EDGAR 10-K Filing

Company CIK: 1723596
Filing Year: 2025
Filename: 1723596_10-K_2025_0001723596-25-000061.json

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ITEM 1. BUSINESS
Item I. Business
General
Columbia Financial, Inc. (“Columbia Financial” or the “Company”) is a Delaware corporation that was organized in March 1997 in connection with the mutual holding company reorganization of Columbia Bank. Columbia Financial is the holding company of Columbia Bank, which is a federally chartered stock savings bank. Columbia Bank, MHC (the “MHC”) was also organized in March 1997 under the laws of the United States. In connection with the reorganization, Columbia Financial became the wholly-owned subsidiary of Columbia Bank MHC.
Columbia Bank is a federally chartered savings bank founded in 1927. Columbia Bank has elected and has received regulatory approval to operate as a "covered savings association" pursuant to Section 5A of the Home Owners’ Loan Act, as amended, and the regulations of the Office of the Comptroller of the Currency promulgated thereunder. A covered savings association generally has the same rights and privileges as a national bank, and is subject to the same duties, restrictions, penalties, liabilities, conditions, and limitations that would apply to a national bank. Management believes that the key benefits of Columbia Bank's election to operate as a covered savings association include the elimination of the requirement to meet the qualified thrift lender test and that Columbia Bank is no longer subject to the limits on an aggregate amount of commercial loans that are applicable to savings associations.
Through Columbia Bank, we serve the financial needs of our depositors and the local community as community-minded, customer service-focused institutions. We offer traditional financial services to businesses and consumers in our market areas. We attract deposits from the general public and use those funds to originate a variety of loans, including multifamily and commercial real estate loans, commercial business loans, one-to-four family real estate loans, construction loans, home equity loans and advances, and other consumer loans. We offer title insurance through our wholly-owned subsidiary, First Jersey Title Services, Inc., In addition, Columbia Insurance Services, Inc. (formerly known as "RSI Insurance Agency, Inc."), a wholly-owned subsidiary of Columbia Bank, is a full-service insurance agency that offers a broad range of insurance products and investment solutions, including personal and business lines of insurance, to our customers and primarily New Jersey residents. Wealth management services are also offered through a third-party relationship.
Our executive offices are located at 19-01 Route 208 North, Fair Lawn, New Jersey 07410 and our telephone number is (800) 522-4167. Our website address is www.columbiabankonline.com. Information on our website should not be considered a part of this report.
Throughout this report, references to “we,” “us” or “our” refer to the Company and Columbia Bank collectively.
Acquisition History
Atlantic Stewardship Bank. On November 1, 2019, the Company completed its acquisition of Stewardship Financial Corporation (“Stewardship Financial”) and Atlantic Stewardship Bank, the wholly-owned subsidiary of Stewardship Financial. At the effective time of the merger, Stewardship Financial merged with and into the Company in a series of transactions, with the Company as the surviving entity, and immediately thereafter, Atlantic Stewardship Bank merged with and into Columbia Bank, with Columbia Bank as the surviving institution. In addition, at the effective time of the merger, each outstanding share of Stewardship Financial common stock was converted into the right to receive from the Company a cash payment equal to $15.75. The total consideration paid was $136.3 million.
Roselle Bank. On April 1, 2020, the Company completed its acquisition of RSB Bancorp, MHC, RSB Bancorp, Inc. and Roselle Bank (collectively, the “Roselle Entities”). At the effective time of the merger, (i) RSB Bancorp, MHC merged with and into the MHC, with the MHC as the surviving entity, (ii) RSB Bancorp, Inc. merged with and into the Company, with the Company as the surviving entity; and (iii) Roselle Bank merged with and into Columbia Bank, with Columbia Bank as the surviving institution. In addition, at the effective time of the merger, depositors of Roselle Bank became depositors of Columbia Bank and were afforded the same rights and privileges in the MHC as if their accounts had been established at Columbia Bank on the date established at Roselle Bank. At the effective time of the merger, the Company also issued 4,759,048 additional shares of its common stock to the MHC, representing an amount equal to the fair value of the Roselle Entities, as determined by an independent appraiser.
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"). At the effective time of the merger, (i) Freehold Bancorp, MHC was merged with and into the MHC, with the MHC as the surviving entity, and (ii) Freehold Bancorp, Inc. was merged with and into the Company, with the Company as the surviving entity. To facilitate the transaction, Freehold Bank converted from a New Jersey chartered savings bank to a federally chartered savings bank. At the effective time of the merger, the Company also issued 2,591,007 additional 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. Following the acquisition of the Freehold Entities, Freehold Bank was maintained as a separate banking subsidiary of the Company until October 5, 2024, when it was merged with and into Columbia Bank. In addition, at the effective time of the merger of the two banks, depositors of Freehold Bank become depositors of Columbia Bank and
were afforded 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.
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"). At the effective time of the merger, (i) RSI Bancorp, M.H.C. merged with and into the MHC, with the MHC as the surviving entity, (ii) RSI Bancorp, Inc. merged with and into the Company, with the Company as the surviving entity; and (iii) RSI Bank merged with and into Columbia Bank, with Columbia Bank as the surviving institution. In addition, at the effective time of the merger, depositors of RSI Bank became depositors of Columbia Bank and were afforded 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. At the effective time of the merger, the Company also 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.
Market Area
We are headquartered in Fair Lawn, New Jersey. As of December 31, 2024, Columbia Bank operated 68 full-service banking offices in twelve of New Jersey’s 21 counties. In addition, (i) First Jersey Title Services, Inc., a wholly-owned subsidiary of Columbia Bank, operates in one of Columbia Bank’s offices in Fair Lawn, New Jersey and (ii) Columbia Insurance Services, Inc., a wholly-owned subsidiary of Columbia Bank, operates in one of Columbia Bank’s offices in Rahway, New Jersey. We periodically evaluate our network of banking offices to optimize the penetration in our market area. Our business strategy currently includes opening new branches in and around our market area, which may include neighboring states.
We consider our market area to be the State of New Jersey and the suburbs surrounding both the New York City and Philadelphia metropolitan areas. This area has historically benefited from having a large number of corporate headquarters and a concentration of financial services-related industries located within it. The area also benefits from having a well-educated employment base and a large number of diverse industrial, service, retail and high technology businesses. Other employment is provided by a variety of wholesale trade, manufacturing, federal, state and local governments, hospitals and utilities.
According to S&P Global projections based on 2020 U.S. Census Data, the population of our twelve county primary market area totaled approximately 6.7 million and the total population for the entire state of New Jersey was 9.3 million. The population in our twelve county market area has increased by 0.39% from 2010 to 2025. According to S&P Global, the weighted average projected median household income for 2025 for the twelve New Jersey counties that we operate in was $108,090. By contrast, the national projected median household income for 2025 is $78,770 and the State of New Jersey projected median income is $99,357. The unemployment rate, not seasonally adjusted, for the State of New Jersey was 3.4% in December 2022, 4.8% in December 2023, and 4.6% in December 2024, compared to the national unemployment rate of 3.5% in December 2022, 3.7% in December 2023, and 4.1% in December 2024.
Competition
We face significant competition in attracting deposits. Many of the nation’s largest financial institutions operate in our market area. Our most direct competition for deposits has historically come from the many banks, thrift institutions and credit unions operating in our market area and from other financial service companies such as brokerage firms and insurance companies. We also face competition for investors’ funds from money market funds, mutual funds and other corporate and government securities.
Our competition for loans comes primarily from the competitors referenced above and from other financial service providers, such as mortgage companies and mortgage brokers. Competition for loans also comes from the increasing number of non-depository financial service companies participating in the mortgage market, such as insurance companies, securities companies, financial technology companies and specialty finance firms, along with federal agencies.
We expect competition to remain intense in the future as a result of legislative, regulatory and technological changes and the continuing trend of consolidation in the financial services industry. Technological advances, for example, have lowered barriers to entry, allowed banks to expand their geographic reach by providing services over the internet and made it possible for non-depository institutions, including financial technology companies, to offer products and services that traditionally have been provided by banks. Competition for deposits and the origination of loans could limit our growth in the future.
Lending Activities
Through our banking subsidiary, Columbia Bank, we offer a variety of loans, including commercial, residential and consumer loans. Our commercial loan portfolio includes multifamily and commercial real estate loans, commercial business loans and construction loans. Our residential loan portfolio includes one-to-four family residential real estate loans and one-to-four family residential construction loans. Our consumer loan portfolio primarily includes home equity loans and advances, and to a lesser extent automobile, personal, unsecured and overdraft lines of credit.
We intend to continue to emphasize commercial lending. In the past five years, we have completed our acquisitions of Stewardship Financial, Roselle Bank, Freehold Bank and RSI Bank, and we have continued to invest in our lending staff, technology
and processes to position us for continued growth. Specifically, in the past three years, we have hired additional lenders with significant experience in our market area to expand our commercial real estate and commercial business lending efforts, including an asset based and equipment finance lending team with long-term existing relationships. In addition, we will continue to offer competitive pricing for our one-to-four family loan products and continue to market these products in New Jersey, New York and Pennsylvania.
Multifamily and Commercial Real Estate Loans. We originate mortgage loans for the acquisition and refinancing of multifamily properties and nonresidential real estate. At December 31, 2024, multifamily and commercial real estate loans totaled $3.8 billion, or 48.3% of our total loan portfolio. Of this amount, $3.0 billion of loans were used for the purchase, financing and/or refinancing of commercial real estate and the financing of income-producing real estate. The majority of these loans are generally non-owner-occupied properties in which 50% or more of the primary source of repayment is derived from rental income from unaffiliated third parties. Our multifamily loans include loans primarily to finance apartment buildings located in the State of New Jersey, and to a lesser extent, in New York and Pennsylvania. Our commercial real estate loans include loans secured by non-medical office buildings, retail shopping centers, medical office buildings, industrial, warehouses, hotels, assisted-living facilities and similar commercial properties.
We offer both fixed and adjustable rate multifamily and commercial real estate loans. We originate these loans generally for terms of up to ten years and with payments generally based on an amortization schedule of up to 30 years for multifamily and industrial commercial real estate properties, and up to 25 years for commercial properties. Our adjustable rate loans are typically fixed from three to ten years.
When making multifamily and commercial real estate loans, we consider the financial statements and tax returns of the borrower, the borrower’s payment history of its debt, the debt service capabilities of the borrower, the projected cash flows of the real estate, leases for any of the tenants located at the collateral property and the value of the collateral and the strength of the guarantors, if any.
As of December 31, 2024, the average outstanding loan balance within our multifamily loan portfolio was $3.4 million, and the average loan balance within our commercial real estate loan portfolio totaled $1.5 million. At December 31, 2024, our largest multifamily loan was a $48.7 million loan secured by three garden style apartment buildings located in Delaware County, Pennsylvania. The loan is well-collateralized and was performing in accordance with its original terms at December 31, 2024. As of December 31, 2024, our largest commercial real estate loan was a $27.4 million participation loan made to fund a warehouse which consists of 62 units of industrial/flex office space located in Montgomery County, Pennsylvania. Columbia Bank is the lead lender and services this loan. The loan is well-collateralized and was performing in accordance with its original terms at December 31, 2024.
One-to-Four Family Residential Loans. We offer fixed-rate and adjustable-rate residential mortgage loans. Our fixed-rate mortgage loans have terms of up to 30 years. At December 31, 2024, one-to-four family residential loans totaled $2.7 billion, or 34.4% of our total loan portfolio. We also offer adjustable-rate mortgage loans with interest rates and payments that adjust annually after an initial fixed period of up to seven years. Interest rates and payments on our adjustable-rate loans generally are adjusted to a rate equal to a spread above the U.S. Treasury security index. Our adjustable-rate single-family residential real estate loans generally have a cap of 2% on any increase or decrease in the interest rate at any adjustment date, and a maximum adjustment limit of 5% on any such increase or decrease over the life of the loan. To increase the originations of adjustable-rate loans, we have been originating loans that bear a fixed interest rate for a period of up to seven years (but historically as long as ten years) after which they convert to one-year adjustable-rate loans. Our adjustable-rate loans require that any payment adjustment resulting from a change in the interest rate be sufficient to result in full amortization of the loan by the end of the loan term and, thus, do not permit any of the increased payment to be added to the principal amount of the loan, creating negative amortization. Although we offer adjustable-rate loans with initial rates below the fully indexed rate, loans previously tied to the one-year constant maturity treasury, and beginning in 2024, based on the 30 day average Secured Overnight Financing Rate ("SOFR"), are underwritten using methods approved by the Federal Home Loan Mortgage Corporation (“Freddie Mac”) or the Federal National Mortgage Association (“Fannie Mae”). We do not offer loans with negative amortization, and we do not currently offer interest-only residential mortgage loans.
Borrower demand for adjustable-rate loans compared to fixed-rate loans is a function of the level of interest rates, the expectations of changes in the level of interest rates, and the difference between the interest rates and loan fees offered for fixed-rate mortgage loans as compared to the interest rates and loan fees for adjustable-rate loans. At December 31, 2024, fixed-rate mortgage loans totaled approximately $2.4 billion and adjustable-rate mortgage loans totaled approximately $299.6 million. The loan fees, interest rates and other provisions of mortgage loans are determined by us on the basis of our own pricing criteria and competitive market conditions.
While one-to-four family residential real estate loans are normally originated with up to 30-year terms, such loans typically remain outstanding for substantially shorter periods because borrowers often prepay their loans in full either upon sale of the property pledged as security or upon refinancing the original loan. Therefore, average loan maturity is a function of, among other factors, the level of purchase and sale activity in the real estate market, prevailing interest rates and the interest rates payable on outstanding loans.
It is our general policy not to make high loan-to-value loans (defined as loans with a loan-to-value ratio of 80% or more) without private mortgage insurance. The maximum loan-to-value ratio we generally permit is 95% with private mortgage insurance,
although occasionally we do originate loans with loan-to-value ratios as high as 97.0% under special loan programs, including our first-time homeowner loan program. We require all properties securing mortgage loans to be appraised by an independent appraiser approved by our board of directors. We require title insurance on all purchase money and refinance mortgage loans. Borrowers must obtain hazard insurance, and flood insurance is required for loans on properties located in a flood zone.
As of December 31, 2024, the average outstanding loan balance within our one-to-four family residential real estate loan portfolio was $287,000. As of December 31, 2024, our largest one-to-four family residential real estate loan was a $4.7 million loan secured by a residential property located in Bergen County, New Jersey. The loan is well-collateralized and was performing in accordance with its original terms at December 31, 2024.
Commercial Business Loans. We make commercial business loans in our market area to a variety of professionals, sole proprietorships, partnerships and corporations. We offer a variety of commercial lending products such as secured and unsecured loans that include term loans for equipment financing and for business acquisitions, working capital loans, inventory financing and revolving lines of credit. In most cases, fixed-rate loans have terms up to ten years and are fully amortizing. Revolving and asset based lines of credit generally will have adjustable rates of interest and will be extended for periods of up to 24 months to support inventory and accounts receivable fluctuations and are subject to periodic review and renewal. Asset based lines require a higher level of monitoring and are governed by a borrowing base structure which requires the submission of monthly accounts receivable, accounts payable and inventory listing reports, annual collateral field examination and more frequent financial reporting. Business loans with variable rates of interest adjust on a daily basis and are generally indexed to the prime rate as published in The Wall Street Journal. Unsecured commercial business lending is generally considered to involve a higher degree of risk than secured lending. Risk of loss on an unsecured commercial business loan is dependent largely on the borrower’s ability to remain financially able to repay the loan out of ongoing operations. If our estimate of the borrower’s financial ability is inaccurate, we may be confronted with a loss of principal on the loan. Equipment financing lending terms are generally five to seven year fully amortizing loans.
In making commercial business loans, we consider a number of factors, including the financial condition of the borrower, the nature of the borrower’s business, economic conditions affecting the borrower, our market area, the management experience of the borrower, the debt service capabilities of the borrower, the projected cash flows of the business and the collateral. Commercial loans are generally secured by a variety of collateral, including equipment, machinery, inventory and accounts receivable, and may be supported by personal guarantees.
We also originate commercial business and real estate loans under the Small Business Administration (“SBA”). Loans originated under this program are partially guaranteed by the SBA and are underwritten within the guidelines set forth by the SBA. As of December 31, 2024, the outstanding balance of our SBA loans was $37.0 million, which is included in secured and unsecured commercial business loan amounts.
As of December 31, 2024, the average outstanding loan balance within our commercial business loan portfolio (excluding lines of credit with no outstanding balances) was $535,000. At December 31, 2024, our largest balance commercial business loan was a $23.2 million loan made to a distributor of medical and other disposable discount retail supplies located in Hudson County, New Jersey, and was secured by its business assets.
Construction Loans. We originate commercial construction loans primarily to professional builders for the construction and acquisition of personal residences, apartment buildings, retail, industrial, warehouse, office buildings and special purpose facilities. We will originate construction loans on unimproved land in amounts typically up to 65% of the lower of the appraised value or the cost of the land. We also originate loans for site improvements and construction costs in amounts generally up to 75% of as completed and stabilized appraised value. Our construction loans generally provide for the payment of interest only during the construction phase, which is usually six to 36 months. Many of our commercial construction loans are structured to convert to permanent financing upon completion and stabilization. Commercial real estate construction loans are typically based upon the prime rate as published in The Wall Street Journal. At December 31, 2024, we had an outstanding balance of $473.6 million in construction loans for commercial development.
Before making a commitment to fund a construction loan, we require an appraisal of the property by a licensed appraiser. We also review and inspect each property before disbursement of funds during the term of the construction loan. Loan proceeds are disbursed after inspections based on the work completed.
