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 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. The following tables present the changes in the components of accumulated other comprehensive income (loss), net of tax, for the three months ended DecemberMarch 31, 20172022 and 2016:2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Three Months Ended March 31, |
| 2022 | | 2021 |
| Unrealized Gains (Losses) on Debt Securities Available for Sale | | Unrealized (Losses) on Swaps | | Employee Benefit Plans | | Accumulated Other Comprehensive (Loss) | | Unrealized Gains on Debt Securities Available for Sale | | Unrealized (Losses) on Swaps | | Employee Benefit Plans | | Accumulated Other Comprehensive (Loss) |
| (In thousands) |
| | | | | | | | | | | | | | | |
Balance at beginning of period | $ | 1,644 | | | $ | (4,917) | | | $ | (42,646) | | | $ | (45,919) | | | $ | 31,028 | | | $ | (16,856) | | | $ | (83,797) | | | $ | (69,625) | |
Current period changes in other comprehensive (loss) income | (57,818) | | | 3,157 | | | 225 | | | (54,436) | | | (17,020) | | | 5,683 | | | 8,455 | | | (2,882) | |
Total other comprehensive (loss) income | $ | (56,174) | | | $ | (1,760) | | | $ | (42,421) | | | $ | (100,355) | | | $ | 14,008 | | | $ | (11,173) | | | $ | (75,342) | | | $ | (72,507) | |
|
| | | | | | | | | | | | | |
| 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 | ) |
|
| | | | | | | | | | | | | |
| 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 months ended DecemberMarch 31, 20172022 and 2016:2021:
| | | | | | | | | | | | | | | | | | | | |
| | Accumulated Other Comprehensive Income (Loss) Components | | |
| | For the Three Months Ended March 31, | | Affected Line Items in the Consolidated Statements of Income |
| | 2022 | | 2021 | | |
| | (In thousands) | | |
| | | | | | |
| | | | | | |
Reclassification adjustment of actuarial net (loss) included in net income | | $ | (339) | | | $ | (1,511) | | | Other non-interest expense |
| | | | | | |
Income tax benefit | | 95 | | | 422 | | | |
Net of tax | | $ | (244) | | | $ | (1,089) | | | |
|
| | | | | | | | |
|
| 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 bothMarch 31, 2022 and December 31, 2017 and September 30, 2017,2021, the Company had ano currency forward contractcontracts in place with a commercial banking customercustomers.
Interest Rate Swaps. At both March 31, 2022 and December 31, 2021, the Company had interest rate swaps in place with a52 commercial banking customers executed by offsetting interest rate swaps with third parties, with aggregated notional amountamounts of $1.6$183.4 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 doesThese 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 March 31, 2022 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, 2021, the Company provides to certain qualified commercial banking customershad 13 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 any14 interest rate swaps with commercial banking customers.
The Company had twonotional amounts of $180.0 million and $190.0 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 March 31, 2022, the Company had 2 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 December 31, 2021, the Company had no interest rate swaps hedged against pools of floating rate commercial loans.
For the three months ended DecemberMarch 31, 20172022 and 2016,2021, the Company did not record any hedge ineffectiveness associated with these contracts.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
16. Derivatives and Hedging Activities (continued)
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 March 31, 2022 and December 31, 2017 and September 30, 2017:2021:
| | | | | | | | | | | | | | | | | | | | | | | |
| March 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 swaps | Other Assets | | $ | 4,226 | | | Other Liabilities | | $ | 7,306 | |
| | | | | | | |
| | | | | | | |
Total derivative instruments | | | $ | 4,226 | | | | | $ | 7,306 | |
|
| | | | | | | | | | | |
| 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, 2021 |
| Asset Derivative | | Liability Derivative |
| Consolidated Statements of Financial Condition | | Fair Value | | Consolidated Statements of Financial Condition | | Fair Value |
| | | (In thousands) | | |
Derivatives: | | | | | | | |
Interest rate swaps | Other Assets | | $ | 9,492 | | | Other Liabilities | | $ | 17,366 | |
| | | | | | | |
Total derivative instruments | | | $ | 9,492 | | | | | $ | 17,366 | |
For the three months ended DecemberMarch 31, 20172022 and 2021, gains of $250,000 and $368,000, respectively, were recorded for changes in fair value of interest rate swaps with third parties.
