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Published: 2023-05-10 00:00:00 ET

clbk-20230331

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-38456

Columbia Financial, Inc.

(Exact name of registrant as specified in its charter)


Delaware		22-3504946
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)
19-01 Route 208 North,	Fair Lawn,
New Jersey		07140
(Address of principal executive offices)		(Zip Code)

(800) 522-4167

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value per share	CLBK	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer

☒

Accelerated filer

☐

Smaller reporting company

☐

Non-accelerated filer

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐ Yes ☒ No

As of May 5, 2023, there were 105,809,601 shares issued and outstanding of the Registrant's common stock, par value $0.01 per share (including 76,016,524 shares held by Columbia Bank, MHC).

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Index to Form 10-Q


Item Number		Page Number

PART I.	Financial Information

Item 1.	Financial Statements
	Consolidated Statements of Financial Condition as of March 31, 2023 (Unaudited) and December 31, 2022	2
	Consolidated Statements of Income for the Three Months Ended March 31, 2023 and 2022 (Unaudited)	3
	Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended March 31, 2023 and 2022 (Unaudited)	4
	Consolidated Statements of Changes in Stockholder's Equity for the Three Months Ended March 31, 2023 and 2022 (Unaudited)	5
	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2023 and 2022 (Unaudited)	7
	Notes to Unaudited Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	54
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	61
Item 4.	Controls and Procedures	65

PART II.	Other Information
	Item 1. Legal Proceedings	66
	Item 1A. Risk Factors	66
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	66
	Item 3. Defaults Upon Senior Securities	67
	Item 4. Mine Safety Disclosures	67
	Item 5. Other Information	67
	Item 6. Exhibits	67

	Exhibit Index	68

	SIGNATURES	69

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Consolidated Statements of Financial Condition

(In thousands, except share and per share data)


	March 31,		December 31,
	2023		2022
Assets	(Unaudited)

Cash and due from banks	$	319,333	$	179,097
Short-term investments	106		131
Total cash and cash equivalents	319,439		179,228

Debt securities available for sale, at fair value	1,272,570		1,328,634
Debt securities held to maturity, at amortized cost (fair value of $372,187 and $370,391 at March 31, 2023 and December 31, 2022, respectively)	417,227		421,523
Equity securities, at fair value	3,552		3,384
Federal Home Loan Bank stock	84,799		58,114


Loans receivable	7,787,072		7,677,564
Less: allowance for credit losses	52,873		52,803
Loans receivable, net	7,734,199		7,624,761

Accrued interest receivable	35,126		33,898

Office properties and equipment, net	83,721		83,877
Bank-owned life insurance ("BOLI")	266,230		264,854
Goodwill and intangible assets	124,581		125,142
Other assets	293,206		284,754
Total assets	$	10,634,650	$	10,408,169

Liabilities and Stockholders' Equity
Liabilities:
Deposits	$	7,674,201	$	8,001,159
Borrowings	1,706,613		1,127,047
Advance payments by borrowers for taxes and insurance	47,690		45,460
Accrued expenses and other liabilities	167,256		180,908
Total liabilities	9,595,760		9,354,574

Stockholders' equity:
Preferred stock, $0.01 par value. 10,000,000 shares authorized; none issued and outstanding at March 31, 2023 and December 31, 2022	—		—
Common stock, $0.01 par value. 500,000,000 shares authorized; 130,902,166 shares issued and 106,584,538 shares outstanding at March 31, 2023 and 130,900,673 shares issued and 108,970,476 shares outstanding at December 31, 2022	1,309		1,309
Additional paid-in capital	783,642		781,165
Retained earnings	876,241		857,518
Accumulated other comprehensive loss	(167,858)		(179,296)
Treasury stock, at cost; 24,317,628 shares at March 31, 2023 and 21,930,197 shares at December 31, 2022	(419,678)		(371,708)
Common stock held by the Employee Stock Ownership Plan	(34,190)		(34,750)
Stock held by Rabbi Trust	(2,668)		(3,149)
Deferred compensation obligations	2,092		2,506
Total stockholders' equity	1,038,890		1,053,595
Total liabilities and stockholders' equity	$	10,634,650	$	10,408,169

See accompanying notes to unaudited consolidated financial statements.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Consolidated Statements of Income

(In thousands, except per share data)


	Three Months Ended March 31,
	2023		2022
Interest income:	(Unaudited)
Loans receivable	$	80,290	$	56,957
Debt securities available for sale and equity securities	8,451		8,888
Debt securities held to maturity	2,457		2,426
Federal funds and interest-earning deposits	812		17
Federal Home Loan Bank stock dividends	870		447
Total interest income	92,880		68,735
Interest expense:
Deposits	17,088		4,687
Borrowings	14,928		1,322
Total interest expense	32,016		6,009

Net interest income	60,864		62,726

Provision for credit losses	175		1,459

Net interest income after provision for credit losses	60,689		61,267

Non-interest income:
Demand deposit account fees	1,176		1,170
Bank-owned life insurance	1,981		1,729
Title insurance fees	587		957
Loan fees and service charges	1,072		640
Loss on securities transactions	(1,295)		—
Change in fair value of equity securities	168		79
Gain on sale of loans	791		110
Other non-interest income	3,593		2,356
Total non-interest income	8,073		7,041

Non-interest expense:
Compensation and employee benefits	31,158		25,999
Occupancy	5,754		5,429
Federal deposit insurance premiums	689		647
Advertising	687		649
Professional fees	1,875		1,754
Data processing and software expenses	3,825		3,267
Merger-related expenses	—		151

Other non-interest expense, net	(87)		2,853
Total non-interest expense	43,901		40,749

Income before income tax expense	24,861		27,559

Income tax expense	6,138		7,155

Net income	$	18,723	$	20,404

Earnings per share-basic	$	0.18	$	0.20
Earnings per share-diluted	$	0.18	$	0.20
Weighted average shares outstanding-basic	104,631,583		103,148,417
Weighted average shares outstanding-diluted	105,148,375		103,737,252

See accompanying notes to unaudited consolidated financial statements.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Loss)

(In thousands)


	Three Months Ended March 31,
	2023		2022
	(Unaudited)

Net income	$	18,723	$	20,404

Other comprehensive income (loss), net of tax:
Unrealized gain (loss) on debt securities available for sale	13,069		(57,815)
Accretion of unrealized (loss) on debt securities reclassified as held to maturity	(7)		(3)
Reclassification adjustment for (loss) included in net income	(929)		—
	12,133		(57,818)

Derivatives, net of tax:
Unrealized (loss) gain on swap contracts accounted for as cash flow hedges	(865)		3,157
	(865)		3,157

Employee benefit plans, net of tax:
Amortization of prior service cost included in net income	(10)		(11)
Reclassification adjustment of actuarial net gain (loss) included in net income	1		(244)
Change in funded status of retirement obligations	179		480
	170		225

Total other comprehensive income (loss)	11,438		(54,436)

Total comprehensive income (loss), net of tax	$	30,161	$	(34,032)

See accompanying notes to unaudited consolidated financial statements.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Consolidated Statements of Changes in Stockholders' Equity (Unaudited)

Three Months Ended March 31, 2023 and 2022 (In thousands)


	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive (Loss)		Treasury Stock		Common Stock Held by the Employee Stock Ownership Plan		Stock Held by Rabbi Trust		Deferred Compensation Obligations		Total Stockholders' Equity

Balance at December 31, 2022	$	1,309	$	781,165	$	857,518	$	(179,296)	$	(371,708)	$	(34,750)	$	(3,149)	$	2,506	$	1,053,595
Net income	—		—		18,723		—		—		—		—		—		18,723
Other comprehensive income	—		—		—		11,438		—		—		—		—		11,438


Stock based compensation	—		1,845		—		—		—		—		—		—		1,845
Purchase of treasury stock (2,378,434 shares)	—		—		—		—		(47,323)		—		—		—		(47,323)
Exercise of stock options (3,618 shares)	—		11		—		—		—		—		—		—		11
Restricted stock forfeitures (1,929 shares)	—		39		—		—		(39)		—		—		—		—
Repurchase shares for taxes (7,068 shares)	—		—		—		—		(133)		—		—		—		(133)
Excise tax on net stock repurchases	—		—		—		—		(475)		—		—		—		(475)
Employee Stock Ownership Plan shares committed to be released	—		582		—		—		—		560		—		—		1,142
Funding of deferred compensation obligations	—		—		—		—		—		—		481		(414)		67
Balance at March 31, 2023	$	1,309	$	783,642	$	876,241	$	(167,858)	$	(419,678)	$	(34,190)	$	(2,668)	$	2,092	$	1,038,890

See accompanying notes to unaudited consolidated financial statements.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Consolidated Statements of Changes in Stockholders' Equity (Unaudited) (continued)

Three Months Ended March 31, 2023 and 2022 (In thousands)


	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive (Loss)		Treasury Stock		Common Stock Held by the Employee Stock Ownership Plan		Stock Held by Rabbi Trust		Deferred Compensation Obligations		Total Stockholders' Equity

Balance at December 31, 2021	$	1,246	$	667,906	$	765,133	$	(45,919)	$	(271,647)	$	(37,026)	$	(2,425)	$	1,813	$	1,079,081
Effect of adopting ASU No. 2016-13 ("CECL")	—		—		6,212		—		—		—		—		—		6,212
Balance at January 1, 2022	1,246		667,906		771,345		(45,919)		(271,647)		(37,026)		(2,425)		1,813		1,085,293
Net income	—		—		20,404		—		—		—		—		—		20,404
Other comprehensive (loss)	—		—		—		(54,436)		—		—		—		—		(54,436)


Issuance of common stock allocated to restricted stock award grants (51,746 shares)	1		(1)		—		—		—		—		—		—		—
Stock based compensation	—		1,915		—		—		—		—		—		—		1,915
Purchase of treasury stock (1,060,268 shares)	—		—		—		—		(21,685)		—		—		—		(21,685)
Exercise of stock options (62,859 shares)	—		(182)		—		—		—		—		—		—		(182)
Restricted stock forfeitures (31,570 shares)	—		676		—		—		(676)		—		—		—		—
Repurchase shares for taxes (5,179 shares)	—		—		—		—		(113)		—		—		—		(113)
Employee Stock Ownership Plan shares committed to be released	—		641		—		—		—		565		—		—		1,206
Funding of deferred compensation obligations	—		—		—		—		—		—		(321)		406		85
Balance at March 31, 2022	$	1,247	$	670,955	$	791,749	$	(100,355)	$	(294,121)	$	(36,461)	$	(2,746)	$	2,219	$	1,032,487

See accompanying notes to unaudited consolidated financial statements.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows


	Three Months Ended March 31,
	2023		2022
	(In thousands, unaudited)
Cash flows from operating activities:
Net income	$	18,723	$	20,404
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of deferred loan costs, fees and purchased premiums and discounts	1,372		1,835
Net amortization of premiums and discounts on securities	511		635
Net amortization of mortgage servicing rights	55		63
Amortization of intangible assets	602		248
Depreciation and amortization of office properties and equipment	1,874		1,769
Amortization of operating lease right-of-use assets	973		942

Provision for credit losses	175		1,459
Loss on securities transactions	1,295		—
Change in fair value of equity securities	(168)		(79)

Gain on sale of loans, net	(791)		(110)
Net loss on disposal of office properties and equipment	7		28
Deferred tax expense	—		951
(Increase) decrease in accrued interest receivable	(1,228)		526
(Increase) decrease in other assets	(14,166)		27,676
(Decrease) in accrued expenses and other liabilities	(13,915)		(24,970)
Income on bank-owned life insurance	(1,981)		(1,729)
Employee stock ownership plan expense	1,142		1,206
Stock based compensation	1,845		1,915
Decrease in deferred compensation obligations under Rabbi Trust	67		85
Net cash (used in) provided by operating activities	(3,608)		32,854

Cash flows from investing activities:
Proceeds from sales of debt securities available for sale	42,625		—

Proceeds from paydowns/maturities/calls of debt securities available for sale	27,888		89,921
Proceeds from paydowns/maturities/calls of debt securities held to maturity	4,277		10,567
Purchases of debt securities available for sale	—		(47,397)


Proceeds from sales of loans held-for-sale	35,059		2,199
Purchases of loans receivable	(14,729)		—
Net increase in loans receivable	(130,620)		(119,631)
Proceeds from bank-owned life insurance death benefits	336		221
Proceeds from redemptions of Federal Home Loan Bank stock	20,207		16,667
Purchases of Federal Home Loan Bank stock	(46,892)		(19,144)

Additions to office properties and equipment	(1,725)		(865)

Net cash (used in) investing activities	$	(63,574)	$	(67,462)

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows (continued)


	Three Months Ended March 31,
	2023		2022
	(In thousands, unaudited)

Cash flows from financing activities:
Net (decrease) increase in deposits	$	(326,958)	$	24,772
Proceeds from long-term borrowings	111,113		—
Payments on long-term borrowings	(10,000)		—
Net increase in short-term borrowings	478,453		55,446
Increase in advance payments by borrowers for taxes and insurance	2,230		1,404

Exercise of stock options	11		(182)
Purchase of treasury stock	(47,323)		(21,685)
Repurchase of shares for taxes	(133)		(113)


Net cash provided by financing activities	$	207,393	$	59,642

Net increase in cash and cash equivalents	$	140,211	$	25,034

Cash and cash equivalents at beginning of year	179,228		70,963
Cash and cash equivalents at end of period	$	319,439	$	95,997

Cash paid during the period for:
Interest on deposits and borrowings	$	27,936	$	5,896
Income tax payments, net of refunds	$	577	$	1,849

Non-cash investing and financing activities:

Transfer of loans receivable to loans held-for-sale	$	34,364	$	2,089























Excise tax on stock repurchases	$	475	$	—

See accompanying notes to unaudited consolidated financial statements.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

1.Basis of Financial Statement Presentation

The accompanying consolidated financial statements include the accounts of Columbia Financial, Inc. ("Columbia Financial"), its wholly-owned subsidiaries, Columbia Bank ("Columbia") and Freehold Bank ("Freehold") and Columbia's wholly-owned subsidiaries, Columbia Investment Services, Inc., 2500 Broadway Corp., 1901 Residential Management Co. LLC, First Jersey Title Services, Inc., Real Estate Management Corp. LLC, 1901 Commercial Management Co. LLC, Stewardship Realty LLC, CSB Realty Corp., RSI Insurance Agency, Inc., and RSI Investment Corporation (collectively, the “Company”). In consolidation, all intercompany accounts and transactions are eliminated.

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

In preparing the interim unaudited consolidated financial statements, management is required to make estimates, significant judgements and assumptions that affect the reported amounts of assets and liabilities as of the dates of the Consolidated Statements of Financial Condition and Consolidated Statements of Income for the periods presented. Actual results could differ from these judgments and estimates under different conditions, resulting in a change that could have a material impact on the carrying values of our assets and liabilities and our results of operations. Material estimates that involve significant judgements and assumptions that are particularly susceptible to change are the determination of the adequacy of the allowance for credit losses, evaluation of the need for valuation allowances on deferred tax assets, and determination of liabilities related to retirement and other post-retirement benefits. These estimates, significant judgements and assumptions are evaluated on an ongoing basis and are adjusted when facts and circumstances dictate.

The interim unaudited consolidated financial statements reflect all normal and recurring adjustments, which are, in the opinion of management, considered necessary for a fair presentation of the financial condition and results of operations for the periods presented. The results of operations for the three month periods ended March 31, 2023 are not necessarily indicative of the results of operations that may be expected for the entire fiscal year or any other period.

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

These unaudited consolidated financial statements should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2022 and the audited consolidated financial statements included therein.

2. Acquisitions

Freehold Bank

On December 1, 2021, the Company completed its acquisition of Freehold Bancorp, MHC, Freehold Bancorp, Inc. and Freehold Bank (collectively, the "Freehold Entities" or "Freehold"). Pursuant to the terms of the merger agreement, Freehold Bancorp, MHC merged with and into the MHC, with the MHC as the surviving entity; and Freehold Bancorp, Inc. merged with and into Columbia Financial, with Columbia Financial as the surviving entity. In connection with the merger, Freehold Bank converted to a federal savings bank and will operate as a wholly-owned subsidiary of Columbia Financial until November 6, 2023, the effective date of the merger of Freehold Bank into Columbia Bank. Under the terms of the merger agreement, depositors of Freehold Bank became depositors of Columbia Bank and have the same rights and privileges in the MHC as if their accounts had been established at Columbia Bank on the date established at Freehold Bank. The Company issued 2,591,007 shares of its common stock to the MHC, representing an amount equal to the fair value of the Freehold Entities as determined by an independent appraiser, at the effective time of the holding company mergers.

Merger-related expenses are recorded in the Consolidated Statements of Income and are expensed as incurred. Direct acquisition and other charges incurred in connection with the acquisition of the Freehold Entities totaled $7,000 during the three months ended March 31, 2022. There were no merger expenses recorded for the three months ended March 31, 2023.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

2. Acquisitions (continued)

RSI Bank

On May 1, 2022, the Company completed its acquisition of RSI Bancorp, M.H.C., RSI Bancorp, Inc. and RSI Bank (collectively, the “RSI Entities” or "RSI"). Pursuant to the terms of the merger agreement, RSI Bancorp, M.H.C. merged with and into the MHC, with the MHC as the surviving entity; RSI Bancorp, Inc. merged with and into Columbia Financial, with Columbia Financial as the surviving entity; and RSI Bank merged with and into Columbia Bank, with Columbia Bank as the surviving institution. Under the terms of the merger agreement, depositors of RSI Bank became depositors of Columbia Bank and have the same rights and privileges in the MHC as if their accounts had been established at Columbia Bank on the date established at RSI Bank. The Company issued 6,086,314 shares of its common stock to the MHC, representing an amount equal to the discounted fair value of the RSI Entities as determined by an independent appraiser, at the effective time of the merger.