Construction lending generally involves a higher degree of risk than permanent mortgage lending because funds are advanced upon the security of the project under construction prior to its completion. As a result, construction lending often involves the disbursement of substantial funds with repayment dependent on the success of the ultimate project and the ability of the borrower or guarantor to repay the loan. Because of these factors, the analysis of prospective construction loan projects requires an expertise that is different in significant respects from that which is required for other types of lending. We have addressed these risks through our underwriting procedures. Additionally, we have attempted to minimize the foregoing risks by, among other things, limiting our construction lending to experienced developers, by limiting the amount of speculative construction projects and requiring executed agreements of sales as conditions for draws of the commercial construction loans. When making commercial construction loans, we consider the financial statements of the borrower, the borrower’s payment history, the projected cash flows from the proposed real estate collateral, and the value of the collateral. In general, our real estate construction loans are typically guaranteed by the principals
of the borrowers. We consider the financial statements and tax returns of the guarantors, along with the guarantors’ payment history, when underwriting a commercial construction loan.
As of December 31, 2024, the average outstanding loan balance within our commercial construction loan portfolio was $3.9 million. At December 31, 2024, our largest commercial construction loan exposure had an outstanding balance of $32.0 million to finance a 120 unit independent living facility for senior citizens located in Medford, New Jersey. The loan payments are current and have been made in accordance with the loan terms at December 31, 2024.
We also originate residential construction loans primarily on a construction-to-permanent basis with such loans converting to an amortizing loan following the completion of the construction phase. Most of our residential construction loans are made to individuals building a personal residence. At December 31, 2024, residential construction loans totaled $8.5 million. Construction lending, by its nature, entails additional risks compared to one-to-four family mortgage lending, attributable primarily to the fact that funds are advanced based upon a security interest in a project which is not yet complete. We address these risks through our established underwriting policies and procedures performed by our experienced staff.
Home Equity Loans and Advances. We offer consumer home equity loans and advances that are secured by one-to-four family residential real estate, where we may be in a first or second lien position. Historically, we offered home equity loans and advances with a lien junior to second position and some of these junior liens still reside in the loan portfolio at December 31, 2024. In addition, in prior years we also offered adjustable-rate home equity loans with fixed terms, although we no longer offer these loans. We generally offer home equity loans and advances with a maximum combined loan-to-value ratio of 80%. At December 31, 2024, home equity loans and advances totaled $259.2 million, or 3.3%, of our total loan portfolio. Home equity loans have fixed rates of interest and are currently offered with terms of up to 20 years. Home equity advances have adjustable rates and are based upon the prime rate as published in The Wall Street Journal. Home equity advances can have repayment schedules of both principal and interest or interest only paid monthly. We held a first mortgage position on approximately 41.9% of the homes that secured our home equity loans and advances at December 31, 2024.
The procedures for underwriting consumer home equity loans and advances include an assessment of the applicant’s payment history on other debts and ability to meet existing obligations and payments on the proposed loan. Although the applicant’s creditworthiness is a primary consideration, the underwriting process also includes a comparison of the value of the collateral to the proposed loan amount.
Other Consumer Loans. We offer a variety of other consumer loans, including loans for automobiles, personal loans, unsecured lines of credit, and overdraft lines of credit. Our unsecured lines of credit bear a substantially higher interest rate than our secured loans and lines of credit. At December 31, 2024, other consumer loans totaled $3.4 million.
For more information on our loan commitments, see “Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity Management.”
Credit Risks
Multifamily and Commercial Real Estate Loans. Loans secured by multifamily and commercial real estate loans generally have larger balances and involve a greater degree of risk than one-to-four family residential mortgage loans. Our primary concern in multifamily and commercial real estate lending is the borrower’s creditworthiness and the feasibility and cash flow potential of the property that secures the loan. Additional considerations include: location, market and geographic concentrations, loan-to-value ratio, strength of guarantors and quality of tenants. Payments on loans secured by income properties often depend on successful operation and management of the properties. As a result, repayment of such loans may be subject to a greater extent than residential real estate loans to adverse conditions in the real estate market or the economy. To monitor cash flows on income properties, we require borrowers and loan guarantors, if any, to provide, at least, annual financial statements and rent rolls where applicable. In reaching a decision on whether to make a commercial real estate loan, we usually consider and review the net operating income of the property or, when applicable, a global cash flow analysis of the borrower the borrower's expertise, credit history, and profitability of the value of the underlying property. The global analysis is more typically performed for owner occupied commercial real estate transactions (an operating company with common ownership provides a corporate guaranty of the transaction and occupies more than 50% of the property) or when lending to real estate development and management companies that own multiple properties with financing from other creditors. The analysis takes into consideration all rental income and expenses from the borrower’s real estate investments to determine if any other real estate holdings in the portfolio do not provide income levels to support the expenses of each property and debt service requirements for any third party financing secured by the properties held in the portfolio. We have generally required that the properties securing these real estate loans have debt service coverage ratios (the ratio of earnings before debt service to debt service) of at least 1.2x and a loan-to-value no greater than 75% for commercial properties and no greater than 80% for multifamily properties. An environmental report is obtained when the possibility exists that hazardous materials may have existed on the site, or the site may have been impacted by adjoining properties with known environmental concerns.
One-to-Four Family Real Estate Loans. While we anticipate that adjustable-rate loans will better offset the adverse effects of an increase in interest rates as compared to fixed-rate mortgages, the increased mortgage payments required of adjustable-rate loan borrowers in a rising interest rate environment could cause an increase in delinquencies and defaults. The marketability of the
underlying property also may be adversely affected in a high interest rate environment. In addition, although adjustable-rate mortgage loans help make our asset base more responsive to changes in interest rates, the extent of this interest sensitivity is limited by the annual and lifetime interest rate adjustment limits on such loans.
Commercial Business Loans. Unlike residential mortgage loans, which generally are made on the basis of the borrower’s ability to make repayment from his or her employment or other income, and which are secured by real property, the value of which tends to be more easily ascertainable, commercial business loans are of higher risk and typically are made on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business. As a result, the availability of funds for the repayment of commercial business loans may depend substantially on the success of the business itself and guarantors, if any. Therefore, we usually consider and review a global cash flow analysis of the borrower and guarantors, when applicable. Further, any collateral securing such loans may depreciate over time, may be difficult to appraise, may fluctuate in value and may depend on the borrower’s ability to collect receivables.
Construction Loans. Loans made to facilitate construction are primarily short-term loans used to finance the construction of an owner-occupied residence or income producing assets. Generally, upon stabilization or upon completion and issuance of a certificate of occupancy, these loans often convert to permanent loans with long-term amortization. Payments during construction consist of an interest-only period funded generally by borrower or guarantor equity. As these loans represent higher risk, each project is monitored for progress throughout the life of the loan, and loan funding occurs through borrower draw requests. These requests are compared to project milestones and progress is verified by independent inspectors engaged by us.
Construction financing is generally considered to involve a higher degree of risk of loss than long-term financing on improved, occupied real estate. Risk of loss on a construction loan is dependent largely upon the accuracy of the initial estimate of the property’s value at completion of construction or development and the estimated cost (including interest) of construction. During the construction phase, a number of factors could result in delays and cost overruns. If the estimate of construction costs proves to be inaccurate, business conditions may dictate that the borrower or guarantors, when applicable, contribute additional equity or we advance funds beyond the amount originally committed to permit completion of the project. If the estimate of value proves to be inaccurate, we may be confronted, at or before the maturity of the loan, with a project having a value which is insufficient to assure full repayment.
Home Equity Loans and Advances. Consumer home equity loans and advances are loans secured by one-to-four family residential real estate, where we may be in a first or junior lien position. In each instance, the value of the property is determined, and the loan is made against identified equity in the market value of the property. When a residential mortgage is not present on the property, a first lien position is secured against the property. In cases where a mortgage is present on the property, a junior lien position is established, subordinated to the first mortgage. As these subordinated liens represent higher risk, loan collection becomes more influenced by various factors, including job loss, divorce, illness or personal bankruptcy. Furthermore, the application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount that can be recovered on such loans.
Other Consumer Loans. Unlike consumer home equity loans, these loans are either unsecured or secured by rapidly depreciating assets such as autos. In such cases, repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment for the outstanding loan and a small remaining deficiency often does not warrant further substantial collection efforts against the borrower. Consumer loan collections depend on the borrower’s continuing financial stability, and, therefore, are likely to be adversely affected by various factors, including job loss, divorce, illness or personal bankruptcy. Furthermore, the application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount that can be recovered on such loans.
Loan Originations and Purchases. Loan originations come from a number of sources. The primary sources of loan originations are existing customers, online channels, walk-in traffic, advertising and referrals from customers and other business contacts, including attorneys, accountants and other professionals. Residential mortgage loans are also sourced through mortgage brokers, although such loans are underwritten by us in accordance with our underwriting standards.
We purchase and have acquired participation interests in loans to supplement our lending portfolio. Loan participations purchased totaled $174.2 million at December 31, 2024 and were comprised of 57 commercial real estate loans. Loan participations are subject to the same credit analysis and loan approvals as loans which we originate. We review all of the documentation relating to any loan in which we participate. However, for participation loans, we do not service the loan and, thus, are subject to the policies and practices of the lead lender with regard to monitoring delinquencies, pursuing collections and instituting foreclosure proceedings.
Loan Commitments. We issue commitments for residential mortgage, consumer, commercial real estate, commercial business loans and construction loans, conditioned upon the occurrence of certain events. Commitments to originate mortgage loans are legally binding agreements to lend to our customers. Generally, our loan commitments expire after 60 days.
Delinquent Loans. We identify loans that may need to be charged-off as a loss by reviewing all delinquent loans, classified loans and other loans for which management may have concerns about collectability. Loans individually analyzed are measured based on the fair value of collateral if the loan is collateral dependent, or cash flows discounted at the loan-level effective interest rate. The collateral or cash flow shortfall on all secured loans is charged-off when the loan becomes 90 days delinquent or earlier where management determines that the collection of loan principal is unlikely. In the case of unsecured consumer loans, the entire balance deemed uncollectible is charged-off when the loan becomes 90 days delinquent. For more information on how we address credit risk, see “Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations-Risk Management.”
Securities Activities
We maintain a securities portfolio that consists of U.S. Government and agency obligations, mortgage-backed securities and collateralized mortgage obligations (“CMOs”), municipal obligations, corporate debt securities, equity securities, and trust preferred securities. We classify our securities as either held to maturity or available for sale. Management determines the appropriate classification of securities at the time of purchase. If we have the intent and the ability to hold the securities until maturity, they are classified as held to maturity. These securities are stated at amortized cost and adjusted for accretion of discounts over the estimated lives of the securities using the level-yield method. Premiums are amortized to the first (or earliest) call date instead of as an adjustment to the yield over the contractual life. Securities in the available for sale category are those for which we do not have the intent at purchase to hold to maturity. These securities are reported at fair value with any unrealized appreciation or depreciation, net of tax effects, reported as a separate component of accumulated other comprehensive income.
Mortgage-backed securities are a type of asset-backed security that is secured by a mortgage, or a collection of mortgages. These securities usually pay periodic payments that are similar to coupon payments. The contractual cash flows of securities in government sponsored enterprises’ mortgage-backed securities are debt obligations of Freddie Mac and Fannie Mae, both of which are currently under the conservatorship of the Federal Housing Finance Agency. The contractual cash flows related to Government National Mortgage Association (“Ginnie Mae”) securities are direct obligations of the U.S. Government. Mortgage-backed securities are also known as mortgage pass-throughs. CMOs are structured as pool mortgage-backed securities and redistribute principal and interest payments to predetermined groups (classes) of investors. The repayments from the pool of pass-through securities are used to retire the bonds in the order specified by the bonds’ prospectuses.
As part of the Company's strategy to improve future earnings and expand its net interest margin, in December 2024 the Company sold $352.3 million of debt securities available for sale, and the proceeds from the sale were used to fund loan growth of $72.9 million, purchase $78.1 million of higher yielding debt securities and prepay $170.0 million of higher cost borrowings. This repositioning was immediately accretive to net interest income. The sale and prepayment resulted in a pre-tax loss of approximately $37.9 million.
At December 31, 2024, 60.7% of the available for sale securities portfolio was comprised of mortgage-backed securities and CMOs issued by Freddie Mac, Fannie Mae and Ginnie Mae. These securities are guaranteed by the issuing agency and backed by residential and multifamily mortgages. These securities are comprised of fixed rate, adjustable-rate and hybrid securities that bear a fixed rate for a specific term and, thereafter, to the extent they are not prepaid, adjust periodically. At December 31, 2024, U.S. government and agency obligations comprised the next largest segment of the available for sale securities portfolio, totaling 30.7% of the portfolio. At December 31, 2024, the remainder of our available for sale securities portfolio consisted of corporate debt securities and municipal obligations which comprised 8.4% and 0.2%, respectively, of the portfolio.
At December 31, 2024, 88.6% of the held to maturity securities portfolio was comprised of mortgage-backed securities and CMOs issued by Freddie Mac, Fannie Mae and Ginnie Mae. These securities are guaranteed by the issuing agency and backed by residential and multifamily mortgages. These securities are comprised of fixed rate, adjustable-rate and hybrid securities that bear a fixed rate for a specific term and thereafter, to the extent they are not prepaid, adjust periodically. At December 31, 2024, the remainder of our held to maturity securities portfolio consisted of U.S. government and agency obligations which comprised 11.4% of the portfolio.
At December 31, 2024, we held $6.7 million of securities in our equity portfolio comprised of Federal Home Loan Mortgage Corporation ("FHLMC") and Federal National Mortgage Association ("FNMA") preferred stock, stock in other financial institutions, and a Community Reinvestment Act qualifying bond fund. In addition, the equity portfolio includes Atlantic Community Bankers Bank ("ACBB") 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. Some of these securities receive dividends and all are carried at fair value.
To mitigate the credit risk related to our securities portfolio, we primarily invest in agency and highly rated securities. As of December 31, 2024, approximately 93.2% of the total portfolio consisted of direct government obligations or government sponsored enterprise obligations, approximately 5.6% of the remaining portfolio was rated at least investment grade and approximately 1.2% of the remaining portfolio was not rated. Securities not rated consist primarily of private placement municipal notes issued and/or guaranteed by local municipal authorities and equity securities.
Deposit Activities and Other Sources of Funds
General. Deposits, borrowings and loan and securities repayments are the major sources of our funds for lending and other investment purposes. Scheduled loan and securities repayments are a relatively stable source of funds, while deposit inflows and outflows and loan prepayments are significantly influenced by general interest rates and market conditions.
Deposit Accounts. Deposits are primarily attracted from within our market area through the offering of a broad selection of deposit products, including non-interest-bearing demand deposits (such as checking accounts to individuals and commercial checking accounts), interest-bearing demand accounts (such as interest-earning checking account products and most municipal accounts), savings and club deposits, money market accounts and certificates of deposit. In 2023, we began utilizing reciprocal and other deposit placement service companies, and in 2024, we began utilizing brokered deposits.
Our three primary categories of deposit customers consist of retail or individual customers, businesses and municipalities. Our business banking deposit products include a commercial checking account, a checking account specifically designed for small businesses and a money market product. Additionally, we offer cash management services, including remote deposit, lockbox service, sweep accounts, and escrow services.
Deposit account terms vary according to the minimum balance required, the time periods the funds must remain on deposit and the interest rate, among other factors. In determining the terms of our deposit accounts, we consider the rates offered by our competition, the rates on borrowings, our liquidity needs, profitability to us, and customer preferences and concerns. We generally review our deposit mix and pricing weekly. Our deposit pricing strategy has traditionally been to offer competitive rates on all types of deposit products, and to periodically offer special rates in order to attract deposits. Current strategies include changing the deposit mix to include more core deposits.
Borrowings. We have the ability to utilize advances and overnight lines of credit from the FHLB to supplement our liquidity. As a member bank, we are required to own capital stock in the FHLB and are authorized to apply for advances on the security of such stock and certain mortgage loans and other assets, provided certain standards related to creditworthiness have been met. Advances are made under several different programs, each having its own interest rate and range of maturities. We can also utilize securities sold under agreements to repurchase to provide funding. We maintain access to the Federal Reserve Bank's discount window and federal funds lines with correspondent banks to supplement our supply of investable funds and to meet deposit withdrawal and contingency funding requirements. At December 31, 2024, the Company had no outstanding borrowings from the Federal Reserve discount window. To secure our borrowings, we generally pledge securities and/or loans. The types of securities pledged for borrowings include, but are not limited to, government-sponsored enterprises (“GSE”) including notes and government agency mortgage-backed securities and CMOs. The types of loans pledged for borrowings include, but are not limited to, one-to-four family real estate mortgage loans, home equity loans and multifamily and commercial real estate loans. At December 31, 2024, we had additional borrowing capacity from the FHLB, and the Federal Reserve Bank of New York based on our ability to collateralize such borrowings. Members in good standing with the FHLB can borrow up to 50% of their asset size as long as they have qualifying collateral to support the advance and purchase of FHLB capital.
Regulation and Supervision
General
As a federal savings bank, Columbia Bank is subject to examination, supervision and regulation, primarily by the Office of the Comptroller of the Currency, and, secondarily, by the Federal Deposit Insurance Corporation (“FDIC”) as deposit insurer. Columbia Bank has elected and has received regulatory approval to operate as a “covered savings association” pursuant to Section 5A of the Home Owners’ Loan Act, as amended, and the regulations of the Office of the Comptroller of the Currency promulgated thereunder. A covered savings association generally has the same rights and privileges as a national bank, and is subject to the same duties, restrictions, penalties, liabilities, conditions, and limitations that would apply to a national bank.
