | Affected Line Items in the Consolidated Statements of Income |
| | 2023 | | 2022 | | |
| | (In thousands) | | |
| | | | | | |
Reclassification adjustment for (loss) gain included in net income | | $ | (10,847) | | | $ | 210 | | | (Loss) gain on securities transactions |
Reclassification adjustment of actuarial net gain (loss) included in net income | | 3 | | | (1,017) | | | Other non-interest expense |
Total before tax | | (10,844) | | | (807) | | | |
Income tax benefit | | 3,067 | | | 226 | | | |
Net of tax | | $ | (7,777) | | | $ | (581) | | | |
|
| | | | | | | | |
|
| December 31, | |
|
|
| 2017 |
| 2016 | |
|
Accumulated other Comprehensive (Loss) Income Components |
|
|
|
| | Affected line items in the Consolidated Statements of Income |
Reclassification adjustment for (loss) gain included in net income |
| (60 | ) |
| 411 |
| | (Loss) Gain on securities transactions, net |
Reclassification adjustment of actuarial net (loss) gain included in net income |
| (9 | ) |
| 7 |
| | Compensation and employee benefits expense |
Total before tax |
| (69 | ) |
| 418 |
| |
|
Income tax benefit |
| (81 | ) |
| (149 | ) | |
|
Net of tax |
| (150 | ) |
| 269 |
| |
|
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
16. Derivatives and Hedging Activities | |
11. | Derivatives and Hedging Activities |
The Company uses derivative financial instruments as components of its market risk management, principally to manage interest rate risk. Certain derivatives are entered into in connection with transactions with commercial customers. Derivatives are not used for speculative purposes. All derivatives are recognized as either assets or liabilities in the Consolidated Statements of Financial Condition, reported at fair value and presented on a gross basis. Until a derivative is settled, a favorable change in fair value results in an unrealized gain that is recognized as an asset, while an unfavorable change in fair value results in an unrealized loss that is recognized as a liability.
The Company offers currency forward contractsgenerally applies hedge accounting to its derivatives used for market risk management purposes. Hedge accounting is permitted only if specific criteria are met, including a requirement that a highly effective relationship exists between the derivative instrument and interest rate swap contractsthe hedged item, both at inception of the hedge and on an ongoing basis. Changes in the fair value of effective fair value hedges are recognized in current earnings (with the change in fair value of the hedged asset or liability also recognized in earnings). Changes in the fair value of effective cash flow hedges are recognized in other comprehensive income (loss) until earnings are affected by the variability in cash flows of the designated hedged item. Ineffective portions of hedge results are recognized in current earnings. Changes in the fair value of derivatives for which hedge accounting is not applied are recognized in current earnings.
The Company formally documents at inception all relationships between the derivative instruments and the hedged items, as well as its risk management objectives and strategies for undertaking the hedge transactions. This process includes linking all derivatives that are designated as hedges to specific assets and liabilities, or to specific firm commitments. The Company also formally assesses, both at inception of the hedge and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in the fair values or cash flows of the hedged items. If it is determined that a derivative is not highly effective or has ceased to be a highly effective hedge, the Company would discontinue hedge accounting prospectively. Gains or losses resulting from the termination of a derivative accounted for as a cash flow hedge remain in other comprehensive income (loss) and is (accreted) amortized to earnings over the remaining period of the former hedging relationship.
Certain derivative financial instruments are offered to certain commercial banking customers to manage their risk of exposure and risk management strategies. These derivative instruments consist primarily of currency forward contracts areand interest rate swap contracts. The risk associated with these transactions is mitigated by simultaneously hedged byentering into similar transactions having essentially offsetting contractsterms with a third party, such that the Company would minimize its net risk exposure resulting from these transactions.party. In addition, the Company executes interest rate swaps with third parties to in order to hedge the interest expense
COLUMBIA FINANCIAL, INC. AND SUSIDIARIES
(A Wholly-owned Subsidiary of Columbia Bank MHC)
Notes to Consolidated Financial Statements
rate risk of short-term Federal Home Loan Bank Advances. These contracts are simultaneously hedged with short-term Federal Home Loan Bank Advances.FHLB advances.
Currency Forward Contracts. At bothSeptember 30, 2023 and December 31, 2017 and September 30, 2017,2022, the Company had ano currency forward contractcontracts in place with a commercial banking customercustomers.
Interest Rate Swaps. At September 30, 2023 and December 31, 2022, the Company had 78 and 54 interest rate swaps in place with acommercial banking customers executed by offsetting interest rate swaps with third parties, with aggregated notional amountamounts of $1.6 million. An offsetting currency forward contract with a third party was also in-force for the respective time periods. The currency forward contracts associated with this program does$273.1 million and $205.0 million, respectively. These derivatives are not designated as hedges and are not speculative. These interest rate swaps do not meet hedge accounting requirements. Changes in the fair value
of both the customer currency forward contract
At September 30, 2023 and the offsetting third party contract is recognized directly in earnings. Derivatives not designated in qualifying hedging relationships are not speculative and result from a serviceDecember 31, 2022, the Company provides to certain qualified commercial banking customershad 21 and are not used to manage interest rate risk in the Company's assets or liabilities.
Interest Rate Swaps. At December 31, 2017 and September 30, 2017, the Company did not have any20 interest rate swaps with commercial banking customers.
The Company had twonotional amounts of $300.0 million and $290.0 million, respectively, hedging certain FHLB advances. These interest rate swaps in place at both December 31, 2017 and September 30, 2017 with offsetting Federal Home Loan Bank Advances with a notional amount of $20.0 million. The interest rate swaps associated withmeet the program meet thecash flow hedge accounting requirements. The effective portion of changes in the fair value of the derivatives designated that qualify as cash flow hedges are recorded in accumulated other comprehensive income (loss). The ineffective portion of changes in the fair value of the derivatives designated that qualify as cash flow hedges are recorded in earnings. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counter-party in exchange for the Company making fixed-rate payment payments over the life of the agreements without the exchange of the underlying notional amount.
At both September 30, 2023 and December 31, 2022, the Company had two interest rate swaps hedged against pools of floating rate commercial loans with notional amounts totaling $100.0 million. These swaps meet the cash flow hedge accounting requirements. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counter-party in exchange for the Company making fixed-rate payments over the life of the agreements without the exchange of the underlying notional amount.
At September 30, 2023, the Company had six interest rate fair value swaps with notional amounts totaling $500.0 million. The Company is exposed to changes in the fair value of certain of its fixed-rate pools of assets due to changes in benchmark interest rates. The Company uses interest rate swaps to manage its exposure to changes in fair value on these instruments attributable to changes in the designated benchmark interest rate, the Secured Overnight Financing Rate ("SOFR"). At December 31, 2022, the Company did not have any fair value swaps.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
16. Derivatives and Hedging Activities (continued)
Interest rate swaps designated as fair value hedges involve the payment of fixed-rate amounts to a counterparty in exchange for the Company receiving variable-rate payments over the life of the agreements without the exchange of the underlying notional amount.
For the three and nine months ended December 31, 2017September 30, 2023, the Company recorded hedge ineffectiveness associated with these contracts totaling $37,000 and 2016,$64,000, respectively. For the three and nine months ended September 30, 2022, the Company did not record any hedge ineffectiveness associated with these contracts.
The tabletables below presentspresent the fair value of the Company’s derivative financial instruments as well as their classification onin the Consolidated Balance SheetsStatements of Financial Condition at September 30, 2023 and December 31, 2017 and September 30, 2017:2022:
| | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2023 |
| Asset Derivative | | Liability Derivative |
| Consolidated Statements of Financial Condition | | Fair Value | | Consolidated Statements of Financial Condition | | Fair Value |
| | | (In thousands) | | |
Derivatives: | | | | | | | |
Interest rate products - designated hedges | Other Assets | | $ | 14,641 | | | Other Liabilities | | $ | 1,893 | |
Interest rate products - non-designated hedges | Other Assets | | 21,564 | | | Other Liabilities | | 21,122 | |
| | | | | | | |
Total derivative instruments | | | $ | 36,205 | | | | | $ | 23,015 | |
|
| | | | | | | | | | | |
| December 31, 2017 |
| Asset Derivative |
| Liability Derivative |
| Consolidated Balance Sheet |
| Fair value |
| Consolidated Balance Sheet |
| Fair Value |
|
|
| (In thousands) |
|
|
| (In thousands) |
Derivatives: |
|
|
|
|
|
|
|
Interest rate swap - cash flow hedge | Other Assets |
| $ | 287 |
|
| Other Liabilities |
| $ | — |
|
Currency forward contract - non-designated hedge | Other Assets |
| 203 |
|
| Other Liabilities |
| 203 |
|
Total derivative instruments |
|
| $ | 490 |
|
|
|
| $ | 203 |
|
|
|
|
|
|
|
|
|
| September 30, 2017 |
| Asset Derivative |
| Liability Derivative |
| Consolidated Balance Sheet |
| Fair value |
| Consolidated Balance Sheet |
| Fair Value |
|
|
| (In thousands) |
|
|
| (In thousands) |
Derivatives: |
|
|
|
|
|
|
|
Interest rate swap - cash flow hedge | Other Assets |
| $ | 95 |
|
| Other Liabilities |
| $ | — |
|
Currency forward contract - non-designated hedge | Other Assets |
| 182 |
|
| Other Liabilities |
| 182 |
|
Total derivative instruments |
|
| $ | 277 |
|
|
|
| $ | 182 |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2022 |
| Asset Derivative | | Liability Derivative |
| Consolidated Statements of Financial Condition | | Fair Value | | Consolidated Statements of Financial Condition | | Fair Value |
| | | (In thousands) | | |
Derivatives: | | | | | | | |
Interest rate products - designated hedges | Other Assets | | $ | 4,290 | | | Other Liabilities | | $ | 3,918 | |
Interest rate products - non-designated hedges | Other Assets | | 15,466 | | | Other Liabilities | | 15,154 | |
Total derivative instruments | | | $ | 19,756 | | | | | $ | 19,072 | |
For the three months ended December 31, 2017September 30, 2023 and 2022, gains of $332,000 and $118,000, respectively, were recorded for changes in fair value of interest rate swaps with third parties. For the nine months ended September 30, 2023 and 2022, gains of $130,000 and $594,000, respectively, were recorded for changes in fair value of interest rate swaps with third parties.
At September 30, 2023 and December 31, 2016, no gains or losses were recorded in the consolidated statements of income.2022, accrued interest was $705,000 and $22,000.
COLUMBIA FINANCIAL, INC. AND SUSIDIARIES
(A Wholly-owned Subsidiary of Columbia Bank MHC)
Notes to Consolidated Financial Statements
The Company has agreements with counter-partiescounterparties that contain a provision that if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default of its derivative obligations.