At March 31, 2022 and December 31, 2016, no gains or losses were recorded in the consolidated statements of income.2021, accrued interest was $405,000 and $567,000.
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 DecemberMarch 31, 20172022, the termination value of derivatives in a net liability position, which includes accrued interest, was $2.7 million. The Company has collateral posting thresholds with certain of its derivative counterparties, and September 30, 2017,has posted collateral of $2.2 million against its obligations under these agreements.
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 and other fees.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
17. Revenue Recognition (continued)
The following table presents non-interest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the three months ended March 31, 2022 and 2021.
| | | | | | | | | | | | | | | |
| For the Three Months Ended March 31, | | |
| 2022 | | 2021 | | | | |
| (In thousands) |
Non-interest income | | | | | | | |
In-scope of Topic 606: | | | | | | | |
Demand deposit account fees | $ | 1,170 | | | $ | 838 | | | | | |
Title insurance fees | 957 | | | 1,620 | | | | | |
Other non-interest income | 2,031 | | | 1,744 | | | | | |
Total in-scope non-interest income | 4,158 | | | 4,202 | | | | | |
Total out-of-scope non-interest income | 2,883 | | | 4,393 | | | | | |
Total non-interest income | $ | 7,041 | | | $ | 8,595 | | | | | |
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.
Title insurance fees are generally recognized at the time the transaction closes or when the service is rendered.
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 DecemberMarch 31, 20172022 and through the financial statement issuance date of March 23, 2018. TheMay 10, 2022, and concluded that no material events occurred that would require disclosure except as noted as noted below.
As noted in Note 2, on May 1, 2022 the Company has not identified any material subsequent events.
completed its acquisition of the RSI Entities and issued 6,086,314 shares of its common stock to the MHC at the effective time of the merger.
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, including the consummation of its pending acquisition of RSI Bank, acquisitions and the integration of acquired businesses, credit risk management, the effect of the COVID-19 pandemic (including its impact on our borrowers and their ability to repay their loans, and on the local and national economies), asset-liability management, the financial and securities markets, 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 March 31, 2022 and December 31, 2021
Net income of $20.4 million was recorded for the quarter ended March 31, 2022, a decrease of $641,000, or 3.0%, compared to net income of $21.0 million for the quarter ended March 31, 2021. The decrease in net income was primarily attributable to a $2.7 million increase in provision for credit losses, a $1.6 million decrease in non-interest income, and a $3.0 million increase in non-interest expense, partially offset by a $6.0 million increase in net interest income and a $712,000 decrease in income tax expense.
Net interest income was $62.7 million for the quarter ended March 31, 2022, an increase of $6.0 million, or 10.5%, from $56.7 million for the quarter ended March 31, 2021. The increase in net interest income was primarily attributable to a $4.9 million decrease in interest expense, resulting from a decrease in interest expense on deposits and borrowings, coupled with a $1.1 million increase in interest income. The decrease in interest expense on deposits was driven by both an inflow of lower cost deposits and the repricing of existing deposits at reduced rates as a result of a sustained lower interest rate environment. The 25 basis point increase in interest rates announced by the Federal Reserve in March 2022 did not significantly impact first quarter results. The increase in interest income for the quarter ended March 31, 2022 was due to an increase in the average balance of interest-earning assets. Prepayment penalties, which are included in interest income on loans, totaled $1.3 million for the quarter ended March 31, 2022, compared to $968,000 for the quarter ended March 31, 2021.
The average yield on loans for the quarter ended March 31, 2022 decreased 25 basis points to 3.62%, as compared to 3.87% for the quarter ended March 31, 2021, due to the sustained lower interest rate environment. The average yield on securities for the quarter ended March 31, 2022 increased 15 basis points to 2.20%, as compared to 2.05% for the quarter ended March 31, 2021, as $47.4 million of higher yielding securities were purchased, and a number of adjustable rate securities tied to various indexes, repriced higher during the quarter. The average yield on other interest-earning assets for the quarter ended March 31, 2022 increased 214 basis points to 2.81%, as compared to 0.67% for the quarter ended March 31, 2021, as average cash balances in lower yielding bank accounts were redeployed into higher yielding loans and securities.