Columbia Bank is also regulated by the Federal Reserve Board, which governs the reserves to be maintained against deposits and other matters. In addition, Columbia Bank is a member of and owns stock in the FHLB of New York, which is one of the 11 regional banks in the Federal Home Loan Bank System. Columbia Bank’s relationships with depositors and borrowers also are regulated to a great extent by federal law and, to a lesser extent, state law, including in matters concerning the ownership of deposit accounts and other contractual arrangements.
As savings and loan holding companies in the mutual holding company structure, the Company and the MHC are subject to examination and supervision by, and are required to file certain reports with the Federal Reserve Board and are treated by the Federal Reserve Board as bank holding companies, for certain regulatory purposes, as a result of Columbia Bank’s election to operate as a “covered savings association.” The Company is also subject to the rules and regulations of the Securities and Exchange Commission ("SEC") under the federal securities laws.
Set forth below are certain material regulatory requirements that are applicable to Columbia Bank and the Company. This description of statutes and regulations is not intended to be a complete description of such statutes and regulations and their effects on Columbia Bank and the Company. Any change in these laws or regulations, whether by Congress or the applicable regulatory agencies, could have a material adverse impact on the Company, Columbia Bank and their operations.
Federal Banking Regulations
Business Activities. A federal savings bank derives its lending and investment powers from the Home Owners' Loan Act, as amended, and applicable federal regulations. However, as a covered savings association, Columbia Bank generally has the same rights and privileges as a national bank, and is subject to the same duties, restrictions, penalties, liabilities, conditions, and limitations that would apply to a national bank.
Examinations and Assessments. Columbia Bank is primarily supervised by the Office of the Comptroller of the Currency. Columbia Bank is required to file reports with and is subject to periodic examination by the Office of the Comptroller of the Currency and is also required to pay assessments to the Office of the Comptroller of the Currency to fund the agency’s operations.
Capital Requirements. Federal regulations require FDIC-insured depository institutions, including federal savings banks, to meet several minimum capital standards: a common equity Tier 1 capital to risk-based assets ratio, a Tier 1 capital to risk-based assets ratio, a total capital to risk-based assets and a Tier 1 capital to total assets leverage ratio.
The capital standards require the maintenance of common equity Tier 1 capital, Tier 1 capital and Total capital to risk-weighted assets of at least 4.5%, 6.0% and 8.0%, respectively. The regulations also establish a minimum required leverage ratio of at least 4.0% of Tier 1 capital. Common equity Tier 1 capital is generally defined as common stockholders’ equity and retained earnings. Tier 1 capital is generally defined as common equity Tier 1 capital plus additional Tier 1 capital. Additional Tier 1 capital generally includes certain noncumulative perpetual preferred stock and related surplus and minority interests in equity accounts of consolidated subsidiaries. Total capital includes Tier 1 capital (common equity Tier 1 capital plus additional Tier 1 capital) and Tier 2 capital. Tier 2 capital is comprised of capital instruments and related surplus meeting specified requirements and may include cumulative preferred stock and long-term perpetual preferred stock, mandatory convertible securities, intermediate preferred stock and subordinated debt. Also included in Tier 2 capital is the allowance for credit losses limited to a maximum of 1.25% of risk-weighted assets and, for institutions that have exercised an opt-out election regarding the treatment of accumulated other comprehensive income such as Columbia Bank, up to 45% of net unrealized gains on available for sale equity securities with readily determinable fair market values. Institutions that have not exercised the accumulated other comprehensive income opt-out have accumulated other comprehensive income incorporated into common equity Tier 1 capital (including unrealized gains and losses on available for sale securities). Calculation of all types of regulatory capital is subject to deductions and adjustments specified in the regulations.
In determining the amount of risk-weighted assets for purposes of calculating risk-based capital ratios, an institution’s assets, including certain off-balance sheet assets (e.g., recourse obligations, direct credit substitutes, residual interests), are multiplied by a risk weight factor assigned by the regulations based on the risk deemed inherent in the type of asset. Higher levels of capital are required for asset categories believed to present greater risk. For example, a risk weight of 0% is assigned to cash and U.S. government securities, a risk weight of 50% is generally assigned to prudently underwritten first lien one-to-four family residential mortgages, a risk weight of 100% is assigned to commercial and consumer loans, a risk weight of 150% is assigned to certain past due loans and a risk weight of between 0% to 600% is assigned to permissible equity interests, depending on certain specified factors.
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.
At December 31, 2024, Columbia Bank’s capital exceeded all applicable requirements.
Loans-to-One Borrower. Generally, a federal savings bank or national bank may not make a loan or extend credit to a single or related group of borrowers in excess of 15% of unimpaired capital and surplus. An additional amount may be lent, equal to 10% of unimpaired capital and surplus, if secured by “readily marketable collateral,” which generally includes certain financial instruments (but not real estate). As of December 31, 2024, Columbia Bank was in compliance with the loans-to-one borrower limitations.
Standards for Safety and Soundness. Federal law requires each federal banking agency to prescribe certain standards for all insured depository institutions. These standards relate to, among other things, internal controls, information systems and audit systems, loan documentation, credit underwriting, interest rate risk exposure, asset growth, compensation and other operational and managerial standards as the agency deems appropriate. Interagency guidelines set forth the safety and soundness standards that the federal banking agencies use to identify and address problems at insured depository institutions before capital becomes impaired. If the appropriate federal banking agency determines that an institution fails to meet any standard prescribed by the guidelines, the agency may require the institution to submit to the agency an acceptable plan to achieve compliance with the standard. Failure to implement such a plan can result in further enforcement action, including the issuance of a cease and desist order or the imposition of civil money penalties.
Prompt Corrective Action. Under the federal prompt corrective action statute, the Office of the Comptroller of the Currency is required to take supervisory actions against undercapitalized institutions under its jurisdiction, the severity of which depends upon the institution’s level of capital. An institution that has a total risk-based capital ratio of less than 8.0%, a Tier 1 risk-based capital ratio of less than 6.0%, a common equity Tier 1 ratio of less than 4.5% or a leverage ratio of less than 4.0% is considered to be “undercapitalized”. An institution that has total risk-based capital of less than 6.0%, a Tier 1 risk-based capital ratio of less than 4.0%, a common equity Tier 1 ratio of less than 3.0% or a leverage ratio that is less than 3.0% is considered to be “significantly undercapitalized”. An institution that has a tangible capital to assets ratio equal to or less than 2.0% is deemed to be “critically undercapitalized”.
Generally, the Office of the Comptroller of the Currency is required to appoint a receiver or conservator for a federal savings bank or national bank that becomes “critically undercapitalized” within specific time frames. The regulations also provide that a capital restoration plan must be filed with the Office of the Comptroller of the Currency within 45 days of the date that a federal savings association is deemed to have received notice that it is “undercapitalized,” “significantly undercapitalized” or “critically undercapitalized”. Any holding company of a federal savings association that is required to submit a capital restoration plan must guarantee performance under the plan in an amount of up to the lesser of 5.0% of the savings association’s assets at the time it was deemed to be undercapitalized by the Office of the Comptroller of the Currency or the amount necessary to restore the savings association to adequately capitalized status. This guarantee remains in place until the Office of the Comptroller of the Currency notifies the institution that it has maintained adequately capitalized status for each of four consecutive calendar quarters. Institutions that are undercapitalized become subject to certain mandatory measures such as restrictions on capital distributions and asset growth. The Office of the Comptroller of the Currency may also take any one of a number of discretionary supervisory actions against undercapitalized federal savings associations, including the issuance of a capital directive and the replacement of senior executive officers and directors.
At December 31, 2024, Columbia Bank met the criteria for being considered “well capitalized,” which means that its total risk-based capital ratio exceeded 10.0%, its Tier 1 risk-based ratio exceeded 8.0%, its common equity Tier 1 ratio exceeded 6.5% and its leverage ratio exceeded 5.0%.
Capital Distributions. Federal regulations govern capital distributions by a federal savings bank, including a covered savings association, which include cash dividends, stock repurchases, and other transactions charged to the institution’s capital account. A federal savings bank, including a covered savings association, must file an application with the Office of the Comptroller of the Currency for approval of a capital distribution if (i) the total capital distributions for the applicable calendar year exceed the sum of the institution’s net income for that year to date plus the institution’s retained net income for the preceding two years; (ii) the institution would not be at least adequately capitalized following the distribution; (iii) the distribution would violate an applicable statute, regulation, agreement or regulatory condition; or (iv) the institution is not eligible for expedited treatment of its filings. Even if an application is not otherwise required, every savings association that is a subsidiary of a savings and loan holding company must file a notice with the Federal Reserve Board at least 30 days before the board of directors declares a dividend. An application or notice related to a capital distribution may be disapproved if (i) the federal savings association would be undercapitalized following the distribution; (ii) the proposed capital distribution raises safety and soundness concerns or (iii) the capital distribution would violate a prohibition contained in any statute, regulation or agreement.
In addition, the Federal Deposit Insurance Act provides that an insured depository institution shall not make any capital distribution if, after making such distribution, the institution would fail to meet any applicable regulatory capital requirement.
Community Reinvestment Act and Fair Lending Laws. All financial institution banks have a responsibility under the Community Reinvestment Act and related regulations to help meet the credit needs of their communities, including low and moderate-income borrowers. In connection with its examination of a federal savings bank, the Office of the Comptroller of the Currency is required to assess the federal savings bank’s record of compliance with the Community Reinvestment Act. A savings bank’s failure to comply with the provisions of the Community Reinvestment Act could, at a minimum, result in denial of certain corporate applications such as branches or mergers, or in restrictions on its activities. In addition, the Equal Credit Opportunity Act and the Fair Housing Act prohibit lenders from discriminating in their lending practices on the basis of characteristics specified in those statutes. The failure to comply with the Equal Credit Opportunity Act and the Fair Housing Act could result in enforcement actions by the Office of the Comptroller of the Currency, as well as other federal regulatory agencies and the Department of Justice.
The Community Reinvestment Act requires all institutions insured by the FDIC to publicly disclose their rating. Columbia Bank received a “satisfactory” Community Reinvestment Act rating in its most recent federal examination.
Transactions with Related Parties. A federal savings bank’s authority to engage in transactions with its affiliates is limited by Sections 23A and 23B of the Federal Reserve Act and federal regulation. An affiliate is generally any company that controls or is under common control with an insured depository institution such as Columbia Bank. The Company and the MHC are affiliates of Columbia Bank because of their direct and indirect control of Columbia Bank. In general, transactions between an insured depository institution and its affiliates are subject to certain quantitative limits and collateral requirements. In addition, federal regulations prohibit a savings association from lending to any of its affiliates that are engaged in activities that are not permissible for bank holding companies and from purchasing the securities of any affiliate, other than a subsidiary. Finally, transactions with affiliates must be consistent with safe and sound banking practices, not involve the purchase of low-quality assets and be on terms that are as favorable to the institution as comparable transactions with non-affiliates.
The authority of Columbia Bank to extend credit to their directors, executive officers and 10% stockholders, as well as to entities controlled by such persons, is currently governed by the requirements of Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O of the Federal Reserve Board. Among other things, these provisions generally require that extensions of credit to insiders:
•be made on terms that are substantially the same as, and follow credit underwriting procedures that are not less stringent than, those prevailing for comparable transactions with unaffiliated persons and that do not involve more than the normal risk of repayment or present other unfavorable features; and
•not exceed certain limitations on the amount of credit extended to such persons, individually and in the aggregate, which limits are based, in part, on the amount of the institution’s capital.
In addition, extensions of credit in excess of certain limits must be approved by the board of directors of Columbia Bank. Extensions of credit to executive officers are subject to additional limits based on the type of extension involved.
Enforcement. The Office of the Comptroller of the Currency has primary enforcement responsibility over federal savings banks and has authority to bring enforcement action against all “institution-affiliated parties,” including directors, officers, stockholders, attorneys, appraisers and accountants who knowingly or recklessly participate in wrongful action likely to have an adverse effect on a federal savings association. Formal enforcement action by the Office of the Comptroller of the Currency may range from the issuance of a capital directive or cease and desist order to removal of officers and/or directors of the institution to the appointment of a receiver or conservator. Civil penalties cover a wide range of violations and actions, and range up to $25,000 per day, unless a finding of reckless disregard is made, in which case penalties may be as high as $1.0 million per day. The FDIC also has the authority to terminate deposit insurance or recommend to the Office of the Comptroller of the Currency that enforcement action be taken with respect to a particular savings association. If such action is not taken, the FDIC has authority to take the action under specified circumstances.
Insurance of Deposit Accounts. The Deposit Insurance Fund of the FDIC insures deposits at FDIC-insured financial institutions such as Columbia Bank. Deposit accounts in Columbia Bank are insured by the FDIC generally up to a maximum of $250,000 per separately insured depositor and up to a maximum of $250,000 for self-directed retirement accounts.
The FDIC assesses insured depository institutions premiums to maintain the Deposit Insurance Fund. Assessments for most institutions are now based on financial measures and supervisory ratings derived from statistical modeling estimating the probability of failure within three years. Previously, the assessment range (inclusive of possible adjustments) for most banks and savings associations ranged from 1.5 basis points to 30 basis points. The FDIC has the authority to increase insurance assessments and adopted a final rule in October 2022 to increase initial base deposit insurance assessment rates by 2 basis points beginning with the first quarterly assessment period of 2023. As a result, effective January 1, 2023, Columbia Bank's assessment rates increased, and for most banks and savings associations the assessment ranges from 2.5 basis points to 42 basis points.
The FDIC has authority to further increase insurance assessments. Any significant increases would have an adverse effect on the operating expenses and results of operations of Columbia Bank. We cannot predict what assessment rates will be in the future.
Insurance of deposits may be terminated by the FDIC upon a finding that an institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC. We do not currently know of any practice, condition or violation that may lead to termination of our deposit insurance.
On November 16, 2023, the FDIC published in the Federal Register its final rule that imposes special assessments to recover the loss to the Deposit Insurance Fund arising from the protection of uninsured depositors in connection with the systemic risk determination announced on March 12, 2023, following the closures of Silicon Valley Bank and Signature Bank. The assessment base for the special assessments is equal to an insured depository institution’s (“IDI”) estimated uninsured deposits, reported as of December 31, 2022, adjusted to exclude the first $5 billion in estimated uninsured deposits from the IDI, or for IDIs that are part of a holding company with one or more subsidiary IDIs, at the banking organization level. The final rule calls for the FDIC to collect special assessments at an annual rate of approximately 13.4 basis points, over eight quarterly assessment periods. Because the estimated loss pursuant to the systemic risk determination will be periodically adjusted, the FDIC retains the ability to cease collection
early, extend the special assessment collection period one or more quarters beyond the initial eight-quarter collection period to collect the difference between actual or estimated losses and the amounts collected, and impose a final shortfall special assessment on a one-time basis after the receiverships for Silicon Valley Bank and Signature Bank terminate. The final rule became effective on April 1, 2024, with special assessments collected beginning with the first quarterly assessment period of 2024. In February 2024, we received notification from the FDIC that the estimated loss attributable to the protection of uninsured depositors at Silicon Valley Bank and Signature Bank is $20.4 billion, an increase of approximately $4.1 billion from the estimate of $16.3 billion described in the final rule, and, as of March 31, 2024, revised the estimate to $19.2 billion. The FDIC provided institutions subject to the special assessment an updated estimate of each institution’s quarterly and total special assessment expense with its first quarter 2024 special assessment invoice. The aggregate amount of Columbia Bank’s special assessment was $4.5 million.
Federal Home Loan Bank System. Columbia Bank is a member of the Federal Home Loan Bank System, which consists of 11 regional Federal Home Loan Banks. The Federal Home Loan Bank System provides a central credit facility primarily for member institutions as well as other entities involved in home mortgage lending. As a member of the FHLB of New York, Columbia Bank is required to purchase and hold shares of capital stock in the FHLB of New York. As of December 31, 2024, Columbia Bank was in compliance with this requirement. The FHLB imposes various limitations on advances such as limiting the amount of certain types of real estate related collateral and limiting total advances to a member.
Other Regulations. Interest and other charges collected or contracted for by Columbia Bank are subject to state usury laws and federal laws concerning interest rates. The operations of Columbia Bank are also subject to various federal laws applicable to credit transactions, such as the:
•Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers;
•Home Mortgage Disclosure Act, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves;
•Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit;
•Fair Credit Reporting Act, governing the use and provision of information to credit reporting agencies;
•Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies;
•Truth in Savings Act, prescribing disclosure and advertising requirements with respect to deposit accounts; and
•Rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws.
The operations of Columbia Bank also are subject to the:
•Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records;
•Electronic Funds Transfer Act and Regulation E promulgated thereunder, which govern automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services;
•Check Clearing for the 21st Century Act (also known as “Check 21”), which gives “substitute checks,” such as digital check images and copies made from that image, the same legal standing as the original paper check;
•The USA PATRIOT Act, which requires savings associations to, among other things, establish broadened anti-money laundering compliance programs, and due diligence policies and controls to ensure the detection and reporting of money laundering. Such required compliance programs are intended to supplement existing compliance requirements that also apply to financial institutions under the Bank Secrecy Act and the Office of Foreign Assets Control regulations; and
•The Gramm-Leach-Bliley Act, which places limitations on the sharing of consumer financial information by financial institutions with unaffiliated third parties. Specifically, the Gramm-Leach-Bliley Act requires all financial institutions offering financial products or services to retail customers to provide such customers with the financial institution’s privacy policy and provide such customers the opportunity to “opt out” of the sharing of certain personal financial information with unaffiliated third parties.