At September 30, 2023, the termination value of derivatives in a net asset position, which includes accrued interest, was $13.2 million. The Company normally has collateral posting thresholds with certain of its derivative counterparties, but as of September 30, 2023 had no posted collateral against its obligations under these agreements.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
16. Derivatives and Hedging Activities (continued)
Fair Value Hedges of Interest Rate Risk. The Company is exposed to changes in the fair value of certain of its fixed-rate pools of assets due to changes in benchmark interest rates. The Company uses interest rate swaps to manage its exposure to changes in fair value on these instruments attributable to changes in the designated benchmark interest rate, SOFR. Interest rate swaps designated as fair value hedges involve the payment of fixed-rate amounts to a counterparty in exchange for the Company receiving variable-rate payments over the life of the agreements without the exchange of the underlying notional amount.
For derivatives designated and that qualify as fair value hedges, the gain or loss on the derivative as well as the offsetting gain or loss on the hedged item attributable to the hedged risk are recognized in interest income.
At September 30, 2023, the following amounts were recorded on the Consolidated Statements of Financial Condition related to cumulative basis adjustment for fair value hedges:
| | | | | | | | | | | | | | | |
| Carrying Amount of Hedged Assets/(Liabilities) | | Cumulative Amount of Fair Value Hedging Adjustment included in the Carrying Amount of Hedged Assets/(Liabilities) |
| At September 30, 2023 |
| | | | | | | |
| (In thousands) |
| | | | | | | |
Fair value interest rate products | $ | 493,698 | | | | | $ | (6,302) | | | |
At December 31, 20172022, the Company had no fair value hedges.
17. Revenue Recognition
The Company's revenue includes net interest income on financial instruments and non-interest income. Most of the Company's revenue is not within the scope of Accounting Standards Codification Topic 606 which does not apply to revenue associated with financial instruments, including interest income on loans and securities, which comprise the majority of the Company's revenue. Revenue-generating activities that are within the scope of this guidance are components of non-interest income. These revenue streams can generally be classified as demand deposit account fees, title insurance fees, insurance agency income and other fees.
The following table presents non-interest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the three and nine months ended September 30, 2017,2023 and 2022.
| | | | | | | | | | | | | | | | | | | | | | | |
| For the Three Months Ended September 30, | | For the Nine Months Ended September 30, |
| 2023 | | 2022 | | 2023 | | 2022 |
| (In thousands) |
Non-interest income | | | | | | | |
In-scope of Topic 606: | | | | | | | |
Demand deposit account fees | $ | 1,348 | | | $ | 1,510 | | | $ | 3,815 | | | $ | 4,129 | |
Title insurance fees | 629 | | | 796 | | | 1,840 | | | 2,788 | |
Insurance agency income | 63 | | | 38 | | | 141 | | | 83 | |
Other non-interest income | 1,518 | | | 2,194 | | | 6,480 | | | 6,334 | |
Total in-scope non-interest income | 3,558 | | | 4,538 | | | 12,276 | | | 13,334 | |
Total out-of-scope non-interest income | 5,044 | | | 3,626 | | | 3,854 | | | 9,540 | |
Total non-interest income | $ | 8,602 | | | $ | 8,164 | | | $ | 16,130 | | | $ | 22,874 | |
Demand deposit account fees include monthly maintenance fees and service charges. These fees are generally derived as a result of either transaction-based or serviced-based services. The Company's performance obligation for these services is generally satisfied, and revenue recognized, at the time the transaction is completed, or the service rendered. Fees for these services are generally received from the customer either at the time of the transaction or monthly.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
17. Revenue Recognition (continued)
Title insurance fees are generally recognized at the time the transaction closes or when the service is rendered.
RSI Insurance Agency, Inc. performs the function of an insurance intermediary, by introducing the policyholder and insurer for life and health, and property and casualty insurance, and is compensated by a commission fee for placement of an insurance policy. Commission and fees are generally recognized as of the effective date of the insurance policy. Commission revenues related to installment billings are recognized on the invoice date. Subsequent commission adjustments are recognized upon the receipt of notification from insurance companies concerning matters necessitating such adjustments.
Other non-interest income includes check printing fees, traveler's check fees, gift card fees, branch service fees, overdraft fees, account analysis fees, other deposit related fees, wealth management related fee income which includes annuity fees, brokerage commissions, and asset management fees. Wealth management related fee income represent fees earned from customers as consideration for asset management and investment advisory services provided by a third party. The Company's performance obligation is generally satisfied monthly, and the resulting fees are recognized monthly based upon the month-end market value of the assets under management and the applicable fee rate. The Company does not earn performance-based incentives. The Company's performance obligation for these transaction-based services are generally satisfied, and related revenue recognized, at the time the transaction closes or when the service is rendered or a point in time when the service is completed.
Also included in other fees are debit card and ATM fees which are transaction-based. Debit card revenue is primarily comprised of interchange fees earned when a customer's Company card is processed through a card payment network. ATM fees are largely generated when a Company cardholder uses a non-Company ATM, or a non-Company cardholder uses a Company ATM. The Company's performance obligation for these services is satisfied when the service is rendered. Payment is generally received at time of transaction or monthly.
Out-of-scope non-interest income primarily consists of income from bank-owned life insurance, loan prepayment and servicing fees, net fees loan level swaps, gains and losses on the sale of loans and securities, credit card interchange income, and changes in the fair value of derivatives was in an asset position and includes accrued interestequity securities. None of $7 thousand and $9 thousand, respectively.these revenue streams are subject to the requirements of Topic 606.
18. Subsequent Events
The Company has evaluated events subsequent to December 31, 2017September 30, 2023 and through the financial statement issuance date of March 23, 2018. The Company has not identified anyNovember 9, 2023, and concluded that no material subsequent events.
events occurred that would require disclosure.
Columbia Financial, Inc.
Management’s Discussion and Analysis
| |
Item 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
Certain statements contained herein are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements may be identified by reference to a future period or periods, or by the use of forward-looking terminology, such as “may,” “will,” “believe,” “expect,” “estimate,” "project," "intend," “anticipate,” “continue,” or similar terms or variations on those terms, or the negative of those terms. Forward-looking statements are subject to numerous risk factors and uncertainties, including, but not limited to, those set forth in Item 1A of the Company's prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b)(3)Annual Report on February 20, 2018,Form 10-K as supplemented by its Quarterly Reports on Form 10-Q, and those related to the economic environment, particularly in the market areas in which the Company operates, competitive products and pricing, as well as its impact on fiscal and monetary policies of the U.S. Government, changes in government regulations affecting financial institutions, including regulatory fees and capital requirements, changes in prevailing interest rates, higher inflation and its impact on national and local economic conditions, the Company's ability to successfully implement its business strategy, acquisitions and the integration of acquired businesses, credit risk management, asset-liability management, the financial and securities markets, the impact of failures or disruptions in or breaches of the Company's operational or security systems, data or infrastructure, or those of third parties, including as a result of cyber attacks or campaigns, and the availability of and costs associated with sources of liquidity.
The Company cautions readers not to place undue reliance on any such forward-looking statements which speak only as of the date made. The Company also advises readers that the factors listed above could affect the Company’s financial performance and could cause the Company’s actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements. The Company does not have any obligation to update any forward-looking statements to reflect any subsequent events or circumstances after the date of this statement.
Comparison of Financial Condition at September 30, 2023 and December 31, 2022
Total assets decreased $84.6 million, or 0.8%, to $10.3 billion at September 30, 2023 from $10.4 billion at December 31, 2022. The decrease in total assets was primarily attributable to a decrease in debt securities available for sale of $310.3 million, partially offset by an increase in cash and cash equivalents of $25.3 million, an increase in loans receivable, net, of $161.7 million, an increase in Federal Home Loan Bank stock of $13.8 million and an increase in other assets of $28.6 million.
Cash and cash equivalents increased $25.3 million, or 14.1%, to $204.5 million at September 30, 2023 from $179.2 million at December 31, 2022. The increase was primarily attributable to $298.0 million in proceeds from the sale of debt securities available for sale, and an increase in borrowings of $229.2 million, or 20.3%, partially offset by purchases of debt securities available for sale of $75.3 million, a decrease in total deposits of $298.0 million and $78.3 million in repurchases of common stock under our stock repurchase program.
Debt securities available for sale decreased $310.3 million, or 23.4%, to $1.0 billion at September 30, 2023 from $1.3 billion at December 31, 2022. The decrease was attributable to sales of securities of $277.0 million which resulted in a realized loss of $10.8 million, repayments on securities of $79.3 million, and an increase in the gross unrealized loss of $16.7 million, which was partially offset by purchases of U.S. government obligations of $75.3 million. The Bank sold U.S. government obligations at a weighted average rate of 2.36%, and mortgage-backed securities at a weighted average rate of 3.26% during the nine months ended September 30, 2023.
Loans receivable, net, increased $161.7 million, or 2.1%, to $7.8 billion at September 30, 2023 from $7.6 billion at December 31, 2022. Multifamily real estate loans, construction loans and commercial business loans increased $178.0 million, $54.4 million, and $49.3 million, respectively, partially offset by a decrease in one-to-four family real estate loans, commercial real estate loans, and home equity loans and advances of $68.2 million, $38.9 million, and $7.3 million, respectively. The allowance for credit losses on loans increased $1.3 million to $54.1 million at September 30, 2023 from $52.8 million at December 31, 2022. During the nine months ended September 30, 2023, the increase in the allowance for credit losses was primarily due to an increase in the outstanding balance of loans and an increase in qualitative factors, partially offset by a decrease in loan loss rates.
Federal Home Loan Bank stock increased $13.8 million, or 23.7%, to $71.9 million at September 30, 2023 from $58.1 million at December 31, 2022. The increase was due to the purchase of stock required upon acquiring new FHLB borrowings.
Other assets increased $28.6 million, or 10.1%, to $313.4 million at September 30, 2023 from $284.8 million at December 31, 2022, primarily due to a $10.5 million increase in the Company's pension plan balance, as the return on plan assets outpaced the growth in the plan’s obligations, and a $15.4 million increase in interest rate swaps assets.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Total liabilities decreased $38.5 million, or 0.4%, to $9.3 billion at September 30, 2023 from $9.4 billion at December 31, 2022. The decrease was primarily attributable to a decrease in total deposits of $298.0 million, or 3.7%, partially offset by an increase in borrowings of $229.2 million, or 20.3%. The decrease in total deposits primarily consisted of decreases in non-interest-bearing demand deposits, interest-bearing demand deposits, and savings and club deposits of $366.6 million, $591.6 million, and $177.2 million, respectively, partially offset by increases in money market accounts of $478.5 million and certificates of deposit of $359.0 million. The Bank has priced select money market and certificates of deposit accounts very competitively to the market, but there continues to be strong competition for funds from other banks and non-bank investment products. The $229.2 million increase in borrowings was primarily driven by an increase in long-term borrowings of $299.8 million, partially offset by a decrease in short-term borrowings of $70.5 million. The $32.8 million increase in accrued expenses and other liabilities was primarily attributable to a $20.4 million increase in the collateral balance related to our interest rate swap program.
