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Columbia Financial, Inc. Announces Second Quarter Earnings

Fair Lawn, New Jersey (April 25, 2018): Columbia Financial, Inc. (the “Company”) (NASDAQ: CLBK), reported net income of $11.8 million for the three months ended March 31, 2018, or an increase of 14.5%, compared to $10.3 million for the three months ended March 31, 2017. The increase in quarterly net income was a function of higher net interest income combined with lower income tax expense.
 
For the six months ended March 31, 2018, the Company reported net income of $15.5 million, compared to net income of $20.3 million for the six months ended March 31, 2017. The decrease in earnings for the six month period reflects higher provision for loan losses and higher income tax expense. The recently enacted tax reform legislation commonly referred to as the "Tax Cuts and Jobs Act" resulted in significant modifications to existing tax laws, and among other things, reduced the effective corporate federal income tax rate. The revaluation of our gross deferred tax assets and liabilities as a result of the change in the corporate tax rate increased our tax expense by $4.7 million for the six month period ended March 31, 2018.
 
Thomas Kemly, President and Chief Executive Officer commented: “We completed our minority stock offering on April 19, 2018 and are very pleased with the strong customer interest in the offering. We are excited and believe we are well positioned to execute our growth strategy.” Kemly added: “We experienced strong earnings results, solid core deposit growth, continued high asset quality and disciplined expense control during the quarter. We continue to enhance our products and services while maintaining focus on our customers across the many communities we serve”.

Results of Operations for the Three Months Ended March 31, 2018 and March 31, 2017
 
Net income increased $1.5 million to $11.8 million for the three months ended March 31, 2018, compared to $10.3 million for the three months ended March 31, 2017. The increase was primarily attributable to a $4.3 million increase in net interest income combined with a $1.2 million decrease in income tax expense partially offset by a $1.6 million increase in loan loss provisions, a $1.3 million decrease in non-interest income and a $1.1 million increase in non-interest expense for the comparable periods.

The Company’s net interest income was $39.1 million for the quarter ended March 31, 2018, an increase of $4.3 million, or 12.3% from $34.8 million for the quarter ended March 31, 2017. The increase in net interest income was attributable to a $6.4 million increase in interest and dividend income which was partially offset by a $2.1 million increase in interest expense.
 
The increase in interest and dividend income for the three month period was largely due to a $278.8 million increase in average loans, a $336.2 million increase in average investment securities and a $110.3 million increase in other interest earning assets. The increase in other interest earning assets was largely due to the increase in excess cash reserves related to the subscriptions for the minority stock offering.

The yield on average earning assets decreased two basis points due to the growth in excess cash reserves as a percentage of the earning asset mix. The yield on average loans increased five basis points while the yield on investment securities increased 16 basis points for the quarter ended March 31, 2018 as compared with the quarter ended March 31, 2017.
 
The $2.0 million increase in interest expense on deposits was largely the result of a $525.3 million increase in the average balance of interest bearing deposits combined with an 11 basis point increase in the cost of deposits. The $122.6 million increase in the average balance of borrowings was almost entirely offset by a 34 basis point decrease in the cost of average borrowings. The reduced cost of average borrowings resulted from the maturity of higher rate borrowings in conjunction with increases in short term borrowings at lower rates.
 
The Company's net interest margin for the quarter ended March 31, 2018 decreased six basis points to 2.80% when compared to 2.86% for the quarter ended March 31, 2017. The weighted average yield on interest-earning assets decreased two basis points to 3.71% for the quarter ended March 31, 2018 compared with 3.73% for the quarter ended March 31, 2017. The cost of average interest bearing liabilities increased three basis points to 1.09% for the quarter ended March 31, 2018 as compared to 1.06% for the quarter ended March 31, 2017.
 
The provision for loan losses was $2.0 million for the quarter ended March 31, 2018, an increase of $1.6 million from $375 thousand for the quarter ended March 31, 2017. The increase in provision expense was primarily attributed to loan growth and changes in certain qualitative risk factors.
 
Non-interest income was $4.5 million for the quarter ended March 31, 2018, a decrease of $1.3 million or 22.1% from $5.8 million for the quarter ended March 31, 2017. Income from bank-owned life insurance decreased $634 thousand as a result of gains recognized during the three months ended March 31, 2017 associated with life insurance proceeds that did not reoccur in the 2018 period. Title insurance fees decreased $193 thousand as a result of a decline in activity. The Company also recognized gains on the sale of other real estate owned totaling $209 thousand during the March 31, 2017 quarter that did not reoccur.
 
