COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

The accompanying unaudited consolidated financial statements include the accounts of Columbia Financial, Inc., its wholly-owned subsidiary Columbia Bank (the "Bank") and the Bank's wholly-owned subsidiaries (collectively, the “Company”). In consolidation, all significant inter-company accounts and transactions are eliminated.

Columbia Financial, Inc. is a wholly-ownedmajority-owned subsidiary of Columbia Bank, MHC ("MHC"). The accounts of MHC are not consolidated in the accompanying consolidated financial statements of the Company.

The Company owns 100% of the common stock of a Delaware statutory basis trust, Columbia Capital Trust I (the "Trust"). The trust is classified as a variable interest entity and is not consolidated as it does not satisfy the conditions for consolidation.

In preparing the interim unaudited consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated balance sheets and consolidated statements of income for the periods presented. Material estimates that are particularly susceptible to change are: the allowance for loan losses, the valuation of securities, the valuation of post-retirement benefits and the valuation of deferred tax assets. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the consolidated financial statements in the period they are deemed necessary. While management uses its best judgment, actual amounts or results could differ significantly from those estimates. Certain reclassifications have been made in the consolidated financial statements to conform with current year classification and presentation.

The interim unaudited consolidated financial statements of the Company presented herein have been prepared in accordance with the rules of the Securities and Exchange Commission (“SEC”) for quarterly reports on Form 10-Q and U.S. generally accepted accounting principles in the United States of America (“GAAP”). Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC.

In the opinion of management, all adjustments and disclosures considered necessary for the fair presentation of the accompanying unaudited consolidated financial statements have been included. Interim results are not necessarily reflective of the results of the entire year. The accompanying unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the yearsyear ended September 30, 2017 and 2016 and notes thereto, which are included in the Company’s Registration Statement on Form S-1.

    

Subsequent to the completion of the offering, the Board of Directors of the Company will have the authority to declare dividends on shares of common stock, subject to statutory and regulatory requirements and other considerations.

    

The direct costs of the Company’s stock offering will be deferred and deducted from the proceeds of the offering. At DecemberMarch 31, 2017,2018, total deferred costs were $1.1$1.7 million. On April 19, 2018, the Company announced the completion of the offering. In connection with the event thatclosing, the Company issued 62,580,155 shares of its common stock to the MHC, the Company's mutual holding company, 3,476,675 shares to the Columbia Bank Foundation, the Bank's charitable foundation, and 49,832,345 shares to depositors of the Bank who subscribed for and were allocated shares in the minority stock offering, is not completed, any deferred costs will be charged to operations.as well as the Columbia Bank Employee Stock Ownership Plan. On April 20, 2018, the Company's common stock began trading on the Nasdaq Global Select Market under the ticker symbol "CLBK".

In February 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") No. 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220). The updated guidance allows a reclassification from accumulated other comprehensive income to retained earnings for the stranded tax effects resulting from the Tax Cuts and Jobs Act further discusseddisclosed in Note 11.9. The purpose of the guidance is to improve the usefulness of the information reported to to the financial statement users. The guidance is effective for all entities for fiscal years beginning after December 31, 2018 and interim periods within those fiscal years. Early adoption is permitted. The Company has completed the analysis of remeasuring our gross deferred tax assets and liabilities utilizing the 21% corporate tax rate. The Company early adopted ASU No. 2018-02 for the period ended December 31, 2017 and the impact of the adoption resulted in a reclassification adjustment between accumulated other comprehensive income and retained earnings of $11.7 million.

    

As an “emerging growth company” as defined in Title 1 of the Jumpstart Our Business Startups (JOBS) Act, the Company has elected to use the extended transition period to delay the adoption of new or reissued accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. As of DecemberMarch 31, 2017,2018, there are no significant differences in the guidance comparability of the financial statements as a result of this extended transition period.