Total stockholders’ equity decreased $46.2 million, or 4.4%, to $1.0 billion at September 30, 2023 from $1.1 billion at December 31, 2022. The decrease in equity was primarily attributable to the repurchase of 4,104,073 shares of common stock at a cost of approximately $78.3 million, or $19.08 per share, under our stock repurchase program, partially offset by net income of $29.5 million, and an increase of $11.8 million in unrealized losses on debt securities available for sale, net of taxes, included in other comprehensive income.
Comparison of Results of Operations for the Three Months Ended September 30, 2023 and September 30, 2022
Net income of $9.1 million was recorded for the quarter ended September 30, 2023, a decrease of $11.8 million, or 56.4%, compared to net income of $20.9 million for the quarter ended September 30, 2022. The decrease in net income was primarily attributable to a $20.6 million decrease in net interest income, and an $863,000 increase in provision for credit losses, partially offset by a $4.9 million decrease in non-interest expense and a $4.3 million decrease in income tax expense.
Net interest income was $48.5 million for the quarter ended September 30, 2023, a decrease of $20.6 million, or 29.8%, from $69.2 million for the quarter ended September 30, 2022. The decrease in net interest income was primarily attributable to a $39.1 million increase in interest expense on deposits and borrowings, partially offset by a $18.5 million increase in interest income. The increase in interest income was primarily due to an increase in the average balance of total interest-earning assets coupled with an increase in average yields due to multiple market interest rate increases that occurred over the previous two years. The increase in interest expense on deposits was driven by these same rate increases coupled with intense competition for deposits in the market and the repricing of existing deposits into higher cost products. The increase in interest expense on borrowings was also impacted by the significant increase in interest rates for new borrowings since interest rates began rising in March 2022, along with an increase in the average balance of borrowings. Prepayment penalties, which are included in interest income on loans, totaled $83,000 for the quarter ended September 30, 2023, compared to $639,000 for the quarter ended September 30, 2022.
The average yield on loans for the quarter ended September 30, 2023 increased 67 basis points to 4.47%, as compared to 3.80% for the quarter ended September 30, 2022, as interest income was influenced by rising interest rates and loan growth. The average yield on securities for the quarter ended September 30, 2023 increased 10 basis points to 2.37%, as compared to 2.27% for the quarter ended September 30, 2022, as a number of adjustable rate securities tied to various indexes repriced higher during the quarter, and new securities purchased during the 2023 period were at higher rates. The average yield on other interest-earning assets for the quarter ended September 30, 2023 increased 323 basis points to 5.91%, as compared to 2.68% for the quarter ended September 30, 2022, due to the rise in average balances and interest rates paid on cash balances and an increase in the dividend rate paid on Federal Home Loan Bank stock.
Total interest expense was $49.9 million for the quarter ended September 30, 2023, an increase of $39.1 million, or 363.0%, from $10.8 million for the quarter ended September 30, 2022. The increase in interest expense was primarily attributable to a 223 basis point increase in the average cost of borrowings, and a significant increase in the average balance of borrowings, coupled with a 187 basis point increase in the average cost of interest-bearing deposits, partially offset by the decrease in the average balance of interest-bearing deposits. Interest expense on borrowings increased $10.2 million, or 266.9%, and interest expense on deposits increased $29.0 million, or 415.5%, due to the rise in interest rates as noted above.
The Company's net interest margin for the quarter ended September 30, 2023 decreased 95 basis points to 2.06%, when compared to 3.01% for the quarter ended September 30, 2022. The weighted average yield on interest-earning assets increased 70 basis points to 4.17% for the quarter ended September 30, 2023, as compared to 3.47% for the quarter ended September 30, 2022. The average cost of interest-bearing liabilities increased 208 basis points to 2.70% for the quarter ended September 30, 2023, as compared to 0.62% for the quarter ended September 30, 2022. The increase in yields for the quarter ended September 30, 2023 was due to the impact of multiple market interest rate increases between periods. The net interest margin decreased for the quarter ended
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
September 30, 2023, as the increase in the average cost of interest-bearing liabilities outweighed the increase in the average yield on interest-earning assets.
The provision for credit losses for the quarter ended September 30, 2023 was $2.4 million, an increase of $863,000, from $1.5 million for the quarter ended September 30, 2022. The increase in provision for credit losses during the quarter was primarily attributable to an increase in the outstanding balance of loans and net charge-offs totaling $1.7 million, partially offset by a decrease in loan loss rates.
Non-interest expense was $42.9 million for the quarter ended September 30, 2023, a decrease of $4.9 million, or 10.3%, from $47.8 million for the quarter ended September 30, 2022. The decrease was primarily attributable to a decrease in compensation and employee benefits expense of $2.8 million, a decrease in merger-related expenses of $1.2 million, and a decrease in other non-interest expense of $1.6 million, partially offset by an increase in federal deposit insurance premiums of $556,000, due to an increase in the assessment rate imposed by the FDIC effective January 1, 2023. The decrease in compensation and employee benefits expense was due to the result of a workforce reduction in June 2023, along with other related employee expense cutting strategies implemented during the current year. The decrease in other non-interest expense was primarily related to a decrease in pension plan related expense during the 2023 period, and $1.7 million in non-recurring litigation settlements included in the 2022 period, compounded with a $1.2 million recovery of provision for credit losses on off-balance sheet exposures.
Income tax expense was $2.7 million for the quarter ended September 30, 2023, a decrease of $4.3 million, as compared to $7.0 million for the quarter ended September 30, 2022, mainly due to a decrease in pre-tax income, and to a lesser extent, the Company's effective tax rate. The Company's effective tax rate was 22.9% and 25.2% for the quarters ended September 30, 2023 and 2022, respectively. The effective tax rate for the 2023 period was primarily impacted by lower net interest income and the loss on the sale of securities.
Comparison of Results of Operations for the Nine Months Ended September 30, 2023 and September 30, 2022
Net income of $29.5 million was recorded for the nine months ended September 30, 2023, a decrease of $34.8 million, or 54.1%, compared to net income of $64.3 million for the nine months ended September 30, 2022. The decrease in net income was primarily attributable to a $37.8 million decrease in net interest income, a $6.7 million decrease in non-interest income, and a $4.1 million increase in non-interest expense, partially offset by a $882,000 decrease in provision for credit losses, and a $13.1 million decrease in income tax expense.
Net interest income was $160.5 million for the nine months ended September 30, 2023, a decrease of $37.8 million, or 19.1%, from $198.4 million for the nine months ended September 30, 2022. The decrease in net interest income was primarily attributable to a $103.5 million increase in interest expense on deposits and borrowings, partially offset by a $65.7 million increase in interest income. The increase in interest income was primarily due to an increase in the average balance of total interest-earning assets coupled with an increase in average yields due to the rise in interest rates in 2022 and 2023. The increase in interest expense on deposits and borrowings was driven by an increase in the average balance of deposits and borrowings coupled with an increase in the cost of deposits and borrowings. The increase in interest expense on interest-bearing liabilities was also impacted by the significant increase in interest rates due to multiple market interest rate increases that occurred over the previous two years, along with an increase in the average balance of borrowings. Prepayment penalties, which are included in interest income on loans, totaled $399,000 for the nine months ended September 30, 2023, compared to $3.4 million for the nine months ended September 30, 2022.
The average yield on loans for the nine months ended September 30, 2023 increased 66 basis points to 4.36%, as compared to 3.70% for the nine months ended September 30, 2022, as interest income was influenced by rising interest rates and loan growth. The average yield on securities for the nine months ended September 30, 2023 increased 22 basis points to 2.42%, as compared to 2.20% for the nine months ended September 30, 2022, as a number of adjustable rate securities tied to various indexes repriced higher during the year and new securities purchased during the 2023 period were at higher rates. The average yield on other interest-earning assets for the nine months ended September 30, 2023 increased 299 basis points to 5.45%, as compared to 2.46% for the nine months ended September 30, 2022, due to the rise in average balances and interest rates, as noted above.
Total interest expense was $126.9 million for the nine months ended September 30, 2023, an increase of $103.5 million, or 443.3%, from $23.4 million for the nine months ended September 30, 2022. The increase in interest expense was primarily attributable to a 276 basis point increase in the average cost of borrowings, and an increase in the average balance of borrowings, coupled with a 142 basis point increase in the average cost of interest-bearing deposits and an increase in the average balance of deposits. Interest expense on borrowings increased $38.1 million, or 542.5%, and interest expense on deposits increased $65.4 million, or 400.6%, due to the rise in interest rates as noted above.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company's net interest margin for the nine months ended September 30, 2023 decreased 73 basis points to 2.27%, when compared to 3.00% for the nine months ended September 30, 2022. The weighted average yield on interest-earning assets increased 71 basis points to 4.06% for the nine months ended September 30, 2023, as compared to 3.35% for the nine months ended September 30, 2022. The average cost of interest-bearing liabilities increased 182 basis points to 2.29% for the nine months ended September 30, 2023, as compared to 0.47% for the nine months ended September 30, 2022. The increase in yields for the nine months ended September 30, 2023 was due to the impact of multiple market interest rate increases between periods. The net interest margin decreased for the nine months ended September 30, 2023, as the average cost of interest-bearing liabilities outweighed the increase in the average yield on interest-earning assets.
The provision for credit losses for the nine months ended September 30, 2023 was $3.6 million, a decrease of $882,000, from $4.5 million for the nine months ended September 30, 2022. The decrease in provision for credit losses during the nine months was primarily attributable to a decrease in loan loss rates, partially offset by an increase in the outstanding balance of loans.
Non-interest income was $16.1 million for the nine months ended September 30, 2023, a decrease of $6.7 million, or 29.5%, from $22.9 million for the nine months ended September 30, 2022. The decrease was primarily attributable to an increase in the loss on securities transactions of $11.1 million, partially offset by an increase in other non-interest income of $3.4 million, which is primarily related to swap income.
Non-interest expense was $134.4 million for the nine months ended September 30, 2023, an increase of $4.1 million, or 3.2%, from $130.3 million for the nine months ended September 30, 2022. The increase was primarily attributable to an increase in compensation and employee benefits expense of $6.0 million, an increase in federal deposit insurance premiums of $1.7 million, due to an increase in the assessment rate imposed by the FDIC effective January 1, 2023, and an increase in data processing and software expenses of $849,000, partially offset by a decrease in merger-related expenses of $2.4 million, and a decrease in other non-interest expense of $3.6 million. The increase in compensation and employee benefits expense for the 2023 period was due to normal annual increases in employee related compensation, increased staff levels due to the May 2022 merger with RSI Bank, and severance expense recorded in June 2023 as a result of a workforce reduction. The decrease in other non-interest expense was primarily related to non-recurring litigation settlements included in the 2022 period and the decrease in expenses related to swap transactions.
Income tax expense was $9.1 million for the nine months ended September 30, 2023, a decrease of $13.1 million, as compared to $22.2 million for the nine months ended September 30, 2022, mainly due to a decrease in pre-tax income, and to a lesser extent, a decrease in the Company's effective tax rate. The Company's effective tax rate was 23.6% and 25.6% for the nine months ended September 30, 2023 and 2022, respectively. The effective tax rate for the 2023 period was primarily impacted by lower net interest income and the loss on the sale of securities.