Merger-related expenses are recorded in the Consolidated Statements of Income and are expensed as incurred. Direct acquisition and other charges incurred in connection with the acquisition of the RSI Entities totaled $144,000 during the three months ended March 31, 2022. There were no merger expenses recorded for the three months ended March 31, 2023.

The following table sets forth assets acquired and liabilities assumed in the acquisition of the RSI Entities, at their estimated fair values as of the closing date of the transaction:


	May 1, 2022
	(In thousands)
Assets acquired:
Cash and cash equivalents	$	140,769
Debt securities available for sale	79,024
Equity securities	1,075
Federal Home Loan Bank Stock	906
Loans receivable	335,501
Accrued interest receivable	910
Office properties and equipment, net	7,296
Bank-owned life insurance	13,033
Deferred tax asset, net	3,633
Core deposit intangibles	10,271
Other assets	2,723
Total assets acquired	$	595,141

Liabilities assumed:
Deposits	$	502,732
Borrowings	5,762
Advance payments by borrowers for taxes and insurance	1,341
Accrued expenses and other liabilities	10,568
Total liabilities assumed	$	520,403

Net assets acquired	$	74,738
Fair market value of stock issued to Columbia Bank MHC for purchase	102,741
Goodwill recorded at merger	$	28,003

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

2. Acquisitions (continued)

The assets acquired and liabilities assumed have been accounted for under the acquisition method of accounting. The assets and liabilities were recorded at their fair values as of May 1, 2022, and resulted in the recognition of goodwill of $28.0 million. The determination of the fair value of assets acquired and liabilities assumed required management to make estimates about discount rates, future expected cash flows, market conditions, and other future events that are highly subjective in nature and subject to change. During the third quarter of 2022, the Company completed all tax returns related to the operation of RSI Bank and its impact on the Company's income taxes, which resulted in a $2.0 million adjustment to deferred income taxes, net, and a corresponding decrease in goodwill. During the fourth quarter of 2022, the Company recorded an adjustment of $490,922 to the original discounted fair value, which resulted in a decrease in additional paid-in-capital, and a corresponding decrease in goodwill. The fair value estimates are subject to change for up to one year after the closing date of the transaction if additional information (existing at the date of closing) relative to closing date fair values becomes available. As the Company continues to analyze the acquired assets and assumed liabilities, there may be additional adjustments to the recorded carrying values. However, management does not expect significant future adjustments to the recorded amounts. At March 31, 2023 and December 31, 2022, goodwill related to the acquisition of the RSI Entities totaled $25.5 million.

Fair Value Measurement of Assets Acquired and Liabilities Assumed

Described below are the methods used to determine the fair values of the significant assets acquired and liabilities assumed in the RSI acquisition:

Cash and cash equivalents. The estimated fair values of cash and cash equivalents approximate their stated face amounts, as

these financial instruments are either due on demand or have short-term maturities.

Debt securities available for sale. The estimated fair values of the debt securities were calculated utilizing Level 2 inputs. The majority of the acquired securities were fixed income instruments that are not quoted on an exchange, but are traded in active markets. The prices for these instruments are obtained through an independent pricing service when available, or dealer market participants with whom the Company has historically transacted with for both purchases and sales of securities. The prices are derived from market quotations and matrix pricing. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, and the bond's terms and conditions, among other things. Management reviewed the data and assumptions used in pricing securities by its third party provider to ensure the highest level of significant inputs are derived from market observable data.

Loans receivable. The acquired loan portfolio was segregated into pools for valuation purposes primarily based on loan type,

non-accrual status, and credit risk rating. The estimated fair values were computed by discounting the expected cash flows from the respective pools. Cash flows were estimated by using valuation models that incorporated estimates of current key assumptions such as prepayment speeds, default rates, and loss severity rates. The process included: (1) projecting monthly principal and/or interest cash flows based on the contractual terms of the loans, including both maturity and contractual amortization; (2) adjusting projected cash flows for expected losses and prepayments, where appropriate; (3) developing a discount rate based on the relative risk of the cash flows, considering the loan type, liquidity risk, the maturity of the loans, servicing costs, and a required return on capital; and (4) discounting the projected cash flows to a present value, to arrive at the calculated value of the loans.

The methods used to estimate the fair values of loans are extremely sensitive to the assumptions and estimates used. While management attempted to use assumptions and estimates that best reflected the acquired loan portfolios and current market conditions, a greater degree of subjectivity is inherent in the values than in those determined in active markets.

Office properties and equipment, net. The fair value of land and buildings was estimated using current appraisals. Acquired

equipment was not material. Buildings are amortized over their estimated useful lives. Equipment is amortized or depreciated over their estimated useful lives usually ranging from three to fifteen years.

Goodwill. Goodwill is not amortized for book purposes: however, it is reviewed at least annually for impairment and is not deductible for tax purposes.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

2. Acquisitions (continued)

Core deposit intangibles. Core deposit intangibles ("CDI") are the measure of the value of non-maturity deposits in a business combination. The fair value of the CDI was calculated utilizing the cost savings approach, the expected cost savings attributable to the core deposits funding relative to an alternative source of funding, using a discounted cash flow present value methodology. Key inputs and assumptions utilized in the discounted cash flow present value methodology include core deposit balances and rates paid, the cost of an additional funding source, the aggregate life of deposits and truncation points, non-interest deposit costs, and the immediate deposit outflow assumption.

Deposits. The fair values of deposit liabilities with no stated maturity (i.e., non-interest-bearing and interest-bearing demand deposit accounts, money market and savings and club accounts) are equal to the carrying amounts payable on demand. The fair value of certificates of deposit represent contractual cash flows, discounted to present value using interest rates currently offered on deposits with similar characteristics and remaining maturities.

Borrowings. The fair values of borrowings consisting of FHLB advances were estimated by discounting future cash flows using market discount rates for borrowings with similar characteristics, terms and remaining maturities.

3. Earnings per Share

Basic earnings per share ("EPS") is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period. For purposes of calculating basic EPS, weighted average common shares outstanding excludes treasury stock, unallocated employee stock ownership plan shares that have not been committed for release and deferred compensation obligations required to be settled in shares of Company stock.

Diluted EPS is computed using the same method as basic EPS and reflects the potential dilution which could occur if stock options and unvested shares were exercised and converted into common stock. The potentially diluted shares would then be included in the weighted average number of shares outstanding for the period using the treasury stock method.

The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share calculations for the three months ended March 31, 2023 and 2022:


	For the Three Months Ended March 31,
	2023		2022
	(In thousands, except per share data)

Net income	$	18,723	$	20,404
Shares:
Weighted average shares outstanding - basic	104,631,583		103,148,417
Weighted average diluted shares outstanding	516,792		588,835
Weighted average shares outstanding - diluted	105,148,375		103,737,252
Earnings per share:
Basic	$	0.18	$	0.20
Diluted	$	0.18	$	0.20

During the three months ended March 31, 2023 and 2022, the average number of stock options which could potentially dilute basic earnings per share in the future that were not included in the computation of diluted earnings per share because to do so would have been anti-dilutive totaled 122,125 and 16,005, respectively.

4. Stock Repurchase Program

On December 6, 2021, the Company announced that its Board of Directors authorized the Company's fourth 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 third stock repurchase program. As of March 31, 2023, all shares were repurchased under this program.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

4. Stock Repurchase Program (continued)

On December 14, 2022 the Company announced that its Board of Directors authorized the Company's fifth stock repurchase program to acquire up to 3,000,000 shares, or approximately 2.7%, of the Company's then issued and outstanding common stock, commencing upon the completion of the Company’s fourth stock repurchase program. As of March 31, 2023, there were 971,100 shares remaining to be purchased under this program.

During the three months ended March 31, 2023, the Company repurchased 2,378,434 shares at a cost of approximately $47.3 million, or $19.90 per share, under these programs. During the three months ended March 31, 2022, the Company repurchased 1,023,519 shares at a cost of approximately $21.7 million, or $21.19 per share, under these programs. Repurchased shares are held as treasury stock and are available for general corporate purposes.

The Inflation Reduction Act of 2022 which was enacted into law on August 16, 2022, imposed a nondeductible 1% excise tax on the net value of certain stock repurchases made after December 31, 2022. During the three months ended March 31, 2023, we reflected the applicable excise tax in treasury stock as part of the cost basis of the stock repurchased and recorded a corresponding liability for the excise tax payable in accrued expenses and other liabilities in our Consolidated Statements of Financial Condition.

5. Summary of Significant Accounting Policies

Accounting Pronouncements Adopted

In March 2022, the FASB issued ASU 2022-01, Derivatives and Hedging (Topic 815): Fair Value Hedging – Portfolio Layer Method. The purpose of this updated guidance is to further align risk management objectives with hedge accounting results on the application of the last-of-layer method, which was first introduced in ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. ASU 2022-01 is effective for public business entities for fiscal years beginning after December 15, 2022, with early adoption in the interim period, permitted. For entities who have already adopted ASU 2017-12, immediate adoption is allowed. ASU 2022-01 requires a modified retrospective transition method for basis adjustments in which the entity will recognize the cumulative effect of the change on the opening balance of each affected component of equity in the statement of financial position as of the date of adoption. The Company adopted this ASU on January 1, 2023 on a prospective basis; therefore, there was no impact to the Company's consolidated financial statements.

In March 2022, the FASB issued ASU 2022-02, Financial Instruments-Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures. ASU 2022-02 addresses areas identified by the FASB as part of its post-implementation review of the credit losses standard (ASU 2016-13) that introduced the CECL model. The amendments eliminated the accounting guidance for troubled debt restructurings by creditors that have adopted the CECL model and enhanced the disclosure requirements for loan refinancing and restructurings made with borrowers experiencing financial difficulty. In addition, the amendments required a public business entity to disclose current period gross write-offs for financing receivables and net investment in leases by year of origination in the vintage disclosures. For entities that adopted ASU 2016-13, this ASU was effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company adopted this pronouncement effective January 1, 2023. The update was applied on a prospective basis to disclosures and did not have a significant impact on the Company's consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments- Credit Losses (Topic 326): Measurement of Credit

Losses on Financial Instruments ("CECL"), further amended by ASU 2019-04, Codification Improvements to Topic 326, Financial

Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. Topic 326 pertains to the

measurement of credit losses on financial instruments. This update requires the measurement of all expected credit losses for financial

instruments held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts.

Financial institutions and other organizations will now use forward-looking information to better determine their credit loss estimates.

This update is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial

instruments held by financial institutions and other organizations. This update was effective for financial statements issued for fiscal

years and interim periods beginning after December 15, 2019.

The Company elected to defer the adoption of the CECL methodology until December 31, 2020 as permitted by the enacted

Coronavirus Aid, Relief and Economic Security Act ("CARES Act"). In late December 2020, the Consolidated Appropriations Act,

2021 was enacted, and extended certain provisions of the CARES Act, which allowed the Company to extend the adoption of CECL

until January 1, 2022. The Company elected to extend its adoption of CECL in accordance with this legislation, and adopted the above

mentioned ASUs related to Financial Instruments -Credit Losses (Topic 326) using a modified retrospective approach.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

5. Summary of Significant Accounting Policies (continued)

Accounting Pronouncements Adopted (continued)

The Company adopted ASU 2016-13 on January 1, 2022 for all financial assets measured at amortized cost and off-balance- sheet credit exposures. Results are presented under Accounting Standards Codification 326, Financial Instruments - Credit Losses. Effective January 1, 2022, the Company recorded a $12.1 million decrease in the allowance for credit losses on loans (previously allowance for loan losses), established a $353,000 allowance for credit losses on debt securities available for sale, and recorded a $5.5 million increase in the liability for off-balance-sheet credit exposures, which resulted in a total cumulative effect adjustment of $6.2 million, net of tax, and an increase to retained earnings.

6. Debt Securities Available for Sale

Debt securities available for sale at March 31, 2023 and December 31, 2022 are summarized as follows:


	March 31, 2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)		Fair Value
	(In thousands)

U.S. government and agency obligations	$	23,432	$	—	$	(1,793)	$	21,639
Mortgage-backed securities and collateralized mortgage obligations	1,324,035		179		(153,341)		1,170,873
Municipal obligations	3,695		—		(147)		3,548
Corporate debt securities	92,539		—		(16,029)		76,510
	$	1,443,701	$	179	$	(171,310)	$	1,272,570


	December 31, 2022
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)		Fair Value
			(In thousands)

U.S. government and agency obligations	$	67,771	$	—	$	(4,205)	$	63,566
Mortgage-backed securities and collateralized mortgage obligations	1,351,929		135		(170,337)		1,181,727
Municipal obligations	3,697		—		(122)		3,575
Corporate debt securities	92,544		6		(12,784)		79,766

	$	1,515,941	$	141	$	(187,448)	$	1,328,634

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

6. Debt Securities Available for Sale

The amortized cost and fair value of debt securities available for sale at March 31, 2023, by contractual final maturity, is shown below. Expected maturities may differ from contractual maturities due to prepayment or early call options exercised by the issuer.


	March 31, 2023
	Amortized Cost		Fair Value
	(In thousands)

One year or less	$	920	$	906
More than one year to five years	54,882		50,274
More than five years to ten years	63,864		50,517

	$	119,666	$	101,697
Mortgage-backed securities and collateralized mortgage obligations	1,324,035		1,170,873
	$	1,443,701	$	1,272,570

Mortgage-backed securities and collateralized mortgage obligations totaling $1.3 billion at amortized cost, and $1.2 billion at fair value, are not classified by maturity in the table above as their expected lives are likely to be shorter than the contractual maturity date due to principal prepayments.

During the three months ended March 31, 2023, proceeds from the sale of debt securities available for sale totaled $42.6 million, resulting in no gross gains and $1.3 million of gross losses. There were no calls or matured debt securities available for sale during the three months ended March 31, 2023.

During the three months ended March 31, 2022, there were no sales, calls or matured debt securities available for sale.

Debt securities available for sale having a carrying value of $990.9 million and $724.0 million, at March 31, 2023 and December 31, 2022, respectively, were pledged as security for public funds on deposit at Columbia Bank as required and permitted by law, pledged for outstanding borrowings at the Federal Home Loan Bank, and pledged for potential borrowings at the Federal Reserve Bank of New York. Debt securities available for sale having a carrying value of $39.0 million and $28.3 million, at March 31, 2023 and December 31, 2022, respectively, were pledged by Freehold Bank for outstanding borrowings at the Federal Home Loan Bank, and for potential borrowings at the Federal Reserve Bank of New York.

The following tables summarize the fair value and gross unrealized losses of those securities that reported an unrealized loss at March 31, 2023 and December 31, 2022 and if the unrealized loss position was continuous for the twelve months prior to those respective dates:


	March 31, 2023
	Less Than 12 Months				12 Months or Longer				Total
	Fair Value		Gross Unrealized (Losses)		Fair Value		Gross Unrealized (Losses)		Fair Value		Gross Unrealized (Losses)
	(In thousands)

U.S. government and agency obligations	$	1,408	$	(53)	$	20,231	$	(1,740)	$	21,639	$	(1,793)
Mortgage-backed securities and collateralized mortgage obligations	87,503		(3,544)		1,060,893		(149,797)		1,148,396		(153,341)
Municipal obligations	3,111		(136)		438		(11)		3,549		(147)
Corporate debt securities	17,309		(5,191)		57,201		(10,838)		74,510		(16,029)

	$	109,331	$	(8,924)	$	1,138,763	$	(162,386)	$	1,248,094	$	(171,310)

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

6. Debt Securities Available for Sale (continued)


	December 31, 2022
	Less Than 12 Months				12 Months or Longer				Total
	Fair Value		Gross Unrealized (Losses)		Fair Value		Gross Unrealized (Losses)		Fair Value		Gross Unrealized (Losses)
	(In thousands)

U.S. government and agency obligations	$	47,956	$	(2,359)	$	15,610	$	(1,846)	$	63,566	$	(4,205)
Mortgage-backed securities and collateralized mortgage obligations	424,328		(29,013)		741,515		(141,324)		1,165,843		(170,337)
Municipal obligations	3,574		(122)		—		—		3,574		(122)
Corporate debt securities	46,751		(5,792)		31,008		(6,992)		77,759		(12,784)

	$	522,609	$	(37,286)	$	788,133	$	(150,162)	$	1,310,742	$	(187,448)

The number of securities in an unrealized loss position at March 31, 2023 totaled 439, compared with 455 at December 31, 2022. All temporarily impaired securities were investment grade as of March 31, 2023 and December 31, 2022.

For available for sale securities, the Company assesses whether a loss is from credit or other factors and considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency and adverse conditions related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows is less than the amortized cost, a credit loss would be recorded through an allowance for credit losses, limited by the amount that the fair value is less than the amortized cost basis.