In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities (ASU 2017-12). The purpose of this updated guidance is to better align a company’s financial reporting for hedging activities with the economic objectives of those activities. The effective date for this guidance is fiscal years beginning after December 15, 2018, with early adoption, including adoption in an interim period, permitted. ASU 2017-12 requires a modified retrospective transition method in which the Company will recognize the cumulative effect of the change on the opening balance of each affected component of equity in the statement of financial position as of the date of adoption. The Company is currently evaluating the impact of the new guidance on the Company’s consolidated financial statements.

In March 2017, the FASB issued ASU No. 2017-08, “Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities.” This guidance shortens the amortization period for premiums on callable debt securities by requiring that premiums be amortized to the first (or earliest) call date instead of as an adjustment to the yield over the contractual life. This change more closely aligns the accounting with the economics of a callable debt security and the amortization period with expectations that already are included in market pricing on callable debt securities. This guidance does not change the accounting for discounts on callable debt securities, which will continue to be amortized to the maturity date. This guidance includes only instruments that are held at a premium and have explicit call features. It does not include instruments that contain prepayment features, such as mortgage backed securities; nor does it include call options that are contingent upon future events or in which the timing or amount to be paid is not fixed. The effective date for this guidance is fiscal years beginning after December 15, 2018, including interim periods within the reporting period, with early adoption permitted. Transition is on a modified retrospective basis with an adjustment to retained earnings as of the beginning of the period of adoption. If early adopted in an interim period, adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The Company is currently evaluating the impact of the new guidance on the Company’s consolidated financial statements.

In March 2017, the FASB issued ASU No. 2017-07, "Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Post-retirement Benefit Cost", which requires that companies disaggregate the service cost component from other components of net benefit cost. This update calls for companies that offer post-retirement benefits to present the service cost, which is the amount an employer has to set aside each quarter or fiscal year to cover the benefits, in the same line item with other current employee compensation costs. Other components of net benefit cost will be presented in the income statement separately from service costs component and outside the subtotal of income from operations, if one is presented. This guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is currently evaluating the impact of the new guidance on the Company’s consolidated financial statements and does not anticipate the new guidance to have a material impact.

In January 2017, the FASB issued ASU No. 2017-04, “Simplifying the Test for Goodwill Impairment.” The main objective of this guidance is to simplify the accounting for goodwill impairment by requiring that impairment charges be based upon the first step in the current two-step impairment test under Accounting Standards Codification (ASC) 350. Currently, if the fair value of a reporting unit is lower than its carrying amount (Step 1), an entity calculates any impairment charge by comparing the implied fair value of goodwill with its carrying amount (Step 2). The implied fair value of goodwill is calculated by deducting the fair value of all assets and liabilities of the reporting unit from the reporting unit’s fair value as determined in

In August 2016, the FASB issued ASU No. 2016-15, "Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments," a new standard which addresses diversity in practice related to eight specific cash flow issues: debt prepayment or extinguishment costs, settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies (including bank-owned life insurance policies), distributions received from equity method investees, beneficial interests in securitization transactions and separately identifiable cash flows and application of the predominance principle. This guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Entities will apply the standard’s provisions using a retrospective transition method to each period presented. If it is impracticable to apply the amendments retrospectively for some of the issues, the amendments for those issues would be applied prospectively as of the earliest date practicable. The Company is currently evaluating the impact of the new guidance on the Company’s consolidated financial statements and does not anticipate the new guidance to have a material impact.

In June 2016, the FASB issued ASU No. 2016-13, “Measurement of Credit Losses on Financial Instruments”. This guidance provides financial statement users with more decision-useful information about expected credit losses on financial instruments by a reporting entity at each reporting date. The amendments of this guidance require financial assets measured at amortized cost to be presented at the net amount expected to be collected. The allowance for credit losses would represent a valuation account that would be deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. The income statement would reflect the measurement of credit losses that have taken place during the period. The measurement of expected credit losses would be based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. An entity would be required to use judgment in determining the relevant information and estimation methods that are appropriate in its circumstances. The guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within that reporting period, early adoption is permitted. The Company is currently evaluating its existing systems and data to support the new standard as well as assessing the impact ofthat the new guidance will have on the Company's consolidated financial statements. The Company has formed a working group under the direction of the Chief Accounting Officer that is primarily comprised of individuals from finance, credit, risk management, and operations. The Company has been developing an implementation plan as well as considering the use of consultants to aid in the implementation.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”. This guidance requires all lessees to recognize a lease liability and a right-of-use asset, measured at the present value of future minimum lease payments, at the lease commencement date. Lessor accounting remains largely unchanged under the new guidance. The guidance is effective for fiscal years beginning after December 15, 2018, including interim reporting periods within that reporting period, early adoption is permitted. A modified retrospective approach must be applied for leases existing at, or entered into after, the beginning of the earliest comparative period present in the financial statements. The Company is currently evaluating the impact of the new guidance on the Company'sits consolidated financial statements.statements by reviewing its existing lease contracts and service contracts.