Asset Quality
The Company's non-performing loans at September 30, 2023 totaled $15.2 million, or 0.19% of total gross loans, as compared to $6.7 million, or 0.09% of total gross loans, at December 31, 2022. The $8.5 million increase in non-performing loans was primarily attributable to an increase in non-performing commercial business loans of $5.8 million, an increase in non-performing one-to-four family real estate loans of $1.6 million, and an increase in non-performing commercial real estate loans of $1.2 million. The increase in non-performing commercial business loans was due to an increase in the number of loans from three non-performing loans at December 31, 2022 to 10 loans at September 30, 2023, including a $3.7 million loan to a technology company. The increase in non-performing one-to-four family real estate loans was due to an increase in the number of loans from 12 non-performing loans at December 31, 2022 to 18 loans at September 30, 2023. The increase in non-performing commercial real estate loans was due to the addition of two loans from December 31, 2022 to September 30, 2023. Non-performing assets as a percentage of total assets totaled 0.15% and 0.06% at September 30, 2023 and December 31, 2022, respectively.
For the quarter ended September 30, 2023, net charge-offs totaled $1.7 million, as compared to $208,000 in net charge-offs recorded for the quarter ended September 30, 2022. For the nine months ended September 30, 2023, net charge-offs totaled $2.3 million, as compared to $8,000 in net recoveries recorded for the nine months ended September 30, 2022. The 2023 periods included a partial charge-off of $2.0 million on a commercial business loan.
The Company's allowance for credit losses on loans was $54.1 million, or 0.69% of total gross loans, at September 30, 2023, compared to $52.8 million, or 0.69% of total gross loans, at December 31, 2022. The increase in the allowance for credit losses for loans was primarily due to an increase in the outstanding balance of loans, partially offset by a decrease in loan loss rates.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Additional Liquidity, Loan, Deposit and Capital Information
The Company services a diverse retail and commercial deposit base through its 67 branches. With over 214,000 accounts, the average deposit account balance was approximately $36,000 at September 30, 2023.
The Company had uninsured deposits (excluding municipal deposits of $810.8 million, which are collateralized, and $3.6 billion of intercompany deposits) totaling $1.8 billion at September 30, 2023, down from $1.9 billion at June 30, 2023.
The Company had uninsured deposits as summarized below:
| | | | | | | | | | | |
| At September 30, 2023 | | At June 30, 2023 |
| (Dollars in thousands) |
| | | |
Uninsured deposits | $ | 1,773,116 | | | $ | 1,858,275 | |
Uninsured deposits to total deposits | 23.0 | % | | 24.1 | % |
Deposit balances are summarized as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| At September 30, 2023 | | At June 30, 2023 |
| Balance | | Weighted Average Rate | | Balance | | Weighted Average Rate |
| (Dollars in thousands) |
| | | | | | | |
Non-interest-bearing demand | $ | 1,439,517 | | | — | % | | $ | 1,509,852 | | | — | % |
Interest-bearing demand | 2,001,260 | | | 1.77 | | | 2,064,803 | | | 1.51 | |
Money market accounts | 1,196,983 | | | 3.09 | | | 1,085,317 | | | 2.80 | |
Savings and club deposits | 736,558 | | | 0.38 | | | 782,996 | | | 0.24 | |
Certificates of deposit | 2,328,848 | | | 3.27 | | | 2,271,188 | | | 2.91 | |
Total deposits | $ | 7,703,166 | | | 1.97 | % | | $ | 7,714,156 | | | 1.68 | % |
The Company continues to maintain strong liquidity and capital positions. The Company has not utilized the Federal Reserve’s Bank Term Funding Program and had no outstanding borrowings from the Federal Reserve Discount Window at September 30, 2023. As of October 23, 2023, the Company had immediate access to approximately $2.7 billion of funding, with additional unpledged loan collateral available to pledge in excess of $1.6 billion. Available sources of liquidity include but are not limited to:
•Cash and cash equivalents of $381.5 million;
•Borrowing capacity based on unencumbered collateral pledged at the FHLB totaling $419.1 million;
•Borrowing capacity based on unencumbered collateral pledged at the Federal Reserve Bank totaling $2.0 billion; and
•Available correspondent lines of credit of $354.0 million with various third parties.
At September 30, 2023, the Company's non-performing commercial real estate loans totaled $4.1 million, or 0.05%, of the total loans receivable loan portfolio balance.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table presents multifamily real estate, owner occupied commercial real estate, and the components of investor owned commercial real estate loans included in the real estate loan portfolio.
| | | | | | | | | | | | | | | | | | | | | | | |
| At September 30, 2023 |
| (Dollars in thousands) |
| Balance | | % of Gross Loans | | Weighted Average Loan to Value Ratio | | Weighted Average Debt Service Coverage |
Multifamily Real Estate | $ | 1,417,233 | | | 18.2 | % | | 61.8 | % | | 1.45x |
| | | | | | | |
Owner Occupied Commercial Real Estate | $ | 498,525 | | | 6.4 | % | | 51.0 | % | | 2.08x |
| | | | | | | |
Investor Owned Commercial Real Estate: | | | | | | | |
Retail / Shopping centers | $ | 497,075 | | | 6.4 | % | | 52.9 | % | | 1.47x |
Mixed Use | 313,480 | | | 4.0 | | | 58.6 | | | 1.61 | |
Industrial / Warehouse | 385,889 | | | 4.9 | | | 52.2 | | | 1.56 | |
Non-Medical Office | 224,103 | | | 2.9 | | | 52.1 | | | 1.57 | |
Medical Office | 140,099 | | | 1.8 | | | 59.3 | | | 1.65 | |
Single Purpose | 77,043 | | | 1.0 | | | 56.4 | | | 2.19 | |
Other | 238,274 | | | 3.1 | | | 50.5 | | | 1.64 | |
Total | $ | 1,875,963 | | | 24.1 | % | | 53.9 | % | | 1.59 | |
| | | | | | | |
Total Multifamily and Commercial Real Estate Loans | $ | 3,791,721 | | | 48.7 | % | | 56.5 | % | | 1.60x |
Critical Accounting Policies
The Company considers certain accounting policies to be critically important to the fair presentation of its consolidated balance sheetsConsolidated Statements of Financial Condition and statementsConsolidated Statements of income.Income. These policies require management to make significant judgments on matters which by their nature have elements of uncertainty. The sensitivity of the Company’s consolidated financial statements to these critical accounting policies, and the assumptions and estimates applied, could have a significant impact on its consolidated balance sheetsfinancial condition and statementsresults of income. Assumptions,operations. These assumptions, estimates and judgments made by management can be influenced by a number of factors, including the general economic environment. The Company has identified the following as critical accounting policies:
▪Adequacy of the allowance for loancredit losses
▪Valuation of securities and impairment analysis
▪Valuation of post-retirement benefits
▪Valuation of deferred tax assets
▪Valuation of retirement and post-retirement benefits
The calculationdetermination of the allowance for loancredit losses (“ACL”) on loans is considered a critical accounting policyestimate by management because of the Company.high degree of judgment involved in determining qualitative loss factors, the subjectivity of the assumptions used, and the potential for changes in the forecasted economic environment The allowanceACL is maintained at a level management considers adequate to provide for loanestimated losses is a valuation account that reflects management’sand impairment based upon an evaluation of the probable lossesknown and inherent risk in the loan portfolio. DeterminingThe ACL consists of two elements: (1) identification of loans that must be individually analyzed for impairment and (2) establishment of an ACL for loans collectively analyzed.
Management estimates the amountACL using relevant and reliable information from internal and external sources, related to past events, current conditions, and a reasonable and supportable forecast. Historical credit loss experience for both the Company and its segment-specific peers provides the basis for the estimate of expected credit losses. Credit losses over a defined period are converted to PD rate curves through the use of segment-specific LGD risk factors that convert default rates to loss severity based on industry-level, observed relationships between the two variables for each segment, primarily due to the nature of the underlying collateral. These risk factors were assessed for reasonableness against the Company’s own loss experience and adjusted in certain cases when the relationship between the Company’s historical default and loss severity deviate from that of the wider industry. The historical PD curves, together with corresponding economic conditions, establish a quantitative relationship between economic conditions and loan performance through an economic cycle.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Portfolio segments are defined as the level at which an entity develops and documents a systematic methodology to determine its allowance for credit losses. Management developed segments for estimating losses based on the type of borrower and collateral which is generally based upon federal call report segmentation. The segments have been combined or sub-segments have been added as needed to ensure loans of similar risk profiles are appropriately pooled.
We maintain a loan losses involvesreview system that provides a high degreeperiodic review of judgment. Estimates required to establish the allowance include:loan portfolio and the overall economic environment,identification of individually analyzed loans. The ACL for individually analyzed loans is based on the fair value of collateral strength of guarantors, loss exposureor cash flows. While management uses the best information available to make such evaluations, future adjustments to the allowance may be necessary if economic conditions differ substantially from the assumptions used in making the eventevaluations.
The ACL quantitative allowance for each segment is measured using a discounted cash flow methodology incorporating an econometric, probability of default (“PD”) and loss given default (“LGD”) with distinct segment-specific multi-variant regression models applied. Expected credit losses are estimated over the amount and timinglife of futurethe loans by measuring the difference between the net present value of modeled cash flows and amortized cost basis. Contractual cash flows over the contractual life of the loans are the basis for the modeled cash flows, adjusted for model defaults and expected prepayments and discounted at the loan-level effective interest rate. The contractual term excludes expected extensions, renewals, and modifications.
Management estimates the ACL using relevant and reliable information from internal and external sources, related to past events, current conditions, and a reasonable and supportable forecast. Historical credit loss experience for both the Company and its segment-specific peers provides the basis for the estimate of expected credit losses. Credit losses over a defined period are converted to PD rate curves through the use of segment-specific LGD risk factors that convert default rates to loss severity based on impaired loans, and determination of loss factors appliedindustry-level, observed relationships between the two variables for each segment, primarily due to the portfolio segments.nature of the underlying collateral. These estimates are susceptible to significant change. Management regularly reviewsrisk factors were assessed for reasonableness against the Company’s own loss experience withinand adjusted in certain cases when the portfolio, monitors currentrelationship between the Company’s historical default and loss severity deviate from that of the wider industry. The historical PD curves, together with corresponding economic conditions, establish a quantitative relationship between economic conditions and loan performance through an economic cycle.
Using the historical relationship between economic conditions and loan performance, management’s expectation of future loan performance is incorporated using a single economic forecast of macroeconomic variables (i.e., unemployment, gross domestic product, vacancy, and home price index). This forecast is applied over a period that management has determined to be reasonable and supportable. Beyond the period over which management can develop or source a reasonable and supportable forecast, the model reverts to long-term average historical loss rates using a straight-line, time-based methodology. The Company's current forecast period is six quarters, with a four-quarter reversion period to long-term average historical loss rates.
After quantitative considerations, management applies additional qualitative adjustments that consider the expected impact of certain factors not fully captured in the quantitative reserve. Qualitative adjustments include but are not limited to concentrations of large loan balances, delinquency trends, change in collateral values within segments, and other factors related toconsiderations.