The following table presents the activity in the allowance for credit losses on debt securities available for sale for the three months ended March 31, 2023 and 2022:


	Three Months Ended March 31,
	2023		2022
	(In thousands)
Allowance for Credit Losses:
Beginning balance	$	—	$	—
Impact of adopting ASU 2016-13 (CECL) effective January 1, 2022	—		490
Provision for credit losses	—		654
Ending balance	$	—	$	1,144

The Company made an accounting policy election to exclude accrued interest receivable from the amortized cost basis of debt securities available for sale. Accrued interest receivable on debt securities available for sale is reported as a component of accrued interest receivable on the Consolidated Statement of Financial Condition, which totaled $3.3 million and $3.2 million at March 31, 2023 and December 31, 2022, respectively, and is excluded from the estimate of credit losses.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

7. Debt Securities Held to Maturity

Debt securities held to maturity at March 31, 2023 and December 31, 2022 are summarized as follows:


	March 31, 2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)		Allowance for Credit Losses		Fair Value
	(In thousands)

U.S. government and agency obligations	$	49,871	$	—	$	(6,599)	$	—	$	43,272
Mortgage-backed securities and collateralized mortgage obligations	367,356		—		(38,441)		—		328,915
	$	417,227	$	—	$	(45,040)	$	—	$	372,187


	December 31, 2022
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)		Allowance for Credit Losses		Fair Value
	(In thousands)

U.S. government and agency obligations	$	49,871	$	—	$	(7,304)	$	—	$	42,567
Mortgage-backed securities and collateralized mortgage obligations	371,652		—		(43,828)		—		327,824
	$	421,523	$	—	$	(51,132)	$	—	$	370,391

The amortized cost and fair value of debt securities held to maturity at March 31, 2023, by contractual final maturity, is shown below. Expected maturities may differ from contractual maturities due to prepayment or early call options exercised by the issuer.


	March 31, 2023
	Amortized Cost		Fair Value
	(In thousands)


More than one year to five years	$	19,875	$	18,600
More than five years to ten years	19,996		17,018
More than ten years	10,000		7,654
	49,871		43,272
Mortgage-backed securities and collateralized mortgage obligations	367,356		328,915
	$	417,227	$	372,187

Mortgage-backed securities and collateralized mortgage obligations totaling $367.4 million at amortized cost, and $328.9 million at fair value at March 31, 2023, are not classified by maturity as their expected lives are likely to be shorter than the contractual maturity date due to principal prepayments.

During the three months ended March 31, 2023, and 2022 there were no sales, calls or maturities of debt securities held to maturity.

Debt securities held to maturity having a carrying value of $346.8 million and $228.8 million, at March 31, 2023 and December 31, 2022, respectively, were pledged as security for public funds on deposit at Columbia Bank as required and permitted by law, pledged for outstanding borrowings at the Federal Home Loan Bank, and pledged for potential borrowings at the Federal Reserve Bank of New York.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

7. Debt Securities Held to Maturity (continued)


	March 31, 2023
	Less Than 12 Months				12 Months or Longer				Total
	Fair Value		Gross Unrealized (Losses)		Fair Value		Gross Unrealized (Losses)		Fair Value		Gross Unrealized (Losses)
	(In thousands)

U.S. government and agency obligations	$	4,935	$	(65)	$	38,337	$	(6,534)	$	43,272	$	(6,599)
Mortgage-backed securities and collateralized mortgage obligations	39,392		(2,340)		289,523		(36,101)		328,915		(38,441)
	$	44,327	$	(2,405)	$	327,860	$	(42,635)	$	372,187	$	(45,040)


	December 31, 2022
	Less Than 12 Months				12 Months or Longer				Total
	Fair Value		Gross Unrealized (Losses)		Fair Value		Gross Unrealized (Losses)		Fair Value		Gross Unrealized (Losses)
	(In thousands)

U.S. government and agency obligations	$	4,956	$	(44)	$	37,611	$	(7,260)	$	42,567	$	(7,304)
Mortgage-backed securities and collateralized mortgage obligations	275,107		(33,000)		52,717		(10,828)		327,824		(43,828)
	$	280,063	$	(33,044)	$	90,328	$	(18,088)	$	370,391	$	(51,132)

The number of securities in an unrealized loss position at March 31, 2023 totaled 114, compared with 116 at December 31, 2022. All temporarily impaired securities were investment grade as of March 31, 2023 and December 31, 2022.

For held to maturity securities, management measures expected credit losses on a collective basis by major security type. All of the mortgage-backed securities are issued by U.S. government agencies and are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies and have a long history of no credit losses and, therefore, the expectation of non-payment is zero and the Company is not required to estimate an allowance for credit losses on these securities under the CECL standard. All these securities reflect a credit quality rating of AAA by Moody's Investors Service.

The Company made an accounting policy election to exclude accrued interest receivable from the amortized cost basis of debt securities held to maturity. Accrued interest receivable on debt securities held to maturity is reported as a component of accrued interest receivable on the Consolidated Statement of Financial Condition, which totaled $818,000 and $1.0 million at March 31, 2023 and December 31, 2022, respectively, and is excluded from the estimate of credit losses.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

8. Equity Securities at Fair Value

The Company has an equity securities portfolio which consists of stock in other financial institutions, a payment technology company, a community bank correspondent services company, preferred stock in U.S. Government agencies, and a community reinvestment act qualifying bond fund which are reported at fair value on the Company's Consolidated Statements of Financial Condition. The fair value of the equities portfolio at March 31, 2023 and December 31, 2022 was $3.6 million and $3.4 million, respectively.

The Company recorded a net increase in the fair value of equity securities of $168,000 and $79,000, during the three months ended March 31, 2023 and 2022, respectively, as a component of non-interest income.

During the three months ended March 31, 2023 and 2022, there were no sales of equity securities.

9. Loans Receivable and Allowance for Credit Losses

Loans receivable at March 31, 2023 and December 31, 2022 are summarized as follows:


	March 31,		December 31,
	2023		2022
	(In thousands)
Real estate loans:
One-to-four family	$	2,860,964	$	2,860,184
Multifamily	1,315,143		1,239,207
Commercial real estate	2,393,918		2,413,394
Construction	374,434		336,553
Commercial business loans	516,682		497,469
Consumer loans:
Home equity loans and advances	271,620		274,302
Other consumer loans	2,322		3,425
Total gross loans	7,735,083		7,624,534
Purchased credit-deteriorated ("PCD") loans	16,245		17,059
Net deferred loan costs, fees and purchased premiums and discounts	35,744		35,971
Loans receivable	$	7,787,072	$	7,677,564

The Company had no loans held-for-sale at March 31, 2023 and December 31, 2022. During the three months ended March 31, 2023, the Company sold $9.8 million, $15.4 million, $9.4 million, and $580,000, of one-to-four family real estate loans and home equity loans and advances, commercial real estate loans, Small Business Administration ("SBA") loans included in commercial business loans, and construction loans held-for-sale, respectively, resulting in gross gains of $799,000 and $8,000 of gross losses.

During the three months ended March 31, 2022, the Company sold $1.3 million and $905,000 of SBA loans included in commercial business loans, and construction loans held-for-sale, respectively, resulting in gross gains of $110,000 and no gross losses.

During the three months ended March 31, 2023, the Company purchased a $14.7 million commercial real estate participation loan from a third party financial institution. During the three months ended March 31, 2022, no loans were purchased by the Company.

At March 31, 2023 and December 31, 2022, commercial business loans included $1.5 million and $1.6 million, respectively, in SBA Payroll Protection Program ("PPP") loans and net deferred fees related to these loans totaling $4,000 and $13,000, respectively.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

9. Loans Receivable and Allowance for Credit Losses (continued)

At March 31, 2023 and December 31, 2022, the carrying value of loans serviced by the Company for investors was $520.8 million and $497.1 million, respectively. These loans are not included in the Consolidated Statements of Financial Condition.

The following tables summarize the aging of loans receivable by portfolio segment, including non-accrual loans and excluding PCD loans at March 31, 2023 and December 31, 2022:


	March 31, 2023
	30-59 Days		60-89 Days		90 Days or More		Total Past Due		Non-accrual		Current		Total
	(In thousands)
Real estate loans:
One-to-four family	$	4,873	$	2,188	$	1,337	$	8,398	$	2,793	$	2,852,566	$	2,860,964
Multifamily	—		—		—		—		—		1,315,143		1,315,143
Commercial real estate	934		852		2,892		4,678		2,892		2,389,240		2,393,918
Construction	1,910		—		—		1,910		—		372,524		374,434
Commercial business loans	—		—		474		474		784		516,208		516,682
Consumer loans:
Home equity loans and advances	504		80		115		699		141		270,921		271,620
Other consumer loans	—		—		—		—		—		2,322		2,322
Total loans	$	8,221	$	3,120	$	4,818	$	16,159	$	6,610	$	7,718,924	$	7,735,083


	December 31, 2022
	30-59 Days		60-89 Days		90 Days or More		Total Past Due		Non-accrual		Current		Total
	(In thousands)
Real estate loans:
One-to-four family	$	4,063	$	1,149	$	1,808	$	7,020	$	2,730	$	2,853,164	$	2,860,184
Multifamily	—		—		—		—		—		1,239,207		1,239,207
Commercial real estate	—		853		2,892		3,745		2,892		2,409,649		2,413,394
Construction	5,218		—		—		5,218		—		331,335		336,553
Commercial business loans	220		—		474		694		801		496,775		497,469
Consumer loans:
Home equity loans and advances	465		33		286		784		286		273,518		274,302
Other consumer loans	3		1		12		16		12		3,409		3,425
Total loans	$	9,969	$	2,036	$	5,472	$	17,477	$	6,721	$	7,607,057	$	7,624,534

The Company considers a loan to be delinquent when we have not received a payment within 30 days of its contractual due date. Generally, a loan is designated as a non-accrual loan when the payment of interest is 90 days or more in arrears of its contractual due date. Non-accruing loans are returned to accrual status after there has been a sustained period of repayment performance (generally six consecutive months of payments) and both principal and interest are deemed collectible. The Company identifies loans that may need to be charged-off as a loss, by reviewing all delinquent loans, classified loans and other loans that management may have concerns about collectability. At March 31, 2023 and December 31, 2022, non-accrual loans totaled $6.6 million and $6.7 million, respectively. Included in non-accrual loans at March 31, 2023 and December 31, 2022, are 11 and 7 loans totaling $1.8 million and $1.2 million, respectively, which are less than 90 days in arrears.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

9. Loans Receivable and Allowance for Credit Losses (continued)

At March 31, 2023 there were no loans past due 90 days or more still accruing interest. At March 31, 2023 and December 31, 2022, there were no loans past due 90 days or more still accruing interest other than COVID-19 related loan forbearances and deferrals. In accordance with the CARES Act, these loans were not included in the aging of loans receivable by portfolio segment in the table above, and the Company continued to accrue interest income during the forbearance or deferral period.

Purchased credit impaired loans ("PCI") were loans acquired at a discount primarily due to deteriorated credit quality. These loans were initially recorded at fair value at acquisition, based upon the present value of expected future cash flows, with no related allowance for credit losses. In connection with the adoption of CECL on January 1, 2022, all loans considered PCI loans prior to that date were converted to purchase credit-deteriorated ("PCD") loans. Loans acquired in a business combination after January 1, 2022 are recorded in accordance with ASC Topic 326, which requires loans as of the acquisition date, that have experienced a more than insignificant deterioration in credit quality since origination to be classified as PCD loans.

At March 31, 2023 and December 31, 2022, PCD loans acquired in the Stewardship Financial Corporation ("Stewardship") acquisition totaled $1.8 million and $2.0 million, respectively, PCD loans acquired in the Roselle Bank acquisition totaled $0 and $184,000, respectively, PCD loans acquired in the Freehold Bank acquisition totaled $3.6 million and $3.7 million, respectively, and PCD loans acquired in the RSI Bank acquisition totaled $10.8 million and $11.3 million, respectively.

We may obtain physical possession of real estate collateralizing a residential mortgage loan via foreclosure or through an in-substance repossession. At March 31, 2023 and December 31, 2022, the Company had no real estate owned. At both March 31, 2023 and December 31, 2022, we had two home equity loans with a total carrying value of $81,000, collateralized by residential real estate which were in the process of foreclosure.

On January 1, 2022, the Company adopted CECL (ASC Topic 326), which replaced the historical incurred loss methodology with an expected loss methodology. The loan portfolio segmentation was expanded to seven portfolio segments taking into consideration common loan attributes and risk characteristics, as well as historical reporting metrics and data availability. The Company made an accounting policy election to exclude accrued interest receivable from the amortized cost basis of loans receivable. Accrued interest receivable on loans receivable is reported as a component of accrued interest receivable in the Consolidated Statement of Financial Condition, which totaled $30.5 million and $29.4 million at March 31, 2023 and December 31, 2022, respectively, and is excluded from the estimate of credit losses.

The allowance for credit losses on loans reflects management’s evaluation of the current expected credit losses in the loan portfolio. The Company maintains the allowance for credit losses through provisions for credit losses that are charged to income. Charge-offs against the allowance for credit 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 credit losses.

Management estimates the allowance 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 expected 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 each segment, primarily due to the nature of the underlying collateral. These risk factors were assessed for reasonableness against the Company’s own loss experience and adjusted in certain cases when the relationship between the Company’s historical default and loss severity deviate from that of the wider industry. The historical 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.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

9. Loans Receivable and Allowance for Credit Losses (continued)

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 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 modeled defaults and expected prepayments and discounted at the loan-level effective interest rate. The contractual term excludes expected extensions, renewals, and modifications. After quantitative considerations, management applies additional qualitative adjustments so that the allowance for credit loss is reflective of the estimate of lifetime losses that exist in the loan portfolio 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 analyzed for impairment is based upon loans that have been identified through the Company’s loan 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, and increases in interest rates in the absence of economic improvement. Any one or a combination of these events may adversely affect a borrower's ability to repay its 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 credit losses to total loans at an acceptable level considering the current composition of the loan portfolio.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

9. Loans Receivable and Allowance for Credit Losses (continued)

The following tables summarize loans receivable (including PCD loans) and allowance for credit losses by portfolio segment and impairment method at March 31, 2023 and December 31, 2022:


	March 31, 2023
	One-to-Four Family		Multifamily		Commercial Real Estate		Construction		Commercial Business		Home Equity Loans and Advances		Other Consumer Loans		Total
	(In thousands)
Allowance for credit losses:
Individually analyzed loans	$	203	$	3	$	104	$	—	$	39	$	27	$	—	$	376
Collectively analyzed loans	12,582		8,142		16,104		6,730		7,264		1,586		9		52,417
Loans acquired with deteriorated credit quality	4		—		49		9		17		1		—		80
Total	$	12,789	$	8,145	$	16,257	$	6,739	$	7,320	$	1,614	$	9	$	52,873

Total loans:
Individually analyzed loans	$	4,753	$	438	$	15,774	$	—	$	2,634	$	679	$	—	$	24,278
Collectively analyzed loans	2,856,211		1,314,705		2,378,144		374,434		514,048		270,941		2,322		7,710,805
Loans acquired with deteriorated credit quality	1,953		—		12,672		1,040		434		146		—		16,245
Total loans	$	2,862,917	$	1,315,143	$	2,406,590	$	375,474	$	517,116	$	271,766	$	2,322	$	7,751,328

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

9. Loans Receivable and Allowance for Credit Losses (continued)


	December 31, 2022
	One-to-Four Family		Multifamily		Commercial Real Estate		Construction		Commercial Business		Home Equity Loans and Advances		Other Consumer Loans		Total
	(In thousands)
Allowance for credit losses:
Individually analyzed loans	$	201	$	3	$	99	$	—	$	10	$	26	$	—	$	339
Collectively analyzed loans	11,591		7,874		17,961		6,415		6,876		1,654		10		52,381
Loans acquired with deteriorated credit quality	10		—		51		10		11		1		—		83
Total	$	11,802	$	7,877	$	18,111	$	6,425	$	6,897	$	1,681	$	10	$	52,803

Total loans:
Individually analyzed loans	$	4,164	$	457	$	16,729	$	—	$	1,173	$	697	$	—	$	23,220
Collectively analyzed loans	2,856,020		1,238,750		2,396,665		336,553		496,296		273,605		3,425		7,601,314
Loans acquired with deteriorated credit quality	2,158		—		13,116		1,040		496		249		—		17,059
Total loans	$	2,862,342	$	1,239,207	$	2,426,510	$	337,593	$	497,965	$	274,551	$	3,425	$	7,641,593

On January 1, 2023, the Company adopted ASU 2022-02, Financial Instruments-Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures, which eliminated the accounting guidance for troubled debt restructurings (“TDRs”) while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower is experiencing financial difficulty. This guidance was applied on a prospective basis. Modifications made to borrowers experiencing financial difficulty may include principal or interest forgiveness, forbearance, interest rate reductions, term extensions, or a combination of these events intended to minimize economic loss and to avoid foreclosure or repossession of collateral..