Total interest expense was $6.0 million for the quarter ended March 31, 2022, a decrease of $4.9 million, or 44.9%, from $10.9 million for the quarter ended March 31, 2021. The decrease in interest expense was primarily attributable to a 34 basis point decrease in the average cost of interest-bearing deposits which was partially offset by the impact of the increase in the average balance of deposits. The decrease in the cost of deposits was driven by both an inflow of lower cost deposits and the repricing of existing deposits at lower interest rates. Interest on borrowings decreased $700,000, or 34.6%, due to a decrease in the average balance of borrowings.
The Company's net interest margin for the quarter ended March 31, 2022 increased 18 basis points to 2.98%, when compared to 2.80% for the quarter ended March 31, 2021. The weighted average yield on interest-earning assets decreased 7 basis points to
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
3.27% for the quarter ended March 31, 2022 as compared to 3.34% for the quarter ended March 31, 2021. The average cost of interest-bearing liabilities decreased 32 basis points to 0.39% for the quarter ended March 31, 2022 as compared to 0.71% for the quarter ended March 31, 2021. The decrease in yields and costs for the quarter ended March 31, 2022 were largely driven by a continued lower interest rate environment. The net interest margin increased for the quarter ended March 31, 2022 as the cost of interest-bearing liabilities continued to reprice lower more rapidly than the yields on interest-earning assets and cash and cash equivalents were redeployed into higher yielding loans.
On January 1, 2022, the Company adopted ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), also known as the Current Expected Credit Loss ("CECL") standard. CECL requires the measurement of all expected credit losses over the life of financial instruments held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. In connection with the adoption of CECL, the Company recognized a cumulative effect adjustment that increased stockholders' equity by $6.2 million, net of tax. At adoption and on a gross basis, the Company decreased its allowance for credit losses ("ACL") by $16.8 million for loans, increased its ACL for unfunded commitments, included in other liabilities, by $7.7 million, and established an ACL for debt securities available for sale of $490,000. The provision for credit losses for the quarter ended March 31, 2022 was $1.5 million, an increase of $2.7 million, from a reversal of provision for loan loss of $1.3 million recorded for the quarter ended March 31, 2021. The increase in provision for credit losses during the quarter was primarily attributable to an increase in the balances of loans and the consideration of economic conditions.
Non-interest income was $7.0 million for the quarter ended March 31, 2022, a decrease of $1.6 million, or 18.1%, from $8.6 million for the quarter ended March 31, 2021. The decrease was primarily attributable to a decrease in income from the gain on the sale of loans of $2.0 million and a decrease in income from title insurance fees of $663,000, partially offset by an increase in the change in fair value of equity securities of $667,000.
Non-interest expense was $40.7 million for the quarter ended March 31, 2022, an increase of $3.0 million, or 8.1%, from $37.7 million for the quarter ended March 31, 2021. The increase was primarily attributable to an increase in compensation and employee benefits expense of $2.6 million and an increase in data processing and software expenses of $496,000. The increase in compensation and employee benefits expense was due to an increase in staff levels and related personnel benefit costs, partially due the acquisition of Freehold Bank in December 2021. The increase in data processing and software expenses was attributable to the amortization of software costs related to several digital banking and other Fintech solutions. Included in other non-interest expense for the quarter ended March 31, 2022, were three litigation settlements paid or accrued for totaling $2.2 million, including a previously disclosed award of $1.3 million in attorney’s fees paid to the plaintiffs’ counsel in connection with the settlement of a lawsuit involving the Company and certain of its current and former directors regarding certain 2019 equity awards granted under the Company's 2019 Equity Incentive Plan. Non-interest expense for the quarter ended March 31, 2022 also includes the provision for credit losses for unfunded commitments of $648,000 related to the CECL standard.
Income tax expense was $7.2 million for the quarter ended March 31, 2022, a decrease of $712,000, as compared to $7.9 million for the quarter ended March 31, 2021, 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 26.0% and 27.2% for the quarters ended March 31, 2022 and 2021, respectively.
Comparison of Results of Operations for the Three Months Ended March 31, 2022 and March 31, 2021
Total assets increased $13.0 million, or 0.1%, with a balance of $9.2 billion at both March 31, 2022 and December 31, 2021. The increase in total assets was primarily attributable to an increase in loans receivable, net of $131.7 million, and an increase in cash and cash equivalents of $25.0 million, partially offset by decreases in debt securities available for sale of $124.4 million, debt securities held to maturity of $10.7 million, and other assets of $10.0 million.