The ACL is established through the collectability of the loan portfolio. The Company maintains the allowanceprovision for loancredit losses through provisions for loan losses whichthat are charged to income.income, which is based upon an evaluation of estimated losses in the current loan portfolio, including the evaluation of individually analyzed loans. Charge-offs against the allowance for loan lossesACL are taken on loans where management determines that the collection of loan principal and interest is unlikely. Recoveries made on loans that have been charged-off are credited to the allowance for loan losses.ACL. Although we believe we have established and maintained the ACL on loans at appropriate levels, changes in reserves may be necessary if actual economic and other conditions differ substantially from the forecast used in estimating the ACL.
As partOur financial results are affected by the changes in and the level of the evaluationACL. This process involves our analysis of internal and external variables, and it requires that we exercise judgment to estimate an appropriate ACL. As a result of the adequacyuncertainty associated with this subjectivity, we cannot assure the precision of the allowance foramount reserved, should we experience sizable loan losses each quarter management prepares an analysis that categorizes the entire loan portfolio by certain risk characteristics such as loan type (residential mortgage, commercial mortgage, construction, commercial, etc.) and loan risk rating.
When assigning a risk rating to a loan, management utilizes an eight-point internal risk rating system. Loans deemed to be “acceptable quality” are rated 1 through 4, with a rating of 1 established for loans with minimal risk. Loans deemed to be of “questionable quality” are rated 5 (Watch) in any particular period and/or 6 (Special Mention). Loans with adverse classifications (Substandard, doubtfulsignificant changes in assumptions or loss) are rated 6, 7 or 8, respectively. The risk ratings are also confirmed through periodic loan review examinations, which are currently performed by both an independent third-party and the Company's internal loan review department. The Company requires an annual review be performed above certain dollar thresholds, depending on loan type, to help determine the appropriate risk rating.
Management estimates the amount of loan losses for groups of loans by applying quantitative loss factors to the loan segments at the risk rating level and applying qualitative adjustments to each loan segment at the risk rating level. Quantitative loss factors give consideration to historical loss experience and migration experience by loan type based upon an appropriate look-back period, adjusted for a loss emergence period. Quantitative loss factors are evaluated periodically. Qualitative adjustments give consideration to other qualitative or environmental factors such as trends and levels of delinquencies, impaired loans, charge-offs, recoveries and loan volumes, as well as national and local economic trends and conditions. Qualitative adjustments reflect risks in the loan portfolio not captured by the quantitative loss factors and, as such, are evaluated from a risk level perspective relative to the risk levels present over the look-back period. The reserves resulting from the application of both the quantitative experience and qualitative factors are combined to arrive at the allowance for loan losses.
Management believescondition. We believe the primary risks inherent in the portfolio are a general decline in the economy, a decline in real estate market values, rising unemployment, elevated unemployment, increasing vacancy rates, and increases in interest rates in the absence of economic improvement.improvement or any other such factors. Any one or a combination of these events may adversely affect a borrowers’borrower's ability to repay theirits loan, resulting in increased delinquencies and loan losses. Accordingly, the Company haswe have recorded loan credit losses at a level which is estimated to represent the current risk in its loan portfolio. Management considers it important
Most of our non-performing assets are collateral dependent loans which are written down to maintain the ratio of the allowance for loan losses to total loans at an acceptable level considering the current composition of the loan portfolio.
Although management believes that the Company has established and maintained the allowance for loan losses at appropriate levels, additional reserves may be necessary if future economic and other conditions differ substantially from the current operating environment. Management evaluates its estimates and assumptions on an ongoing basis and the estimates and assumptions are adjusted when facts and circumstances necessitate a re-valuation of the estimate. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. In addition, regulatory agencies periodically review the adequacy of the Company’s allowance for loan losses as an integral part of their examination process. Such agencies may require the Company to recognize additions to the allowance or additional write-downs based on their judgments about information available to them at the time of their examination. Although management uses the best information available, the level of the allowance for loan losses remains an estimate that is subject to significant judgment.
The Company’s available-for-sale securities portfolio is carried at fair value, with unrealized gains or losses, net of taxes, reported in accumulated other comprehensive income or loss. Fair values are based on third party market quotations. Securities which the Company has the intent and ability to hold to maturity are classified as held-to-maturity and carried at amortized cost. Management conducts a periodic review and evaluation of the securities portfolio to determine if any declines in the fair values of securities are other-than-temporary. In this evaluation, if such a decline were deemed other-than temporary, management would measure the total credit-related component of the unrealized loss, and recognize that portion of the loss as a charge to current period earnings. The remaining portion of the unrealized loss would be recognized as an adjustment to accumulated other comprehensive income (loss). The fair value of the securities portfolio is significantly affected by changescollateral less estimated costs to sell. We continue to assess the collateral of these loans and update our appraisals on these loans on an annual basis. To the extent the property values decline, there could be additional losses on these non-performing assets, which may be
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
material. Management considered these market conditions in interest rates. In general, as interest rates rise,deriving the fair valueestimated ACL. Should economic difficulties occur, the ultimate amount of fixed-rate securities decreases and as interest rates decline, the fair value of fixed-rate securities increases. The Company determines if it has the intent to sell these securities or if it is more likely than not that the Company would be required to sell the securities before the anticipated recovery. If either exists, the entire decline in value is considered other-than-temporary and would be recognized as an expense in theloss could vary from our current period.estimate.
The Company provides certain health care and life insurance benefits to eligible retired employees. The cost of retiree health care and other benefits during the employees' period of active service are accrued monthly. The accounting guidance requires the following: a) recognizing in the statement of financial position the over funded or underfunded status of a defined benefit post-retirement plan measured as the difference between the fair value of plan assets and the benefit obligations; b) measuring a plan's assets and its obligations that determine its funded status as of the end of the Company's fiscal year (with limited exceptions); and c) recognizing as a component of other comprehensive income (loss), net of tax, the actuarial gain and losses and the prior service costs and credits that arise during the period.
The determination of whether deferred tax assets will be realizable is predicated on the reversal of existing deferred tax liabilities, utilization against carry-back years, and estimatesprojections of future taxable income. SuchThese estimates are subject to management’s judgment. A valuation allowance is established when management is unable to conclude that it is more likely than not that it will realize deferred tax assets based on the nature and timing of these items. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income tax expense in the period enacted.
Comparison of Financial Condition at Management believes, based on current facts, that it is more likely than not that there will be sufficient taxable income in future years to realize federal deferred tax assets and that it is more likely than not that the benefits from certain state temporary differences will not be realized. At September 30, 2023 and December 31, 2017 and September 30, 2017
Total Assets. Total assets increased $337.2 million or 6.2% to $5.8 billion at December 31, 2017 from $5.4 billion at September 30, 2017. The increase was primarily2022, the result of growth in investment securities and loans, which was primarily funded by short-term borrowings and to a lesser extent deposits.
Total Cash and Cash Equivalents. Total cash and cash equivalents decreased $35.5 million, or 35.1%, to $65.5 million at December 31, 2017 from $101.0 million at September 30, 2017, as excess funds were redeployed principally to fund the purchase of investment securities.
Investment Securities. Total investment securities increased $260.1 million, or 37.7%, to $950.2 million at December 31, 2017 from $690.1 million at September 30, 2017. Consistent with our anticipated use of proceeds and to take advantage of then-existing investment opportunities in the securities market, we increased our position in investment securities utilizing short-term borrowings originated during the quarter ended December 31, 2017, with the intent to repay the borrowings with proceeds from the offering. At December 31, 2017, our total investment securities portfolio consisted of 74.8% of available-for-sale securities and 25.2% of securities held-to-maturity as compared to 80.7% and 19.3%, respectively, at September 30, 2017. At December 31, 2017, our investment portfolio comprised 16.5% of total assets.
Loans Receivable. Loans receivable, net, increased $92.8 million, or 2.2%, to $4.4 billion at December 31, 2017 from $4.3 billion at September 30, 2017. The increase was primarily the result of purchasing $49.8 million of commercial real estate and multifamily loans combined with an increase in residential loans of $37.4 million. The purchased loans were re-underwritten by Columbia Bank using its own underwriting standards.
Non-Performing Assets. Non-performing assets increased $696 thousand to $7.5 million, or 0.13% of total assets at December 31, 2017 from $6.8 million, or 0.12% of total assets at September 30, 2017.
Deposits. Deposits increased $139.9 million, or 3.4%, to $4.3 billion at December 31, 2017 from $4.1 billion at September 30, 2017. The increase was primarily the result of growth in interest-bearing and noninterest-bearing transaction accounts as well as certificates of deposit.
Borrowings. Borrowings increased $196.0 million, or 26.7%, to $929.1 million at December 31, 2017 from $733.0 million at September 30, 2017, primarily due to increases in short-term Federal Home Loan Bank of New York advances used to purchase investment securities as part of our leverage strategy noted above.
Stockholder’s Equity. Total stockholder’s equity decreased $3.8 million, or 0.8%, to $472.1 million at December 31, 2017 from $475.9 million at September 30, 2017. The decrease was the result of a $7.5 million increase in accumulated other comprehensive loss primarily attributable to a decline in the discount rate used to present value our pension benefit obligations, which was partially offset by net income of $3.7 million for the three months ended December 31, 2017.
Comparison of the Results of Operations for the Three Months Ended December 31, 2017 and 2016
General. Net income decreased $6.3 million, or 63.2%, to $3.7 million for the three months ended December 31, 2017 compared to $10.0 million for the three months ended December 31, 2016. The decrease was primarily attributable to a $4.1 million increase in income tax expense due to the re-measurement of ourCompany's net deferred tax assets totaled $37.3 million and $36.9 million, respectively, which included a valuation allowance totaling $2.0 million at both period end dates. Based upon projections of future taxable income and the ability to carryforward operating losses indefinitely, management believes it is more likely than not the Company will realize the remaining deferred tax assets.
The Company provides certain health care and life insurance benefits, along with a split dollar BOLI death benefit, to eligible retired employees. The cost of retiree health care and other benefits during the employees' period of active service are accrued monthly. The accounting guidance requires the following: a) recognize in the statement of financial position the over funded or underfunded status of a defined benefit post-retirement plan measured as wellthe difference between the fair value of plan assets and the benefit obligations; b) measure a plan's assets and its obligations that determine its funded status as of the end of the Company's fiscal year (with limited exceptions); and c) recognize as a $3.4 million increase incomponent of other comprehensive income (loss), net of tax, the provision for loan losses. These items were partially offset by a $3.5 million increase in net interest income.
Net Interest Income. Net interest income increased $3.5 million, or 10.5%, to $36.9 million for the three months ended December 31, 2017 compared to $33.4 million for the three months ended December 31, 2016. The increase was largely a result of an increase in interest income on loans of $3.7 million due to portfolio
growth.