For the three months ended March 31, 2023, the Company had no modifications.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

9. Loans Receivable and Allowance for Credit Losses (continued)

The activity in the allowance for credit losses by portfolio segment for the three months ended March 31, 2023 and 2022 are as follows:


	For the Three Months Ended March 31,
	One-to-Four Family		Multifamily		Commercial Real Estate		Construction		Commercial Business		Home Equity Loans and Advances		Other Consumer Loans		Totals
	(In thousands)
2023
Balance at beginning of period	$	11,802	$	7,877	$	18,111	$	6,425	$	6,897	$	1,681	$	10	$	52,803

Provision for (reversal of) credit losses	1,121		268		(1,768)		314		272		(61)		29		175
Recoveries	—		—		—		—		151		20		5		176
Charge-offs	(134)		—		(86)		—		—		(26)		(35)		(281)
Balance at end of period	$	12,789	$	8,145	$	16,257	$	6,739	$	7,320	$	1,614	$	9	$	52,873

2022
Balance at beginning of period	$	8,798	$	7,741	$	16,114	$	8,943	$	20,214	$	873	$	6	$	62,689
Impact of adopting ASU No. 2016-13	(2,308)		(2,030)		(4,227)		(2,346)		(5,302)		(229)		(1)		(16,443)
Provision for (reversal of) credit losses	2,185		5,492		1,626		(1,623)		(7,767)		886		6		805
Recoveries	139		—		—		—		25		4		—		168
Charge-offs	—		—		—		—		(27)		(27)		(3)		(57)
Balance at end of period	$	8,814	$	11,203	$	13,513	$	4,974	$	7,143	$	1,507	$	8	$	47,162

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

9. Loans Receivable and Allowance for Credit Losses (continued)

The following tables present loans individually analyzed loans by segment, excluding PCD loans, at March 31, 2023 and December 31, 2022:


	At March 31, 2023
	Recorded Investment		Unpaid Principal Balance		Specific Allowance
	(In thousands)
With no allowance recorded:
Real estate loans:
One-to-four family	$	1,914	$	2,261	$	—
Multifamily	57		60		—
Commercial real estate	13,899		13,899		—

Commercial business loans	130		386		—
Consumer loans:
Home equity loans and advances	210		272		—
	16,210		16,878		—
With a specific allowance recorded:
Real estate loans:
One-to-four family	2,839		2,858		203
Multifamily	381		382		3
Commercial real estate	1,875		1,877		104

Commercial business loans	2,504		3,254		39
Consumer loans:
Home equity loans and advances	469		469		27
	8,068		8,840		376
Total:
Real estate loans:
One-to-four family	4,753		5,119		203
Multifamily	438		442		3
Commercial real estate	15,774		15,776		104

Commercial business loans	2,634		3,640		39
Consumer loans:
Home equity loans and advances	679		741		27
Total loans	$	24,278	$	25,718	$	376

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

9. Loans Receivable and Allowance for Credit Losses (continued)


	At December 31, 2022
	Recorded Investment		Unpaid Principal Balance		Specific Allowance
	(In thousands)
With no allowance recorded:
Real estate loans:
One-to-four family	$	1,296	$	1,644	$	—
Multifamily	59		63		—
Commercial real estate	14,836		15,699		—

Commercial business loans	143		400		—
Consumer loans:
Home equity loans and advances	223		315		—
	16,557		18,121		—
With a specific allowance recorded:
Real estate loans:
One-to-four family	2,868		2,887		201
Multifamily	398		397		3
Commercial real estate	1,893		1,896		99

Commercial business loans	1,030		1,030		10
Consumer loans:
Home equity loans and advances	474		474		26
	6,663		6,684		339
Total:
Real estate loans:
One-to-four family	4,164		4,531		201
Multifamily	457		460		3
Commercial real estate	16,729		17,595		99

Commercial business loans	1,173		1,430		10
Consumer loans:
Home equity loans and advances	697		789		26
	$	23,220	$	24,805	$	339

Specific allocations of the allowance for credit losses attributable to impaired loans totaled $376,000 and $339,000 at March 31, 2023 and December 31, 2022, respectively. At March 31, 2023 and December 31, 2022, impaired loans for which there was no related allowance for credit losses totaled $16.2 million and $16.6 million, respectively.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

9. Loans Receivable and Allowance for Credit Losses (continued)

The following table presents interest income recognized for individually analyzed loans by loan segment, excluding PCD loans, for the three months ended March 31, 2023 and 2022:


	For the Three Months Ended March 31,
	2023				2022
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
	(In thousands)
Real estate loans:
One-to-four family	$	4,459	$	45	$	5,030	$	55
Multifamily	448		5		752		11
Commercial real estate	16,252		151		16,423		242

Commercial business loans	1,904		49		1,626		22
Consumer loans:
Home equity loans and advances	688		7		796		11
Total loans	$	23,751	$	257	$	24,627	$	341

Management prepares an analysis each quarter that categorizes the entire loan portfolio by certain risk characteristics such as loan type (residential mortgage, commercial mortgage, construction, commercial business, etc.) and loan risk rating. The categorization of loans into risk categories is based upon relevant information about the borrower's ability to service their debt.

The Company utilizes an eight-point risk rating system to summarize its loan portfolio into categories with similar risk characteristics. Loans deemed to be “acceptable quality” are rated 1 through 4 (Pass), with a rating of 1 established for loans with minimal risk. Loans that are deemed to be of “questionable quality” are rated 5 (Special Mention) or 6 (Substandard). Loans with adverse classifications are rated 7 (Doubtful) or 8 (Loss). 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 credit risk review department. The Company requires an annual review be performed above certain dollar thresholds, depending on loan type, to help determine the appropriate risk ratings. Results from examinations are presented to the Audit Committee of the Board of Directors.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

9. Loans Receivable and Allowance for Credit Losses (continued)

The following table summarizes the Company's loans by year of origination and internally assigned credit risk rating, excluding PCD loans, at March 31, 2023 and December 31, 2022:


	Loans by Year of Origination at March 31, 2023
	2023		2022		2021		2020		2019		Prior		Revolving Loans		Revolving Loans to Term Loans		Total
	(In thousands)
One-to-Four Family
Pass	$	20,462	$	848,150	$	831,259	$	289,824	$	174,220	$	694,583	$	—	$	—	$	2,858,498
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		641		—		679		1,146		—		—		2,466


Total One-to-Four Family	20,462		848,150		831,900		289,824		174,899		695,729		—		—		2,860,964
Gross charge-offs	—		—		—		—		—		134		—		—		134

Multifamily
Pass	91,142		312,669		308,390		160,035		204,633		233,740		—		—		1,310,609
Special mention	—		—		—		—		—		4,534		—		—		4,534
Substandard	—		—		—		—		—		—		—		—		—


Total Multifamily	91,142		312,669		308,390		160,035		204,633		238,274		—		—		1,315,143
Gross charge-offs	—		—		—		—		—		—		—		—		—

Commercial Real Estate
Pass	50,010		430,326		391,963		167,649		246,612		1,037,991		—		—		2,324,551
Special mention	—		—		475		—		888		46,046		—		—		47,409
Substandard	—		—		—		3,116		1,607		17,235		—		—		21,958


Total Commercial Real Estate	50,010		430,326		392,438		170,765		249,107		1,101,272		—		—		2,393,918
Gross charge-offs	—		—		—		—		—		86		—		—		86

Construction
Pass	24,441		195,969		101,388		20,638		1,382		30,616		—		—		374,434
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—


Total Construction	24,441		195,969		101,388		20,638		1,382		30,616		—		—		374,434
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

9. Loans Receivable and Allowance for Credit Losses (continued)


	Loans by Year of Origination at March 31, 2023
	2023		2022		2021		2020		2019		Prior		Revolving Loans		Revolving Loans to Term Loans		Total
	(In thousands)
Commercial Business
Pass	$	23,304	$	54,209	$	34,624	$	31,811	$	19,711	$	48,713	$	283,464	$	—	$	495,836
Special mention	—		—		90		47		1,042		1,015		4,367		—		6,561
Substandard	—		—		224		10		—		6,783		7,268		—		14,285


Total Commercial Business	23,304		54,209		34,938		31,868		20,753		56,511		295,099		—		516,682
Gross charge-offs	—		—		—		—		—		—		—		—		—

Home Equity Loans and Advances
Pass	3,751		22,676		19,615		12,896		11,581		95,538		104,936		426		271,419
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		165		36		—		201


Total Home Equity Loans and Advances	3,751		22,676		19,615		12,896		11,581		95,703		104,972		426		271,620
Gross charge-offs	—		—		—		—		—		26		—		—		26

Other Consumer Loans
Pass	1,441		223		64		92		71		109		322		—		2,322
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—


Total Other Consumer Loans	1,441		223		64		92		71		109		322		—		2,322
Gross charge-offs	—		5		30		—		—		—		—		—		35

Total Loans	214,551		1,864,222		1,688,733		686,118		662,426		2,218,214		400,393		426		7,735,083
Total gross charge-offs	$	—	$	5	$	30	$	—	$	—	$	246	$	—	$	—	$	281

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

9. Loans Receivable and Allowance for Credit Losses (continued)


	Loans by Year of Origination at December 31, 2022
	2022		2021		2020		2019		2018		Prior		Revolving Loans		Revolving Loans to Term Loans		Total
	(In thousands)
One-to-Four Family
Pass	$	829,363	$	836,355	$	294,721	$	177,114	$	125,057	$	595,097	$	—	$	—	$	2,857,707
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		641		—		681		320		835		—		—		2,477


Total One-to-Four family	829,363		836,996		294,721		177,795		125,377		595,932		—		—		2,860,184
Gross charge-offs	—		—		50		—		122		210		—		—		382

Multifamily
Pass	315,157		309,611		167,955		205,608		38,849		197,489		—		—		1,234,669
Special mention	—		—		—		—		—		4,538		—		—		4,538
Substandard	—		—		—		—		—		—		—		—		—


Total Multifamily	315,157		309,611		167,955		205,608		38,849		202,027		—		—		1,239,207
Gross charge-offs	—		—		—		—		—		—		—		—		—

Commercial Real Estate
Pass	448,313		392,689		170,125		260,268		231,868		852,104		—		—		2,355,367
Special mention	—		478		1,843		892		15,498		20,939		—		—		39,650
Substandard	—		—		1,286		1,607		—		15,484		—		—		18,377


Total Commercial Real Estate	448,313		393,167		173,254		262,767		247,366		888,527		—		—		2,413,394
Gross charge-offs	—		—		—		—		—		—		—		—		—

Construction
Pass	159,751		104,339		28,058		14,216		870		29,319		—		—		336,553
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—


Total Construction	$	159,751	$	104,339	$	28,058	$	14,216	$	870	$	29,319	$	—	$	—	$	336,553
Gross charge-offs	—		—		—		—		—		—		—		—		—

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

9. Loans Receivable and Allowance for Credit Losses (continued)


	Loans by Year of Origination at December 31, 2022
	2022		2021		2020		2019		2018		Prior		Revolving Loans		Revolving Loans to Term Loans		Total
	(In thousands)
Commercial Business
Pass	$	58,631	$	32,880	$	32,788	$	20,705	$	24,634	$	27,277	$	280,857	$	—	$	477,772
Special mention	—		110		63		1,137		1,030		38		10,761		—		13,139
Substandard	—		224		60		—		2,085		315		3,874		—		6,558


Total Commercial Business	58,631		33,214		32,911		21,842		27,749		27,630		295,492		—		497,469
Gross charge-offs	—		—		—		143		29		18		—		—		190

Home Equity Loans and Advances
Pass	22,903		20,476		13,770		12,070		11,126		88,251		105,005		457		274,058
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		188		56		—		244


Total Home Equity Loans and Advances	22,903		20,476		13,770		12,070		11,126		88,439		105,061		457		274,302
Gross charge-offs	—		—		—		—		—		33		—		—		33

Other Consumer Loans
Pass	2,669		87		100		102		30		96		341		—		3,425
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—


Total Other Consumer Loans	2,669		87		100		102		30		96		341		—		3,425
Gross charge-offs	10		18		—		—		—		5		—		—		33

Total Loans	1,836,787		1,697,890		710,769		694,400		451,367		1,831,970		400,894		457		7,624,534
Total gross charge-offs	$	10	$	18	$	50	$	143	$	151	$	266	$	—	$	—	$	638

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

9. Loans Receivable and Allowance for Credit Losses (continued)

The Company is required to include unfunded commitments that are expected to be funded in the future within the allowance calculation, other than those that are unconditionally cancellable. To arrive at that reserve, the reserve percentage for each applicable segment is applied to the unused portion of the expected commitment balance and is multiplied by the expected funding rate. To determine the expected funding rate, the Company uses a historical utilization rate for each segment. The allowance for credit losses for off-balance-sheet exposures is reported in other liabilities in the Consolidated Statements of Financial Condition. The liability represents an estimate of expected credit losses arising from off-balance-sheet exposures such as unfunded commitments. At March 31, 2023 and December 31, 2022, the balance of the allowance for credit losses on unfunded commitments, included in other liabilities, totaled $6.4 million and $7.0 million, respectively. The Company recorded a (reversal of) provision for credit losses on unfunded commitments, included in other non-interest expense in the Consolidated Statements of Income, of $(528,000) and $648,000 during the three months ended March 31, 2023 and 2022.

The following table presents the activity in the allowance for credit losses on off-balance-sheet exposures for the three months ended March 31, 2023 and 2022:


	Three Months Ended March 31,
	2023		2022
	(In thousands)
Allowance for Credit Losses:
Beginning balance	$	6,970	$	524
Impact of adopting ASU 2016-13 ("CECL") effective January 1, 2022	—		7,674
(Reversal of) provision for credit losses	(528)		648
Balance at End of Period	$	6,442	$	8,846

10. Leases

The Company's leases real estate property for branches and office space. At March 31, 2023 and December 31, 2022, all of the Company's leases are classified as operating leases.

The Company determines if an arrangement is a lease at inception. Topic 842 requires lessees to recognize a right-of-use asset and a lease liability, measured at the present value of the future minimum lease payments, at the lease commencement date. The calculated amount of the right-of-use asset and lease liabilities are impacted by the length of the lease term and the discount rate used to calculate the present value of minimum lease payments.

At March 31, 2023 and December 31, 2022, the weighted average remaining lease term for operating leases was 6.3 years and 6.5 years, respectively, and the weighted average discount rate used in the measurement of operating lease liabilities was 2.42% and 2.35%, respectively.

The Company elected to account for the lease and non-lease components separately since such amounts are readily determinable under the Company's lease contracts. Operating lease expense is recognized on a straight-line basis over the lease term, while variable lease payments are recognized as incurred. Variable lease payments include common area maintenance charges, real estate taxes, repairs and maintenance costs and utilities. Operating and variable lease expenses are recorded in occupancy expense in the Consolidated Statements of Income. During the three months ended March 31, 2023 and 2022, operating and variable lease expenses totaled approximately $633,000 and $731,000, respectively.

There were no sale and leaseback transactions, leveraged leases or lease transactions with related parties during the three months ended March 31, 2023 and 2022. At March 31, 2023, the Company had not entered into any leases which had not yet commenced.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

10. Leases (continued)

The following table summarizes lease payment obligations for each of the next five years and thereafter as follows:


	Lease Payment Obligations at
	March 31, 2023		December 31, 2022
	(In thousands)


One year or less	$	3,322	$	4,290
After one year to two years	3,899		3,745
After two years to three years	3,134		3,075
After three years to four years	2,773		2,773
After four years to five years	2,000		2,000
Thereafter	4,345		4,345
Total undiscounted cash flows	19,473		20,228
Discount on cash flows	(1,525)		(1,613)
Total lease liability	$	17,948	$	18,615

11. Deposits

Deposits at March 31, 2023 and December 31, 2022 are summarized as follows:


	March 31,		December 31,
	2023		2022
	(In thousands)

Non-interest-bearing demand	$	1,583,329	$	1,806,152
Interest-bearing demand	2,260,240		2,592,884
Money market accounts	896,336		718,524
Savings and club deposits	850,777		913,738
Certificates of deposit	2,083,519		1,969,861
Total deposits	$	7,674,201	$	8,001,159

The aggregate amount of certificates of deposit that meet or exceed $100,000 totaled approximately $1.2 billion and $1.1 billion at March 31, 2023 and December 31, 2022, respectively. Interest expense on deposits for the three months ended March 31, 2023 and 2022 totaled $17.1 million and $4.7 million, respectively.

Uninsured deposits (excluding municipal deposits which are collateralized) totaled $2.1 billion at March 31, 2023, representing a decrease of $108.0 million, from $2.2 billion at December 31, 2022. Columbia Bank and Freehold Bank both provide eligible customers additional security by increasing their FDIC insured protection beyond the $250,000 limit through the IntraFi Cash Service ("ICS") and the Certificate of Deposit Account Registry Service ("CDARS"). These funds are placed in multiple banks throughout the network and are managed solely through their current relationship at each bank to provide FDIC coverage for the entire deposit balance.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

11. Deposits (continued)

Scheduled maturities of certificates of deposit accounts at March 31, 2023 and December 31, 2022 are summarized as follows:


	March 31,		December 31,
	2023		2022
	(In thousands)

One year or less	$	1,276,310	$	1,189,826
After one year to two years	678,890		610,965
After two years to three years	66,338		92,120
After three years to four years	37,716		48,981
After four years	24,265		27,969
	$	2,083,519	$	1,969,861

12. Stock Based Compensation

At the Company's annual meeting of stockholders held on June 6, 2019, stockholders approved the Columbia Financial, Inc. 2019 Equity Incentive Plan ("2019 Plan") which provides for the issuance of up to 7,949,996 shares (2,271,427 restricted stock awards and 5,678,569 stock options) of common stock.

At March 31, 2023, there were 798,232 shares remaining available for future restricted stock awards and 1,907,647 shares remaining available for future stock option grants under the 2019 plan

On March 2, 2022, 51,746 shares of restricted stock were awarded, with a grant date fair value of $21.79 per share. To fund the grant of restricted common stock, the Company issued shares from authorized but unissued shares.

On October 31, 2022, 38,730 shares of restricted stock were awarded, with a grant date fair value of $20.54 per share. To fund the grant of restricted common stock, the Company issued shares from authorized unissued shares.