Cash and cash equivalents increased $25.0 million, or 35.3%, to $96.0 million at March 31, 2022 from $71.0 million at December 31, 2021. The increase was primarily attributable to repayments on loans and mortgage-backed securities and growth in deposits, partially offset by $47.4 million in purchases of debt securities available for sale and $21.7 million in repurchases of common stock under our stock repurchase program.
Debt securities available for sale decreased $124.4 million, or 7.3%, to $1.6 billion at March 31, 2022 from $1.7 billion at December 31, 2021. The decrease was attributable to repayments of $89.9 million, partially offset by purchases of $47.4 million, consisting primarily of corporate debt and mortgage-backed securities. The gross unrealized gain (loss) on debt securities available for sale decreased $80.2 million, predominately due to rising interest rates, and the allowance for credit losses on debt securities available for sale increased $1.1 million during the quarter ended March 31, 2022.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Debt securities held to maturity decreased $10.7 million, or 2.5%, to $419.0 million at March 31, 2022 from $429.7 million at December 31, 2021 due to repayments of $10.7 million.
Loans receivable, net, increased $131.7 million, or 2.1%, to $6.4 billion at March 31, 2022 from $6.3 billion at December 31, 2021. One-to-four family real estate loans, multi-family real estate loans, commercial real estate loans, and commercial business loans increased $87.4 million, $36.8 million, $13.5 million, and $14.3 million, respectively, partially offset by decreases in construction loans and home equity loans and advances of $33.4 million and $5.9 million, respectively. The allowance for credit losses for loans decreased $15.5 million to $47.2 million at March 31, 2022 from $62.7 million at December 31, 2021. A $16.8 million decrease in the allowance for credit losses for loans was recorded on January 1, 2022 upon adoption of the CECL standard. During the quarter ended March 31, 2022, the allowance for credit losses increased $916,000 primarily due to an increase in the outstanding balance of loans. The March 31, 2022 methodology and impact of loss rates and qualitative factors remained consistent with those established upon initial adoption.
Other assets decreased $10.0 million, or 4.0%, to $239.6 million at March 31, 2022 from $249.6 million at December 31, 2021. The decrease in other assets consisted of a decrease of $15.0 million in the collateral balance related to our swap agreement obligations, and a decrease of $4.9 million in interest rate swap assets, partially offset by an increase in net deferred tax assets of $8.9 million.
Total liabilities increased $59.6 million, or 0.7%, to $8.2 billion at March 31, 2022 from $8.1 billion at December 31, 2021. The increase was primarily attributable to an increase in total deposits of $24.8 million, or 0.3%, and an increase in borrowings of $55.4 million, or 14.7%, partially offset by a decrease in accrued expenses and other liabilities of $22.0 million, or 13.7%. The increase in total deposits consisted of increases in interest-bearing demand deposits, money market accounts, and savings and club deposits of $53.1 million, $39.0 million, and $28.6 million, respectively, partially offset by decreases in non-interest- bearings demand deposits and certificates of deposit accounts of $53.5 million, and $42.5 million, respectively. The increase in borrowings was primarily driven by a $65.5 million increase in FHLB overnight borrowings. The decrease in accrued expenses and other liabilities primarily consisted of a $9.5 million decrease in interest rate swap liabilities, a $9.3 million decrease in accrued bonus and a decrease in net deferred tax liabilities of $9.7 million, partially offset by an increase in allowance for credit losses for unfunded commitments of $8.3 million. Upon the initial adoption of the CECL standard on January 1 2022, an allowance for credit losses for unfunded commitments of $7.7 million was recorded.
Total stockholders’ equity decreased $46.6 million, or 4.3%, to $1.0 billion at March 31, 2022 from $1.1 billion at December 31, 2021. The decrease was primarily attributable to an increase of $54.4 million in unrealized losses on debt securities available for sale and interest rate swap contracts, net of taxes, included in other comprehensive income, and the repurchase of 1,023,519 shares of common stock totaling $21.7 million, or $21.19 per share, under our stock repurchase program, partially offset by net income of $20.4 million.