Non-interest expense was $26.0 million for the quarter ended March 31, 2018, an increase of $1.1 million, or 4.4%, from $24.9 million for the quarter ended March 31, 2017. Compensation and employee benefits increased $545 thousand primarily as a result of additional salary expense related to annual merit increases and an increase in the accrual for incentive compensation, partially offset by a decrease in retirement benefit costs. Occupancy expenses increased $285 thousand due primarily to higher maintenance costs and the addition of new branches. Advertising expenses were higher by $166 thousand related to increased advertising of bank products.
 
Income tax expense was $3.8 million for the quarter ended March 31, 2018, a decrease of $1.2 million or 24.1%, from $5.0 million for the quarter ended March 31, 2017. The Company's effective tax rates were 24.4% and 32.7% for the three months ended March 31, 2018 and 2017 respectively. The decrease in the effective tax rate for the three months ended March 31, 2018 compared to March 31, 2017 is primarily attributed to the Tax Cuts and Jobs Act.

Balance Sheet Summary
 
Total assets increased approximately $1.1 billion, or 20.9%, to $6.6 billion at March 31, 2018 from $5.4 billion at September 30, 2017. The increase in total assets was primarily attributed to the receipt of subscription funds relating to the minority stock offering. Subscriptions received by check totaled $921.3 million at March 31, 2018.
 
Cash and cash equivalents increased $533.4 million between March 31, 2018 and September 30, 2017. This increase is entirely the result of the minority stock offering which was pending at March 31, 2018.
 
Securities available-for-sale increased $295.0 million to $852.2 million at March 31, 2018 from $557.2 million at September 30, 2017. Securities held-to-maturity increased $121.2 million between March 31, 2018 and September 30, 2017. The increase in both categories of securities was attributable to the pre-investment of the anticipated proceeds from the minority stock offering.
 
Total loans increased $174.5 million to $4.5 billion at March 31, 2018 from $4.4 billion at September 30, 2017. One-to-four family, multifamily and commercial and construction loans contributed $110.5 million, $66.8 million, and $23.3 million to the growth, respectively. Home equity loans and advances declined $31.9 million between March 31, 2018 and September 30, 2017.
 
Total liabilities increased $1.1 billion, or 23.0%, to $6.1 billion at March 31, 2018 from $5.0 billion at September 30, 2017. The increase is primarily attributable to an increase in total deposits of $1.3 billion partially offset by a decrease in borrowings of $143.6 million. The $1.3 billion increase in total deposits is primarily attributable to subscription funds relating to the minority stock offering. Other components of the deposit growth were increases in non-interest bearing transaction accounts of $67.3 million, interest bearing transaction accounts of $108.7 million, money market accounts of $85.2 million and certificates of deposits of $66.7 million.
 
Total stockholders’ equity decreased $2.0 million net, or 0.4%, to $473.9 million at March 31, 2018 from $475.9 million at September 30, 2017. The net decrease reflects net income earned for the six months ended March 31, 2018, offset by the increase in unrealized losses in the available-for-sale investment portfolio and the change in pension benefit obligations.
 
Asset Quality

The Company's total non-performing loans at March 31, 2018 were $3.7 million, or 0.08% of total loans, compared to $6.4 million or 0.15% of total loans at September 30, 2017. The Company held $959 thousand in foreclosed assets at March 31, 2018 compared to $393 thousand at September 30, 2017. Non-performing assets as a percentage of total assets were 0.07% at March 31, 2018 compared to 0.13% at September 30, 2017.
 
The Company's allowance for loan losses was $60.0 million, or 1.32% of total loans at March 31, 2018, compared to $54.6 million or 1.26% of total loans at September 30, 2017.
 
About Columbia Financial, Inc.
 
The unaudited consolidated financial results include the accounts of Columbia Financial, Inc. its wholly-owned subsidiary Columbia Bank (the "Bank") and the Bank's wholly-owned subsidiaries. Columbia Financial, Inc. is a Delaware corporation organized as Columbia Bank's mid-tier stock holding company. Columbia Bank is a federally chartered savings bank headquartered in Fair Lawn, New Jersey. The Bank offers traditional financial services to consumers and businesses in our market areas. We currently operate 48 full-services banking offices.