In January 2016, the FASB issued ASU No. 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities”. This guidance requires an entity to: i) measure equity investments at fair value through net income, with certain exceptions; (ii) present in other comprehensive income the changes in instrument-specific credit risk for financial liabilities measured using the fair value option; (iii) present financial assets and financial liabilities by measurement category and form of financial asset; (iv) calculate the fair value of financial instruments for disclosure purposes based on an exit price and; (v) assess a valuation allowance on deferred tax assets related to unrealized losses on available-for-sale debt securities in combination with other deferred tax assets. This guidance provides an election to subsequently measure certain nonmarketable equity investments at cost less any impairment and adjusted for certain observable price changes. The guidance also requires a qualitative impairment assessment of such equity investments and amends certain fair value disclosure requirements. The guidance is effective for annual periods beginning after December 15, 2017. The Company is currently evaluating the impact of the new guidance on the Company’s consolidated financial statements by evaluating its revenue streams and does not anticipatecontracts potentially affected by the new guidance to have a material impact.guidance.

In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers." The objective of this amendment is to clarify the principles for recognizing revenue and to develop a common revenue standard for U.S. GAAP and IFRS. This update affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are in the scope of other standards. The guidance is effective for public business entities for financial statements issued for fiscal years beginning after December 15, 2017, and early adoption is permitted. Subsequently, the FASB issued the following standards related to ASU No. 2014-09: ASU No. 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations;” ASU No. 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing;” ASU No. 2016-11, “Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because of ASU No. 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting;” and ASU No. 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients”. These amendments are intended to improve and clarify the implementation guidance of ASU No. 2014-09 and have the same effective date as the original guidance. The Company's revenue is primarily comprised of net interest income on interest earning assets and liabilities and non-interest income. The scope of guidance explicitly excludes net interest income as well as other revenues associated with financial assets and liabilities, including loans, leases, securities and derivatives. The Company is currently evaluating the impact of the new guidance on the Company’s consolidated financial statements and does not anticipate the new guidance to have a material impact.

In March 2017, the FASB issued ASU No. 2017-08, Receivables- NonrefundableReceivables-Nonrefundable Fees and Other Costs (Subtopic 310- 20): Premium Amortization on Purchased Callable Debt Securities. The amendments require the premium to be amortized to the earliest call date. The Company adopted ASU No. 2017-08 for the period ended December 31,beginning October 1, 2017 and the impact was immaterial to the Company's financial statements.

The table below presents the amortized cost and fair value of debt securities available-for-sale at DecemberMarch 31, 20172018 by contractual maturity.maturity excluding equity securities. Expected maturities may differ from contractual maturities due to prepayment or early call privileges of the issuer.

Mortgage-backed securities and collateralized mortgage obligations totaling $615.9$754.9 million at amortized cost and $606.6$735.2 million at fair value are excluded from the maturity table above as their expected lives are likely to be shorter than the contractual maturity date due to principal prepayments.

For the three months ended DecemberMarch 31, 2017,2018, proceeds from the sales of securities-available for sale totaled $9.7 million, resulting in $116 thousand of gross gains and zero losses. For the six months ended March 31, 2018, proceeds from sales of securities available-for-sale totaled $92 thousand,$9.8 million, resulting in zero gains and $60$116 thousand of gross gains and $61 thousand of gross losses. For

There were no sales of securities from the available-for-sale investment portfolio for the three months ended DecemberMarch 31, 2016,2017. For the six months ended March 31, 2017, proceeds from the sales of securities available-for-sale totaled $58.0$57.4 million, resulting in gross gains of $500 thousand and gross losses of $89 thousand.