On November 21, 2022, 13,722 shares of restricted stock were awarded, with a grant date fair value of $21.86 per share. To fund the grant of restricted common stock, the Company issued shares from authorized unissued shares.

On December 19, 2022, 18,984 shares of restricted stock were awarded, with a grant date fair value of $21.07 per share. To fund the grant of restricted common stock, the Company issued shares from authorized unissued shares.

Restricted shares granted under the 2019 Plan generally vest in equal installments, over performance or service periods ranging from 1 year to 5 years, beginning 1 year from the date of grant. A portion of restricted shares awarded were performance awards, which vested upon the satisfactory attainment of certain corporate financial targets during the year ended December 31, 2022. Management recognizes compensation expense for the fair value of restricted shares on a straight-line basis over the requisite performance or service period. During the three months ended March 31, 2023 and 2022, approximately $1 million and $1.2 million in expense was recognized in regard to these awards. The expected future compensation expense related to the 402,601 non-vested restricted shares outstanding at March 31, 2023 is approximately $5.0 million over a weighted average period of 1.5 years.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

12. Stock Based Compensation (continued)

The following is a summary of the Company's restricted stock activity during the three months ended March 31, 2023 and 2022:


	Number of Restricted Shares	Weighted Average Grant Date Fair Value

Non-vested at January 1, 2023	430,954	$	17.31

Vested	(26,424)	21.16
Forfeited	(1,929)	21.12
Non-vested at March 31, 2023	402,601	$	17.10


	Number of Restricted Shares	Weighted Average Grant Date Fair Value

Non-vested at January 1, 2022	1,054,335	$	15.78
Grants	51,746	21.79
Vested	(27,775)	17.86
Forfeited	(31,570)	16.91
Non-vested at March 31, 2022	1,046,736	$	15.98

On March 21, 2022, options to purchase 130,951 shares of Company common stock were awarded with a grant date fair value of $6.51 per option. These stock options granted under the 2019 Plan on such date, vest in equal installments over the service period of three years beginning one year from the date of grant. These stock options were granted at an exercise price of $21.79, which represents the fair value of the Company's common stock price on the grant date based on the closing market price, and have an expiration period of approximately 10 years. The fair value of stock options granted was estimated utilizing the Black-Scholes option pricing model using the following assumptions: expected life of six years risk-free rate of return of 2.34%, volatility of 25.31%, and a dividend yield of 0.00%.

On October 31, 2022, options to purchase 173,766 shares of Company common stock were awarded with a grant date fair value of $7.22 per option. Stock options granted under the 2019 Plan vest in equal installments over the service period of three years beginning one year from the date of grant. These stock options were granted at an exercise price of $20.54, which represents the fair value of the Company's common stock price on the grant date based on the closing market price, and have an expiration period of 10 years. The fair value of stock options granted was estimated utilizing the Black-Scholes option pricing model using the following assumptions: expected life of six years, risk-free rate of return of 4.19%, volatility of 26.25%, and a dividend yield of 0.00%.

On December 19, 2022, options to purchase 58,912 shares of Company common stock were awarded with a grant date fair value of $6.79 per option. Stock options granted under the 2019 Plan generally vest in equal installments over the service period of one year beginning one year from the date of grant. These stock options were granted at an exercise price of $21.07, which represents the fair value of the Company's common stock price on the grant date based on the closing market price, and have an expiration period of approximately 10 years. The fair value of stock options granted was estimated utilizing the Black-Scholes option pricing model using the following assumptions: expected life of 5.5 years, risk-free rate of return of 3.71%, volatility of 26.11%, and a dividend yield of 0.00%.

The expected life of the options represents the period of time that stock options are expected to be outstanding and is estimated using the simplified approach, which assumes that all outstanding options will be exercised at the midpoint of the vesting date and full contractual term. The risk-free rate of return is based on the rates on the grant date of a U.S. Treasury Note with a term equal to the expected option life. Since the Company recently converted to a public company and does not have sufficient historical price data, the expected volatility is based on the historical daily stock prices of Company stock plus a peer group of similar entities based on factors such as industry, stage of life cycle, size and financial leverage. The Company has not paid any cash dividends on its common stock.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

12. Stock Based Compensation (continued)

Management recognizes expense for the fair value of these awards on a straight-line basis over the requisite service period. During the three months ended March 31, 2023 and 2022, approximately $921,000 and $756,300 in expense was recognized in regard to these awards. The expected future compensation expense related to the 1,542,386 non-vested options outstanding at March 31, 2023 is $5.4 million over a weighted average period of 1.5 years.

The following is a summary of the Company's option activity during the three months ended March 31, 2023 and 2022:


	Number of Stock Options	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value

Outstanding, January 1, 2023	3,436,869	$	16.26	6.9	$	18,435,239

Exercised	(3,618)	15.60		—	—
Expired	(2,117)	15.60		—	—
Forfeited	(8,055)	20.03		—	—
Outstanding, March 31, 2023	3,423,079	$	16.25	6.7	$	7,893,117









Options exercisable at March 31, 2023	1,880,693	$	15.85	6.4	$	4,711,769


	Number of Stock Options	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value

Outstanding, January 1, 2022	3,637,542	$	15.78	7.6	$	18,654,905
Granted	130,951	21.79		—	—
Exercised	(62,859)	16.42		—	—
Expired	(1,412)	15.60		—	—
Forfeited	(61,961)	16.84		—	—
Outstanding, March 31, 2022	3,642,261	$	15.92	7.5	$	20,401,381








Options exercisable at March 31, 2022	1,398,446	$	15.69	7.3	$	8,140,661

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value, the difference between the Company's closing stock price on the last trading day of the period and the exercise price, multiplied by the number of in-the-money options.

During the three months ended March 31, 2023 and 2022, the aggregate intrinsic value of options exercised was $19,285 and $360,469, respectively.

13. Components of Net Periodic Benefit Cost

Pension Plan, Retirement Income Maintenance Plan (the "RIM Plan") Post-retirement Plan, and Split-Dollar Life Insurance Plans

The Company maintains a single employer, tax-qualified defined benefit pension plan (the "Pension Plan") which covers full-time employees that satisfy the Pension Plan's eligibility requirements. The benefits are based on years of service and the employee's average compensation for the highest five consecutive years of employment. Effective October 1, 2018, newly hired employees are not eligible to participate in the Pension Plan as the Pension Plan has been closed to new employees as of that date.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

13. Components of Net Periodic Benefit Cost (continued)

The Company also maintains a Retirement Income Maintenance Plan (the "RIM Plan") which is a non-qualified defined benefit plan which provides benefits to all employees of the Company if their benefits under the Pension Plan are limited by Internal Revenue Code Sections 415 and 401(a)(17).

In addition, the Company provides certain health care and life insurance benefits to eligible retired employees under a Post-retirement Plan. The Company accrues the cost of retiree health care and other benefits during the employee's period of active service. Effective January 1, 2019, the Post-retirement Plan has been closed to new hires.

The Company also provides life insurance benefits to eligible employees under an endorsement split-dollar life insurance program. The Company recognizes a liability for future benefits applicable to endorsement split-dollar life insurance arrangements that provide death benefits post-retirement. Through its mergers, the Company recognized additional liability for future benefits applicable to endorsement split-dollar life insurance arrangements that provide death benefits post-retirement under those respective Bank's program.

Net periodic (income) benefit cost for the Pension Plan, RIM Plan, Post-retirement Plan and Split-Dollar Life Insurance plan benefits for the three months ended March 31, 2023 and 2022, includes the following components:


	For the Three Months Ended March 31,
	Pension Plan				RIM Plan				Post-retirement Plan				Split-Dollar Life Insurance
	2023		2022		2023		2022		2023		2022		2023		2022		Affected Line Item in the Consolidated Statements of Income
	(In thousands)

Service cost	$	1,199	$	1,966	$	69	$	93	$	54	$	87	$	69	$	125	Compensation and employee benefits
Interest cost	2,790		2,031		158		97		242		150		204		142		Other non-interest expense
Expected return on plan assets	(7,479)		(7,559)		—		—		—		—		—		—		Other non-interest expense
Amortization:
Prior service cost	—		—		—		—		—		—		14		14		Other non-interest expense
Net loss	—		—		14		111		—		78		—		151		Other non-interest expense
Net periodic (income) benefit cost	$	(3,490)	$	(3,562)	$	241	$	301	$	296	$	315	$	287	$	432

Through the acquisition of RSI on May 1, 2022, the Company acquired a funded pension plan and a non-funded post-retirement plan. The benefits are based on years of service and the employee’s compensation, as defined. The Plan was amended effective March 31, 2011, to freeze the Plan so that no employee shall commence or recommence participation in the Plan, that there shall be no further benefit accruals under the Plan, and that compensation received after the effective date shall not be recognized for any purpose under the Plan. The defined benefit post-retirement healthcare plan covers substantially all retirees and employees.

Net periodic (income) benefit cost for the Pension Plan and Post-retirement Plan for the three months ended March 31, 2023 includes the following components:

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

13. Components of Net Periodic Benefit Cost (continued)


	For the Three Months Ended March 31, 2023
	Pension Plan		Post-retirement Plan	Affected Line Item in the Consolidated Statements of Income
	(In thousands)

Service cost	$	—		$	17	Compensation and employee benefits
Interest cost	76			27		Other non-interest expense
Expected return on plan assets	(122)			—		Other non-interest expense
Amortization:

Net (gain)	—			(15)		Other non-interest expense
Net periodic (income) benefit cost	$	(46)		$	29

For the three months ended March 31, 2023, no contribution was made to either Pension Plan. The net periodic (income) cost for pension benefits, other post-retirement and split-dollar life insurance benefits for the three months ended March 31, 2023, were calculated using the most recent available benefit valuations.

14. Fair Value Measurements

The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. The determination of fair values of financial instruments often requires the use of estimates. Where quoted market values in an active market are not readily available, the Company utilizes various valuation techniques to estimate fair value.

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:

Level 1: Unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access on the measurement date.

Level 2: Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar instruments in markets that are active or not active, or inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.

Level 3: Prices or valuation techniques that require unobservable inputs that are both significant to the fair value measurement and unobservable (i.e., supported by minimal or no market activity). Valuation techniques include the use of option pricing models, discounted cash flow models and similar techniques.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The methods described below were used to measure fair value of financial instruments as reflected in the tables below on a recurring basis at March 31, 2023 and December 31, 2022.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

14. Fair Value Measurements (continued)

Debt Securities Available for Sale, at Fair Value

For debt securities available for sale, fair value was estimated using a market approach. The majority of these securities are fixed income instruments that are not quoted on an exchange, but are traded in active markets. Prices for these instruments are obtained through third-party data service providers or dealer market participants with which the Company has historically transacted both purchases and sales of securities. Prices obtained from these sources include market quotations, matrix pricing and discounted cash flow pricing. Matrix pricing, a Level 2 input, is a mathematical technique used principally to value certain securities to a benchmark or to comparable securities. The Company evaluates the quality of Level 2 matrix pricing through comparison to similar assets with greater liquidity and evaluation of projected cash flows. Discounted cash flows, a Level 3 input, is estimated by discounting the expected future cash flows using the current rates for securities with similar credit ratings and similar remaining maturities. As the Company is responsible for the determination of fair value, it performs quarterly analysis on the prices received from the pricing service to determine whether the prices are reasonable estimates of fair value. Specifically, the Company compares the prices received from the pricing service to a secondary pricing source. Additionally, the Company compares changes in the reported market values and returns to relevant market indices to assess the reasonableness of the reported prices. The Company’s internal price verification procedures and review of fair value methodology documentation provided by independent pricing services has not historically resulted in an adjustment in the prices obtained from the pricing service. The Company may hold debt instruments issued by the U.S. government and U.S. government-sponsored agencies that are traded in active markets with readily accessible quoted market prices that are considered Level 1 inputs. The Company classifies the estimated fair value of its loan portfolio as Level 3.

Equity Securities, at Fair Value

The Company holds equity securities that are traded in active markets with readily accessible quoted market prices that are considered Level 1 inputs. A trust preferred security that is not traded in an active market and Federal Home Loan Mortgage Corporation ("FHLMC") and Federal National Mortgage Association ("FNMA") preferred stock are considered Level 2 instruments. In addition, Level 2 instruments include Atlantic Community Bankers Bank ("ACCB") stock, which is based on redemption at par value and can only be sold to the issuing ACBB or another institution that holds ACBB stock.

Derivatives

The Company records all derivatives included in other assets and liabilities on the Consolidated Statements of Financial Condition at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting, and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. See note 16 for disclosures related to the accounting treatment for derivatives.

The fair value of the Company's derivatives is determined using discounted cash flow analysis using observable market-based inputs, which are considered Level 2 inputs.

The following tables present the assets and liabilities reported on the Consolidated Statements of Financial Condition at their fair values at March 31, 2023 and December 31, 2022, by level within the fair value hierarchy:

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

14. Fair Value Measurements (continued)


	March 31, 2023
			Fair Value Measurements
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)
Debt securities available for sale:
U.S. government and agency obligations	$	21,639	$	13,420	$	8,219	$	—
Mortgage-backed securities and collateralized mortgage obligations	1,170,873		—		1,170,873		—
Municipal obligations	3,548		—		895		2,653
Corporate debt securities	76,510		—		68,563		7,947

Total debt securities available for sale	1,272,570		13,420		1,248,550		10,600
Equity securities	3,552		3,231		321		—
Derivative assets	15,111		—		15,111		—
	$	1,291,233	$	16,651	$	1,263,982	$	10,600

Derivative liabilities	$	15,813	$	—	$	15,813	$	—


	December 31, 2022
			Fair Value Measurements
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)
Debt securities available for sale:
U.S. government and agency obligations	$	63,566	$	55,178	$	8,388	$	—
Mortgage-backed securities and collateralized mortgage obligations	1,181,727		—		1,181,727		—
Municipal obligations	3,575		—		897		2,678
Corporate debt securities	79,766		—		70,321		9,445

Total debt securities available for sale	1,328,634		55,178		1,261,333		12,123
Equity securities	3,384		3,053		331
Derivative assets	19,756		—		19,756		—
	$	1,351,774	$	58,231	$	1,281,420	$	12,123

Derivative liabilities	$	19,072	$	—	$	19,072	$	—

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

14. Fair Value Measurements (continued)

The table below provides activity of assets reported as Level 3 for the period ended March 31, 2023:


	Significant Unobservable Inputs (Level 3)
	(In thousands)
Debt securities available for sale:
Balance of recurring Level 3 assets -December 31, 2022	$	12,123
Change in fair value of Level 3 assets	$	(1,523)
Transfers into Level 3 assets	—
Balance of recurring Level 3 assets - March 31, 2023	$	10,600

The fair value of investments placed in Level 3 is estimated by discounting the expected future cash flows using reasonably available current rates for comparable new issue securities with similar structure, including original maturity, call date, and assumptions about risk. Discounted cash flow estimated valuations are subsequently validated against comparable structures as an approximation of value.

Expected cash flows were projected based on contractual cash flows. At both March 31, 2023 and December 31, 2022, two private placement corporate debt securities classified as available for sale and three private placement municipal obligations classified as available for sale were included in Level 3 assets. There were no transfers to Level 3 assets during the three months ended March 31, 2023.

Private placement debt security cash flows were discounted to a market yield of 11.00% (weighted average is 11.00%), and the cash flows for private placement municipal obligations were discounted to a market yield ranging from 4.22% to 4.74% (weighted average is 4.40%).

The period end valuations were support by an analysis prepared by an independent third party market participant and approved by management.

Assets Measured at Fair Value on a Non-Recurring Basis

The valuation techniques described below were used to estimate fair value of financial instruments measured on a non-recurring basis at March 31, 2023 and December 31, 2022.

Individually Analyzed Collateral Dependent Loans/Impaired Loans

The fair value of collateral dependent loans that are individually analyzed or were previously deemed impaired is measured based on the present value of expected future cash flows discounted at the loan's effective interest rate or, as a practical expedient, at the loan's observable market price or the fair value of the collateral if the loan is collateral dependent. For individually analyzed loans measured for impairment based on the fair value of the underlying collateral, fair value was estimated using a market approach. The Company measures the fair value of collateral underlying impaired loans primarily through obtaining independent appraisals that rely upon quoted market prices for similar assets in active markets. These appraisals include adjustments, on an individual case-by-case basis, to comparable assets based on the appraisers’ market knowledge and experience, as well as adjustments for estimated costs to sell between 6% and 8%. For non-collateral dependent loans, management estimates fair value using discounted cash flows based on inputs that are largely observable. The Company classifies these loans as Level 3 within the fair value hierarchy.