Interestactuarial gain and Dividend Income. Interestlosses and dividend income increased $5.0 million, or 11.4%, to $49.2 million for the three months ended December 31, 2017 compared to $44.1 million for the three months ended December 31, 2016. The increase was primarily the result of increased average loan and investment security balances. In addition, the yield on average earning assets increased eight basis points for the three months ended December 31, 2017 compared to the prior yearservice costs and credits that arise during the period.
Interest income on loans increased $3.7 million, or 9.3%, to $43.0 million for the three months ended December 31, 2017 compared to $39.4 million for the three months ended December 31, 2016, due to a $301.8 million increase in the average loan balance as well as a six basis point increase in the yield.
Interest income on investment securities, including Federal Home Loan Bank stock, increased $1.3 million, or 27.6%, to $6.0 million for the three months ended December 31, 2017 compared to $4.7 million for the three months ended December 31, 2016, due to a $122.1 million increase in the average balance coupled with a 24 basis point increase in the yield.
Interest Expense. Interest expense increased $1.5 million, or 14.1%, to $12.2 million for the three months ended December 31, 2017 compared to $10.7 million for the three months ended December 31, 2016. The increase was attributable to both a $340.8 million increase in average interest-bearing These assets and liabilities and a five basis point increase in the costexpenses are based upon actuarial assumptions including interest rates, rates of interest-bearing liabilities.
Interest expense on interest-bearing deposits increased $1.4 million, or 22.8%, to $7.6 million for the three months ended December 31, 2017 compared to $6.2 million for the three months ended December 31, 2016, due to a ten basis point increase in the cost of average interest-bearing deposits coupled with a $256.0 million increase in average interest-bearing deposits.
Interest expense on borrowings increased $101 thousand, or 2.2%, to $4.6 million for the three months ended December 31, 2017 compared to $4.5 million for the three months ended December 31, 2016, the result of an $84.8 million increase in average borrowings which was largely offset by a 27 basis point decrease in the cost of average borrowings. The decrease in the cost of average borrowings reflects the maturity of certain higher cost borrowings combined with the addition of lower cost short-term borrowings.
Provision for Loan Losses. The provision for loan losses was $3.4 million for the three months ended December 31, 2017, compared to no provision for the three months ended December 31, 2016. The provision recorded during the three months ended December 31, 2017 was due to: (i) changes in certain qualitative factors based on management’s assessment of the impact of the Tax Cuts and Jobs Act on collateral values supporting our residential and home equity loan portfolio; (ii) an increase in the loss emergence period on the commercial real estate portfolio; and (iii) growth of the loan portfolio.
Non-Interest Income. Non-interest income decreased $833 thousand, or 15.1%, to $4.7 million for the three months ended December 31, 2017 compared to $5.5 million for the three months ended December 31, 2016. The decrease was largely the result of a $411 thousand gain on sale of securities and a $409 thousand gain on sale of loans recognized during the three months ended December 31, 2016 which did not reoccur in the current year period. In addition, there was a decline in title insurance fees of $319 thousand between periods due to reduced activity in our title insurance business.
Non-Interest Expense. Non-interest expense increased $1.5 million, or 6.2%, to $25.5 million for the three months ended December 31, 2017 compared to $24.1 million for the three months ended December 31, 2016. The increase was primarily the result of an increase in advertising expenses of $697 thousand related to product advertising and an increase in compensation, expected rate of return on plan assets and employee benefits expensethe length of $611 thousand.time we will have to provide those benefits. Actual results may differ from these assumptions. These assumptions are reviewed and updated at least annually, and management believes the estimates are reasonable.
Income Tax Expense. Income tax expense increased $4.1 million, or 84.6%, to $9.0 million for the three months ended December 31, 2017 compared to $4.9 million for the three months ended December 31, 2016. The increase was the result of the re-measurement of our net deferred tax assets resulting from the change in the federal corporate income tax rate and a corresponding charge to income tax expense of $4.7 million as discussed above.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
| |
Item 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES |
Net Interest Income:
Qualitative Analysis.Interest rate risk is defined as the exposure of a Company's current and future earnings and capital arising from adverse movements in market interest rates. The guidelines of the Company’s interest rate risk policy seek to limit the exposure to changes in interest rates that affect the underlying economic value of assets, liabilities, earnings and capital.
The Asset/Liability Committee meets regularly to review the impact of interest rate changes on net interest income, net interest margin, net income, and the economic value of equity. The Asset/Liability Committee reviews a variety of strategies that project changes in asset or liability mix and the impact of those changes on projected net interest income and net income.
The Company’s strategy for liabilities has been to maintain a stable funding base by focusing on core deposit accounts. The Company’s ability to retain maturing time deposit accounts is the result of its strategy to remain competitively priced within its marketplace. The Company’s pricing strategy may vary depending upon current funding needs and the ability of the Company to fund operations through alternative sources.
Quantitative Analysis. Current and future sensitivity to changes in interest rates are measured through the use of balance sheet and income simulation models. The analysis captures changes in net interest income using flat rates as a base and rising and declining interest rate forecasts. Changes in net interest income and net income for the forecast period, generally twelve to twenty-four months, isare measured and compared to policy limits for acceptable changes. The Company periodically reviews historical deposit re-pricing activity and makes modifications to certain assumptions used in its balance sheet and income simulation models regarding the interest rate sensitivity of deposits. These modifications are made to more closely reflect the most likely results under the various interest rate change scenarios. Since it is inherently difficult to predict the sensitivity of interest bearinginterest-bearing deposits to changes in interest rates, the changes in net interest income due to changes in interest rates cannot be precisely predicted. There are a variety of reasons that may cause actual results to vary considerably from the predictions presented below which include, but are not limited to, the timing, magnitude, and frequency of changes in interest rates, interest rate spreads, prepayments, and actions taken in response to such changes.
Assumptions used in the simulation model may include but are not limited to:
•InvestmentSecurities pricing from third parties;
•Loan pricing indications from third parties;
•Loan and depository spread assumptions based upon the Company's product offerings;
•InvestmentSecurities and borrowing spreads based upon third party indications; and
•Prepayment assumptions derived from the Company's actual results and third party surveys.
The following table sets forth the results of the estimated impact of interest rate changes on our estimated net interest income as of December 31, 2017:
|
| | |
| December 31, |
| 2017 |
Change in Interest Rates (Basis Points) | Change in Net Interest Income |
-100 | (0.89 | )% |
Base | - |
|
+100 | (0.91 | )% |
+200 | (2.38 | )% |
Another measure of interest rate sensitivity is to model changes in economic value of equity ("EVE") through the use of immediate and sustained interest rate shocks. The following table illustrates the result of the economic value of equity model as of December 31, 2017 (dollars in thousands):
|
| | | | | | | | | | | | | | | | | |
|
| December 31, 2017 |
|
|
|
| Estimated Increase (Decrease) in EVE |
| EVE as a Percentage of Economic Value of Assets |
Change in Interest Rates (Basis Points) |
| Estimated EVE |
| Amount |
| Percent |
| EVE Ratio |
| Change in Basis Points |
-100 |
| $ | 830,835 |
|
| $ | 40,586 |
|
| 5.1 | % |
| 14.10 | % |
| 27 |
|
Base |
| 790,249 |
|
| - |
|
| - |
|
| 13.84 | % |
| - |
|
+100 |
| 711,430 |
|
| (78,819 | ) |
| (10.0 | )% |
| 12.88 | % |
| (96 | ) |
+200 |
| 625,566 |
|
| (164,683 | ) |
| (20.8 | )% |
| 11.72 | % |
| (212 | ) |
The preceding table indicates that as of December 31, 2017, in the event of an immediate and sustained 200 basis point increase in interest rates, the EVE is projected to decrease 20.8%, or $164.7 million. If rates were to decrease 100 basis points, the model forecasts a 5.1%, or $40.6 million increase in the EVE. Certain shortcomings are inherent in the methodologies used in the above interest rate risk measurements. Modeling changes in net interest income requires the use of certain assumptions regarding prepayment and deposit repricing, which may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. While management believes such assumptions are reasonable, there can be no assurance that assumed prepayment rates and repricing rates will approximate actual future loanasset prepayment and depositliability repricing activity. Moreover, net
The table below sets forth an approximation of our interest rate exposure. Net interest income assumes that the composition of interest sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and also assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration to maturity or repricing of specific assets and liabilities. Accordingly, although the net interest income table provides an indicationindication of the Company’sour interest rate risk exposure at a particular point in time, such measurement is not intended to and does not provide a precise forecast of the effect of changes in market interest rates on the Company’sour net interest income and will differ from actual.
Asset Quality:
The following table below sets forth, information regarding the Company’s non-performing assets as of December 31, 2017 and September 30, 2017 (in thousands):2023, the net portfolio value, the estimated changes in the net portfolio value, and the net interest income that would result from the designated instantaneous parallel changes in market interest rates. This data is for Columbia Bank and Freehold Bank and its subsidiaries only and does not include any assets of the Company.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
| | | | | | | | | | | | | | | |
| | December 31, 2017 | | September 30, 2017 |
| | (In Thousands) |
Mortgage Loans: | | | | |
Residential | | $ | 3,360 |
| | $ | 3,496 |
|
Multi-Family & Commercial | | 1,329 |
| | 1,510 |
|
Total Mortgage Loans | | 4,689 |
| | 5,006 |
|
Commercial Loans | | 1,263 |
| | 1,038 |
|
Consumer Loans | | 573 |
| | 351 |
|
Total Non-Performing Loans | | 6,525 |
| | 6,395 |
|
Foreclosed Assets | | 959 |
| | 393 |
|
Total Non-Performing Assets | | $ | 7,484 |
| | $ | 6,788 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Twelve Months Net Interest Income | | Net Portfolio Value ("NPV") |
Change in Interest Rates (Basis Points) | Amount | | Dollar Change | | Percent of Change | | Estimated NPV | | Present Value Ratio | | Percent Change |
| | | | | (Dollars in thousands) | | | | |
+400 | $ | 154,880 | | | $ | (42,324) | | | (21.46) | % | | $ | 669,508 | | | 7.98 | % | | (41.61) | % |
+300 | 166,498 | | | (30,706) | | | (15.57) | | | 790,862 | | | 9.15 | | | (31.02) | |
+200 | 177,174 | | | (20,030) | | | (10.16) | | | 911,765 | | | 10.25 | | | (20.48) | |
+100 | 187,544 | | | (9,660) | | | (4.90) | | | 1,030,965 | | | 11.25 | | | (10.08) | |
Base | 197,204 | | | — | | | — | | | 1,146,523 | | | 12.15 | | | — | |
-100 | 207,364 | | | 10,160 | | | 5.15 | | | 1,259,588 | | | 12.94 | | | 9.86 | |
-200 | 212,890 | | | 15,686 | | | 7.95 | | | 1,334,324 | | | 13.30 | | | 16.38 | |
-300 | 212,482 | | | 15,278 | | | 7.75 | | | 1,368,384 | | | 13.64 | | | 19.35 | |
-400 | 202,205 | | | 5,001 | | | 2.54 | | | 1,336,418 | | | 13.32 | | | 16.56 | |
The following table sets forth information regarding the Company's 60-89 day delinquent loans as As of December 31, 2017 and September 30, 2017 (in thousands):2023, based on the scenarios above, net interest income would decrease by approximately 10.16% if rates were to rise 200 basis points, and would increase by 7.95% if rates were to decrease 200 basis points over a one-year time horizon.
|
| | | | | | | | | | | | | | | |
| | December 31, 2017 | | September 30, 2017 |
| | (In Thousands) |
Mortgage loans: | | | | |
Residential | | $ | 1,229 |
| | $ | 932 |
|
Multi-Family & Commercial | | 380 |
| | 123 |
|
Total Mortgage Loans | | 1,609 |
| | 1,055 |
|
Commercial Loans | | 730 |
| | 388 |
|
Consumer Loans | | 26 |
| | 187 |
|
Total 60-89 day delinquent loans | | $ | 2,365 |
| | $ | 1,630 |
|
At December 31, 2017, Another measure of interest rate sensitivity is to model changes in net portfolio value through the allowance for loan losses totaled $58.2 million, or 1.30%use of total loans, compared with $54.6 million, or 1.26%immediate and sustained interest rate shocks. As of total loans at September 31, 2017. Total non-performing loans were $6.5 million, or 0.15% of total loans at December 31, 2017, compared to $6.4 million, or 0.15% of total loans at September 30, 2017.2023, based on the scenarios above, in the event of an immediate and sustained 200 basis point increase in interest rates, the NPV is projected to decrease 20.48%. If rates were to decrease 200 basis points, the model forecasts a 16.38% increase in the NPV.
