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Columbia Financial, Inc. Announces Second Quarter Earnings

Fair Lawn, New Jersey (July 26, 2018):  Columbia Financial, Inc. (the “Company”) (NASDAQ: CLBK) reported a net loss of  $14.7 million for the three months ended June 30, 2018, compared to net income of $9.3 million for the three months ended June 30, 2017.  The quarterly earnings reflects $34.8 million of expense related to the contribution of 3% of the Company's outstanding common stock to the Columbia Bank Foundation as we previously disclosed in the prospectus relating to our minority stock offering.  Excluding the charitable contribution, core net income would have been $12.7 million for the three months ended June 30, 2018, an increase of 35.8% as compared to the same period ended June 30, 2017. 

Mr. Thomas J. Kemly, President and Chief Executive Officer commented: "The contribution of stock to our charitable foundation will provide the necessary future funding for charitable causes and community development activities.  This contribution demonstrates our unwavering commitment to supporting the local communities that we serve". 

For the six months ended June 30, 2018, the Company reported a net loss of $3.0 million, compared to net income of $19.6 million for the six months ended June 30, 2017.  The decrease in earnings for the six month period is driven by the increase in charitable contribution expense as discussed above.  Excluding the charitable contribution, core net income would have been $24.5 million for the six months ended June 30, 2018, an increase of 23.4% as compared to the same period ending June 30, 2017. 

Mr. Kemly also commented: "With the recent minority stock offering now behind us, we are intently focused on executing on our growth strategy and deploying the newly acquired capital in a measured and controlled fashion.  We experienced solid growth in our balance sheet and realized strong core earnings for the quarter while maintaining the desired asset quality and achieving other targeted performance measures."

 

Results of Operations for the Three Months Ended June 30, 2018 and June 30, 2017 

A net loss of $14.7 million was recorded for the three months ended June 30, 2018, compared to net income of $9.3 million for the three months ended June 30, 2017.  The decrease of $24.0 million was primarily attributable to the above-noted $34.8 million expense related to the contribution of shares of the Company's common stock to our charitable foundation coupled with a $2.0 million increase in the provision for loan losses.  These expenses were partially offset by a $5.4 million increase in net interest income and an $8.9 million decrease in income tax expense.

The Company’s net interest income was $41.0 million for the quarter ended June 30, 2018, an increase of $5.4 million, or 15.1% from $35.6 million for the quarter ended June 30, 2017.  The increase in net interest income was attributable to an $8.2 million increase in interest and dividend income which was partially offset by a $2.8 million increase in interest expense. 

The increase in interest and dividend income for the three month period was largely due to a $308.6 million increase in average loans, a $500.2 million increase in average investment securities and a $104.7 million increase in other interest earning assets. The increase in other interest earning assets was largely due to the increase in excess cash reserves for the majority of the month of April related to the subscriptions for the minority stock offering.

The yield on total average earning assets decreased two basis points due to the growth in lower yielding excess cash reserves as a percentage of the earning asset mix.  The yield on average loans increased seven basis points while the yield on investment securities increased 11 basis points for the quarter ended June 30, 2018 as compared with the quarter ended June 30, 2017.

The $2.8 million increase in interest expense on deposits was largely the result of a $536.0 million increase in the average balance of interest bearing deposits combined with a 19 basis point increase in the cost of deposits. Interest expense related to junior subordinated debt increased as the Company has completed all steps required to call the debt during the third quarter of 2018 and therefore accelerated the amortization of deferred issuance costs.

The Company's net interest margin for the quarter ended June 30, 2018 decreased seven basis points to 2.76% when compared to 2.83% for the quarter ended June 30, 2017.  The weighted average yield on interest-earning assets decreased two basis points to 3.70% for the quarter ended June 30, 2018 compared with 3.72% for the quarter ended June 30, 2017.  The cost of average total interest bearing liabilities increased 11 basis points to 1.20% for the quarter ended June 30, 2018 as compared to 1.09% for the quarter ended June 30, 2017.

The provision for loan losses was $2.4 million for the quarter ended June 30, 2018, an increase of approximately $2.0 million from $375 thousand for the quarter ended June 30, 2017.  The increase was primarily driven by loan growth during the period and changes in certain credit metrics.