Asset Quality
The Company's non-performing loans at March 31, 2022 totaled $4.6 million, or 0.07% of total gross loans, as compared to $3.9 million, or 0.06% of total gross loans, at December 31, 2021. The $656,000 increase in non-performing loans was primarily attributable to an increase of $1.3 million in non-performing commercial real estate loans, partially offset by decreases of $566,000 and $65,000, respectively, in non-performing commercial business loans and home equity loans and advances. The increase in non-performing commercial real estate loans was due to an increase in the number of loans from one non-performing loan at December 31, 2021 to two loans at March 31, 2022. The decrease in non-performing commercial business loans was due to a decrease in the number of loans from six non-performing loans at December 31, 2021 to one non-performing loans at March 31, 2022. Non-performing assets as a percentage of total assets totaled 0.05% at March 31, 2022 as compared to 0.04% at December 31, 2021.
For the quarter ended March 31, 2022, net recoveries totaled $111,090, as compared to $1.5 million in net charge-offs for the quarter ended March 31, 2021.
The Company's allowance for credit losses on loans was $47.2 million, or 0.73% of total gross loans, at March 31, 2022, compared to $62.7 million, or 0.99% of total gross loans, at December 31, 2021. The decrease in the allowance for credit losses for loans was primarily attributable to the impact of the initial adoption of the CECL standard on January 1, 2022, which resulted in a decrease to allowance for credit losses on loans of $16.8 million.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
COVID-19
At March 31, 2022, there were two loans on deferral for $2.6 million, a decrease of $68.1 million, compared to $70.7 million at March 31, 2021, and a decrease of $21.7 million, compared to $24.3 million at December 31, 2021. These short-term loan modifications are treated in accordance with Section 4013 of the CARES Act and are not treated as troubled debt restructurings during the short-term modification period if the loan was not in arrears. The Consolidated Appropriations Act, 2021, which was enacted in late December 2020, extended certain provisions of the CARES Act through January 1, 2022, including provisions permitting loan deferral extension requests to not be treated as troubled debt restructurings. Subsequent modifications to these loans will be evaluated for troubled debt restructuring accounting treatment.
Subsequently, both of these loans are back on full repayment as the deferral period ended, and payments are current for April 2022.
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 calculation of the allowance for loancredit losses is a critical accounting policy of the Company. The allowance for loancredit losses is a valuation account that reflects management’s evaluation of the probablecurrent expected credit losses in the loan portfolio. Determining the amount of the allowance for loan losses involves a high degree of judgment. Estimates required to establish the allowance include: the overall economic environment, value of collateral, strength of guarantors, loss exposure in the event of default, the amount and timing of future cash flows on impaired loans, and determination of loss factors applied to the portfolio segments. These estimates are susceptible to significant change. Management regularly reviews loss experience within the portfolio, monitors current economic conditions and other factors related to the collectability of the loan portfolio. The Company maintains the allowance for loancredit losses through provisions for loancredit losses whichthat are charged to income. Charge-offs against the allowance for loancredit losses 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 loancredit losses.
As part of the evaluation of the adequacy of the allowance for 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) or 6 (Special Mention). Loans with adverse classifications (Substandard, doubtful 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 amountallowance balance using relevant available 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 peers provides the basis for the estimation of loanexpected credit losses, where observed credit losses are converted to probability of default rate through the use of segment-specific loss given default risk factors that convert default rates to loss severity based on industry-level, observed relationships between the two variables for groups of loans by applying quantitative loss factorseach segment, primarily due to the loan segments atnature of the underlying collateral. These risk rating level and applying qualitative adjustments to each loan segment atfactors were assessed for reasonableness against the risk rating level. Quantitative loss factors give consideration to historicalCompany’s own loss experience and migration experienceadjusted in certain cases when the relationship between the Company’s historical default and loss severity deviate from that of the wider industry. The historical probability of default ("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 an externally developed economic forecast. 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 will revert to long-term average economic conditions using a straight-line, time-based methodology. The Company's current forecast period is six quarters, with a four quarter reversion period to historical average macroeconomic factors.
The allowance for credit losses is measured on a collective (pool) basis, with both a quantitative and qualitative analysis that is applied on a quarterly basis, when similar risk characteristics exist. The respective quantitative allowance for each segment is measured using an economic forecast, discounted cash flow modeling methodology in which distinct, segment-specific multi-variate regression models are applied to an external economic forecast. Under the discounted cash flows methodology, expected credit losses are estimated over the effective life of the loans by loan type based upon an appropriate look-back period,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 modeled cash flows, adjusted for amodeled defaults and expected prepayments and discounted at the loan-level effective interest rate. The contractual term excludes
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
expected extensions, renewals, and modifications. After quantitative considerations, management applies additional qualitative adjustments so that the allowance for credit loss emergence period. Quantitative loss factors are evaluated periodically. Qualitative adjustments give consideration to other qualitative or environmental factors such as trends and levelsis reflective of delinquencies, impaired loans, charge-offs, recoveries and loan volumes, as well as national and local economic trends and conditions. Qualitative adjustments reflect risksthe estimate of lifetime losses that exist 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 balance sheet date.