At December 31, 2017 and Overall, our September 30, 2017, the Company held $959 thousand2023 results indicate that we are adequately positioned with an acceptable net interest income and $393 thousand of foreclosed assets, respectively. During the three months ended December 31, 2017, there were 2 additionseconomic value at risk in all scenarios and that all interest rate risk results continue to foreclosed assets with a carrying value of $566 thousand.be within our policy guidelines.
Non-performing assets totaled $7.5 million, or 0.13% of total assets at December 31, 2017, compared to $6.8 million, or 0.13% of total assets at September 31, 2017.
Liquidity Management and Capital Resources:
Liquidity Management. Liquidity isrefers to the Company's ability to generate adequate amounts of cash to meet current and future financial obligations of a short-term and long-term nature. Our primary sourceSources of funds consistsconsist of deposit inflows, loan repayments and maturities, maturities and sales of securities, and the ability to execute new borrowings. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows, calls of investmentdebt securities, and borrowed fundsprepayments on loans and prepayments of loansmortgage-backed securities are influenced by economic conditions, competition, and interest rate movements.
The Company's cash flows are classifiedidentified as cash flows from operating activities, investing activities and financing activities. Refer to the Consolidated Statements of Cash Flows for further details of the cash inflows and outflows of the Company.
We mitigate liquidity risk by attempting to structure our balance sheet prudently and by maintaining diverse borrowing resources to fund potential cash needs. For example, we structure our balance sheet so that we fund less liquid assets, such as loans, with stable funding sources, such as retail deposits, long-term debt, wholesale borrowings, and capital. We assess liquidity needs arising from asset growth, maturing obligations, and deposit withdrawals, taking into account operations in both the normal course of business and times of unusual events. In addition, we consider our off-balance sheet arrangements and commitments that may impact liquidity in certain business environments.
Our Asset/Liability Committee measures liquidity risks, sets policies to manage these risks, and reviews adherence to those policies at its quarterly meetings. For example, we manage the use of short-term unsecured borrowings as well as total wholesale funding through policies established and reviewed by our Asset/Liability Committee. In addition, the Risk Committee of our Board of Directors reviews liquidity limits, and reviews current and forecasted liquidity positions at each of its regularly scheduled meetings.
We have contingency funding plans that assess liquidity needs that may arise from certain stress events such as rapid asset growth or financial market disruptions. Our contingency plans also provide for continuous monitoring of net borrowed funds and dependence and available sources of contingent liquidity. These sources of contingent liquidity include cash and cash equivalents, capacity to borrow at the Federal Reserve discount window or the Bank Term Funding Program and through the FHLB system, fed funds purchased from other banks and the ability to sell, pledge or borrow against unencumbered securities in our securities
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
portfolio. As of September 30, 2023, the potential liquidity from these sources is an amount we believe currently exceeds any contingent liquidity need.
Capital Resources. The Company isand its subsidiary banks (Columbia Bank and Freehold Bank) are subject to various regulatory capital requirements administered by the federal banking agencies.regulators, including a risk-based capital measure. The Federal Reserve establishes capital requirements, including well capitalized standards, for the consolidated financial holding company, and the Office of the Comptroller of the Currency (the "OCC") has similar requirements for the Company's subsidiary banks. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company's consolidated statementsConsolidated Statements of financial condition. Financial Condition.
Federal regulators require federally insured depository institutions to meet several minimum capital standards: 1)(1) total capital to risk-weighted assets of 8.0%; 2)(2) tier 1 capital to risk-weighted assets of 6.0%; 3)(3) common equity tier 1 capital to risk-weighted assets of 4.5%; and 4)(4) tier 1 capital to adjusted total assets of 4.0%. In addition to establishing the minimum regulatory capital requirements, the regulations limit capital distributions and certain discretionary bonus payments to management if the institution does not hold a “capital conservation buffer” consisting of 2.5% of common equity tier 1 capital to risk-weighted assets above the amount necessary to meet its minimum risk-based capital requirements. The capital conservation buffer requirement was phased in beginning January 1, 2016, at 0.625% of risk-weighted assets and increases each year until fully implemented at 2.5% on January 1, 2019.
The regulations establishregulators established a framework for the classification of savings institutions into five categories: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized. Generally, an institution is considered well capitalized if it has: a total capital to risk-weighted assets ratio of at least 10%10.5%, a tier 1 capital to risk-weighted assets ratio of at least 8%8.5%, a common tier 1 capital to risk-weighted assets ratio of at least 6.5%7.0%, and a tier 1 capital to adjusted total assets ratio of at least 5.0%4.0%. As of September 30, 2023 and December 31, 20172022, each of the Company and Columbia Bank and Freehold Bank exceeded all capital adequacy requirements to which it iswas subject.
The following tabletables presents the Company's, Columbia Bank's and Freehold Bank's actual capital amounts and ratios as ofat September 30, 2023 and December 31, 20172022 compared to the Federal Reserve Bank minimum capital adequacy requirements and the Federal Reserve Bank requirements for classification as a well - capitalizedwell-capitalized institution:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Actual | | Minimum Capital Adequacy Requirements | | Minimum Capital Adequacy Requirements with Capital Conservation Buffer | | To be Well Capitalized Under Prompt Corrective Action Provisions |
| Amount | Ratio | | Amount | Ratio | | Amount | Ratio | | Amount | Ratio |
Company | (In thousands, except ratio data) |
At September 30, 2023: | | | | | | | | | | | |
Total capital (to risk-weighted assets) | $ | 1,100,669 | | 13.91 | % | | $ | 633,028 | | 8.00 | % | | $ | 830,849 | | 10.50 | % | | N/A | N/A |
Tier 1 capital (to risk-weighted assets) | 1,040,960 | | 13.16 | | | 474,771 | | 6.00 | | | 672,592 | | 8.50 | | | N/A | N/A |
Common equity tier 1 capital (to risk-weighted assets) | 1,033,743 | | 13.06 | | | 356,078 | | 4.50 | | | 553,900 | | 7.00 | | | N/A | N/A |
Tier 1 capital (to adjusted total assets) | 1,040,960 | | 10.25 | | | 406,283 | | 4.00 | | | 406,283 | | 4.00 | | | N/A | N/A |
| | | | | | | | | | | |
At December 31, 2022: | | | | | | | | | | | |
Total capital (to risk-weighted assets) | $ | 1,145,331 | | 15.39 | % | | $ | 595,313 | | 8.00 | % | | $ | 781,348 | | 10.50 | % | | N/A | N/A |
Tier 1 capital (to risk-weighted assets) | 1,085,665 | | 14.59 | | | 446,485 | | 6.00 | | | 632,520 | | 8.50 | | | N/A | N/A |
Common equity tier 1 capital (to risk-weighted assets) | 1,078,448 | | 14.49 | | | 334,863 | | 4.50 | | | 520,899 | | 7.00 | | | N/A | N/A |
Tier 1 capital (to adjusted total assets) | 1,085,665 | | 10.68 | | | 406,643 | | 4.00 | | | 406,643 | | 4.00 | | | N/A | N/A |
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
| | | | | | | | | | | | | | | | | |
| December 31, 2017 |
| Actual | | For capital adequacy purposes | | To be well capitalized under prompt corrective action provisions |
| Amount | Ratio | | Amount | Ratio | | Amount | Ratio |
| (in Thousands) |
Company: |
|
| |
|
| |
|
|
Total capital to risk-weighted assets | $ | 631,952 |
| 15.01 | % | | $ | 336,730 |
| 8.0 | % | | $ | 420,912 |
| 10.0 | % |
Tier 1 capital to risk-weighted assets | 579,080 |
| 13.76 |
| | 252,547 |
| 6.0 |
| | 336,730 |
| 8.0 |
|
Common equity tier 1 capital to risk-weighted assets | 528,080 |
| 12.55 |
| | 189,410 |
| 4.5 |
| | 273,593 |
| 6.5 |
|
Tier 1 capital to adjusted total assets | 579,080 |
| 10.54 |
| | 219,833 |
| 4.0 |
| | 210,456 |
| 5.0 |
|
|
|
| |
|
| |
|
|
| September 30, 2017 |
| Actual | | For capital adequacy purposes | | To be well capitalized under prompt corrective action provisions |
| Amount | Ratio | | Amount | Ratio | | Amount | Ratio |
| (in Thousands) |
Company: |
|
| |
|
| |
|
|
Total capital to risk-weighted assets | $ | 616,052 |
| 15.11 | % | | $ | 326,254 |
| 8.0 | % | | $ | 407,817 |
| 10.0 | % |
Tier 1 capital to risk-weighted assets | 564,854 |
| 13.85 |
| | 244,690 |
| 6.0 |
| | 326,254 |
| 8.0 |
|
Common equity tier 1 capital to risk-weighted assets | 513,854 |
| 12.60 |
| | 183,518 |
| 4.5 |
| | 265,081 |
| 6.5 |
|
Tier 1 capital to adjusted total assets | 564,854 |
| 10.59 |
| | 213,298 |
| 4.0 |
| | 266,023 |
| 5.0 |
|
|
|
|
|
| |
|
|
|
| |
|
|
|
|
|
|
| |
|
| |
|
|
| December 31, 2017 |
| Actual | | For capital adequacy purposes | | To be well capitalized under prompt corrective action provisions |
| Amount | Ratio | | Amount | Ratio | | Amount | Ratio |
| (in Thousands) |
Columbia Bank: |
|
|
| |
|
|
| |
|
|
Total capital to risk-weighted assets | $ | 625,336 |
| 14.90 | % | | $ | 335,736 |
| 8.0 | % | | $ | 419,671 |
| 10.0 | % |
Tier 1 capital to risk-weighted assets | 572,617 |
| 13.64 |
| | 251,802 |
| 6.0 |
| | 335,736 |
| 8.0 |
|
Common equity tier 1 capital to risk-weighted assets | 572,617 |
| 13.64 |
| | 188,852 |
| 4.5 |
| | 272,786 |
| 6.5 |
|
Tier 1 capital to adjusted total assets | 572,617 |
| 10.44 |
| | 221,257 |
| 4.0 |
| | 276,571 |
| 5.0 |
|
|
|
|
| |
|
| |
|
|
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Actual | | Minimum Capital Adequacy Requirements | | Minimum Capital Adequacy Requirements with Capital Conservation Buffer | | To be Well Capitalized Under Prompt Corrective Action Provisions |