Securities available-for-sale with a fair value of $282.6$187.6 million and $302.9 million at DecemberMarch 31, 20172018 and September 30, 2017 were sold under agreements to repurchase or were pledged as security for deposits of public funds as required and permitted by law.

The following tables summarize the fair value and gross unrealized losses of those securities that reported an unrealized loss at DecemberMarch 31, 20172018 and September 30, 2017 and if the unrealized loss position was continuous for the twelve months prior to DecemberMarch 31, 20172018 and September 30, 2017:

The Company evaluates securities for other-than-temporary impairment at each reporting period and more frequently when economic or market conditions warrant such evaluation. The temporary loss position associated with securities available-for-sale was the result of changes in market interest rates relative to the coupon of the individual security and changes in credit spreads. The Company does not have the intent to sell securities in a temporary loss position at DecemberMarch 31, 2017,2018, nor is it more likely than not that the Company will be required to sell the securities before their prices recover.the anticipated recovery.

The Company did not record an other-than-temporary impairment charge on securities in the available-for-sale portfolio for the three and six months ended DecemberMarch 31, 20172018 and December 31, 2016.2017.

The following tables present the amortized cost, gross unrealized gains, gross unrealized losses and the fair value for securities held-to-maturity at DecemberMarch 31, 20172018 and September 30, 2017:

The table below presents the amortized cost and fair value of debt securities held-to-maturity at DecemberMarch 31, 20172018 by contractual maturity. Expected maturities may differ from contractual maturities due to prepayment or early call privileges of the issuer.

Mortgage-backed securities and collateralized mortgage obligations totaling 231.2$240.7 million at amortized cost and 227.8$232.3 million at fair value are excluded from the maturity table above as their expected lives are likely to be shorter than the contractual maturity date due to principal prepayments.

There were no sales of securities from the held-to-maturity investment portfolio for the three and six months ended DecemberMarch 31, 20172018 and December 31, 2016.2017.

The following tables summarize the fair value and gross unrealized losses of those securities that reported an unrealized loss at DecemberMarch 31, 20172018 and September 30, 2017 and if the unrealized loss position was continuous for the twelve months prior to DecemberMarch 31, 20172018 and September 30, 2017:

The Company evaluates securities for other-than-temporary impairment at each reporting period and more frequently when economic or market conditions warrant such evaluation. The temporary loss position associated with securities held-to-maturity was the result of changes in market interest rates relative to the coupon of the individual security and changes in credit spreads. The Company does not have the intent to sell securities in a temporary loss position at DecemberMarch 31, 2017,2018, nor is it more likely than not that the Company will be required to sell the securities before their prices recover.the anticipated recovery.

The Company did not record an other-than-temporary impairment charge on securities in the held-to-maturity portfolio for the three and six months ended DecemberMarch 31, 20172018 and December 31, 2016.2017.

Loans receivable at DecemberMarch 31, 20172018 and September 30, 2017 are summarized as follows:

The Company had no loans held for sale at DecemberMarch 31, 20172018 and September 30, 2017.

The Company purchased $2.7 million of residential loans and $2.1 million of commercial real estate and multifamily loans with a carrying value of $49.8 million and residential loans with a carrying value of $6.2 million from third parties during the three months ended DecemberMarch 31, 2017.2018. The Company purchased $9.4$7.4 million of residential loans from third parties forduring the three months ended DecemberMarch 31, 2016.2017. During the six months ended March 30, 2018, the Company purchased $8.9 million of residential loans and $51.9 million of commercial real estate loans. During the six months ended March 31, 2017, the total residential loans purchased were $16.8 million.

At DecemberMarch 31, 20172018 and September 30, 2017, the carrying value of real estate loans serviced by the Company for investors was $478.8$464.3 million and $493.2 million, respectively.