Non-interest income was $5.4 million for the quarter ended June 30, 2018, an increase of $642 thousand or 13.5% from $4.8 million for the quarter ended June 30, 2017.  Income from bank-owned life insurance increased $434 thousand as a result of  one-time gains associated with life insurance proceeds during the three months ended  June 30, 2018.  Title insurance fees were higher by $306 thousand as a result of increased activity during the quarter.

Non-interest expense was $61.7 million for the quarter ended June 30, 2018, an increase of $36.9 million, or 148.6%, from $24.8 million for the quarter ended June 30, 2017.  The increase was driven primarily by the previously noted one-time $34.8 million contribution of common stock of Columbia Financial, Inc. to the Columbia Bank Foundation.  In addition, compensation and employee benefit expenses increased $1.4 million  as a result of the newly created Employee Stock Ownership Plan, several strategic hires and annual merit increases and incentives for staff.

Income tax benefit was $3.0 million for the quarter ended June 30, 2018 as compared to $5.9 million of tax expense for the quarter ended June 30, 2017.

 

Results of Operations for the Six Months Ended June 30, 2018 and June 30, 2017 

For the six months ended June 30, 2018, earnings decreased $22.5 million to a loss of $3.0 million, compared to income of $19.6 million for the six months ended June 30, 2017.  The decrease was primarily attributable to the previously noted one-time contribution of the Company's stock to our charitable foundation and related tax benefit associated with the contribution and a $3.6 million increase in the provision for loan losses, partially offset by a $9.7 million increase in net interest income. 

Net interest income was $80.1 million for the six month period ended June 30, 2018, an increase of $9.7 million, or 13.7% from $70.4 million for the six months ended June 30, 2017.  The increase in net interest income was attributable to a $14.5 million increase in interest and dividend income which was partially offset by a $4.9 million increase in interest expense. 

The increase in interest and dividend income for the six month period was primarily the result of a $293.8 million increase in average loans, a $418.7 million increase in average investment securities and a $107.5 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 total average earning assets decreased two basis points due to the growth in lower yielding excess cash reserves as a percentage of the earning asset mix.  The yield on average loans increased six basis points while the yield on investment securities increased 13 basis points for the six months ended June 30, 2018 as compared with the same period ended June 30, 2017.

For the six months ended June 30, 2018, interest expense on deposits was $17.3 million, an increase of $4.8 million or 38.9% from $12.5 million for the six months ended June 30, 2017, driven by a $530.7 million increase in the average balance of total interest bearing deposits coupled with a 14 basis point increase in the cost of deposits.  Total borrowings increased by $62.0 million in average balances while the average cost of borrowings declined by 19 basis points.  The reduced cost of average borrowings resulted from the maturity of higher rate borrowings.  Interest expense related to the junior subordinated debt increased as the

Company completed all steps required to call the debt during the third quarter of 2018 and therefore accelerated the amortization of deferred issuance costs.

The Company's net interest margin for the six month period ended June 30, 2018 decreased seven basis points to 2.78%  compared with 2.85% for the six months ended June 30, 2017.  The weighted average yield on interest-earning assets decreased two basis points to 3.71% for the six months ended June 30, 2018 compared with 3.73% for the six months ended June 30, 2017.  The cost of average total interest bearing liabilities increased eight basis points to 1.15% for the six months ended June 30, 2018 compared with 1.07% for the six months ended June 30, 2017.

For the six months ended June 30, 2018 the provision for loan losses expense was $4.4 million, an increase of $3.6 million from $751 thousand for the six months ended June 30, 2017.  The increase was primarily driven by loan growth during the period and changes in certain credit metrics.

Non-interest income was $9.9 million for the six month period ended June 30, 2018, a decrease of $615 thousand, or 5.8% from $10.5 million for the six months ended June 30, 2017.  Income from bank-owned life insurance decreased approximately $201 thousand as a result of higher gains associated with life insurance proceeds recognized during the six months ended June 30, 2017.

For the six months ended June 30, 2018 non-interest expense was $87.7 million, an increase of $38.0 million, or 76.5% from $49.7 million for the six months ended June 30, 2017.  The increase was driven primarily by the above noted $34.8 million contribution of common stock of Columbia Financial, Inc. to the Columbia Bank Foundation.  In addition, compensation and employee benefit expenses increased $2.0 million as a result of newly created Employee Stock Ownership Plan, several strategic hires and annual merit increases and incentives for staff.

Income tax expense was $844 thousand for the six months ended June 30, 2018 as compared to $10.9 million of tax expense for the same period ended June 30, 2017.