Portfolio segment is 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 loss based on type of borrower and collateral, which is generally based upon federal call report segmentation. The segments have been combined or sub-segmented as needed to ensure loans of similar risk profiles are appropriately pooled.
The allowance for credit losses on loans individually evaluated for impairment is based upon loans that have been identified through the Company’s loan losses.monitoring process. This process includes the review of delinquent, restructured, and charged-off loans.
Management believes 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. 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 has recorded loan losses at a level which is estimated to represent the current risk in its loan portfolio. Management considers it important to maintain the ratio of the allowance for loancredit 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 loancredit losses at appropriate levels, additional reservesreserve levels may be necessarychange if future economic, organizational, and otherportfolio 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 loancredit 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 loancredit 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 changes in interest rates. In general, as interest rates rise, the fair value 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 the current period.
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 March 31, 2022 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 primarily2021, 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 as well as(liabilities) totaled $8.9 million and $(9.7) million, respectively, which included a $3.4valuation allowance totaling $2.0 million increaseat both 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 provision for loan losses. These items were partially offset bystatement of financial position the over funded or underfunded status of a $3.5 million increase indefined benefit post-retirement plan measured as the 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) recognizes a component of other comprehensive income (loss), net interest income.
Net Interest Income. Net interest income increased $3.5 million, or 10.5%, to $36.9 million forof tax, 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 DecemberMarch 31, 20172022, the net portfolio value, the estimated changes in the net portfolio value, and September 30, 2017 (in thousands):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) | | | | |
+300 | $ | 239,272 | | | $ | (7,134) | | | (2.90) | % | | $ | 1,194,268 | | | 14.77 | % | | (20.23) | % |
+200 | 241,979 | | | (4,427) | | | (1.80) | | | 1,303,105 | | | 15.62 | | | (12.96) | |
+100 | 244,294 | | | (2,112) | | | (0.86) | | | 1,404,224 | | | 16.30 | | | (6.20) | |
Base | 246,406 | | | — | | | — | | | 1,497,094 | | | 16.83 | | | — | |
-100 | 237,969 | | | (8,437) | | | (3.42) | | | 1,518,375 | | | 16.52 | | | 1.42 | |
The following table sets forth information regarding As of March 31, 2022, based on the Company's 60-89 day delinquent loans asscenarios above, net interest income would decrease by approximately 1.80% if rates were to rise 200 basis points, and would decrease by 3.42% if rates were to decrease 100 basis points over a one-year time horizon.
Another measure of Decemberinterest rate sensitivity is to model changes in net portfolio value through the use of immediate and sustained interest rate shocks. As of March 31, 20172022, based on the scenarios above, in the event of an immediate and September 30, 2017 (in thousands):sustained 200 basis point increase in interest rates, the NPV is projected to decrease 12.96%. If rates were to decrease 100 basis points, the model forecasts a 1.42% decrease in the NPV.
Overall, our March 31, 2022 results indicate that we are adequately positioned with an acceptable net interest income and economic value at risk in all scenarios and that all interest rate risk results continue to be within our policy guidelines.
|
| | | | | | | | | | | | | | | |
| | 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, the allowance for loan losses totaled $58.2 million, or 1.30% of total loans, compared with $54.6 million, or 1.26% 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.
At December 31, 2017 and September 30, 2017, the Company held $959 thousand and $393 thousand of foreclosed assets, respectively. During the three months ended December 31, 2017, there were 2 additions to foreclosed assets with a carrying value of $566 thousand.
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.
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%10.0%, a tier 1 capital to risk-weighted assets ratio of at least 8%8.0%, a common tier 1 capital to risk-weighted assets ratio of at least 6.5%, and a tier 1 capital to adjusted total assets ratio of at least 5.0%. As of March 31, 2022 and December 31, 20172021, each of the Company and the Banks exceeded all capital adequacy requirements to which it is subject.