| Amount | Ratio | | Amount | Ratio | | Amount | Ratio | | Amount | Ratio |
Columbia Bank | (In thousands, except ratio data) |
At September 30, 2023: | | | | | | | | | | | |
Total capital (to risk-weighted assets) | $ | 1,011,926 | | 13.86 | % | | $ | 584,221 | | 8.00 | % | | $ | 766,790 | | 10.50 | % | | $ | 730,276 | | 10.00 | % |
Tier 1 capital (to risk-weighted assets) | 953,543 | | 13.06 | | | 438,165 | | 6.00 | | | 620,734 | | 8.50 | | | 584,221 | | 8.00 | |
Common equity tier 1 capital (to risk-weighted assets) | 953,543 | | 13.06 | | | 328,624 | | 4.50 | | | 511,193 | | 7.00 | | | 474,679 | | 6.50 | |
Tier 1 capital (to adjusted total assets) | 953,543 | | 9.67 | | | 394,613 | | 4.00 | | | 394,613 | | 4.00 | | | 493,267 | | 5.00 | |
| | | | | | | | | | | |
At December 31, 2022: | | | | | | | | | | | |
Total capital (to risk-weighted assets) | $ | 1,019,850 | | 14.12 | % | | $ | 577,656 | | 8.00 | % | | $ | 758,173 | | 10.50 | % | | $ | 722,070 | | 10.00 | % |
Tier 1 capital (to risk-weighted assets) | 961,613 | | 13.32 | | | 433,242 | | 6.00 | | | 613,759 | | 8.50 | | | 577,656 | | 8.00 | |
Common equity tier 1 capital (to risk-weighted assets) | 961,613 | | 13.32 | | | 324,931 | | 4.50 | | | 505,449 | | 7.00 | | | 469,345 | | 6.50 | |
Tier 1 capital (to adjusted total assets) | 961,613 | | 9.74 | | | 394,968 | | 4.00 | | | 394,968 | | 4.00 | | | 493,711 | | 5.00 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Actual | | Minimum Capital Adequacy Requirements | | Minimum Capital Adequacy Requirements with Capital Conservation Buffer | | To be Well Capitalized Under Prompt Corrective Action Provisions |
| Amount | Ratio | | Amount | Ratio | | Amount | Ratio | | Amount | Ratio |
Freehold Bank | (In thousands, except ratio data) |
At September 30, 2023: | | | | | | | | | | | |
Total capital (to risk-weighted assets) | $ | 45,210 | | 22.24 | % | | $ | 16,265 | | 8.00 | % | | $ | 21,347 | | 10.50 | % | | $ | 20,331 | | 10.00 | % |
Tier 1 capital (to risk-weighted assets) | 43,850 | | 21.57 | | | 12,198 | | 6.00 | | | 17,281 | | 8.50 | | | 16,265 | | 8.00 | |
Common equity tier 1 capital (to risk-weighted assets) | 43,850 | | 21.57 | | | 9,149 | | 4.50 | | | 14,231 | | 7.00 | | | 13,215 | | 6.50 | |
Tier 1 capital (to adjusted total assets) | 43,850 | | 15.27 | | | 11,484 | | 4.00 | | | 11,484 | | 4.00 | | | 14,355 | | 5.00 | |
| | | | | | | | | | | |
At December 31, 2022: | | | | | | | | | | | |
Total capital (to risk-weighted assets) | $ | 44,725 | | 22.92 | % | | $ | 15,609 | | 8.00 | % | | $ | 20,486 | | 10.50 | % | | $ | 19,511 | | 10.00 | % |
Tier 1 capital (to risk-weighted assets) | 43,298 | | 22.19 | | | 11,706 | | 6.00 | | | 16,584 | | 8.50 | | | 15,609 | | 8.00 | |
Common equity tier 1 capital (to risk-weighted assets) | 43,298 | | 22.19 | | | 8,780 | | 4.50 | | | 13,657 | | 7.00 | | | 12,682 | | 6.50 | |
Tier 1 capital (to adjusted total assets) | 43,298 | | 15.19 | | | 11,399 | | 4.00 | | | 11,399 | | 4.00 | | | 14,249 | | 5.00 | |
|
| | | | | | | | | | | | | | | | | |
| September 30, 2017 |
| Actual | | For capital adequacy purposes | | To be well capitalized under prompt corrective action provisions |
| Amount | Ratio | | Amount | Ratio | | Amount | Ratio |
| (in Thousands) |
Columbia Bank: |
|
| |
|
| |
|
|
Total capital to risk-weighted assets | $ | 608,971 |
| 14.95 | % | | $ | 325,980 |
| 8.0 | % | | $ | 407,475 |
| 10.0 | % |
Tier 1 capital to risk-weighted assets | 557,815 |
| 13.69 |
| | 244,485 |
| 6.0 |
| | 325,980 |
| 8.0 |
|
Common equity tier 1 capital to risk-weighted assets | 557,815 |
| 13.69 |
| | 183,364 |
| 4.5 |
| | 264,859 |
| 6.5 |
|
Tier 1 capital to adjusted total assets | 557,815 |
| 10.47 |
| | 213,160 |
| 4.0 |
| | 266,450 |
| 5.0 |
|
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Item 4. CONTROLS AND PROCEDURES
| |
Item 4. | CONTROLS AND PROCEDURES |
An evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended) as of December 31, 2017.September 30, 2023. In designing and evaluating the Company’s disclosure controls and procedures, the Company and its management recognize that any controls and procedures, no matter how well-designed and operated, can provide only a reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating and implementing possible controls and procedures. Based on that evaluation, the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.effective.
During the quarter ended December 31, 2017,September 30, 2023, there were no changes in the Company’s internal controlscontrol over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal controlscontrol over financial reporting.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
The Company is involved in various legal actions and claims arising in the normal course of business. In the opinion of management, these legal actions and claims are not expected to have a material adverse impact on the Company’s financial condition.
Item 1A. Risk Factors
For information regarding the Company’s risk factors, refer to the “Risk Factors” inRisk Factors previously disclosed under Item 1A of the Company’s prospectus,Annual Report on Form 10-K for the year ended December 31, 2022 filed with the Securities and Exchange Commission pursuant to Rule 424(b)(3) on February 20, 2018.March 1, 2023. As of December 31, 2017,September 30, 2023, the risk factors of the Company have not materially changed materially from those disclosed in the prospectus. Company's Annual Report on Form 10-K for the year ended December 31, 2022, and the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2023.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table reports information regarding repurchases of the Company's common stock, excluding excise tax during the quarter ended September 30, 2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Period | | Total Number of Shares (2) | | Average Price Paid per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) | | Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs |
July 1 - 31, 2023 | | 186,489 | | | $ | 17.83 | | | 167,640 | | | 1,596,360 | |
August 1 - 31, 2023 | | 275,099 | | | 17.41 | | | 275,099 | | | 1,321,261 | |
September 1 - 30, 2023 | | 91,309 | | | 15.87 | | | 75,800 | | | 1,245,461 | |
Total | | 552,897 | | | $ | 17.29 | | | 518,539 | | | |
| | | | | | | | |
(1) On May 25, 2023, the Company announced that its Board of Directors authorized the Company's sixth stock repurchase program to acquire up to 2,000,000 shares, or approximately 1.9% of the Company's then issued and outstanding common stock. |
(2) During the three months ended September 30, 2023, 18,849 shares were repurchased for taxes related to the 2019 Equity Incentive Plan and 15,509 shares were repurchased pursuant to forfeitures and not as part of a share repurchase program. |
Item 3. Defaults Upon Senior Securities
| |
Item 2. | Unregistered Sales of Equity Securities |
None.
| |
Item 3. | Defaults Upon Senior Securities |
None.
| |
Item 4. | Mine Safety Disclosures |
Not Applicable.
None.Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
During the fiscal quarter ended September 30, 2023, none of our directors or officers informed us of the adoption or termination of a “Rule 10b5-1 trading arrangement or “non-Rule 10b5-1 trading arrangement,” as those terms are defined in Item 408 of Regulation S-K.
Item 6. Exhibits
The exhibits listed in the Exhibit Index (following the signatures section of this report) are included in, or incorporated by reference into this Quarterly Report on Form 10-Q.
Exhibit Index
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3.131.1 | | |
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3.2 | | |
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31.1 | | |
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31.2 | | |
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32 | | |
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101.101.0 | | The following materials from the Company’s Quarterly Report to Stockholders on Form 10-Q for the quarter ended. December 31, 2017,ended September 30, 2023, formatted in inline XBRL (Extensible Business Reporting Language): (i) the Consolidated Statements of Financial Condition, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income (Loss), (iv) the Consolidated Statements of Changes in Stockholder’s Equity, (v) the Consolidated Statements of Cash Flows and (vi) the Notes to the Consolidated Financial Statements. |
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101. INS | | INSThe instance document does not appear in the interactive data file because its XBRL Instance Documenttags are embedded within the Inline XBRL document |
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101. SCH | | SCHInline XBRL Taxonomy Extension Schema Document |
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101. CAL | | CALInline XBRL Taxonomy Extension Calculation Linkbase Document |
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101. DEF | | DEFInline XBRL Taxonomy Extension Definition Linkbase Document |
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101. LAB | | LABInline XBRL Taxonomy Extension LabelsLabel Linkbase Document |
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101. PRE | | PREInline XBRL Taxonomy Extension Presentation Linkbase Document |
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104 | | Cover page Interactive Data File (embedded within the Inline XBRL document) |
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SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the Registrant has duly caused this quarterly report to be signed on its behalf by the undersigned, thereunto duly authorized. | | | | | | | | | | | | | | |
| | | | Columbia Financial, Inc. |
| | | | |
Date: | | November 9, 2023 | | Columbia Financial, Inc |
| | | | |
Date: | | March 23, 2018 | | /s/Thomas J. Kemly |
| | | | Thomas J. Kemly |
| | | | President and Chief Executive Officer |
| | | | (Principal Executive Officer) |
| | | | |
Date: | | March 23, 2018November 9, 2023 | | /s/Dennis E. Gibney |
| | | | Dennis E. Gibney |
| | | | Executive Vice President and Chief Financial Officer |
| | | | (Principal Financial and Accounting Officer)
|