 

Balance Sheet Summary 

Total assets increased approximately $510.9 million, or 8.9%, to $6.3 billion at June 30, 2018 from $5.8 billion at December 31, 2017.  The increase in total assets was primarily attributed to the increases in loans receivable, net of $248.6 million and available-for-sale securities of $221.5 million.  Growth was funded primarily by $492.4 million of net proceeds from the minority stock offering. 

Securities available-for-sale increased $221.5 million to $932.1 million at June 30, 2018 from $710.6 million at December 31, 2017.  Securities held-to-maturity increased $15.2 million to $254.8 million at June 30, 2018 from $239.6 million at December 31, 2017. 

Loans receivable, net increased $248.6 million to $4.6 billion at June 30, 2018 from $4.4 billion at December 31, 2017.  One-to-four family, multifamily and commercial, construction loans and C&I lending contributed $146.9 million, $100.6 million, $21.2 million and $14.1 million to the growth, respectively.  Home equity loans and advances declined $33.6 million between June 30, 2018 and December 31, 2017. 

Total liabilities increased $41.7 million, or 0.8%, to $5.3 billion at June 30, 2018 from $5.3 billion at December 31, 2017.  The increase is primarily attributable to an increase in total deposits of $31.5 million mainly driven by higher certificate of deposit balances. Overall borrowings remained relatively flat over the six month period. 

Total stockholders’ equity increased $469.2 million or 99.4%, to $941.3 million at June 30, 2018 from $472.1 million at December 31, 2017.  The net increase is primarily driven by the recording of common stock and additional-paid-in capital related to the completion of the minority stock offering.  Net proceeds from the offering totaled $492.4 million. 


Asset Quality 

The Company's total non-performing loans at June 30, 2018 totaled $3.8 million, or 0.08% of total loans, compared to $6.5 million or 0.15% of total loans at December 31, 2017.  The Company held $660 thousand in foreclosed assets at June 30, 2018 compared to $959 thousand at December 31, 2017.  Non-performing assets as a percentage of total assets totaled 0.07% at June 30, 2018 compared to 0.13% at December 31, 2017. 

The Company's allowance for loan losses was $62.5 million, or 1.33% of total loans at June 30, 2018, compared to $58.2 million or 1.31% of total loans at December 31, 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 Financial, Inc. is a majority-owned subsidiary of Columbia Bank, MHC.  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 49 full-services banking offices.

 

Forward Looking Statements 

Certain statements herein constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  Such statements may be identified by words such as “believes,” “will,” “would,” “expects,” “project,” “may,” “could,” “developments,” “strategic,” “launching,” “opportunities,” “anticipates,” “estimates,” “intends,” “plans,” “targets” and similar expressions.  These statements are based upon the current beliefs and expectations of the Company’s management and are subject to significant risks and uncertainties.  Actual results may differ materially from those set forth in the forward-looking statements as a result of numerous factors.  Factors that could cause such differences to exist include, but are not limited to, adverse conditions in the capital and debt markets and the impact of such conditions on the Company’s business activities; changes in interest rates; competitive pressures from other financial institutions; the effects of general economic conditions on a national basis or in the local markets in which the Company operates, including changes that adversely affect borrowers’ ability to service and repay the Company’s loans; changes in the value of securities in the Company’s investment portfolio; changes in loan default and charge-off rates; fluctuations in real estate values; the adequacy of loan loss reserves; decreases in deposit levels necessitating increased borrowing to fund loans and investments; legislative changes and changes in government regulation; changes in accounting standards and practices; the risk that goodwill and intangibles recorded in the Company’s financial statements will become impaired; demand for loans in the Company’s market area; the Company’s ability to attract and maintain deposits; risks related to the implementation of acquisitions, dispositions, and restructurings; the risk that the Company may not be successful in the implementation of its business strategy or its deployment of the proceeds raised in its minority public offering; and changes in assumptions used in making such forward-looking statements and Quarterly Reports on Form 10-Q as filed with the Securities and Exchange Commission (the “SEC”), which are available at the SEC’s website, www.sec.gov.  Should one or more of these risks materialize or should underlying beliefs or assumptions prove incorrect, Columbia Financial, Inc.’s actual results could differ materially from those discussed.  Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this release.  The Company disclaims any obligation to publicly update or revise any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes, except as required by law.