Holding Company Regulation
General. The Company and the MHC are non-diversified savings and loan holding companies within the meaning of the Home Owners’ Loan Act. As such, the Company and the MHC are registered with the Federal Reserve Board and are subject to the regulation, examination, supervision and reporting requirements applicable to savings and loan holding companies and mutual holding companies. As a result of Columbia Bank’s election to be treated as a covered savings association, the Federal Reserve Board will generally treat the Company and the MHC as bank holding companies even though they remain savings and loan holding companies under existing law. In addition, the Federal Reserve Board has enforcement authority over the Company, the MHC and their non-savings institution subsidiaries. Among other things, this authority permits the Federal Reserve Board to restrict or prohibit activities that are determined to be a serious risk to the subsidiary savings bank.
Permissible Activities. Due to Columbia Bank’s status as a covered savings association, the activities of the Company and the MHC are generally limited to activities permissible for bank holding companies under Section 4(c)(8) of the Bank Holding Company Act, subject to regulatory approval, and certain additional activities authorized by federal regulations. Federal law prohibits a holding company, including the Company and the MHC, directly or indirectly, or through one or more subsidiaries, from acquiring control of more than 5% of another financial institution or financial institution holding company, without prior Federal Reserve Board approval. In evaluating applications by holding companies to acquire other financial institutions, the Federal Reserve Board considers factors such as the financial and managerial resources, future prospects of the company and institution involved, the effect of the acquisition on the risk to the federal deposit insurance fund, the convenience and needs of the community and competitive factors.
Capital. The Company is subject to consolidated regulatory capital requirements that are similar to those that apply to Columbia Bank. The Company was in compliance with these requirements as of December 31, 2024.
Source of Strength. The Dodd-Frank Act extended the “source of strength” doctrine to savings and loan holding companies. The Federal Reserve Board has issued regulations requiring that all savings and loan holding companies serve as a source of strength to their subsidiary depository institutions.
Dividends and Stock Repurchases. The Federal Reserve Board has issued a policy statement regarding the payment of dividends by holding companies. In general, the policy provides that dividends should be paid only out of current earnings and only if the prospective rate of earnings retention by the holding company appears consistent with the organization’s capital needs, asset quality and overall supervisory financial condition. Separate regulatory guidance provides for prior consultation with Federal Reserve Bank staff concerning dividends in certain circumstances such as where the company’s net income for the past four quarters, net of dividends previously paid over that period, is insufficient to fully fund the dividend or the company’s overall rate or earnings retention is inconsistent with the company’s capital needs and overall financial condition. The ability of a savings and loan holding company to pay dividends may be restricted if a subsidiary savings association becomes undercapitalized. The regulatory guidance also states that a savings and loan holding company should inform Federal Reserve Bank supervisory staff prior to redeeming or repurchasing common stock or perpetual preferred stock if the savings and loan holding company is experiencing financial weaknesses or the repurchase or redemption would result in a net reduction, at the end of a quarter, in the amount of such equity instruments outstanding compared with the beginning of the quarter in which the redemption or repurchase occurred. The Federal Reserve requires the Company to file to provide notification to the Federal Reserve prior to implementing any repurchase plan. These regulatory policies may affect the ability of the Company to pay dividends, repurchase shares of common stock or otherwise engage in capital distributions.
Waivers of Dividends by Columbia Bank MHC. The Company may pay dividends on its common stock to public stockholders. If it does, it is also required to pay dividends to the MHC, unless the MHC elects to waive the receipt of dividends. Under the Dodd-Frank Act, the MHC must receive the approval of the Federal Reserve Board before it may waive the receipt of any dividends from the Company. The Federal Reserve Board issued an interim final rule providing that it will not object to dividend waivers under certain circumstances, including circumstances where the waiver is not detrimental to the safe and sound operation of the savings association and a majority of the mutual holding company’s members have approved the waiver of dividends by the mutual holding company within the previous twelve months. In addition, for a “non-grandfathered” mutual holding company such as the MHC, each of our officers and directors, and any tax-qualified stock benefit plan or non-tax-qualified stock benefit plan in which such individual participates that holds any shares of stock to which the waiver would apply, must waive the right to receive any such dividend declared. The Federal Reserve Board’s current position is to not permit a non-grandfathered savings and loan or bank holding company to waive dividends declared by its subsidiary. In addition, any dividends waived by the MHC must be considered in determining an appropriate exchange ratio in the event of a second step conversion of the mutual holding company to stock form.
Conversion of Columbia Bank MHC to Stock Form. Federal Reserve Board regulations permit the MHC to convert from the mutual form of organization to the capital stock form of organization (a “Conversion Transaction”). There can be no assurance when, if ever, a Conversion Transaction will occur, and the board of directors has no current intention or plan to undertake a Conversion Transaction but are periodically updated on market conditions for such a transaction. In a Conversion Transaction, a new stock holding company would be formed as the successor to the Company (the “New Holding Company”), the MHC’s corporate existence would end, and certain depositors and borrowers of Columbia Bank would receive the right to subscribe for shares of the New Holding Company. In a Conversion Transaction, each share of common stock held by stockholders other than the MHC (“Minority Stockholders”) would be automatically converted into a number of shares of common stock of the New Holding Company determined
pursuant to an exchange ratio that ensures that Minority Stockholders own the same percentage of common stock in the New Holding Company as they owned in the Company immediately prior to the Conversion Transaction. Any Conversion Transaction would be subject to approvals by Minority Stockholders and members of the MHC. Minority Stockholders will not be able to force a Conversion Transaction without the consent of the MHC since such transaction also requires, under federal corporate law, the approval of a majority of all of the outstanding voting stock, which can only be achieved if the MHC voted to approve such transaction.
Acquisition. Under the Federal Change in Bank Control Act, a notice must be submitted to the Federal Reserve Board if any person (including a company), or group acting in concert, seeks to acquire direct or indirect “control” of a savings and loan holding company. Under certain circumstances, a change of control may occur, and prior notice is required, upon the acquisition of 10% or more of the company’s outstanding voting stock, unless the Federal Reserve Board has found that the acquisition will not result in control of the company. A change in control definitively occurs upon the acquisition of 25% or more of the company’s outstanding voting stock. Under the Change in Bank Control Act, the Federal Reserve Board generally has 60 days from the filing of a complete notice to act, taking into consideration certain factors, including the financial and managerial resources of the acquirer and the competitive effects of the acquisition.
Federal Securities Laws
The Company’s common stock is registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934. The Company is therefore subject to the information, proxy solicitation, insider trading restrictions and other requirements under the Securities Exchange Act of 1934.
Personnel
As of December 31, 2024, we had 708 full-time employees and 47 part-time employees, none of whom is represented by a collective bargaining unit. We believe that our relationship with our employees is good.
Human Capital Management
We consider our employees to be our most valuable asset, and we promote an environment that is both rewarding and challenging. We offer many different programs and initiatives to develop our workforce and to ensure the work culture matches our mission of offering a challenging and rewarding work environment for employees while promoting programs that support wellness and the quality of employees’ lives. We encourage our employees to get involved with their communities and through “Team Columbia” our employees participate in many outreach programs and volunteer events. In addition, we host various employee events such as the Annual Service Awards Dinner, Community Service Dinner, an Employee and Family Picnic and holiday events to further promote our culture and to provide opportunities for employee engagement.
At December 31, 2024, we employed 755 full and part time employees throughout the State of New Jersey. During the year ended December 31, 2024, we hired 109 employees. Our voluntary turnover rate was 13.5% and the involuntary turnover rate was 3.6% in 2024. The attrition rate was nearly 60% improved over 2023 due to increased efforts to engage employees and increase focus on collaboration and manager support in 2024. The voluntary turnover rate reflected the competitive market for employees, especially branch staff.
Retention
In order to retain our talented workforce, we provide a competitive compensation and benefits program to help meet the needs of our employees. We monitor salaries on a regular basis participating in various external salary surveys and analyzing internal reports to ensure market competitiveness and internal equity. We also offer annual incentive programs to further reward our employees based on their performance. For the second year in a row, our employees participated in, and our organization was certified as a "Great Place to Work", with 85% of employee participation in 2024.
Benefits
In addition to competitive salaries, we offer comprehensive benefit programs which include equity awards, an Employee Stock Ownership Plan (“ESOP”) and a deferred compensation plan (401k) with an employer matching contribution, healthcare and life insurance benefits, health savings accounts, flexible spending accounts, paid time off, family leaves of absence, tuition reimbursement, student loan repayments, good grade awards and an employee assistance program. In 2024, 53 employees received good grade awards totaling approximately $260,000 due to the accomplishments of their children and we assisted 34 employees with approximately $53,000 of repayments to their student loans through our repayment program.
Employee Wellness
The Human Resources Department continues to enhance our wellness programs to establish an environment that promotes a holistic approach to well-being that includes healthy lifestyles, financial stability, mental well-being, decreases the risk of disease, and
improves the quality of employee life. These programs enhance our employee experience by giving our employees the tools necessary to create a healthier lifestyle through the promotion of healthy diets, workplace activities, exercise programs, the opportunity to participate in individualized wellness coaching, financial literacy and wellness seminars. Active participants in wellness programs enjoy a wealth incentive, under which we paid out incentives of over $100,000 in 2024 to approximately 60% of the workforce under this program. In 2024, our medical insurance provider paid approximately $50,000 in additional funds which enhanced our wellness programming incentives. We have also created wellness and quiet rooms in the Company's corporate headquarters for people to be able to take breaks or attend to personal matters. All of these programs are intended to make us an employer of choice.
Learning and Development
We invest in the growth and development of our employees by providing a multi-dimensional approach to learning that empowers, intellectually grows, and professionally develops our colleagues. Our employees receive continuing education courses that are relevant to the banking industry and their job function within the Company. We have developed succession programs that help us to create a pipeline for leadership. Our core curriculum is offered to all employees and helps to build upon the competencies and skills of which we are assessed during the performance management process.
We offer robust training programs on the topics of customer service, sales, change management, digital banking and various other products and services. As we continually look for ways to automate and use technology effectively, we continue to build an extensive digital systems training curriculum, delivering more than 43,000 hours of in-person or virtual learning completed by our employees. Through our use of the learning management system, virtual classroom and an eLearning authoring tool, job function and soft skills training courses continue to be offered at a distance for all employees. We also provide training on the collaboration tools that are in support of technology enhancements.
Talent Management
Our Human Resources and Learning and Development Departments have action plans designed specifically to facilitate the screening, acquisition, development, and performance management of a talent pool that aligns with the initiatives of the Company, including promoting quality customer service and enhancing the client experience throughout Columbia Bank. We have funded significant technological investments, including the upgrade of our core banking platform, loan origination systems, document imaging systems, and business intelligence reporting. While these new systems provide enhanced features for customers and automation of routine tasks for staff, they require specialized technical skills to operate and administer. Based on our strategic objectives, acquiring and developing a talent pool of well-educated and technically skilled professionals is essential to support our growth plans over the next decade.
Organizational Culture
Our workplace strategy focuses on productivity and collaboration. Our recruiting practices focus on finding top talent with a broad range of experience and ensuring they have the tools needed to be successful in the Company. The Bank employs a range of images and languages in its brand marketing initiatives to emphasize its ability to serve clientele from varied backgrounds and with differing needs. We believe that as our footprint grows, our brand will evolve to reflect the wide range of clients and communities we support. In connection with our Environmental, Social and Governance Program ("ESG"), we have established a Corporate Responsibility Committee, which is supported by various cross functional members of the Company.
Management is committed to cultivating a fair and inclusive culture in which all individuals feel valued, respected, and able to thrive, both personally and professionally. We have eight voluntary employee resource groups with membership open to all employees. Bringing together individuals with a wide range of experiences and knowledge promote higher quality decisions, enhance economic growth, and represent the stockholders and customers we serve.
We look to develop an employee base that reflects our customer base and local community. We strive for effective recruitment through social media, comprehensive listings on various career platforms, partnerships with social and civic organizations, and by utilizing our employees as brand ambassadors. In addition, we enhanced our employee referral program to further assist in our hiring efforts.
Our mission is to enhance shareholder value, maintain a robust capital position, achieve strong financial performance, and ensure the safety of depositors' funds. We also aim to provide high-quality products and services that improve our customers' financial well-being, deliver exceptional customer service, and foster a rewarding work environment that promotes accountability, success, wellness, and quality of life for our employees.
Succession Planning
Succession planning is a critical driver of our transformation. Succession planning efforts are helping our organization become what it needs to be, rather than simply recreating the existing organization. We have programs in place to support these initiatives: Associate Development Program, Career Development Program, Leadership Development Program, Stonier/Wharton School Program, Coaching for Success, and other innovative programs under consideration We have active support of top leadership and have linked succession to strategic planning. In 2024, we aligned the organization to a single, focused timeline for goal setting, performance and annual reviews. There is emphasis on developmental assignments in addition to formal training. Along the way, we are addressing specific human capital challenges, such as leadership capacity and retention.
Workplace Safety
We have policies and programs in place that protect our employees and invest in their well-being.
We provide our employees various outlets to gain emotional assistance through our Employee Assistance Program which includes stress, financial and relationship counseling, as well as a wide array of webinars provided by our healthcare and financial service provider. We provide employees a safe workplace, both in the branches and back office departments, and implement technologies for a remote work environment to accommodate remote workers in support of potential weather or pandemic concerns. We established service level agreements for the work from home environment, communicating expectations to employees and receiving employee agreement regarding the execution of these expectations. These agreements are monitored on a regular basis, and a monthly feedback survey is completed to ensure connectivity between employees, managers, and administrative staff. We continually review our workplaces, many which have undergone recent renovations, to allow for the envisioned growth of department staff and operations which is consistent with our strategic growth objectives.
Subsidiaries
Columbia Financial's sole banking subsidiary is Columbia Bank. The Company also maintains a Delaware trust subsidiary, Stewardship Statutory Trust I, that was formed in connection with the prior issuance of trust preferred securities. Stewardship Statutory Trust I was acquired by the Company as a result of its acquisition of Stewardship in November 2019.
Columbia Bank’s active subsidiaries are as follows:
First Jersey Title Services, Inc., a title insurance agency that we acquired in 2002. At December 31, 2024, total assets were approximately $15.2 million. For the year ended December 31, 2024, First Jersey Title Services, Inc. had a net loss of approximately $86,000.
1901 Commercial Management Co. LLC, which was established in 2009 to hold commercial other real estate owned, and 1901 Residential Management Co. LLC, which was established in 2009 to hold residential other real estate owned. At December 31, 2024, these subsidiaries held approximately $1.4 million and $125,000, respectively, in total assets.
1901 Community Development Corporation, which was established in 2024 to make public welfare investments that promote and support affordable housing in low- and moderate-income neighborhoods. At December 31, 2024, total assets were approximately $1.0 million.
Stewardship Realty LLC is a New Jersey limited liability company which was formed in 2005 and acquired by the Company as a result of its acquisition of Stewardship Financial in November 2019. At December 31, 2024, total assets were approximately $100,000.
Columbia Insurance Services, Inc. (formerly RSI Insurance Agency, Inc.), which was formed in 2009 and acquired by the Company as a result of its acquisition of RSI Bank in May 2022, is a full-service insurance agency and whose primary business is to offer a broad range of insurance products and investment solutions, including personal and business lines of insurance, to Columbia Bank customers and primarily New Jersey residents. In October 2024, Columbia Bank changed the corporate name of this insurance agency subsidiary from "RSI Insurance Agency, Inc." to "Columbia Insurance Services, Inc." At December 31, 2024, total assets were approximately $1.2 million. For the year ended December 31, 2024, Columbia Insurance Services, Inc. had a net loss of approximately $324,000.
Information About Our Executive Officers
Our executive officers are elected annually by the board of directors and serve at the board’s discretion. The following individuals currently serve as executive officers:
Name Position
Thomas J. Kemly President and Chief Executive Officer
Dennis E. Gibney, CFA Senior Executive Vice President and Chief Financial Officer
W. Justin Jennings Executive Vice President and Operations Officer
John Klimowich Senior Executive Vice President and Chief Risk Officer
Oliver E. Lewis, Jr. Senior Executive Vice President and Head of Commercial Banking
Manesh Prabhu Executive Vice President and Chief Information Officer
Mayra L. Rinaldi Executive Vice President, Corporate Governance and Culture
Allyson Schlesinger Senior Executive Vice President and Head of Consumer Banking
Matthew Smith Senior Executive Vice President and Chief Operating Officer
Jenifer W. Walden Executive Vice President and Chief Human Resources Officer
Effective as of January 31, 2025, E. Thomas Allen, Jr. retired as Senior Executive Vice President and Chief Operating Officer of the Company and the Bank.
Below is information regarding our current executive officers who are not also directors. Each executive officer has held his or her current position for the period indicated below. Ages presented are as of December 31, 2024.
Dennis E. Gibney, CFA was appointed Executive Vice President and Chief Financial Officer of the Company and Columbia Bank in 2014 and was subsequently designated as a Senior Executive Vice President in June 2024. Prior to joining Columbia Bank, Mr. Gibney worked for FinPro, Inc. a bank consulting firm, and its wholly-owned investment banking subsidiary, FinPro Capital Advisors, Inc., for 17 years. While at FinPro, Mr. Gibney worked on mergers and acquisitions, mutual-to-stock conversions, corporate valuations, strategic planning and interest rate risk management engagements for community banks. Mr. Gibney graduated Magna Cum Laude from Babson College with a triple major in Finance, Investments and Economics. He is a CFA Charterholder and a member of the New York Society of Security Analysts. Age 51.