The following table presents the Company's, Columbia Bank's and Freehold Bank's actual capital amounts and ratios as ofat March 31, 2022 and December 31, 20172021 compared to the Federal Reserve Bank minimum capital adequacy requirements and the Federal Reserve Bank requirements for classification as a well - capitalizedwell-capitalized institution:
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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 March 31, 2022: | | | | | | | | | | | |
Total capital (to risk-weighted assets) | $ | 1,104,246 | | 16.93 | % | | $ | 521,645 | | 8.00 | % | | $ | 684,660 | | 10.50 | % | | N/A | N/A |
Tier 1 capital (to risk-weighted assets) | 1,048,214 | | 16.08 | | | 391,234 | | 6.00 | | | 554,248 | | 8.50 | | | N/A | N/A |
Common equity tier 1 capital (to risk-weighted assets) | 1,040,997 | | 15.96 | | | 293,426 | | 4.50 | | | 456,440 | | 7.00 | | | N/A | N/A |
Tier 1 capital (to adjusted total assets) | 1,048,214 | | 11.41 | | | 367,389 | | 4.00 | | | 367,389 | | 4.00 | | | N/A | N/A |
| | | | | | | | | | | |
At December 31, 2021: | | | | | | | | | | | |
Total capital (to risk-weighted assets) | $ | 1,104,863 | | 17.13 | % | | $ | 515,924 | | 8.00 | % | | $ | 677,151 | | 10.50 | % | | N/A | N/A |
Tier 1 capital (to risk-weighted assets) | 1,041,650 | | 16.15 | | | 386,943 | | 6.00 | | | 548,170 | | 8.50 | | | N/A | N/A |
Common equity tier 1 capital (to risk-weighted assets) | 1,034,433 | | 16.04 | | | 290,207 | | 4.50 | | | 451,434 | | 7.00 | | | N/A | N/A |
Tier 1 capital (to adjusted total assets) | 1,041,650 | | 11.23 | | | 370,909 | | 4.00 | | | 370,909 | | 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 March 31, 2022: | | | | | | | | | | | |
Total capital (to risk-weighted assets) | $ | 983,196 | | 15.56 | % | | $ | 505,507 | | 8.00 | % | | $ | 663,478 | | 10.50 | % | | $ | 631,884 | | 10.00 | % |
Tier 1 capital (to risk-weighted assets) | 928,031 | | 14.69 | | | 379,130 | | 6.00 | | | 537,101 | | 8.50 | | | 505,507 | | 8.00 | |
Common equity tier 1 capital (to risk-weighted assets) | 928,031 | | 14.69 | | | 284,348 | | 4.50 | | | 442,319 | | 7.00 | | | 410,724 | | 6.50 | |
Tier 1 capital (to adjusted total assets) | 928,031 | | 10.43 | | | 355,941 | | 4.00 | | | 355,941 | | 4.00 | | | 444,927 | | 5.00 | |
| | | | | | | | | | | |
At December 31, 2021: | | | | | | | | | | | |
Total capital (to risk-weighted assets) | $ | 962,137 | | 15.39 | % | | $ | 500,127 | | 8.00 | % | | $ | 656,417 | | 10.50 | % | | $ | 625,159 | | 10.00 | % |
Tier 1 capital (to risk-weighted assets) | 898,935 | | 14.38 | | | 375,095 | | 6.00 | | | 531,385 | | 8.50 | | | 500,127 | | 8.00 | |
Common equity tier 1 capital (to risk-weighted assets) | 898,935 | | 14.38 | | | 281,322 | | 4.50 | | | 437,611 | | 7.00 | | | 406,353 | | 6.50 | |
Tier 1 capital (to adjusted total assets) | 898,935 | | 9.80 | | | 366,961 | | 4.00 | | | 366,961 | | 4.00 | | | 458,701 | | 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 March 31, 2022: | | | | | | | | | | | |
Total capital (to risk-weighted assets) | $ | 42,613 | | 23.12 | % | | $ | 14,742 | | 8.00 | % | | $ | 19,349 | | 10.50 | % | | $ | 18,428 | | 10.00 | % |
Tier 1 capital (to risk-weighted assets) | 41,794 | | 22.68 | | | 11,057 | | 6.00 | | | 15,663 | | 8.50 | | | 14,742 | | 8.00 | |
Common equity tier 1 capital (to risk-weighted assets) | 41,794 | | 22.68 | | | 8,292 | | 4.50 | | | 12,899 | | 7.00 | | | 11,978 | | 6.50 | |
Tier 1 capital (to adjusted total assets) | 41,794 | | 14.65 | | | 11,409 | | 4.00 | | | 11,409 | | 4.00 | | | 14,261 | | 5.00 | |
| | | | | | | | | | | |
At December 31, 2021: | | | | | | | | | | | |