Mortgage Servicing Rights, Net ("MSR's")

Mortgage servicing rights are carried at the lower of cost or estimated fair value. The estimated fair value of MSRs is obtained through an analysis of future cash flows, incorporating assumptions that market participants would use in determining fair value including market discount rates, prepayments speeds, servicing income, servicing costs, default rates and other market driven data, including the market's perception of future interest rate movements. The prepayment speed and the discount rate are considered two of the most significant inputs in the model. A significant degree of judgment is involved in valuing the mortgage servicing rights using Level 3 inputs. The use of different assumptions could have a significant effect on this fair value estimate.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

14. Fair Value Measurements (continued)

The following tables present the assets and liabilities reported on the Consolidated Statements of Financial Condition at their fair values on a non-recurring basis at March 31, 2023 and December 31, 2022, by level within the fair value hierarchy:


	March 31, 2023
			Fair Value Measurements
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)



Mortgage servicing rights	2,264		—		—		2,264
	$	2,264	$	—	$	—	$	2,264


	December 31, 2022
			Fair Value Measurements
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)



Mortgage servicing rights	2,107		—		—		2,107
	$	2,107	$	—	$	—	$	2,107

The following table presents information for Level 3 assets measured at fair value on a non-recurring basis at March 31, 2023 and December 31, 2022:

March 31, 2023

Fair Value

Valuation Methodology

Unobservable Inputs

Range of Inputs

Weighted Average Rate

(Dollars in thousands)

Mortgage servicing rights

2,264

Discounted cash flow

Prepayment speeds and discount rates (1)

4.9% - 24.2%

7.8

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

14. Fair Value Measurements (continued)

December 31, 2022

Fair Value

Valuation Methodology

Unobservable Inputs

Range of Inputs

Weighted Average Rate

(Dollars in thousands)

Mortgage servicing rights

2,107

Discounted cash flow

Prepayment speeds and discount rates (2)

5.5% - 27.1%

8.6

(1) Value of SBA servicing rights based on a discount rate of 15.00%.

(2) Value of SBA servicing rights based on a discount rate of 14.50%.

Other Fair Value Disclosures

The Company is required to disclose estimated fair value of financial instruments, both assets and liabilities on and off the balance sheet, for which it is practicable to estimate fair value. A description of the valuation methodologies used for those assets and liabilities not recorded at fair value on a recurring or non-recurring basis are set forth below.

Cash and Cash Equivalents

For cash and due from banks, federal funds sold and short-term investments, the carrying amount approximates fair value due to their nature and short-term maturities.

Debt Securities Held to Maturity

For debt securities held to maturity, fair value was estimated using a market approach. The majority of the Company’s securities are fixed income instruments that are not quoted on an exchange, but are traded in active markets. Prices for these instruments are obtained through third-party data service providers or dealer market participants with which the Company has historically transacted both purchases and sales of securities. Prices obtained from these sources include market quotations and matrix pricing. Matrix pricing, a Level 2 input, is a mathematical technique used principally to value certain securities to a benchmark or to comparable securities. The Company evaluates the quality of Level 2 matrix pricing through comparison to similar assets with greater liquidity and evaluation of projected cash flows. As the Company is responsible for the determination of fair value, it performs quarterly analysis on the prices received from the pricing service to determine whether the prices are reasonable estimates of fair value. Specifically, the Company compares the prices received from the pricing service to a secondary pricing source. Additionally, the Company compares changes in the reported market values and returns to relevant market indices to assess the reasonableness of the reported prices. The Company’s internal price verification procedures and review of fair value methodology documentation provided by independent pricing services has not historically resulted in an adjustment in the prices obtained from the pricing service. The Company also holds debt instruments issued by the U.S. government and U.S. government-sponsored agencies that are traded in active markets with readily accessible quoted market prices that are considered Level 1 inputs within the fair value hierarchy.

Federal Home Loan Bank Stock ("FHLB")

The fair value of FHLB stock is based on redemption at par value and can only be sold to the issuing FHLB, to other FHLBs, or to other member banks. As such, the Company's FHLB stock is recorded at cost, or par value, and is evaluated for impairment each reporting period by considering the ultimate recoverability of the investment rather than temporary declines in value. The Company classifies the estimated fair value as Level 2 within the fair value hierarchy.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

14. Fair Value Measurements (continued)

Loans Receivable

Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type such as commercial mortgage, residential mortgage, commercial, construction, consumer, and other. Each loan category is further segmented into fixed and adjustable rate interest terms and into performing and non-performing categories.

The fair value of performing loans was estimated using a combination of techniques, including a discounted cash flow model that utilizes a discount rate that reflects the Company's current pricing for loans with similar characteristics and remaining maturity, adjusted by an amount for estimated credit losses inherent in the portfolio at the balance sheet date. The rates take into account the expected yield curve, as well as an adjustment for prepayment risk, when applicable. The Company classifies the estimated fair value of its loan portfolio as Level 3.

The fair value for significant non-performing loans was based on recent external appraisals of collateral securing such loans, adjusted for the timing of anticipated cash flows. The Company classifies the estimated fair value of its non-performing loan portfolio as Level 3.

Deposits

The fair value of deposits with no stated maturity, such as demand, money market, and savings and club deposits are payable on demand at each reporting date and classified as Level 2. The estimated fair value of certificates of deposit was based on the discounted value of contractual cash flows. The discount rate was estimated using the Company’s current rates offered for deposits with similar remaining maturities. The Company classifies the estimated fair value of its certificates of deposit portfolio as Level 2.

Borrowings

The fair value of borrowings was estimated by discounting future cash flows using rates available for debt with similar terms and maturities and is classified by the Company as Level 2 within the fair value hierarchy.

Commitments to Extend Credit and Letters of Credit

The fair value of commitments to extend credit and letters of credit was estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counter-parties. For fixed rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair value estimates of commitments to extend credit and letters of credit are deemed immaterial.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

14. Fair Value Measurements (continued)

The following tables present the assets and liabilities reported on the Consolidated Statements of Financial Condition at their fair values at March 31, 2023 and December 31, 2022:


	March 31, 2023
			Fair Value Measurements
	Carrying Value		Total Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)
Financial assets:
Cash and cash equivalents	$	319,439	$	319,439	$	319,439	$	—	$	—
Debt securities available for sale	1,272,570		1,272,570		13,420		1,248,550		10,600
Debt securities held to maturity	417,227		372,187		—		372,187		—
Equity securities	3,552		3,552		3,231		321		—
Federal Home Loan Bank stock	84,799		84,799		—		84,799		—

Loans receivable, net	7,734,199		6,917,988		—		—		6,917,988
Derivative assets	15,111		15,111		—		15,111		—

Financial liabilities:
Deposits	$	7,674,201	$	7,630,592	$	—	$	7,630,592	$	—
Borrowings	1,706,613		1,701,206		—		1,701,206		—
Derivative liabilities	15,813		15,813		—		15,813		—


	December 31, 2022
			Fair Value Measurements
	Carrying Value		Total Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)
Financial assets:
Cash and cash equivalents	$	179,228	$	179,228	$	179,228	$	—	$	—
Debt securities available for sale	1,328,634		1,328,634		55,178		1,261,333		12,123
Debt securities held to maturity	421,523		370,391		—		370,391		—
Equity securities	3,384		3,384		3,053		331		—
Federal Home Loan Bank stock	58,114		58,114		—		58,114		—

Loans receivable, net	7,624,761		6,771,095		—		—		6,771,095
Derivative assets	19,756		19,756		—		19,756		—

Financial liabilities:
Deposits	$	8,001,159	$	7,942,782	$	—	$	7,942,782	$	—
Borrowings	1,127,047		1,146,265		—		1,146,265		—
Derivative liabilities	19,072		19,072		—		19,072		—

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

14. Fair Value Measurements (continued)

Limitations

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 limited 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.

Fair value estimates are based on existing on and off-balance-sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Other significant assets and liabilities that are not considered financial assets or liabilities include goodwill and intangible assets, deferred tax assets and liabilities, office properties and equipment, and bank-owned life insurance.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

15. Other Comprehensive Income (Loss)

The following tables present the components of other comprehensive income (loss), both gross and net of tax, for the three months ended March 31, 2023 and 2022:


	For the Three Months Ended March 31,
	2023						2022
	Before Tax		Tax Effect		After Tax		Before Tax		Tax Effect		After Tax
	(In thousands)
Components of other comprehensive income (loss):
Unrealized gain (loss) on debt securities available for sale:	$	17,541	$	(4,472)	$	13,069	$	(80,181)	$	22,366	$	(57,815)
Accretion of unrealized (loss) on debt securities reclassified as held to maturity	(11)		4		(7)		(4)		1		(3)
Reclassification adjustment for (loss) included in net income	(1,295)		366		(929)		—		—		—
	16,235		(4,102)		12,133		(80,185)		22,367		(57,818)
Derivatives:
Unrealized (loss)gain on swap contracts accounted for as cash flow hedges	(1,203)		338		(865)		4,382		(1,225)		3,157
	(1,203)		338		(865)		4,382		(1,225)		3,157

Employee benefit plans:
Amortization of prior service cost included in net income	(14)		4		(10)		(14)		3		(11)
Reclassification adjustment of actuarial net gain (loss) included in net income	1		—		1		(339)		95		(244)
Change in funded status of retirement obligations	26		153		179		706		(226)		480
	13		157		170		353		(128)		225
Total other comprehensive income (loss)	$	15,045	$	(3,607)	$	11,438	$	(75,450)	$	21,014	$	(54,436)

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

15. Other Comprehensive Income (Loss) (continued)

The following tables present the changes in the components of accumulated other comprehensive income (loss), net of tax, for the three months ended March 31, 2023 and 2022:


	For the Three Months Ended March 31,
	2023								2022
	Unrealized Gains (Losses) on Debt Securities Available for Sale		Unrealized Gains (Losses) on Swaps		Employee Benefit Plans		Accumulated Other Comprehensive (Loss)		Unrealized Gains (Losses) on Debt Securities Available for Sale		UnrealizedGains (Losses) on Swaps		Employee Benefit Plans		Accumulated Other Comprehensive (Loss)
	(In thousands)

Balance at beginning of period	$	(135,482)	$	504	$	(44,318)	$	(179,296)	$	1,644	$	(4,917)	$	(42,646)	$	(45,919)
Current period changes in other comprehensive income (loss)	12,133		(865)		170		11,438		(57,818)		3,157		225		(54,436)
Total other comprehensive income (loss)	$	(123,349)	$	(361)	$	(44,148)	$	(167,858)	$	(56,174)	$	(1,760)	$	(42,421)	$	(100,355)

The following tables reflect amounts reclassified from accumulated other comprehensive income (loss) to the Consolidated Statements of Income and the affected line item in the statement where net income is presented for the three months ended March 31, 2023 and 2022:


	Accumulated Other Comprehensive Income (Loss) Components
	For the Three Months Ended March 31,				Affected Line Items in the Consolidated Statements of Income
	2023		2022
	(In thousands)

Reclassification adjustment for (loss) included in net income	$	(1,295)	$	—	Loss on securities transactions
Reclassification adjustment of actuarial net gain (loss) included in net income	1		(339)		Other non-interest expense
Total before tax	(1,294)		(339)
Income tax benefit	366		95
Net of tax	$	(928)	$	(244)

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

16. 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 generally 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 the 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 and interest rate swap contracts. The risk associated with these transactions is mitigated by simultaneously entering into similar transactions having essentially offsetting terms with a third party. In addition, the Company executes interest rate swaps with third parties in order to hedge the interest rate risk of short-term FHLB advances.

Currency Forward Contracts. At March 31, 2023 and December 31, 2022, the Company had no currency forward contracts in place with commercial banking customers.

Interest Rate Swaps. At March 31, 2023 and December 31, 2022, the Company had 56 and 54 interest rate swaps in place with commercial banking customers executed by offsetting interest rate swaps with third parties, with aggregated notional amounts of $213.0 million and $205.0 million, respectively. These derivatives are not designated as hedges and are not speculative. These interest rate swaps do not meet hedge accounting requirements.

At March 31, 2023 and December 31, 2022, the Company had 22 and 20 interest rate swaps with notional amounts of $340.0 million and $290.0 million, respectively, hedging certain FHLB advances. These interest rate 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 both March 31, 2023 and December 31, 2022, the Company had two interest rate swaps hedged against pools of floating rate commercial loans with notional amounts totaling $100.0 million. These swaps meet the cash flow hedge accounting requirements. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counter-party in exchange for the Company making fixed-rate payments over the life of the agreements without the exchange of the underlying notional amount.

At March 31, 2023, the Company had two interest rate fair value swaps with notional amounts totaling $200.0 million. These swaps meet the cash flow hedge accounting requirements. The Company is exposed to changes in the fair value of certain of its fixed-rate pools of assets due to changes in benchmark interest rates. The Company uses interest rate swaps to manage its exposure to changes in fair value on these instruments attributable to changes in the designated benchmark interest rate, the Secured Overnight Financing Rate ("SOFR"). At December 31, 2022, the Company did not have any fair value swaps.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

16. Derivatives and Hedging Activities (continued)

Interest rate swaps designated as fair value hedges involve the payment of fixed-rate amounts to a counterparty in exchange for the Company receiving variable-rate payments over the life of the agreements without the exchange of the underlying notional amount.

For the three months ended March 31, 2023, the Company recorded hedge ineffectiveness associated with these contracts totaling $4,000. For the three months ended March 31, 2022, the Company did not record any hedge ineffectiveness associated with these contracts.

The tables below present the fair value of the Company’s derivative financial instruments as well as their classification in the Consolidated Statements of Financial Condition at March 31, 2023 and December 31, 2022:

March 31, 2023

Asset Derivative

Liability Derivative

Consolidated Statements of Financial Condition

Fair Value

Consolidated Statements of Financial Condition

Fair Value

(In thousands)

Derivatives:

Interest rate products - designated hedges

Other Assets

2,850

Other Liabilities

3,670

Interest rate products - non-designated hedges

Other Assets

12,261

Other Liabilities

12,143

Total derivative instruments

15,111

15,813

December 31, 2022

Asset Derivative

Liability Derivative

Consolidated Statements of Financial Condition

Fair Value

Consolidated Statements of Financial Condition

Fair Value

(In thousands)

Derivatives:

Interest rate products - designated hedges

Other Assets

4,290

Other Liabilities

3,918

Interest rate products - non-designated hedges

Other Assets

15,466

Other Liabilities

15,154

Total derivative instruments

19,756

19,072

For the three months ended March 31, 2023 and 2022, gains of $193,000 and $250,000, respectively, were recorded for changes in fair value of interest rate swaps with third parties.

At March 31, 2023 and December 31, 2022, accrued interest was $151,000 and $22,000.

The Company has agreements with counterparties 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 March 31, 2023, the termination value of derivatives in a net liability position, which includes accrued interest, was $701,000. The Company has collateral posting thresholds with certain of its derivative counterparties, and has posted collateral of $620,000 against its obligations under these agreements.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

16. Derivatives and Hedging Activities (continued)

Fair Value Hedges of Interest Rate Risk. The Company is exposed to changes in the fair value of certain of its fixed-rate pools of assets due to changes in benchmark interest rates. The Company uses interest rate swaps to manage its exposure to changes in fair value on these instruments attributable to changes in the designated benchmark interest rate, SOFR. Interest rate swaps designated as fair value hedges involve the payment of fixed-rate amounts to a counterparty in exchange for the Company receiving variable-rate payments over the life of the agreements without the exchange of the underlying notional amount.

For derivatives designated and that qualify as fair value hedges, the gain or loss on the derivative as well as the offsetting gain or loss on the hedged item attributable to the hedged risk are recognized in interest income.

At March 31, 2023, the following amounts were recorded on the Consolidated Statements of Financial Condition related to cumulative basis adjustment for fair value hedges:


	Carrying Amount of Hedged Assets/(Liabilities)		Cumulative Amount of Fair Value Hedging Adjustment included in the Carrying Amount of Hedged Assets/(Liabilities)
	March 31, 2023

	(In thousands)

Fair value interest rate products	$	200,156		$	156

At December 31, 2022, the Company had no fair value hedges.

17. Revenue Recognition

The Company's revenue includes net interest income on financial instruments and non-interest income. Most of the Company's revenue is not within the scope of Accounting Standards Codification Topic 606 which does not apply to revenue associated with financial instruments, including interest income on loans and securities, which comprise the majority of the Company's revenue. Revenue-generating activities that are within the scope of this guidance are components of non-interest income. These revenue streams can generally be classified as demand deposit account fees, title insurance fees, insurance agency income and other fees.

The following table presents non-interest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the three months ended March 31, 2023 and 2022.


	For the Three Months Ended March 31,
	2023		2022
	(In thousands)
Non-interest income
In-scope of Topic 606:
Demand deposit account fees	$	1,176	$	1,170
Title insurance fees	587		957
Insurance agency income	39		—
Other non-interest income	2,483		2,031
Total in-scope non-interest income	4,285		4,158
Total out-of-scope non-interest income	3,788		2,883
Total non-interest income	$	8,073	$	7,041

Demand deposit account fees include monthly maintenance fees and service charges. These fees are generally derived as a result of either transaction-based or serviced-based services. The Company's performance obligation for these services is generally satisfied, and revenue recognized, at the time the transaction is completed or the service rendered. Fees for these services are generally received from the customer either at the time of the transaction or monthly.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

17. Revenue Recognition (continued)

Title insurance fees are generally recognized at the time the transaction closes or when the service is rendered.

RSI Insurance Agency, Inc. performs the function of an insurance intermediary, by introducing the policyholder and insurer for life and health, and property and casualty insurance, and is compensated by a commission fee for placement of an insurance policy. Commission and fees are generally recognized as of the effective date of the insurance policy. Commission revenues related to installment billings are recognized on the invoice date. Subsequent commission adjustments are recognized upon the receipt of notification from insurance companies concerning matters necessitating such adjustments.

Other non-interest income includes check printing fees, traveler's check fees, gift card fees, branch service fees, overdraft fees, account analysis fees, other deposit related fees, wealth management related fee income which includes annuity fees, brokerage commissions, and asset management fees. Wealth management related fee income represent fees earned from customers as consideration for asset management and investment advisory services provided by a third party. The Company's performance obligation is generally satisfied monthly and the resulting fees are recognized monthly based upon the month-end market value of the assets under management and the applicable fee rate. The Company does not earn performance-based incentives. The Company's performance obligation for these transaction-based services are generally satisfied, and related revenue recognized, at the time the transaction closes or when the service is rendered or a point in time when the service is completed.