W. Justin Jennings was appointed Executive Vice President, Operations Officer of the Company and Columbia Bank in January 2022. Prior to joining Columbia Bank, Mr. Jennings served in various positions with JP Morgan Chase & Co. since 2004. Most recently, Mr. Jennings served as Executive Director, Head of Treasury Services - Community Development Banking at JP Morgan Chase & Co. from 2020 to January 2022, served as Executive Director, Client Service Director - Commercial Real Estate at JP Morgan Chase & Co. from 2015 to 2020 and served as Executive Director, Senior Business Manager - Commercial Banking Client Services at JP Morgan Chase & Co. from 2013 to 2015. Mr. Jennings holds a Bachelor’s degree in Sociology from The Ohio State University and received an MBA from the University of Notre Dame’s Mendoza School of Business. Age 43.
John Klimowich was appointed Executive Vice President and Chief Risk Officer of the Company and Columbia Bank on October 5, 2013 and was subsequently designated as a Senior Executive Vice President in 2024. Mr. Klimowich began working for Columbia Bank in November 1985 and held various positions in the accounting department. Mr. Klimowich was promoted to Senior Vice President, Controller in March 2002 and served Columbia Bank in that capacity until his appointment as Executive Vice President and Chief Risk Officer in 2013. Mr. Klimowich holds a Bachelor’s degree in Economics from William Paterson University and an MBA in Accounting from Seton Hall University. Age 61.
Oliver E. Lewis, Jr. was appointed Executive Vice President and Head of Commercial Banking of the Company and Columbia Bank in January 2021 and was subsequently designated as a Senior Executive Vice President in June 2024. Mr. Lewis began working for Columbia Bank in May 2019 and served as Senior Vice President, Commercial Banking Market Manager until his appointment as Executive Vice President and Head of Commercial Banking. In this role, Mr. Lewis is responsible for the commercial banking division consisting of Columbia Bank's commercial & industrial, SBA, middle market, commercial real estate and construction lending activities, treasury management sales and the business development department. Prior to joining Columbia Bank, Mr. Lewis served as a Market Executive at JP Morgan Chase and Treasury Services, Regional Sales Executive. Mr. Lewis holds a Bachelor’s degree in Aviation Administration from Embry-Riddle Aeronautical University and received an MBA from Rutgers University. Age 60.
Manesh Prabhu was appointed Executive Vice President, Chief Information Officer of the Company and Columbia Bank in October 2022. In this role, Mr. Prabhu is responsible for Columbia Bank’s information systems and digital banking. Mr. Prabhu has over 20 years of experience at leading institutions including People’s United Bank N.A. Most recently, he held the title of Chief Technology Officer where he led the IT strategy and technology transformation for People’s United. Through his nearly 20-year
tenure and senior leadership roles at People’s United, Mr. Prabhu led enterprise architecture, data architecture, IT governance, business intelligence, marketing analytics, and data quality with a heavy focus on digital transformation. Mr. Prabhu holds an MBA from Thiagarajar School of Management (TSM) - Madurai Kamaraj University in India and a Bachelor of Technology in Electrical & Electronics Engineering from Rajiv Gandhi Institute of Technology (RIT) - Mahatma Gandhi University in India. Age 50.
Mayra L. Rinaldi was appointed Executive Vice President, Corporate Governance and Culture of the Company and Columbia Bank in December 2022. In this role, Mrs. Rinaldi is responsible for overseeing the Corporate Governance, Executive Administration, Community Development and Corporate Facilities departments of the Company and Columbia Bank. She is also responsible for the Company’s and Columbia Bank’s regulatory and SEC compliance requirements, ESG strategy, as well as community support initiatives consisting of Team Columbia, Community Reinvestment Act (CRA) outreach and the Columbia Bank Foundation. Mrs. Rinaldi is also responsible for providing executive oversight and monitoring of the Company’s and Columbia Bank’s culture to ensure that it remains aligned with Columbia’s Creed of Shared Values, which is designed to ensure that all policies, products, and services, and actions throughout the Company and Bank allow team members to always act in the best interests of customers, coworkers, communities and shareholders. Mrs. Rinaldi has over 20 years of experience at Columbia Bank, having joined Columbia Bank in 2000 and serving in various roles since that time. Most recently, Mrs. Rinaldi has served as Columbia Bank’s Senior Vice President, Corporate Governance since 2014. Mrs. Rinaldi holds a Bachelor of Science degree in Finance from Kean University and is a graduate of the Stonier School of Banking. Age 41.
Allyson Schlesinger was appointed Executive Vice President and Head of Consumer Banking of the Company and Columbia Bank in September 2018 and was subsequently designated as a Senior Executive Vice President in June 2024. In this role, Ms. Schlesinger is responsible for the retail banking, retail lending, wealth management and marketing divisions of Columbia Bank. Ms. Schlesinger was previously with Citigroup, Inc. for 25 years, most recently as its Managing Director, U.S. Retail and Division Manager for Citigroup, Inc. in the New York City and New Jersey markets. Ms. Schlesinger holds a Bachelor’s degree from the University of Michigan. Age 53.
Matthew Smith was appointed Senior Executive Vice President and Chief Operating Officer of the Company and Columbia Bank in November 2024 in anticipation of the retirement of E. Thomas Allen, Jr. on January 31, 2025. Mr. Smith served as the Chief Digital Banking Officer and Head of Enterprise Product, Marketing and Transformation at Webster Bank from February 2022 until November 2024. Prior to that time, Mr. Smith served as Head of Digital Banking and Banking as a Service at Sterling National Bank from January 2020 to February 2022 (when Sterling National Bank was acquired by Webster Bank) and Chief Product and Marketing Strategy Officer of Sterling National Bank from October 2017 to January 2020. Mr. Smith has also previously held positions with Bridgewater Associates, GE Capital Americas, Lornamead Brands NA and Pitney Bowes Management Services. Mr. Smith is a board member of Summer Search, a nonprofit organization that empowers young people to discover their purpose through mentoring and is an advisory board member of multiple fintech companies. Mr. Smith holds an MBA with a concentration in Corporate Finance and Risk Management from Iona University and a Bachelor’s degree in Finance and Business Management from La Salle University. Age 41.
Jenifer W. Walden was appointed Executive Vice President, Chief Human Resources Officer of the Company and Columbia Bank effective as of September 2022. Prior to joining the Company and Columbia Bank, Ms. Walden spent more than two decades at Fortune 50 financial services institutions, and more recently, at three smaller entities including a mid-cap bank, a technology start-up, and a global manufacturing company. From 2021 until June 2022, Ms. Walden served as the Global Director of Talent Management, Human Resources, at Nice-Pak Products. Prior to that time, Ms. Walden was Senior Vice President, Human Resources, at USEReady from 2020 to 2021 and was Director of Talent, First Senior Vice President at Valley Bank from 2018 to 2020. Ms. Walden also served as Senior HR Business Partner and IT Recruitment Leader (Prudential Insurance & Annuities) for Prudential Financial from 2013 to 2018, and as Director of Human Resources (Prudential Real Estate Investors, PGIM) for Prudential Financial from 2010 to 2013. Prior to that, Ms. Walden served in various positions with Ernst & Young LLP from 1994 to 2010. Ms. Walden is a doctoral candidate in strategic leadership at Liberty University and holds a Master’s degree in Organizational Development & Leadership from St. Joseph’s University and a Bachelor’s degree from St. Lawrence University. Age 57.

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ITEM 1A. RISK FACTORS
Item 1A. Risk Factors
Investing in the Company’s common stock involves risks. The investor should carefully consider the following risk factors before deciding to make an investment decision regarding the Company’s stock. The risk factors may cause future earnings to be lower or the financial condition to be less favorable than expected. In addition, other risks that the Company is not aware of, or which are not believed to be material, may cause earnings to be lower, or may deteriorate the financial condition of the Company. Consideration should also be given to the other information in this Annual Report on Form 10-K, as well as in the documents incorporated by reference into this Form 10-K.
Risks Related to Our Lending Activities
Our multifamily and commercial real estate lending practices expose us to increased lending risks and related loan losses.
At December 31, 2024, our multifamily and commercial real estate loan portfolios totaled $3.8 billion, or 48.3% of our total loan portfolio. Our current business strategy is to continue our originations of multifamily and commercial real estate loans. These loans generally expose a lender to greater risk of non-payment and loss than one-to-four family residential mortgage loans because repayment of the loans often depends on the successful operation of the properties and the income stream of the borrowers. These loans involve larger loan balances to single borrowers or groups of related borrowers compared to one-to-four family residential mortgage loans. Further, we may increase our loans to individual borrowers, which would result in larger loan balances. To the extent that borrowers have more than one multifamily or commercial real estate loan outstanding, an adverse development with respect to one loan or one credit relationship could expose us to a significantly greater risk of loss compared to an adverse development with respect to a one-to-four family residential real estate loan. Moreover, if loans that are collateralized by multifamily or commercial real estate properties become troubled and the value of the real estate has been significantly impaired, then we may not be able to recover the full contractual amount of principal and interest that we anticipated at the time we originated the loan, which could cause us to increase our provision for credit losses and adversely affect our earnings and financial condition.
Imposition of limits by the bank regulators on commercial and multifamily real estate lending activities could curtail our growth and adversely affect our earnings.
In 2006, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation and the Board of Governors of the Federal Reserve System (collectively, the “Agencies”) issued joint guidance entitled “Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices” (the “CRE Guidance”). Although the CRE Guidance did not establish specific lending limits, it provides that a bank’s commercial real estate lending exposure could receive increased supervisory scrutiny where total non-owner-occupied commercial real estate loans, including loans secured by apartment buildings, investor commercial real estate, and construction and land loans, represent 300% or more of an institution’s total risk-based capital, and the outstanding balance of the commercial real estate loan portfolio has increased by approximately 50% during the preceding 36 months. The balance of these real estate loans represented 326.0% of Columbia Bank’s total risk-based capital at December 31, 2024, and our commercial real estate loan portfolio increased by 8.3% during the preceding 36 months.
In December 2015, the Agencies released a new statement on prudent risk management for commercial real estate lending (the “2015 Statement”). In the 2015 Statement, the Agencies, among other things, indicate the intent to continue “to pay special attention” to commercial real estate lending activities and concentrations going forward. If the Office of the Comptroller of the Currency, our primary federal regulator, were to impose restrictions on the amount of commercial real estate loans we can hold in our portfolio, for reasons noted above or otherwise, our earnings would be adversely affected.
Our origination of construction loans exposes us to increased lending risks.
We originate commercial construction loans, including speculative construction loans, primarily to professional builders for the construction and acquisition of personal residences, apartment buildings, retail, industrial/warehouse, office buildings and special purpose facilities. Speculative construction loans are loans made to builders who have not identified a buyer for the completed property at the time of loan origination. At December 31, 2024, $473.6 million, or 6.0%, of our loan portfolio, consisted of construction loans, of which $309.7 million or 65.4% consisted of speculative construction loans. In addition, we originate residential construction loans primarily on a construction-to-permanent basis with such loans converting to an amortizing loan following the completion of the construction phase. Our construction loans present a greater level of risk than loans secured by improved, occupied real estate due to: (1) the increased difficulty at the time the loan is made of estimating the building costs and the selling price of the property to be built; (2) the increased difficulty and costs of monitoring the loan; (3) the higher degree of sensitivity to increases in market rates of interest; and (4) the increased difficulty of working out loan problems. In addition, with respect to speculative construction loans, repayment often depends on the successful construction or development and ultimate sale of the property and, possibly, unrelated cash needs of the borrowers. Further, construction costs may exceed original estimates as a result of increased materials, labor or other costs. Construction loans also often involve the disbursement of funds with repayment dependent, in part, on the success of the project and the ability of the borrower to sell or lease the property or refinance the indebtedness.
Our concentration of residential mortgage loans exposes us to increased lending risks.
At December 31, 2024, $2.7 billion or 34.4%, of our loan portfolio was secured by one-to-four family real estate, a significant majority of which is located in the State of New Jersey, and to a lesser extent New York and Pennsylvania, and we intend to continue this type of lending in the foreseeable future. One-to-four family residential mortgage lending is generally sensitive to regional and local economic conditions that significantly impact the ability of borrowers to meet their loan payment obligations, making loss levels difficult to predict. A decline in residential real estate values as a result of a downturn in the local housing market or in the markets in neighboring states in which we originate residential mortgage loans could reduce the value of the real estate collateral securing these types of loans. Declines in real estate values could cause some of our residential mortgages to be inadequately collateralized, which would expose us to a greater risk of loss if we seek to recover on defaulted loans by selling the real estate collateral.
Our commercial business lending activities exposes us to additional lending risks.
We make commercial business loans in our market area to a variety of professionals, sole proprietorships, partnerships and corporations. Unlike residential mortgage loans, which generally are made on the basis of the borrower’s ability to make repayment from his or her employment or other income, and which are secured by real property, the value of which tends to be more easily ascertainable, commercial business loans are of higher risk and typically are made on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business. As a result, the availability of funds for the repayment of commercial business loans may depend substantially on the success of the business itself. Further, any collateral securing such loans may depreciate over time, may be difficult to appraise, may fluctuate in value and may depend on the borrower’s ability to collect receivables. We have increased our focus on commercial business lending in recent years and intend to continue to focus on this type of lending in the future.
If our allowance for credit losses is not sufficient to cover actual loan losses, our results of operations would be negatively affected.
In determining the amount of the allowance for credit losses, we evaluate loans individually and establish credit loss allowances for specifically identified impairments. For loans not individually analyzed, we estimate losses and establish reserves based on reasonable and supportable forecasts and adjustments for qualitative factors. If the assumptions used in our calculated methodology are inaccurate, our allowance of credit losses may not be sufficient to cover losses inherent in our loan portfolio, which may require additions to our allowance and may decrease our net income. Our emphasis on loan growth and on increasing our portfolio, as well as any future credit deterioration, will require us to increase our allowance further in the future.
In addition, our banking regulators periodically review our allowance for credit losses and may require us to increase our provision for credit losses. Any increase in our allowance for credit losses or loan charge-offs as required by regulatory authorities may have a material adverse effect on our results of operations and financial condition.
The geographic concentration of our loan portfolio and lending activities makes us vulnerable to a downturn in the New Jersey and metropolitan New York and Philadelphia economies.
While there is not a single employer or industry in our market area on which a significant number of our customers are dependent, a substantial portion of our loan portfolio is comprised of loans secured by property located in northern New Jersey and in metropolitan New York and Philadelphia. This makes us vulnerable to a downturn in the local economy and real estate markets. Adverse conditions in the local economy such as unemployment, recession, a catastrophic event or other factors beyond our control could impact the ability of our borrowers to repay their loans, which could impact our net interest income. Decreases in local real estate values caused by economic conditions, recent changes in tax laws or other events could adversely affect the value of the property used as collateral for our loans, which could cause us to realize a loss in the event of a foreclosure. Further, deterioration in local economic conditions could drive the level of loan losses beyond the level we have provided for in our allowance for credit losses, which in turn could necessitate an increase in our provision for credit losses and a resulting reduction to our earnings and capital.
Economic conditions could result in increases in our level of non-performing loans and/or reduce demand for our products and services, which could have an adverse effect on our results of operations.
Prolonged deteriorating economic conditions could significantly affect the markets in which we do business, the value of our loans and securities, and our ongoing operations, costs and profitability. Further, declines in real estate values and sales volumes and elevated unemployment levels may result in higher loan delinquencies, increases in our non-performing and classified assets and a decline in demand for our products and services. These events may cause us to incur losses and may adversely affect our financial condition and results of operations. Reduction in problem assets can be slow, and the process can be exacerbated by the condition of the properties securing non-performing loans and the lengthy foreclosure process in New Jersey. To the extent that we must work through the resolution of assets, economic problems may cause us to incur losses and adversely affect our capital, liquidity, and financial condition.
Risks Related to Our Growth Strategies
Our business strategy includes growth, and our financial condition and results of operations could be negatively affected if we fail to grow or fail to manage our growth effectively. Growing our operations could also cause our expenses to increase faster than our revenues.
Our business strategy includes growth in assets and deposits and the scale of our operations. Achieving such growth will require us to attract customers that currently bank at other financial institutions in our market area. Our ability to successfully grow will depend on a variety of factors, including our ability to attract and retain experienced bankers, the continued availability of desirable business opportunities, competition from other financial institutions in our market area and our ability to manage our growth. Growth opportunities may not be available, or we may not be able to manage our growth successfully. If we do not manage our growth effectively, our financial condition and operating results could be negatively affected. Furthermore, there can be considerable costs involved in expanding deposit and lending capacity that generally require a period of time to generate the necessary revenues to offset their costs, especially in areas in which we do not have an established presence and that require alternative delivery methods. Accordingly, any such business expansion can be expected to negatively impact our earnings for some period of time until certain economies of scale are reached. Our expenses could be further increased if we encounter delays in modernizing existing facilities, opening new branches or deploying new services.
We are subject to certain risks in connection with our strategy of growing through mergers and acquisitions.
Mergers and acquisitions are currently a component of our business model and growth strategy. Since November 2019, we have acquired Atlantic Stewardship Bank, Roselle Bank, Freehold Bank and RSI Bank. It is possible that we could acquire other banking institutions, other financial services companies or branches of banks in the future. Acquisitions typically involve the payment of a premium over book and trading values and, therefore, may result in the dilution of our tangible book value per share. Our ability to engage in future mergers and acquisitions depends on various factors, including: (1) our ability to identify suitable merger partners and acquisition opportunities; (2) our ability to finance and complete transactions on acceptable terms and at acceptable prices; and (3) our ability to receive the necessary regulatory and, when required, stockholder approvals. Our inability to engage in an acquisition or merger for any of these reasons could have an adverse impact on the implementation of our business strategies. Furthermore, mergers and acquisitions involve a number of risks and challenges, including (1) our ability to achieve planned synergies and to integrate the branches and operations we acquire, and the internal controls and regulatory functions into our current operations; (2) the integration process could adversely affect our ability to maintain relationships with existing customers; (3) the diversion of management’s attention from existing operations, which may adversely affect our ability to successfully conduct our business and negatively impact our financial results and (4) our ability to identify potential asset quality issues or contingent liabilities during the due diligence process.