Total capital (to risk-weighted assets) | $ | 41,549 | | 22.87 | % | | $ | 14,534 | | 8.00 | % | | $ | 19,076 | | 10.50 | % | | $ | 18,168 | | 10.00 | % |
Tier 1 capital (to risk-weighted assets) | 41,537 | | 22.86 | | | 10,901 | | 6.00 | | | 15,443 | | 8.50 | | | 14,534 | | 8.00 | |
Common equity tier 1 capital (to risk-weighted assets) | 41,537 | | 22.86 | | | 8,176 | | 4.50 | | | 12,717 | | 7.00 | | | 11,809 | | 6.50 | |
Tier 1 capital (to adjusted total assets) | 41,537 | | 13.71 | | | 12,118 | | 4.00 | | | 12,118 | | 4.00 | | | 15,147 | | 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 DecemberMarch 31, 2017.2022. 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 DecemberMarch 31, 2017,2022, 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, 2021 filed with the Securities and Exchange Commission pursuant to Rule 424(b)(3) on February 20, 2018.Commission. As of DecemberMarch 31, 2017,2022, 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, 2021.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table reports information regarding repurchases of the Company's common stock during the quarter ended March 31, 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
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 |
January 1 - 31, 2022 | | 504,500 | | | $ | 20.89 | | | 504,500 | | | 4,309,439 | |
February 1 - 28, 2022 | | 301,500 | | | 21.44 | | | 301,500 | | | 4,007,939 | |
March 1 - 31, 2022 | | 254,268 | | | 21.51 | | | 217,519 | | | 3,790,420 | |
Total | | 1,060,268 | | | $ | 21.20 | | | 1,023,519 | | | |
| | | | | | | | |
(1) On December 6, 2021, the Company announced that its Board of Directors authorized a new stock repurchase program to acquire up to 5,000,000 shares, or approximately 4.6%, of the Company's then issued and outstanding common stock, commencing upon the completion of the Company's stock repurchase program announced on February 1, 2021. On December 21, 2021, the Company completed the repurchases under the previous stock repurchase program. |
(2) During the three months ended March 31, 2022, 31,570 shares were repurchased pursuant to forfeitures and 5,179 shares were repurchased for taxes related to the 2019 Equity Incentive Plan and not as part of a share repurchase program. |
| |
Item 2. | Unregistered Sales of Equity Securities |
None.Item 3. Defaults Upon Senior Securities
| |
Item 3. | Defaults Upon Senior Securities |
None.
| |
Item 4. | Mine Safety Disclosures |
Not Applicable.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
None.
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
|
| | | | | | | |
3.131.1 | | |
| | |
3.2 | | |
| | |
4 | | |
| | |
31.1 | | |
| | |
31.2 | | |
| | |
32 | | |
| | |
101.101.0 | | The following materials from the Company’s Quarterly Report to Stockholders on Form 10-Q for the quarter ended. Decemberended March 31, 2017,2022, 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. |
| | |
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 |
| | |
101. SCH | | SCHInline XBRL Taxonomy Extension Schema Document |
| | |
101. CAL | | CALInline XBRL Taxonomy Extension Calculation Linkbase Document |
| | |
101. DEF | | DEFInline XBRL Taxonomy Extension Definition Linkbase Document |
| | |
101. LAB | | LABInline XBRL Taxonomy Extension LabelsLabel Linkbase Document |
| | |
101. PRE | | PREInline XBRL Taxonomy Extension Presentation Linkbase Document |
| | |
104 | | Cover page Interactive Data File (embedded within the Inline XBRL document) |
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: | | May 10, 2022 | | 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, 2018May 10, 2022 | | /s/Dennis E. Gibney |
| | | | Dennis E. Gibney |
| | | | Executive Vice President and Chief Financial Officer |
| | | | (Principal Financial and Accounting Officer)
|