Also included in other fees are debit card and ATM fees which are transaction-based. Debit card revenue is primarily comprised of interchange fees earned when a customer's Company card is processed through a card payment network. ATM fees are largely generated when a Company cardholder uses a non-Company ATM, or a non-Company cardholder uses a Company ATM. The Company's performance obligation for these services is satisfied when the service is rendered. Payment is generally received at time of transaction or monthly.

Out-of-scope non-interest income primarily consists of income from bank-owned life insurance, loan prepayment and servicing fees, net fees loan level swaps, gains and losses on the sale of loans and securities, credit card interchange income, and changes in the fair value of equity securities. None of these revenue streams are subject to the requirements of Topic 606.

18. Subsequent Events

The Company has evaluated events subsequent to March 31, 2023 and through the financial statement issuance date of May 10, 2023.

Between April 1, 2023 and May 5, 2023, the Company sold approximately $245.0 million of securities held as available-for-sale at a pre-tax loss of approximately $9.5 million and used the proceeds to repay short term borrowings.

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 Annual Report on Form 10-K as supplemented by its Quarterly Reports on Form 10-Q, and those related to the economic environment, particularly in the market areas in which the Company operates, competitive products and pricing, as well as its impact on fiscal and monetary policies of the U.S. Government, changes in government regulations affecting financial institutions, including regulatory fees and capital requirements, changes in prevailing interest rates, higher inflation and its impact on national and local economic conditions, the Company's ability to successfully implement its business strategy, acquisitions and the integration of acquired businesses, credit risk management, the effect of the COVID-19 pandemic including on our credit quality and business operations, as well as its impact on general economic and financial market conditions, 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, 2023 and December 31, 2022

Total assets increased $226.5 million, or 2.2%, to $10.6 billion at March 31, 2023 from $10.4 billion at December 31, 2022. The increase in total assets was primarily attributable to an increase in cash and cash equivalents of $140.2 million, an increase in loans receivable, net of $109.4 million, and an increase in Federal Home Loan Bank ("FHLB") stock of $26.7 million, partially offset by a decrease in debt securities available for sale of $56.1 million.

Cash and cash equivalents increased $140.2 million, or 78.2%, to $319.4 million at March 31, 2023 from $179.2 million at December 31, 2022. The increase was primarily attributable to repayments on loans and mortgage-backed securities, $42.6 million in proceeds from the sale of debt securities available for sale, and acquisition of new FHLB borrowings, partially offset by $47.3 million in repurchases of common stock under our stock repurchase program.

Debt securities available for sale decreased $56.1 million, or 4.2%, to $1.27 billion at March 31, 2023 from $1.33 billion at December 31, 2022. The decrease was attributable to repayments on securities of $27.9 million, and sales of securities of $42.6 million, which was partially offset by a decrease in the gross unrealized loss of $16.2 million. The Bank sold U.S. government obligations at a weighted average rate of 2.35% during the 2023 period.

Loans receivable, net, increased $109.4 million, or 1.4%, to $7.7 billion at March 31, 2023 from $7.6 billion at December 31, 2022. One-to-four family real estate loans, multi-family real estate loans, construction loans and commercial business loans increased $780,000, $75.9 million, $37.9 million and $19.2 million, respectively, partially offset by a decrease in commercial real estate loans and home equity loans and advances of $19.5 million and $2.7 million, respectively. The allowance for credit losses on loans increased $70,000 to $52.9 million at March 31, 2023 from $52.8 million at December 31, 2022. During the quarter ended March 31, 2023, the increase in the allowance for credit losses was primarily due to an increase in the outstanding balance of loans and the evaluation of current and forecasted economic conditions, partially offset by a decrease in loan loss rates.

Federal Home Loan Bank stock increased $26.7 million, or 45.9%, to $84.8 million at March 31, 2023 from $58.1 million at December 31, 2022. The increase was due to the purchase of stock required upon acquiring new FHLB borrowings.

Total liabilities increased $241.2 million, or 2.6%, to $9.6 billion at March 31, 2023 from $9.4 billion at December 31, 2022. The increase was primarily attributable to an increase in borrowings of $579.6 million, or 51.4%, partially offset by a decrease in total deposits of $327.0 million, or 4.1%, and a decrease in accrued expenses and other liabilities of $13.7 million, or 7.5%. The increase in borrowings was driven by a net $579.6 million increase in FHLB advances. The decrease in total deposits primarily consisted of decreases in non-interest-bearing demand deposits, interest-bearing demand deposits, and savings and club deposits of $222.8 million, $332.6 million, and $63.0 million, respectively, partially offset by increases in money market accounts of $177.8 million and certificates of deposit of $113.7 million. The Bank has priced select money market and certificates of deposit accounts very

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

competitively to the market, but there continues to be fierce competition for funds from other banks and non-bank investment products. The decrease in accrued expenses and other liabilities primarily consisted of a $9.0 million decrease in accrued bonuses and a $3.5 million decrease in interest rate swap liabilities.

Total stockholders’ equity decreased $14.7 million, or 1.4%, to $1.0 billion at March 31, 2023 from $1.1 billion at December 31, 2022. The decrease in equity was primarily attributable to the repurchase of 2,378,434 shares of common stock at a cost of approximately $47.3 million, or $19.90 per share, under our stock repurchase program, partially offset by net income of $18.7 million, and a decrease of $12.1 million in unrealized losses on debt securities available for sale, net of taxes, included in other comprehensive income.

Comparison of Results of Operations for the Three Months Ended March 31, 2023 and March 31, 2022

Net income of $18.7 million was recorded for the quarter ended March 31, 2023, a decrease of $1.7 million, or 8.2%, compared to net income of $20.4 million for the quarter ended March 31, 2022. The decrease in net income was primarily attributable to a $1.9 million decrease in net interest income, and a $3.2 million increase in non-interest expense, partially offset by a $1.3 million decrease in provision for credit losses, a $1.0 million increase in non-interest income and a $1.0 million decrease in income tax expense.

Net interest income was $60.9 million for the quarter ended March 31, 2023, a decrease of $1.9 million, or 3.0%, from $62.7 million for the quarter ended March 31, 2022. The decrease in net interest income was primarily attributable to a $26.0 million increase in interest expense on deposits and borrowings, partially offset by a $24.1 million increase in interest income. The increase in interest income was primarily due to an increase in the average balance of total interest-earning assets coupled with an increase in average yields due to the rise in interest rates in 2022 and 2023. The increase in interest expense on deposits and borrowings was driven by an increase in the average balance of deposits and borrowings coupled with the repricing of existing deposits at higher rates. The Federal Reserve raised interest rates 25 basis points in March 2022, and approved five additional rate increases between May 2022 and December 2022, ranging from 50 to 75 basis points. In 2023, the Federal Reserve raised rates another 50 basis points. The rise in interest rates in 2022 initially had a more immediate impact on interest income from loans, securities and other interest-earning assets than on interest expense on deposits, as the repricing on deposit products lags in relation to increases in market interest rates, but significantly impacted interest expense for the quarter ended March 31, 2023. The increase in interest expense on borrowings was also impacted by the significant increase in interest rates for new borrowings since March 2022, along with an increase in the balance of borrowings. Prepayment penalties, which are included in interest income on loans, totaled $200,000 for the quarter ended March 31, 2023, compared to $1.3 million for the quarter ended March 31, 2022.

The average yield on loans for the quarter ended March 31, 2023 increased 62 basis points to 4.24%, as compared to 3.62% for the quarter ended March 31, 2022, as interest income was influenced by rising interest rates and loan growth. The average yield on securities for the quarter ended March 31, 2023 increased 33 basis points to 2.53%, as compared to 2.20% for the quarter ended March 31, 2022, as 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, 2023 increased 141 basis points to 4.22%, as compared to 2.81% for the quarter ended March 31, 2022, due to the rise in average balances and interest rates, as noted above.

Total interest expense was $32.0 million for the quarter ended March 31, 2023, an increase of $26.0 million, or 432.8%, from $6.0 million for the quarter ended March 31, 2022. The increase in interest expense was primarily attributable to a 328 basis point increase in the average cost of borrowings, and an increase in the average balance of borrowings, coupled with an 81 basis point increase in the average cost of interest-bearing deposits and an increase in the average balance of deposits. Interest expense on borrowings increased $13.6 million, or 1029.2%, and interest expense on deposits increased $12.4 million, or 264.58%, due to the rise in interest rates as noted above.

The Company's net interest margin for the quarter ended March 31, 2023 decreased 40 basis points to 2.58%, when compared to 2.98% for the quarter ended March 31, 2022. The weighted average yield on interest-earning assets increased 66 basis points to 3.93% for the quarter ended March 31, 2023, as compared to 3.27% for the quarter ended March 31, 2022. The average cost of interest-bearing liabilities increased 135 basis points to 1.74% for the quarter ended March 31, 2023, as compared to 0.39% for the quarter ended March 31, 2022. The increase in yields for the quarter ended March 31, 2023 was due to the impact of the rise in interest rates which began in March 2022. The net interest margin decreased for the quarter ended March 31, 2023, as the average cost of interest-bearing liabilities outweighed the increase in the average yield on interest-earning assets.

The provision for credit losses for the quarter ended March 31, 2023 was $175,000, a decrease of $1.3 million, from $1.5 million for the quarter ended March 31, 2022. The decrease in provision for credit losses during the quarter was primarily attributable

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

to the decrease in loan loss rates and the evaluation of current and forecasted economic conditions, partially offset by an increase in the outstanding balances of loans.

Non-interest income was $8.1 million for the quarter ended March 31, 2023, an increase of $1.0 million, or 14.7%, from $7.0 million for the quarter ended March 31, 2022. The increase was primarily attributable to an increase in loan fees and service charges of $432,000, an increase in income from the gain on sale of loans of $681,000 and an increase in other non-interest income of $1.2 million, primarily related to swap income, partially offset by the loss on securities transactions of $1.3 million and a decrease in title insurance fees of $370,000.

Non-interest expense was $43.9 million for the quarter ended March 31, 2023, an increase of $3.2 million, or 7.7%, from $40.7 million for the quarter ended March 31, 2022. The increase was primarily attributable to an increase in compensation and employee benefits expense of $5.2 million, partially offset by a decrease in other non-interest expense of $2.9 million. The increase in compensation and employee benefits expense was due to an increase in staff levels and related personnel benefit costs, mainly due to the acquisition of RSI Bank in May 2022, lower deferred compensation due to lower loan originations, and normal annual increases in employee related benefits. The decrease in other non-interest expense was primarily related to a decrease of $1.2 million related to the provision for credit losses for unfunded commitments and a decrease of $1.1 million in expenses related to swap transactions. The decrease for the 2023 period was also attributable to the quarter ended March 31, 2022 including three litigation settlements paid or accrued totaling $2.2 million.

Income tax expense was $6.1 million for the quarter ended March 31, 2023, a decrease of $1.0 million, as compared to $7.2 million for the quarter ended March 31, 2022, mainly due to a decrease in pre-tax income, and to a lesser extent, a decrease in the Company's effective tax rate. The Company's effective tax rate was 24.7% and 26.0% for the quarters ended March 31, 2023 and 2022, respectively.

Asset Quality

The Company's non-performing loans at March 31, 2023 totaled $6.6 million, or 0.09% of total gross loans, as compared to $6.7 million, or 0.09% of total gross loans, at December 31, 2022. The $111,000 decrease in non-performing loans was primarily attributable to a decrease of $145,000 in non-performing home equity loans and advances, partially offset by an increase of $63,000 in non-performing one-to-four family loans. Non-performing assets as a percentage of total assets totaled 0.06% at both March 31, 2023 and December 31, 2022.

For the quarter ended March 31, 2023, net charge-offs totaled $104,544, as compared to $111,090 in net recoveries recorded for the quarter ended March 31, 2022.

The Company's allowance for credit losses on loans was $52.9 million, or 0.68% of total gross loans, at March 31, 2023, compared to $52.8 million, or 0.69% of total gross loans, at December 31, 2022. The increase in the allowance for credit losses for loans was primarily due to an increase in the outstanding balance of loans and the evaluation of current and forecasted economic conditions, partially offset by a decrease in loan loss rates.

Additional Liquidity, Loan, Deposit and Capital Information

The Company services a diverse retail and commercial deposit base through its 67 branches. With over 210,000 accounts, the average deposit account balance was approximately $37,000 at March 31, 2023. The Company had uninsured deposits (excluding municipal deposits which are collateralized) totaling $2.1 billion at March 31, 2023, or 27.7% of total deposits as of that date.

Deposit balances are summarized as follows:

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


	At March 31, 2023				At February 28, 2023				At December 31, 2022
	Balance		Weighted Average Rate		Balance		Weighted Average Rate		Balance		Weighted Average Rate
	(Dollars in thousands)

Non-interest-bearing demand	$	1,583,329	—	%	$	1,658,247	—	%	$	1,806,152	—	%
Interest-bearing demand	2,260,240		1.06		2,492,166		1.08		2,592,884		0.75
Money market accounts	896,336		2.27		739,592		1.81		718,524		0.93
Savings and club deposits	850,777		0.10		881,147		0.10		913,738		0.06
Certificates of deposit	2,083,519		2.32		2,022,697		2.14		1,969,861		2.16
Total deposits	$	7,674,201	1.22	%	$	7,793,849	1.08	%	$	8,001,159	0.86	%

The Company continues to maintain strong liquidity and capital positions. The Company has not utilized the Federal Reserve’s Bank Term Funding Program and had no outstanding borrowings from the Federal Reserve Discount Window at March 31, 2023. The Company had immediate access to $2.9 billion of funding with additional unpledged loan collateral available to pledge in excess of $2.7 billion at March 31, 2023. At March 31, 2023, available sources of liquidity include but are not limited to:

•Cash and cash equivalents of $319.4 million;

•Borrowing capacity based on unencumbered collateral pledged at the FHLB totaling $1.1 billion;

•Borrowing capacity based on unencumbered collateral pledged at the Federal Reserve Bank totaling $1.4 billion;

•Available correspondent lines of credit of $384.0 million with various third parties; and

•Unpledged loan collateral available to pledge in excess of $2.7 billion.

At March 31, 2023, other comprehensive income includes net unrealized losses on debt securities available for sale of $123.5 million and net unrealized losses on the Company's defined benefit plan of $44.1 million. If the Company sold all its debt securities available for sale at March 31, 2023, the Company’s tier 1 capital (leverage ratio) and total risk-based capital ratios would be 9.03% and 13.75%, respectively, which are well in excess of regulatory capital requirements.

At March 31, 2023, the Company's non-performing commercial real estate loans totaled $2.9 million, or 0.04% of the total loans receivable loan portfolio balance.

The following table presents multifamily real estate, owner occupied commercial real estate, and the components of investor owned commercial real estate loans included in the real estate loan portfolio.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

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


	At March 31, 2023
	(Dollars in thousands)
	Balance		% of Gross Loans		Loan to Value Ratio		Debt Service Coverage
Multifamily Real Estate	$	1,315,143	17.0	%	62.2	%	1.45x

Owner Occupied Commercial Real Estate	$	521,653	6.7	%	51.5	%	2.21x

Investor Owned Commercial Real Estate:
Retail / Shopping centers	$	520,753	6.7	%	52.1	%	1.43x
Mixed Use	306,504		4.0		59.4		1.48
Industrial / Warehouse	332,560		4.3		52.2		1.65
Non-Medical Office	238,495		3.1		52.1		1.66
Medical Office	147,778		1.9		60.3		1.56
Single Purpose	71,636		0.9		59.6		2.33
Other	254,539		3.3		53.5		1.44
Total	$	1,872,265	24.2	%	54.5	%	1.55x

Total Multifamily and Commercial Real Estate Loans	$	3,709,061	48.0	%	56.8	%	1.61x

Critical Accounting Policies

The Company considers certain accounting policies to be critically important to the fair presentation of its Consolidated Statements of Financial Condition and Consolidated Statements of 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 financial condition and results of 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 credit losses

▪Valuation of deferred tax assets

▪Valuation of retirement and post-retirement benefits

The determination of the allowance for credit losses (“ACL”) on loans is considered a critical accounting estimate by management because of the high degree of judgment involved in determining qualitative loss factors, the subjectivity of the assumptions used, and the potential for changes in the forecasted economic environment The ACL is maintained at a level management considers adequate to provide for estimated losses and impairment based upon an evaluation of known and inherent risk in the loan portfolio. The ACL consists of two elements: (1) identification of loans that must be individually analyzed for impairment and (2) establishment of an ACL for loans collectively analyzed.

Management estimates the ACL using relevant and reliable information from internal and external sources, related to past events, current conditions, and a reasonable and supportable forecast. Historical credit loss experience for both the Company and its segment-specific peers provide the basis for the estimate of expected credit losses. Credit losses over a defined period are converted to PD rate curves through the use of segment-specific LGD risk factors that convert default rates to loss severity based on industry-level, observed relationships between the two variables for each segment, primarily due to the nature of the underlying collateral. These risk factors were assessed for reasonableness against the Company’s own loss experience and adjusted in certain cases when the relationship between the Company’s historical default and loss severity deviate from that of the wider industry. The historical PD curves, together with corresponding economic conditions, establish a quantitative relationship between economic conditions and loan performance through an economic cycle.