Our consolidated assets now exceed $10 billion, which will result in increased regulation and supervision for the Bank and may also result in increased costs and/or reduced revenues.
As of December 31, 2024, the Company had on a consolidated basis, total assets of $10.5 billion. Accordingly, we are subject to certain regulations that apply only to depository institution holding companies or depository institutions with total consolidated assets of $10 billion or more, and the additional regulatory costs resulting from the Company having total consolidated assets of $10 billion or more may negatively impact the Company’s revenue and earnings.
Debit card interchange fee restrictions set forth in Section 1075 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which is known as the Durbin Amendment, as implemented by regulations of the Federal Reserve, cap the maximum debit interchange fee that a debit card issuer may receive per transaction at the sum of $0.21 plus five basis points. A debit card issuer that adopts certain fraud prevention procedures may charge an additional $0.01 per transaction. Debit card issuers with total consolidated assets of less than $10 billion are exempt from these interchange fee restrictions. The exemption for small issuers ceases to apply as of July 1st of the year following the calendar year in which the debit card issuer has total consolidated assets of $10 billion or more at calendar year-end. As a result, we became subject to the interchange restrictions of the Durbin Amendment beginning July 1, 2023.
In addition, an insured depository institution with total assets of $10 billion or more is subject to supervision, examination, and enforcement with respect to consumer protection laws by the Consumer Financial Protection Bureau, or the CFPB. Under its current policies, the CFPB will assert jurisdiction in the first quarter after the call reports of a depository institution show total consolidated assets of $10 billion or more for four consecutive quarters. As a result, because our total consolidated assets continued to exceed $10 billion through the quarter ended September 30, 2024, we became subject to CFPB supervision, examination and enforcement at the beginning of the quarter ended December 31, 2024.
There are other regulatory requirements that apply to insured depository institution holding companies and insured depository institutions with total consolidated assets of $10 billion or more. These include, but are not limited to, (i) the establishment by publicly traded depository institution holding companies with $10 billion or more in assets of a risk committee responsible for oversight of enterprise-wide risk management practices that are commensurate with the entity’s structure, risk profile, complexity, activities and size and (ii) an institution with total consolidated assets of $10 billion or more no longer being entitled to benefit from the FDIC’s offset of the effect of the increase in the statutory minimum Deposit Insurance Fund reserve ratio to 1.35% from the former statutory minimum of 1.15% that is required for institutions with assets of less than $10 billion by the Dodd-Frank Wall Street Reform and Consumer Protection Act.
In addition, Congress and/or regulatory agencies may impose new requirements or surcharges on these institutions in the future. The Economic Growth, Regulatory Reform, and Consumer Protection Act, which was enacted on May 24, 2018, includes provisions that, as they are implemented, relieve banking organizations with total consolidated assets of less than $10 billion (and that satisfy certain other conditions) from risk-based capital requirements, restrictions on proprietary trading and investment and sponsorship in hedge funds and private equity funds known as the Volcker Rule, and certain other regulatory requirements. Because our total consolidated assets are in excess of $10 billion, we no longer qualify for any of the foregoing relief.
The increased regulatory costs resulting from the Company having total consolidated assets of $10 billion or more may negatively impact the Company’s revenue and earnings.
Risks Related to Our Business and Industry Generally
Ineffective liquidity management could adversely affect our financial results and condition.
Effective liquidity management is essential for the operation of our business. We require sufficient liquidity to meet customer loan requests, customer deposit maturities/withdrawals, payments on our debt obligations as they come due and other cash commitments under both normal operating conditions and other unpredictable circumstances causing industry or general financial market stress. Our access to funding sources in amounts adequate to finance our activities on terms that are acceptable to us could be impaired by factors that affect us specifically or the financial services industry or economy generally. Factors that could detrimentally impact our access to liquidity sources include a downturn in the geographic markets in which our loans and operations are concentrated or difficult credit markets. Our access to deposits may also be affected by the liquidity needs of our depositors. In particular, a majority of our liabilities are checking accounts and other liquid deposits, which are payable on demand or upon several days’ notice, while by comparison, a substantial majority of our assets are loans, which cannot be called or sold in the same time frame. Although we have historically been able to replace maturing deposits and advances as necessary, we might not be able to replace such funds in the future, especially if a large number of our depositors seek to withdraw their accounts, regardless of the reason. A failure to maintain adequate liquidity could materially and adversely affect our business, results of operations or financial condition.
Changes in interest rates or the shape of the yield curve may hurt our profits and asset values and our strategies for managing interest rate risk may not be effective.
We are subject to significant interest rate risk as a financial institution with a high percentage of fixed rate loans and certificates of deposit on our balance sheet. Our interest-bearing liabilities reprice or mature more quickly than our interest-earning assets. Changes in the general level of interest rates can affect our net interest income by affecting the difference between the weighted-average yield earned on our interest-earning assets and the weighted-average rate paid on our interest-bearing liabilities, or interest rate spread, and the average life of our interest-earning assets and interest-bearing liabilities. Changes in interest rates also can affect: (1) our ability to originate loans; (2) the value of our interest-earning assets and our ability to realize gains from the sale of such assets; (3) our ability to obtain and retain deposits in competition with other available investment alternatives; and (4) the ability of our borrowers to repay their loans, particularly adjustable or variable rate loans. Interest rates are highly sensitive to many factors, including government monetary policies, domestic and international economic and political conditions and other factors beyond our control.
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. At December 31, 2024, we had approximately $2.7 billion in available liquidity, including $289.2 million in cash and cash equivalents, 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.
Municipal deposits are an important source of funds for us and a reduced level of such deposits may hurt our profits.
Municipal deposits are an important source of funds for our lending and investment activities. At December 31, 2024, $969.4 million, or 11.7% of our total deposits were comprised of municipal deposits, including public funds deposits from local government entities primarily domiciled in the State of New Jersey. Given our use of these high-average balance municipal deposits as a source of funds, our inability to retain such funds could have an adverse effect on our liquidity. In addition, our municipal deposits are primarily demand deposit accounts or short-term deposits and therefore are more sensitive to changes in interest rates. If we are forced to pay higher rates on our municipal deposits to retain those funds, or if we are unable to retain those funds and we are forced to turn to borrowing sources for our lending and investment activities, the interest expense associated with such borrowings may be higher than the rates we are paying on our municipal deposits, which could adversely affect our net income.
We are dependent on our information technology and telecommunications systems and third-party service providers; systems failures, interruptions and cybersecurity breaches could have a material adverse effect on us.
Our business is dependent on the successful and uninterrupted functioning of our information technology and telecommunications systems and third-party service providers. The failure of these systems, or the termination of a third-party software license or service agreement on which any of these systems is based, could interrupt our operations. Because our information technology and telecommunications systems interface with and depend on third-party systems, we could experience service denials if demand for such services exceeds capacity, or such third-party systems fail or experience interruptions. If significant, sustained or repeated, a system failure or service denial could compromise our ability to operate effectively, damage our reputation, result in a loss of customer business, and/or subject us to additional regulatory scrutiny and possible financial liability, any of which could have a material adverse effect on us.
Our third-party service providers may be vulnerable to unauthorized access, computer viruses, phishing schemes and other security breaches. We likely will expend additional resources to protect against the threat of such security breaches and computer viruses, or to alleviate problems caused by such security breaches or viruses. To the extent that the activities of our third-party service providers or the activities of our customers involve the storage and transmission of confidential information, security breaches and viruses could expose us to claims, regulatory scrutiny, litigation costs and other possible liabilities.
Security breaches and cybersecurity threats could compromise our information and expose us to liability, which would cause our business and reputation to suffer.
In the ordinary course of our business, we collect and store sensitive data, including our proprietary business information and that of our customers, suppliers and business partners, as well as personally identifiable information about our customers and employees. The secure processing, maintenance and transmission of this information is critical to our operations and business strategy. We, our customers, and other financial institutions with which we interact, are subject to ongoing, continuous attempts to penetrate key systems by individual hackers, organized criminals, and in some cases, state-sponsored organizations.
While we have established policies and procedures to prevent or limit the impact of cyber attacks, there can be no assurance that such events will not occur or will be adequately addressed if they do. In addition, we also outsource certain cybersecurity functions, such as penetration testing to third party service providers, and the failure of these service providers to adequately perform such functions could increase our exposure to security breaches and cybersecurity threats. Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other malicious code and cyber attacks that could have an impact on information security. Any such breach or attacks could compromise our networks and the information stored could be accessed, publicly disclosed, lost or stolen. Any such unauthorized access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, and regulatory penalties; disrupt our operations and the services we provide to customers; damage our reputation; and cause a loss of confidence in our products and services, all of which could adversely affect our financial condition and results of operations.
We must keep pace with technological change to remain competitive.
Financial products and services have become increasingly technology driven. Our ability to meet the needs of our customers competitively, and in a cost-efficient manner, is dependent on the ability to keep pace with technological advances and to invest in new technology as it becomes available, as well as related essential personnel. In addition, technology has lowered barriers to entry into the financial services market and made it possible for financial technology companies and other non-bank entities to offer financial products and services traditionally provided by banks. The ability to keep pace with technological change is important, and the failure to do so, due to cost, proficiency or otherwise, could have a material adverse impact on our business and therefore on our financial condition and results of operations.
Because the nature of the financial services business involves a high volume of transactions, we face significant operational risks.
We operate in diverse markets and rely on the ability of our employees and systems to process a high number of transactions. Operational risk is the risk of loss resulting from our operations, including but not limited to, the risk of fraud by employees or outside persons, the execution of unauthorized transactions by employees, errors relating to transaction processing and technology, breaches of our internal control system and compliance requirements, and business continuation and disaster recovery. Insurance coverage may not be available for such losses, or where available, such losses may exceed insurance limits. This risk of loss also includes the potential legal actions that could arise as a result of an operational deficiency or as a result of noncompliance with applicable regulations, adverse business decisions or their implementation, and customer attrition due to potential negative publicity. Although our control testing has not identified any significant deficiencies in our internal control system, a breakdown in our internal control system, improper operation of our systems or improper employee actions could result in material financial loss to us, the imposition of regulatory action, and damage to our reputation.
The building of market share through our branch office strategy, and our ability to achieve profitability on new branch offices, may increase our expenses and negatively affect our earnings.
We believe there are branch expansion opportunities within our market area and adjacent markets, including other states, and will seek to grow our deposit base by adding branches to our existing branch network. There are considerable costs involved in opening branch offices, especially in light of the capabilities needed to compete in today’s environment. Moreover, new branch offices generally require a period of time to generate sufficient revenues to offset their costs, especially in areas in which we do not have an established presence. Accordingly, new branch offices could negatively impact our earnings and may do so for some period of time. Our investments in products and services, and the related personnel required to implement new policies and procedures, take time to earn returns and can be expected to negatively impact our earnings for the foreseeable future. The profitability of our expansion strategy will depend on whether the income that we generate from the new branch offices will offset the increased expenses resulting from operating these branch offices.
Strong competition within our market area could hurt our profits and slow growth.
Our profitability depends upon our continued ability to compete successfully in our market area. We face intense competition both in making loans and attracting deposits. We continue to face stiff competition for one-to-four family residential loans from other financial service providers, including large national residential lenders and local community banks. Other competitors for one-to-four family residential loans include credit unions and mortgage brokers which keep overhead costs and mortgage rates down by selling loans and not holding or servicing them. Our competitors for commercial real estate and multifamily loans include other community banks, commercial lenders and insurance companies, some of which are larger than us and have greater resources and lending limits than we have and offer services that we do not provide, along with government agencies such as Freddie Mac, Fannie Mae and Ginnie Mae. Price competition for loans and deposits might result in us earning less on our loans and paying more on our deposits, which reduces net interest income. We expect competition to remain strong in the future.
Acts of terrorism and other external events could impact our ability to conduct business.
Financial institutions have been and continue to be targets of terrorist threats aimed at compromising operating and communication systems. Additionally, the metropolitan New York area and northern New Jersey remain central targets for potential acts of terrorism. Such events could cause significant damage, impact the stability of our facilities and result in additional expenses, impair the ability of our borrowers to repay their loans, reduce the value of collateral securing repayment of our loans, and result in the loss of revenue. The occurrence of any such event could have a material adverse effect on our business, operations and financial condition.
Climate change, severe weather, global pandemics, natural disasters, and other external events could significantly impact our business.
Natural disasters, including severe weather events, global pandemics, and other adverse external events could have a significant impact on our ability to conduct business or upon third parties who perform operational services for us. Such events could affect the stability of our deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, cause significant property damage, result in lost revenue, or cause us to incur additional expenses.
Economic, social and political conditions or civil unrest in the United States, may affect the markets in which we operate, our customers, our ability to provide customer service, and could have a material adverse impact on our business, results of operations, or financial condition.
Our business may be adversely affected by instability, disruption or destruction in the markets in which we operate, regardless of cause, including war, terrorism, riot, civil insurrection or social unrest, and natural or man-made disasters, including storm or other events beyond our control. Such events can increase levels of political and economic unpredictability, result in property damage and business closures within in our markets and increase the volatility of the financial markets. Any of these effects could have a material and adverse impact on our business and results of operations. These events also pose significant risks to the
Company’s personnel and to physical facilities, transportation and operations, which could materially adversely affect the Company’s financial results.
Regulation of the financial services industry is intense, and we may be adversely affected by changes in laws and regulations.
We are subject to extensive government regulation, supervision and examination. Such regulation, supervision and examination govern the activities in which we may engage and are intended primarily for the protection of the federal deposit insurance fund and Columbia Bank’s depositors. Any future legislative or regulatory changes could have a material impact on our profitability, the value of assets held for investment or the value of collateral for loans. Future legislative changes could also require changes to business practices and potentially expose us to additional costs, liabilities, enforcement action and reputational risk. Federal regulatory agencies also have the ability to take strong supervisory actions against financial institutions that have experienced increased loan production and losses and other underwriting weaknesses or have compliance weaknesses. These actions include entering into formal or informal written agreements and cease and desist orders that place certain limitations on their operations, and/or they can impose fines. If we were to become subject to a regulatory action, such action could negatively impact our ability to execute our business plan, and result in operational restrictions, as well as our ability to grow, pay dividends, repurchase stock or engage in mergers and acquisitions. See “Item 1: Business-Regulation and Supervision-Federal Banking Regulations-Capital Requirements” for a discussion of regulatory capital requirements.
We face significant legal risks, both from regulatory investigations and proceedings, and from private actions brought against us.
As a financial services company, many aspects of our business involve substantial risk of legal liability. From time to time, customers and others make claims and take legal action pertaining to the performance of our responsibilities. In addition, at any given time, we are involved in a number of legal and regulatory examinations and investigations as a part of reviews conducted by regulators and other parties, which may involve banking, securities, consumer protection, employment, tort, and numerous other laws and regulations. Whether customer claims or legal and/or regulatory action related to the performance of our responsibilities are founded or unfounded, they may result in significant expenses, attention from management and financial liability, even if they are resolved in a manner favorable to us. Any financial liability or reputational damage could have a material adverse effect on our business, which, in turn, could have a material adverse effect on our financial condition and results of operations. There is no assurance that litigation with private parties will not increase in the future. In addition, regulatory actions or investigations may result in judgments, settlements, fines, penalties or other results adverse to us, which could materially adversely affect our business, financial condition or results of operations, or cause reputational harm to us.
Increasing scrutiny and evolving expectations from customers, regulators, investors, and other stockholders with respect to our ESG practices may impose additional costs on us or expose us to new or additional risks.
Companies are facing increasing scrutiny from customers, regulators, investors, and other stockholders related to their ESG practices and disclosure. Investor advocacy groups, investment funds and influential investors are also increasingly focused on these practices, especially as they relate to the environment, health and safety, diversity, labor conditions and human rights. Increased ESG related compliance costs could result in increases to our overall operational costs. Failure to adapt to or comply with regulatory requirements or investor or shareholder expectations and standards could negatively impact our reputation, ability to do business with certain partners, and our stock price. New government regulations could also result in new or more stringent forms of ESG oversight and expanding mandatory and voluntary reporting, diligence, and disclosure.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B. Unresolved Staff Comments
None.

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ITEM 2. PROPERTIES
Item 2. Properties
We conduct our business through Columbia Bank’s main office and 68 branch offices located in Bergen, Passaic, Morris, Essex, Union, Middlesex, Monmouth, Burlington, Camden, Gloucester, Somerset and Hunterdon Counties in New Jersey. We own 33 properties and lease the other 35 properties. First Jersey Title Services, Inc. and Columbia Insurance Services, Inc. operate within two of Columbia Bank’s branch facilities.

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ITEM 3. LEGAL PROCEEDINGS
Item 3. Legal Proceedings
From time to time, we are involved in routine legal proceedings in the ordinary course of business. Such routine legal proceedings, in the aggregate, are believed by management to be immaterial to our financial condition, results of operations and cash flows.

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ITEM 4. MINE SAFETY DISCLOSURE
Item 4. Mine Safety Disclosures
None.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Stock Listing and Holders
The Company’s common stock is listed on the Nasdaq Global Select Market (“Nasdaq”) under the trading symbol “CLBK.” As of February 26, 2025 the Company had approximately 3,207 holders of record of common stock.
Dividends
The Company has not declared any dividends to holders of its common stock, and we do not currently anticipate paying dividends on our common stock. Our board of directors has the authority to declare dividends on our shares of common stock, and may determine to pay dividends in the future, subject to statutory and regulatory requirements and other considerations such as the ability of Columbia Bank MHC to receive permission to waive receipt of any dividends we may determine to declare in the future.
A policy statement issued by the Federal Reserve Board provides that dividends should be paid only out of current earnings and only if our prospective rate of earnings retention is consistent with our capital needs, asset quality and overall financial condition. Regulatory guidance also provides for prior regulatory consultation with respect to capital distributions in certain circumstances, such as where a holding company’s net income for the past four quarters, net of dividends previously paid over that period, is insufficient to fully fund the dividend or a holding company’s overall rate of earnings retention is inconsistent with its capital needs and overall financial condition. In determining whether to pay a cash dividend in the future and the amount of any cash dividend, the board of directors is expected to take into account a number of factors, including regulatory capital requirements, our financial condition and results of operations, other uses of funds for the long-term value of stockholders, tax considerations, statutory and regulatory limitations and general economic conditions.
If Columbia Financial pays dividends to its stockholders, it also will be required to pay dividends to Columbia Bank MHC, unless Columbia Bank MHC is permitted by the Federal Reserve to waive the receipt of dividends. The Federal Reserve Board’s current position is to not permit a "non-grandfathered" mutual holding company, such as Columbia Bank MHC, to waive dividends declared by its subsidiary. Columbia Bank MHC may determine to apply to the Federal Reserve Board for approval to waive dividends if we determine to pay dividends to our stockholders without dilution of minority stockholders in the event of a second-step conversion to stock form. Given the Federal Reserve Board’s current position on this issue, there is no assurance that any request by Columbia Bank MHC to waive dividends from Columbia Financial would be permitted. The denial by the Federal Reserve Board of any such dividend waiver request, if sought, could significantly affect any determination by Columbia Financial to pay dividends or the amount of any dividend it might determine to pay in the future, if any.
Dividends we can declare and pay will depend, in part, upon receipt of dividends from Columbia Bank. Regulations of the Federal Reserve Board and the Office of the Comptroller of the Currency impose limitations on “capital distributions” by savings institutions. See “Item 1: Business-Regulation and Supervision-Federal Banking Regulations-Capital Distributions.”
Stock Performance Graph
The following graph provided by S&P Global Market Intelligence compares the cumulative total return of the Company’s common stock with the cumulative total return of the Nasdaq Composite Index, and S&P U.S. SmallCap Banks Index. The graph assumes $100 was invested on December 31, 2019. Cumulative total return assumes reinvestment of all dividends. The performance graph is being furnished solely to accompany this report pursuant to Item 201(e) of Regulation S-K, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
Period Ending
Index 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024
Columbia Financial, Inc. 100.00 91.85 123.14 127.63 113.81 93.33
NASDAQ Composite Index 100.00 144.92 177.06 119.45 172.77 223.87
S&P U.S. SmallCap Banks Index 100.00 90.82 126.43 111.47 112.03 132.44
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Source: S&P Global Market Intelligence
Equity Compensation Plan Information
The following table sets forth information about the Company’s common stock that may be issued upon the exercise of stock options, warrants and rights under all of the Company’s equity compensation plans as of December 31, 2024:
(A) (B) (C)
Plan Category Number of Securities to be Issued Upon Exercise of Outstanding options Weighted Average Exercise Price of Outstanding Options Number of Securities Remaining Available for Future Issuance Under Equity Compensation plans (Excluding Securities Reflected in Column (A))
Equity compensation plans approved by
stockholders:
2019 Equity Incentive Plan 3,757,032 $ 16.22 1,779,838
Equity compensation plans not yet approved by stockholders:
None. - - -
Total 3,757,032 $ 16.22 1,779,838
Issuer Purchases of Equity Securities
The following table reports information regarding repurchases of the Company’s common stock during the quarter ended December 31, 2024:
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
October 1 - 31, 2024 1,552 $ 17.08 - -
November 1 - 30, 2024 791 17.32 - -
December 1 - 31, 2024 7,069 16.02 - -
Total 9,412 $ 16.31 -
(1) On May 25, 2023, the Company announced that its Board of Directors authorized the Company's sixth stock repurchase program to acquire up to 2,000,000 shares, or approximately 1.9% of the Company's then issued and outstanding common stock. This program expired with 741,725 shares outstanding.
(2) During the three months ended December 31, 2024, 1,573 shares were repurchased pursuant to forfeitures and 7,839 shares were repurchased for taxes related to the 2019 Equity Incentive Plan and not as part of a share repurchase program.

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ITEM 6. SELECTED FINANCIAL DATA
Item 6. Reserved
PART II

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The objective of this section is to help potential investors understand our views on our results of operations and financial condition. You should read this discussion in conjunction with the consolidated financial statements and notes to the consolidated financial statements that appear at the end of this report.
Executive Summary
Our primary source of pre-tax income is net interest income. Net interest income is the difference between the interest we earn on our loans and securities and the interest we pay on our deposits and borrowings. Changes in levels of interest rates as well as the balances of interest-earning assets and interest-bearing liabilities affect our net interest income.
A secondary source of income is non-interest income, which is revenue we receive from providing products and services. Traditionally, the majority of our non-interest income has come from service charges, loan fees, interchange income, gains (losses) on sales of loans and securities, revenue from mortgage servicing, income from bank-owned life insurance and fee income from title insurance, insurance agency and wealth management businesses.
The non-interest expense we incur in operating our business consists of compensation and employee benefits expenses, occupancy expenses, depreciation, amortization and maintenance expenses, data processing and software expenses and other miscellaneous expenses, such as loan expenses, advertising, insurance, professional fees and federal deposit insurance premiums. Our largest non-interest expense is compensation and employee benefits, which consist primarily of compensation and wages paid to our employees, payroll taxes, and expenses for health insurance, retirement plans and other employee benefits.
Our business results are impacted by the pace of economic growth and the level of market interest rates, and the difference between short-term and long-term rates. Competition among banks to secure new customers, loans and deposits has remained fierce, and interest rate spreads have again declined over the last few years. We continue to adhere to our prudent underwriting standards and are committed to originating quality loans. Additionally, we have maintained relatively low levels of non-performing assets, past due loans and charge-offs, through all economic environments.
December 2024 Balance Sheet Repositioning
As part of the Company’s strategy to improve future earnings and expand its net interest margin, in December 2024 the Company sold $352.3 million of debt securities available for sale that were mostly purchased during the COVID period. Proceeds from the sale were used to fund loan growth of $72.9 million, purchase $78.1 million of higher yielding debt securities and prepay $170.0 million of higher cost borrowings. The repositioning was immediately accretive to net interest income. The sale and prepayment resulted in a pre-tax loss of approximately $37.9 million. The repositioning is expected to be neutral to tangible book value per share as the unrealized loss with respect to the debt securities is already recognized in the Company’s stockholders’ equity through accumulated other comprehensive loss.
Business Strategy
Our business strategy is to continue to operate and grow Columbia Bank as a profitable community-oriented financial institution and to continue to shift our focus to more business-oriented commercial banking. We plan to achieve this by:
Increasing earnings through the growth of our balance sheet.
We intend to continue to grow our balance sheet through organic growth of loans and securities, funded by growth of deposits and borrowings. We expect that this growth will increase revenue faster than the growth of expenses, resulting in increased earnings over time.
As part of our growth strategy, we will seek to grow our loan portfolio and deposit base at consistent rates of growth. We have a diversified loan portfolio, which includes multifamily and commercial real estate loans, residential mortgage loans, residential and commercial construction loans, commercial business loans and consumer loans (primarily home equity loans and advances). We expect to continue to shift the mix of our loans over time, from residential mortgage loans, toward commercial loans and, correspondingly, shift our deposit mix toward commercial deposits, particularly non-interest-bearing checking accounts. These strategies along with continued deposit pricing discipline are expected to enhance our net interest margin.
Expanding our commercial business relationships.
Historically, our commercial loan products have consisted primarily of loans secured by multifamily and commercial real estate and construction loans. As part of our growth strategy, we intend to continue our increased focus on commercial business lending, which offers shorter terms and variable rates, helps to manage interest rate risk exposure, and provides us with an opportunity to offer a full range of our products and services, including cash management, and deposit products to commercial customers. In 2024, most of our commercial banking customers had deposit accounts with us.
In 2024, our commercial business loans increased 16.7% from the year ended December 31, 2023 which was primarily due to a stable volume of originations, including our equipment finance and asset based lending. Historically, we have focused on commercial business lending in New Jersey with only a minimal volume from neighboring states but anticipate that we will increase the amount of loans originated in Pennsylvania and New York, as we continue to grow our commercial loan business. We anticipate that any such expansion of our commercial lending to market areas outside New Jersey will increase lending and deposit opportunities in those areas and provide geographic diversification within our portfolio.
Increasing fee income through continued growth of fee-based activities.
We intend to focus on growing our existing title insurance business, our existing insurance agency business and expanding the scope of the wealth management services we provide and increasing our revenues from loan servicing activities to increase the amount of income earned from our fee-based businesses. Presently, the majority of our revenue comes from interest income and less than 0.4% from other sources, including title insurance fees, loan and deposit fees, bank-owned life insurance, insurance agency income and gains and losses on the sales of securities and loans. We expect to increase fee income from enhancing interchange services, generating additional commercial loan swap fee income and expanding treasury services.
We currently offer title insurance services through our title insurance agency, offer wealth management services through a third-party networking arrangement, and offer life and health, and property and casualty insurance to our customers through our insurance agency. In order to expand our services and grow our business, we have considered the acquisition of title insurance agencies and wealth management businesses in recent years and expect to actively pursue the acquisition of such fee-based businesses, as well as considering the acquisition of other fee-based businesses such as other insurance agencies and specialty lending companies. We continue to consider acquisition opportunities of fee-based businesses, but we currently have no understandings or agreements with respect to any such acquisitions.
We also intend to grow our servicing revenue by continuing to periodically sell one-to-four family residential mortgage loans that we originate to third-party investors, including other financial institutions, while retaining the servicing of such loans.
Expanding our franchise through de novo branching, branch acquisitions and the possible acquisition of other financial institutions and/or financial services companies.
We believe there are branch expansion opportunities within our market area and adjacent markets, including other states, and will seek to grow our deposit base by adding branches to our existing branch network. In addition to deposit generation, our branch network also generates one-to-four family loans, home equity loans and advances and other consumer loans. While we are aware of the industry branch consolidation trends, we believe that in order to attract new customers, we need to selectively expand our network to fill in gaps in the existing footprint and into adjacent markets. We believe that new smaller branch designs, which are more cost-efficient, are more appropriately sized and staffed for the expected transaction volumes.
Our growth strategy also includes the acquisition of other financial institutions within our market area as well as in neighboring states. Since November 2019, we have acquired Atlantic Stewardship Bank, Roselle Bank, Freehold Bank and RSI Bank. We intend to continue to pursue the acquisition of banks and thrifts, including thrifts in the mutual and mutual holding company structure. In the past, we have relied upon organic growth rather than acquisitions to grow our franchise, and there is no guarantee that we will be successful in pursuing our acquisition strategy.
Maintaining asset quality through the application of a prudent, disciplined approach to credit risk as part of an overall risk management program.
We employ a conservative, analytical approach to the assets we acquire that we have tested over many different business and interest rate cycles. This applies to our securities portfolio, which is comprised primarily of liquid, low credit-risk, government agency-backed securities as well as our loan portfolio. Residential loans are underwritten to secondary market standards and our commercial lending policies are designed to be consistent with industry best practices. We subject our loan portfolio to independent internal and external reviews to validate conformance to policies and stress tests to identify areas of potential risk. We have management information systems that provide regular insight into the quantity and direction of credit risk in our loan portfolio segments, including borrower and industry-specific concentrations. We employ limits on concentration risks, including the ratios of commercial real estate and construction loan portfolios to capital. We have developed reporting, analytics and stress testing that we believe provide effective oversight of these portfolios at higher concentration levels.
We employ tools to ensure we are being appropriately compensated for the risks inherent in the lending products we offer, and in the specific transactions. Our commercial loan pricing model quantifies the credit and interest rate risk embedded in our new loan originations and provides a target return hurdle.
We operate with Risk Committees, at both the management and board levels, that review changes in the quantity and direction of risk. These committees review our key risk indicators, loan portfolio and liquidity stress tests and operational and cyber risk assessments, which draw from our Asset/Liability Committee data, our loan portfolio credit metrics and treasury risk (investment/funding) metrics.
Enhancing our technology infrastructure to broaden our product capabilities and improve product delivery and efficiency.
We have embraced the latest technological developments in the banking industry, which we believe allows us to better leverage our employees by enabling them focus on developing customer relationships, generate retail deposits in an efficient manner, expand the suite of products that we can offer to customers and allow us to compete more efficiently and effectively as we grow. Our commercial loan underwriting and relationship monitoring system enables us to better support and manage our commercial customer base. In recent years, we have released several digital banking and other Fintech solutions to support our customers, which included a new digital mortgage system which greatly expedited the handling of mortgage, home equity and HELOC applications. We have also introduced a digital small business lending solution, online chat and appointment scheduling and a credit card platform. More recently we implemented an online wire transfer tool for customers. We expect to continue to enhance our digital technology platforms to provide more appealing products and services to our customers and support our sales, marketing initiatives, and call center. We are continuously upgrading our company-wide technology infrastructure to support both organic and inorganic growth.
Focusing on an enhanced customer experience and continued customer satisfaction.
We believe that customer satisfaction is a key to generating sustainable growth and profitability. While continually striving to ensure that our products and services meet our customers’ needs, we also encourage our officers and employees to focus on providing personal service and attentiveness to our customers in a proactive manner.
Our strategy continues to be focused on providing quality customer service through our convenient branch network, supported by our Call Center, where customers can speak with a representative to answer questions and resolve issues during business and extended hours. We believe that our ability to close transactions and deliver our services in a timely manner is attractive to our customers and distinguishes us from other financial institutions that operate in our marketplace. Our customers enjoy access to senior executives and decision makers and the value it brings to their businesses. We also offer convenient online and mobile banking tools for customers to transact business anytime and anywhere.
We believe that many opportunities remain to deliver what our customers want in the form of exceptional service and convenience, and we intend to continue to focus our operating strategy on taking advantage of these opportunities.
Employing a stockholder-focused management of capital.
We intend to manage our capital position through the growth of assets, as well as the utilization of appropriate capital management tools, consistent with applicable regulations and policies, and subject to market conditions. Under Federal Reserve Board regulations, we were prohibited from repurchasing shares of our common stock for one year following our minority public offering that was completed in April 2018. Since June 2019, we have announced six stock repurchase programs under which we have repurchased an aggregate of 26,258,275 shares of common stock as of December 31, 2024. However, repurchases have currently been paused in order to retain capital.
Our Board of Directors has the authority to declare dividends on our shares of common stock, and may determine to pay dividends in the future, subject to statutory and regulatory requirements and other considerations such as the ability of Columbia Bank MHC to receive permission from the Federal Reserve Board to waive receipt of any dividends we may determine to declare in the future. If Columbia Financial pays dividends to its stockholders, it also will be required to pay dividends to Columbia Bank MHC, unless Columbia Bank MHC is permitted by the Federal Reserve Board to waive the receipt of dividends. The Federal Reserve Board’s current position is to not permit a "non-grandfathered" mutual holding company to waive dividends declared by its subsidiary. Columbia Bank MHC may determine to apply to the Federal Reserve Board for approval to waive dividends if we determine to pay dividends to our stockholders. Given the Federal Reserve Board’s current position on this issue, there is no assurance that any request by Columbia Bank MHC to waive dividends from Columbia Financial would be permitted. The denial by the Federal Reserve Board of any such dividend waiver request, if sought, could determine whether the board of directors of Columbia Financial determines to declare a dividend, or if so declared, could significantly limit the amount of dividends Columbia Financial would pay in the future, if any.
Critical Accounting Policies and Estimates
In the preparation of our consolidated financial statements, we have adopted various accounting policies that govern the application of U.S. generally accepted accounting principles (“GAAP”) and general practices within the banking industry. Our significant accounting policies are described in note 2 to the consolidated financial statements.
Certain accounting policies involve significant judgments and assumptions by us that have a material impact on the carrying value of certain assets and liabilities. We consider these accounting policies, which are discussed below, to be critical accounting policies. These assumptions, estimates and judgments we use can be influenced by a number of factors, including the general economic environment. 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.
Allowance for Credit Losses. The Company adopted ASU 2016-13, Financial Instruments-Credit Losses (Topic 326) ("CECL") on January 1, 2022 for all financial assets measured at amortized cost and off-balance-sheet exposures. See note 2 in the notes to our consolidated financial statements for a detailed discussion of our accounting policies and methodologies for establishing the allowance for credit losses. Additional information about our allowance for credit losses is also presented in note 7 to the audited consolidated financial statements.
The determination of our 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. Although we believe we have established and maintained the ACL 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 ACL totaled $60.0 million and $55.1 million at December 31, 2024 and 2023, respectively. The increase in the allowance for credit losses was primarily attributable to an increase in net charge-offs and an increase in loan performance qualitative factors. The ACL components related to collectively evaluated loans and individually analyzed loan reserves was $60.0 million and $54.3 million, respectively and $0 and $787,000, respectively, at December 31, 2024 and 2023, under the CECL methodology.