Portfolio segments are defined as the level at which an entity develops and documents a systematic methodology to determine its allowance for credit losses. Management developed segments for estimating losses based on the type of borrower and collateral which is generally based upon federal call report segmentation. The segments have been combined or sub-segments have been added as needed to ensure loans of similar risk profiles are appropriately pooled.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

We maintain a loan review system that provides a periodic review of the loan portfolio and the identification of individually analyzed loans. The ACL for individually analyzed loans is based on the fair value of collateral or cash flows. While management uses the best information available to make such evaluations, future adjustments to the allowance may be necessary if economic conditions differ substantially from the assumptions used in making the evaluations.

The ACL quantitative allowance for each segment is measured using a discounted cash flow methodology incorporating an econometric, probability of default (“PD”) and loss given default (“LGD”) with distinct segment-specific multi-variant regression models applied. Expected credit losses are estimated over the life of the loans by measuring the difference between the net present value of modeled cash flows and amortized cost basis. Contractual cash flows over the contractual life of the loans are the basis for the modeled cash flows, adjusted for model defaults and expected prepayments and discounted at the loan-level effective interest rate. The contractual term excludes expected extensions, renewals, and modifications.

Using the historical relationship between economic conditions and loan performance, management’s expectation of future loan performance is incorporated using a single economic forecast of macroeconomic variables (i.e., unemployment, gross domestic product, vacancy, and home price index). This forecast is applied over a period that management has determined to be reasonable and supportable. Beyond the period over which management can develop or source a reasonable and supportable forecast, the model reverts to long-term average historical loss rates using a straight-line, time-based methodology. The Company's current forecast period is six quarters, with a four-quarter reversion period to long-term average historical loss rates.

After quantitative considerations, management applies additional qualitative adjustments that consider the expected impact of certain factors not fully captured in the quantitative reserve. Qualitative adjustments include but are not limited to concentrations of large loan balances, delinquency trends, change in collateral values within segments, and other considerations.

The ACL is established through the provision for credit losses that are charged to income, which is based upon an evaluation of estimated losses in the current loan portfolio, including the evaluation of individually analyzed loans. Charge-offs against the ACL 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 ACL. Although we believe we have established and maintained the ACL on loans at appropriate levels, changes in reserves may be necessary if actual economic and other conditions differ substantially from the forecast used in estimating the ACL.

Our financial results are affected by the changes in and the level of the ACL. This process involves our analysis of internal and external variables, and it requires that we exercise judgment to estimate an appropriate ACL. As a result of the uncertainty associated with this subjectivity, we cannot assure the precision of the amount reserved, should we experience sizable loan losses in any particular period and/or significant changes in assumptions or economic condition. We believe the primary risks inherent in the portfolio are a general decline in the economy, a decline in real estate market values, rising unemployment, increasing vacancy rates, and increases in interest rates in the absence of economic improvement or any other such factors. Any one or a combination of these events may adversely affect a borrower's ability to repay its loan, resulting in increased delinquencies and loan losses. Accordingly, we have recorded loan credit losses at a level which is estimated to represent the current risk in its loan portfolio.

Most of our non-performing assets are collateral dependent loans which are written down to the fair value of the collateral less estimated costs to sell. We continue to assess the collateral of these loans and update our appraisals on these loans on an annual basis. To the extent the property values decline, there could be additional losses on these non-performing assets, which may be material. Management considered these market conditions in deriving the estimated ACL. Should economic difficulties occur, the ultimate amount of loss could vary from our current estimate.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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 projections of future taxable income. These 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. 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, 2023 and December 31, 2022, the Company's net deferred tax assets totaled $33.3 million and $36.9 million, respectively, which included a valuation allowance totaling $2.0 million at both period end dates. Based upon projections of future taxable income and the ability to carryforward operating losses indefinitely, management believes it is more likely than not the Company will realize the remaining deferred tax assets.

The Company provides certain health care and life insurance benefits, along with a split dollar BOLI death benefit, to eligible retired employees. The cost of retiree health care and other benefits during the employees' period of active service are accrued monthly. The accounting guidance requires the following: a) recognize in the statement of financial position the over funded or underfunded status of a defined benefit post-retirement plan measured as 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) recognize 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. These assets and liabilities and expenses are based upon actuarial assumptions including interest rates, rates of increase in compensation, expected rate of return on plan assets and the length of 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.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Qualitative Analysis. Interest rate risk is defined as the exposure of a Company's current and future earnings and capital arising from 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, are 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-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:

•Securities pricing from third parties;

•Loan pricing indications from third parties;

•Loan and depository spread assumptions based upon the Company's product offerings;

•Securities and borrowing spreads based upon third party indications; and

•Prepayment assumptions derived from the Company's actual results and third party surveys.

Certain shortcomings are inherent in the methodologies used in the 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 asset prepayment and liability repricing activity.

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 indication of our 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 our net interest income and will differ from actual.

The table below sets forth, as of March 31, 2023, the net portfolio value, the estimated changes in the net portfolio value, and the net interest income that would result from the designated instantaneous parallel changes in market interest rates. This data is for Columbia Bank and Freehold Bank and its subsidiaries only and does not include any assets of the Company.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


	Twelve Months Net Interest Income						Net Portfolio Value ("NPV")
Change in Interest Rates (Basis Points)	Amount		Dollar Change		Percent of Change		Estimated NPV		Present Value Ratio		Percent Change
					(Dollars in thousands)
+400	$	226,842	$	(6,321)	(2.71)	%	$	927,947	10.47	%	(36.46)	%
+300	229,247		(3,916)		(1.68)		1,069,097		11.71		(26.79)
+200	230,968		(2,195)		(0.94)		1,203,372		12.78		(17.60)
+100	232,362		(801)		(0.34)		1,334,968		13.76		(8.59)
Base	233,163		—		—		1,460,349		14.59		—
-100	233,226		63		0.03		1,570,233		15.20		7.52
-200	226,571		(6,592)		(2.83)		1,617,865		15.20		10.79
-300	212,967		(20,196)		(8.66)		1,606,717		15.09		10.02

As of March 31, 2023, based on the scenarios above, net interest income would decrease by approximately 0.94% if rates were to rise 200 basis points, and would decrease by 2.83% if rates were to decrease 200 basis points over a one-year time horizon.

Another measure of interest rate sensitivity is to model changes in net portfolio value through the use of immediate and sustained interest rate shocks. As of March 31, 2023, based on the scenarios above, in the event of an immediate and sustained 200 basis point increase in interest rates, the NPV is projected to decrease 17.60%. If rates were to decrease 200 basis points, the model forecasts a 10.79% increase in the NPV.

Overall, our March 31, 2023 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.

Liquidity Management and Capital Resources:

Liquidity Management. Liquidity refers to the Company's ability to generate adequate amounts of cash to meet financial obligations of a short-term and long-term nature. Sources of funds consist 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 debt securities, and prepayments on loans and mortgage-backed securities are influenced by economic conditions, competition, and interest rate movements.

The Company's cash flows are identified as cash flows from operating activities, investing activities and financing activities. Refer to the Consolidated Statements of Cash Flows for further details of the cash inflows and outflows of the Company.

We mitigate liquidity risk by attempting to structure our balance sheet prudently and by maintaining diverse borrowing resources to fund potential cash needs. For example, we structure our balance sheet so that we fund less liquid assets, such as loans, with stable funding sources, such as retail deposits, long-term debt, wholesale borrowings, and capital. We assess liquidity needs arising from asset growth, maturing obligations, and deposit withdrawals, taking into account operations in both the normal course of business and times of unusual events. In addition, we consider our off-balance sheet arrangements and commitments that may impact liquidity in certain business environments.

Our Asset/Liability Committee measures liquidity risks, sets policies to manage these risks, and reviews adherence to those policies at its quarterly meetings. For example, we manage the use of short-term unsecured borrowings as well as total wholesale funding through policies established and reviewed by our Asset/Liability Committee. In addition, the Risk Committee of our Board of Directors reviews liquidity limits and reviews current and forecasted liquidity positions at each of its regularly scheduled meetings.

We have contingency funding plans that assess liquidity needs that may arise from certain stress events such as rapid asset growth or financial market disruptions. Our contingency plans also provide for continuous monitoring of net borrowed funds and dependence and available sources of contingent liquidity. These sources of contingent liquidity include cash and cash equivalents, capacity to borrow at the Federal Reserve discount window or the newly established Bank Term Funding Program and through the FHLB system, fed funds purchased from other banks and the ability to sell, pledge or borrow against unencumbered securities in our securities portfolio. As of March 31, 2023, the potential liquidity from these sources is an amount we believe currently exceeds any contingent liquidity need.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Capital Resources. The Company and its subsidiary banks (Columbia Bank and Freehold Bank) are subject to various regulatory capital requirements administered by the federal banking 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 Statements of Financial Condition.

Federal regulators require federally insured depository institutions to meet several minimum capital standards: (1) total capital to risk-weighted assets of 8.0%; (2) tier 1 capital to risk-weighted assets of 6.0%; (3) common equity tier 1 capital to risk-weighted assets of 4.5%; and (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 regulators 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 10.0%, a tier 1 capital to risk-weighted assets ratio of at least 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, 2023 and December 31, 2022, each of the Company and the banks exceeded all capital adequacy requirements to which it was subject.

The following tables presents the Company's, Columbia Bank's and Freehold Bank's actual capital amounts and ratios at March 31, 2023 and December 31, 2022 compared to the Federal Reserve Bank minimum capital adequacy requirements and the Federal Reserve Bank requirements for classification as a well-capitalized institution:


	Actual				Minimum Capital Adequacy Requirements				Minimum Capital Adequacy Requirements with Capital Conservation Buffer				To be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount	Ratio
Company	(In thousands, except ratio data)
At March 31, 2023:
Total capital (to risk-weighted assets)	$	1,117,801	14.75	%	$	606,226	8.00	%	$	795,671	10.50	%	N/A	N/A
Tier 1 capital (to risk-weighted assets)	1,058,620		13.97		454,669		6.00		644,115		8.50		N/A	N/A
Common equity tier 1 capital (to risk-weighted assets)	1,051,403		13.87		341,002		4.50		530,447		7.00		N/A	N/A
Tier 1 capital (to adjusted total assets)	1,058,620		10.19		415,472		4.00		415,472		4.00		N/A	N/A

At December 31, 2022:
Total capital (to risk-weighted assets)	$	1,145,331	15.39	%	$	595,313	8.00	%	$	781,348	10.50	%	N/A	N/A
Tier 1 capital (to risk-weighted assets)	1,085,665		14.59		446,485		6.00		632,520		8.50		N/A	N/A
Common equity tier 1 capital (to risk-weighted assets)	1,078,448		14.49		334,863		4.50		520,899		7.00		N/A	N/A
Tier 1 capital (to adjusted total assets)	1,085,665		10.68		406,643		4.00		406,643		4.00		N/A	N/A

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Item 4. CONTROLS AND PROCEDURES


	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, 2023:
Total capital (to risk-weighted assets)	$	1,045,352	14.21	%	$	588,401	8.00	%	$	772,276	10.50	%	$	735,501	10.00	%
Tier 1 capital (to risk-weighted assets)	987,523		13.43		441,301		6.00		625,176		8.50		588,401		8.00
Common equity tier 1 capital (to risk-weighted assets)	987,523		13.43		330,975		4.50		514,851		7.00		478,076		6.50
Tier 1 capital (to adjusted total assets)	987,523		9.77		404,115		4.00		404,115		4.00		505,144		5.00

At December 31, 2022:
Total capital (to risk-weighted assets)	$	1,019,850	14.12	%	$	577,656	8.00	%	$	758,173	10.50	%	$	722,070	10.00	%
Tier 1 capital (to risk-weighted assets)	961,613		13.32		433,242		6.00		613,759		8.50		577,656		8.00
Common equity tier 1 capital (to risk-weighted assets)	961,613		13.32		324,931		4.50		505,449		7.00		469,345		6.50
Tier 1 capital (to adjusted total assets)	961,613		9.74		394,968		4.00		394,968		4.00		493,711		5.00


	Actual				Minimum Capital Adequacy Requirements				Minimum Capital Adequacy Requirements with Capital Conservation Buffer				To be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
Freehold Bank	(In thousands, except ratio data)
At March 31, 2023:
Total capital (to risk-weighted assets)	$	44,953	22.82	%	$	15,760	8.00	%	$	20,684	10.50	%	$	19,699	10.00	%
Tier 1 capital (to risk-weighted assets)	43,567		22.12		11,820		6.00		16,744		8.50		15,759		8.00
Common equity tier 1 capital (to risk-weighted assets)	43,567		22.12		8,865		4.50		13,790		7.00		12,805		6.50
Tier 1 capital (to adjusted total assets)	43,567		15.22		11,447		4.00		11,447		4.00		14,309		5.00

At December 31, 2022:
Total capital (to risk-weighted assets)	$	44,725	22.92	%	$	15,609	8.00	%	$	20,486	10.50	%	$	19,511	10.00	%
Tier 1 capital (to risk-weighted assets)	43,298		22.19		11,706		6.00		16,584		8.50		15,609		8.00
Common equity tier 1 capital (to risk-weighted assets)	43,298		22.19		8,780		4.50		13,657		7.00		12,682		6.50
Tier 1 capital (to adjusted total assets)	43,298		15.19		11,399		4.00		11,399		4.00		14,249		5.00

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 March 31, 2023. In designing and evaluating the Company’s disclosure controls and procedures, the Company and its management recognize that any controls and procedures, no matter how well-designed and operated, can provide only a reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating and implementing possible controls and procedures. Based on that evaluation, the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective.

During the quarter ended March 31, 2023, there were no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control 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 previously disclosed under Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 filed with the Securities and Exchange Commission on March 1, 2023. As of March 31, 2023, the risk factors of the Company have not materially changed from those disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2022, except as described below:

Financial challenges at other banking institutions could lead to depositor concerns that spread within the banking industry causing disruptive and destabilizing deposit outflows.

In March 2023, Silicon Valley Bank and Signature Bank experienced large deposit outflows coupled with insufficient liquidity to meet withdrawal demands, resulting in the institutions being placed into FDIC receivership. Additionally, in May 2023, First Republic Bank experienced similar circumstances which resulted in the institution being placed in FDIC receivership. In the aftermath of these events, there has been substantial market disruption and concerns that diminished depositor confidence could spread across the banking industry, leading to deposit outflows that could destabilize other institutions. To strengthen public confidence in the banking system, the FDIC took action to protect funds held in uninsured deposit accounts at Silicon Valley Bank and Signature Bank following the placement of those institutions into receivership. However, the FDIC has not committed to protecting uninsured deposits in other institutions that experience outsized withdrawal demands. To further bolster the banking system, the Federal Reserve Board created a new Bank Term Funding Program to provide an additional source of liquidity. At March 31, 2023, we had $2.9 billion in available liquidity, including $319.4 million in cash, which was sufficient to cover our uninsured deposits. Notwithstanding our significant liquidity, large deposit outflows could adversely affect our financial condition and results of operations and could result in the closure of the Bank. Furthermore, the recent bank failures may result in strengthening of capital and liquidity rules which, if the revised rules apply to us, could adversely affect our financial condition and results of operations.

Our FDIC deposit insurance premiums and assessments may increase, which would reduce our profitability.

On March 12, 2023, the Department of the Treasury, the Federal Reserve and the FDIC issued a joint statement relating to the resolution of Silicon Valley Bank and Signature Bank that stated that losses to support uninsured deposits of those banks would be recovered via a special assessment on banks. The terms of that special assessment have not been announced. The announced special assessment, as well as any future increases in assessment rates or required prepayments in FDIC insurance premiums, to the extent that they result in increased deposit insurance costs, would reduce our profitability.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table reports information regarding repurchases of the Company's common stock, excluding excise tax during the quarter ended March 31, 2023:


Period	Total Number of Shares (2)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
January 1 - 31, 2023	427,546	$	21.24	427,434	2,922,100
February 1 - 28, 2023	738,717	20.75		736,900	2,185,200
March 1 - 31, 2023	1,221,168	18.90		1,214,100	971,100
Total	2,387,431	$	19.89	2,378,434

(1) On December 14, 2022 the Company announced that its Board of Directors authorized the Company's fifth stock repurchase program to acquire up to 3,000,000 shares, or approximately 2.7%, of the Company's then issued and outstanding common stock, commencing upon the completion of the Company’s fourth stock repurchase program announced on December 6, 2021.
(2) During the three months ended March 31, 2023, 1,929 shares were repurchased pursuant to forfeitures and 7,068 shares were repurchased for taxes related to the 2019 Equity Incentive Plan and not as part of a share repurchase program.

Item 3. Defaults Upon Senior Securities

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


31.1						Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2						Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32						Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.0						The following materials from the Company’s Quarterly Report to Stockholders on Form 10-Q for the quarter ended March 31, 2023, formatted in inline XBRL (Extensible Business Reporting Language): (i) the Consolidated Statements of Financial Condition, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income (Loss), (iv) the Consolidated Statements of Changes in Stockholder’s Equity, (v) the Consolidated Statements of Cash Flows and (vi) the Notes to the Consolidated Financial Statements.

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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, 2023

/s/Thomas J. Kemly

Thomas J. Kemly

President and Chief Executive Officer

(Principal Executive Officer)

Date:

May 10, 2023

/s/Dennis E. Gibney

Dennis E. Gibney

Executive Vice President and Chief Financial Officer

(Principal Financial and Accounting Officer)