At December 31, 2024, management performed a hypothetical sensitivity analysis to understand the impact of a change in a key input on our ACL. If the U.S. unemployment rate had been increased from an average range of approximately 4.3% to 6.0% for the forecast period, and U.S. Gross Domestic Product ("GDP") decreased from an average range of approximately 1.9% to 1.0% for the forecast period, our ACL reserves would have been approximately $218,000 higher. This sensitivity analysis includes the impact of quantitative components of our ACL. Changes in quantitative inputs and qualitative loss factors may not occur in the same direction or magnitude across all segments of our loan portfolio and deterioration in some quantitative inputs and qualitative loss factors may offset improvement in others. This sensitivity analysis does not represent a change to our expectations of the economic environment but provides a hypothetical result to assess the sensitivity of the ACL to a change in a key input. This sensitivity analysis does not incorporate changes to management’s judgment of qualitative loss factors.
If the four-quarter U.S. unemployment rate forecast had been 9.0% rather than an average of approximately 4.7%, our ACL would have been approximately $9.0 million higher. This sensitivity analysis includes the impact to the quantitative components of our ACL. Changes in quantitative inputs and qualitative loss factors may not occur in the same direction or magnitude across all segments of our loan portfolio and deterioration in some quantitative inputs and qualitative loss factors may offset improvement in others. This sensitivity analysis does not represent a change to our expectations of the economic environment but provides a hypothetical result to assess the sensitivity of the ACL to a change in a key input. This sensitivity analysis does not incorporate changes to management’s judgment of qualitative loss factors.
Going forward, the impact of utilizing the CECL approach to calculate the allowance for credit losses will be significantly influenced by the composition, characteristics, and quality of our loan portfolio, as well as the prevailing economic conditions and forecasts utilized. Material changes to these and other relevant factors may result in greater volatility to the allowance for credit losses, and, therefore, greater volatility to our reported earnings.
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 obtain updated 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. For additional discussion related to the determination of the allowance for credit losses, see “Risk Management-Analysis and Determination of the Allowance for Credit Losses” and the notes to the consolidated financial statements.
Income Taxes. We are subject to the income tax laws of the various jurisdictions where we conduct business and estimate income tax expense based on amounts expected to be owed to these various tax jurisdictions. The estimated income tax expense (benefit) is reported in the Consolidated Statements of Income. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. We
exercise significant judgment in evaluating the amount and timing of recognition of the resulting tax assets and liabilities. These judgments require us to make projections of future taxable income. The judgments and estimates we make in determining our deferred tax assets are inherently subjective and are reviewed on a continual basis as regulatory and business factors change.
Accrued or prepaid taxes represent the net estimated amount due to or to be received from tax jurisdictions either currently or in the future and are reported in other assets or other liabilities in our consolidated financial statements. We assess the appropriate tax treatment of transactions and filing positions after considering statutes, regulations, judicial precedent and other pertinent information and maintain tax accruals consistent with our evaluation. Changes in the estimate of accrued taxes occur periodically due to changes in tax rates, interpretations of tax laws, status of examinations by the tax authorities and newly enacted statutory, judicial and regulatory guidance that could impact the relative merits of tax positions. These changes, when they occur, impact accrued taxes and can materially affect our operating results. The Company identified no significant income tax uncertainties through the evaluation of its income tax positions as of December 31, 2024 and 2023. Therefore, the Company has no unrecognized income tax benefits as of those dates.
As of December 31, 2024 and 2023, we had a net deferred tax assets totaling $12.4 million and $25.5 million, respectively. In accordance with Accounting Standards Codification (“ASC”) Topic 740 “Income Taxes,” we use the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. 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. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. We exercise significant judgment in evaluating the amount and timing of recognition of the resulting tax assets and liabilities. These judgments require us to make projections of future taxable income. The judgments and estimates we make in determining our deferred tax assets are inherently subjective and are reviewed on a regular basis as regulatory or business factors change. Any reduction in estimated future taxable income may require us to record a valuation allowance against our deferred tax assets. A valuation allowance that results in additional income tax expense in the period in which it is recognized would negatively affect earnings. 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 as of December 31, 2023, it was more likely than not that the benefits from certain state temporary differences would not be realized, resulting in a valuation allowance of $26,000. As of December 31, 2024, no valuation allowance was deemed necessary for the deferred tax assets related to state net operating losses.
Post-retirement Benefits. We provide certain health care and life insurance benefits, along with split-dollar BOLI death benefits, to eligible retired employees. The cost of retiree health care and other benefits during the employees’ period of active service are accrued monthly. We account for benefits in accordance with ASC Topic 715 “Pension and Other Post-retirement Benefits.” The guidance requires an employer to: (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.
Pending Accounting Pronouncements
In December 2023, the FASB has issued ASU 2023-09, Improvements to Income Tax Disclosures. Under the ASU, public business entities ("PBEs") must annually (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than five percent of the amount computed by multiplying pretax income [or loss] by the applicable statutory income tax rate). The Board is releasing the ASU in response to stakeholder feedback indicating that the existing income tax disclosures should be enhanced to provide information to better assess how an entity’s operations and related tax risks and tax planning and operational opportunities affect its tax rate and prospects for future cash flows. The ASU’s amendments are effective for PBEs for annual periods beginning after December 15, 2024. For entities other than PBEs, the amendments are effective for annual periods beginning after December 15, 2025. Entities are permitted to early adopt the standard for annual financial statements that have not yet been issued or made available for issuance. The Company is currently evaluating the impact of the adoption of the ASU on its consolidated financial statements, but as it is only disclosure related, does not expect it to have an impact on its consolidated financial statements.
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40), which requires improved disclosures about a public business entity’s expense, including more detailed information about the types of expenses in commonly presented expense captions. The amendments in this update are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, although early adoption is permitted. The Company is currently evaluating the impact of the adoption of the ASU on its consolidated financial statements, but as it is only disclosure related, does not expect it to have an impact on its consolidated financial statements.
Comparison of Financial Condition at December 31, 2024 and 2023
General
Total assets decreased $170.1 million, or 1.6%, to $10.5 billion at December 31, 2024 from $10.6 billion at December 31, 2023. The decrease in total assets was primarily attributable to decreases in cash and cash equivalents of $134.0 million, debt securities available for sale of $67.6 million, and Federal Home Loan Bank stock of $20.6 million, partially offset by an increase in loans receivable, net of $37.5 million and an increase in other assets of $15.6 million. The decrease in cash and cash equivalents was primarily attributable to purchases of securities of $446.2 million, a decrease in borrowings of $448.1 million, and repurchases of common stock under our stock repurchase program of $5.9 million, partially offset by proceeds from the sale of securities of $321.2 million, principal repayments on securities of $185.6 million, and an increase in total deposits of $249.6 million. The increase in loans receivable, net was primarily attributable to an increase in multifamily real estate loans, construction loans, and commercial business loans of $51.5 million, $30.5 million, and $89.0 million, respectively, partially offset by decreases in one-to-four family, commercial real estate loans and home equity loans and advances of $81.9 million, $37.2 million, and $7.6 million, respectively. The allowance for credit losses for loans increased $4.9 million to $60.0 million at December 31, 2024 from $55.1 million at December 31, 2023. During the year ended December 31, 2024, the increase in the allowance for credit losses for loans was primarily due to net charge-offs of $9.6 million and an increase in loan performance qualitative factors. The decrease in Federal Home Loan Bank Stock was due to the redemption of stock required upon repaying Federal Home Loan Bank borrowings. The increase in other assets was primarily attributable to a $14.3 million increase in the Company's pension plan balance, as the return on plan assets outpaced the growth in the plan's obligation. The decrease in debt securities available for sale was primarily attributable to the sales of securities of $357.1 million which resulted in a realized loss of $35.9 million, and repayments on securities of $140.5 million, which was partially offset by purchases of securities of $404.7 million and a decrease in the gross unrealized loss on securities of $34.9 million.
Total liabilities decreased $210.1 million, or 2.2%, to $9.4 billion at December 31, 2024 from $9.6 billion at December 31, 2023. The decrease was primarily attributable to decreases in borrowings of $448.1 million, or 29.3%, partially offset by an increase in total deposits of $249.6 million, or 3.2%. The $448.1 million decrease in borrowings was primarily driven by a net decrease in long-term borrowings of $213.7 million and a decrease in short-term borrowings of $237.8 million. The increase in total deposits primarily consisted of increases in non-interest-bearing and interest-bearing demand deposits, and certificates of deposit of $669,000, $54.8 million, and $255.8 million, respectively, partially offset by decreases in money market and savings and club accounts of $13.8 million and $47.8 million, respectively.
Total stockholders’ equity increased $40.0 million, or 3.8%, to $1.1 billion at December 31, 2024 from $1.0 billion at December 31, 2023. The increase in total stockholders' equity was primarily attributable to the recognition of $8.0 million in stock based compensation expense and an increase of $48.2 million in other comprehensive income, which includes changes in unrealized losses on debt securities available for sale and unrealized gains on swap contracts, net of taxes. These increases were partially offset by a net loss of $11.7 million, and the repurchase of 365,116 shares of common stock at a cost of approximately $5.9 million, or $16.14 per share, under our stock repurchase program.
Securities
As part of the Company’s strategy to improve future earnings and expand its net interest margin, in December 2024 the Company sold $352.3 million of debt securities available for sale that were mostly purchased during the COVID period. Proceeds from the sale were used to fund loan growth of $72.9 million, purchase $78.1 million of higher yielding debt securities and prepay $170 million of higher cost borrowings. The repositioning was immediately accretive to net interest income. The sale and prepayment resulted in a pre-tax loss of approximately $37.9 million. The repositioning is expected to be neutral to tangible book value per share as the unrealized loss with respect to the debt securities is already recognized in the Company’s stockholders’ equity through accumulated other comprehensive loss.
Debt securities available for sale and held to maturity decreased $75.9 million, or 5.1%, to $1.4 billion at December 31, 2024 from $1.5 billion at December 31, 2023. The decrease in securities during 2024 was primarily attributable to sales of securities of $352.3 million which resulted in a realized loss of $35.9 million, and repayments on securities of $185.6 million, which was partially offset by purchases of $446.2 million and a decrease in unrealized losses on securities of $34.9 million. We continue to focus on maintaining a high quality securities portfolio that provides consistent cash flows in changing interest rate environments. At December 31, 2024, our total securities portfolio, which includes equity securities, was 13.6% of total assets, as compared to 14.1% at December 31, 2023.
At December 31, 2024, 60.7% of the debt securities available for sale portfolio was comprised of mortgage-backed securities and CMOs issued by Freddie Mac, Fannie Mae and Ginnie Mae. These securities are guaranteed by the issuing agency and backed by residential and multifamily mortgages. These securities are comprised of fixed rate, adjustable-rate and hybrid securities that bear a fixed rate for a specific term and thereafter, to the extent they are not prepaid, adjust periodically. At December 31, 2024, U.S. government and agency obligations comprised the next largest segment of the available for sale portfolio, totaling 30.7%. At December 31, 2024, the remainder of our available for sale securities portfolio consisted of corporate debt securities and municipal obligations which comprised 8.4% and 0.2%, respectively.
At December 31, 2024, 88.6% of the debt securities held to maturity portfolio was comprised of mortgage-backed securities and CMOs issued by Freddie Mac, Fannie Mae and Ginnie Mae. These securities are guaranteed by the issuing agency and backed by residential and multifamily mortgages. These securities are comprised of fixed rate, adjustable-rate and hybrid securities that bear a fixed rate for a specific term and thereafter, to the extent they are not prepaid, adjust periodically. At December 31, 2024, the remaining 11.4% of our held to maturity securities portfolio consisted of U.S. government and agency obligations.
To mitigate the credit risk related to our securities portfolio, we primarily invest in agency and highly-rated securities. As of December 31, 2024, approximately 93.2% of the total portfolio consisted of direct government obligations or government sponsored enterprise obligations, approximately 5.6% of the remaining portfolio was rated at least investment grade and approximately 1.2% of the remaining portfolio was not rated. Securities not rated consist primarily of private placement municipal notes issued and/or guaranteed by local municipal authorities and equity securities.
The following table sets forth the amortized cost and fair value of securities at December 31, 2024, 2023 and 2022:
At December 31,
2024 2023 2022
Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value
(In thousands)
Debt securities available for sale:
U.S. government and agency obligations $ 314,494 $ 314,702 $ 146,387 $ 145,501 $ 67,771 $ 63,566
Mortgage-backed securities and collateralized mortgage obligations 729,488 622,957 1,009,508 867,585 1,351,929 1,181,727
Municipal obligations 2,378 2,359 2,770 2,702 3,697 3,575
Corporate debt securities 95,508 85,928 92,565 77,769 92,544 79,766
Total securities available for sale $ 1,141,868 $ 1,025,946 $ 1,251,230 $ 1,093,557 $ 1,515,941 $ 1,328,634
Debt securities held to maturity:
U.S. government and agency obligations $ 44,871 $ 39,583 $ 49,871 $ 43,969 $ 49,871 $ 42,567
Mortgage-backed securities and collateralized mortgage obligations 347,969 310,570 351,283 313,208 371,652 327,824
Total debt securities held to maturity $ 392,840 $ 350,153 $ 401,154 $ 357,177 $ 421,523 $ 370,391
Equity securities $ 3,943 $ 6,673 $ 3,943 $ 3,384 $ 3,943 $ 3,384
Total securities $ 1,538,651 $ 1,382,772 $ 1,656,327 $ 1,454,118 $ 1,941,407 $ 1,702,409
At December 31, 2024 and 2023, securities with carrying values of $1.1 billion and $1.3 billion, respectively, were in net unrealized loss positions that totaled $159.7 million and $202.6 million, respectively. The decrease in unrealized losses on securities in 2024 was primarily due to the sales of lower yielding securities as discussed above. .
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. We believe that unrealized and unrecognized losses on securities at December 31, 2024 and 2023 are a function of changes in market interest rates and credit spreads, not changes in credit quality. Therefore, no allowance for credit losses was recorded at December 31, 2024 and 2023.
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.
At December 31, 2024 and 2023, we had no securities in a single company or entity (other than United States Government and United States GSE securities) that had an aggregate book value in excess of 5% of our equity.
The following tables set forth the stated maturities and weighted average yields of securities at December 31, 2024. Certain securities have adjustable interest rates and will reprice monthly, quarterly, semi-annually or annually within the various maturity ranges. Weighted average yields for tax-exempt securities totaling $2.4 million with a weighted average rate of 2.02%, are presented on a tax equivalent basis using a federal marginal tax rate of 21%.
Equity securities are not included in the table based on lack of a maturity date. The tables present contractual final maturities for mortgage-backed securities and does not reflect repricing or the effect of prepayments.
At December 31, 2024
One Year or Less More Than One Year to Five Years More Than Five Years to Ten Years After Ten Years Total
Carrying Value Weighted Average Yield Carrying Value Weighted Average Yield Carrying Value Weighted Average Yield Carrying Value Weighted Average Yield Carrying Value Weighted Average Yield
(Dollars in thousands)
Debt securities available for sale:
U.S. government and agency obligations $ 94,705 4.12 % $ 210,374 4.40 % $ 9,623 4.48 % $ - - % $ 314,702 4.32 %
Mortgage-backed securities and collateralized mortgage obligations 115 2.65 88,985 4.52 60,885 1.87 472,972 4.37 622,957 4.14
Municipal obligations 1,933 2.32 - - 426 3.61 - - 2,359 2.56
Corporate debt securities 28,160 4.27 5,715 4.35 52,053 3.63 - - 85,928 3.87
Total $ 124,913 4.13 % $ 305,074 4.44 % $ 122,987 2.80 % $ 472,972 4.37 % $ 1,025,946 4.17 %
At December 31, 2024
One Year or Less More Than One Year to Five Years More Than Five Years to Ten Years After Ten Years Total
Carrying Value Weighted Average Yield Carrying Value Weighted Average Yield Carrying Value Weighted Average Yield Carrying Value Weighted Average Yield Carrying Value Weighted Average Yield
(Dollars in thousands)
Debt securities held to maturity:
U.S. government and agency obligations $ - - % $ 24,875 1.34 % $ 9,996 1.50 % $ 10,000 2.30 % $ 44,871 1.59 %
Mortgage-backed securities and collateralized mortgage obligations 18,605 2.85 71,369 2.66 114,813 2.07 143,182 2.66 347,969 2.48
Total $ 18,605 2.85 % $ 96,244 2.32 % $ 124,809 2.02 % $ 153,182 2.63 % $ 392,840 2.37 %
Loans Receivable
Total gross loans increased $44.8 million, or 0.6%, to $7.9 billion at December 31, 2024 from $7.8 billion at December 31, 2023. One-to-four family real estate loans decreased $81.9 million, or 2.9%, to $2.7 billion at December 31, 2024 from $2.8 billion at December 31, 2023. Multifamily loans increased $51.5 million, or 3.7%, to $1.5 billion at December 31, 2024 from $1.4 billion at December 31, 2023. Commercial real estate loans decreased $37.2 million, or 1.6%, to $2.3 billion at December 31, 2024 from $2.4 billion at December 31, 2023. Construction loans increased $30.5 million, or 6.9%, to $473.6 million at December 31, 2024 from $443.1 million at December 31, 2023. Commercial business loans increased $89.0 million, or 16.7%, to $622.0 million at December 31, 2024 from $533.0 million at December 31, 2023. Home Equity loans and advances decreased $7.6 million, or 2.9%, to $259.0 million at December 31, 2024 from $266.6 million at December 31, 2023. We had a slowdown in originations and prepayments in several categories of loans in 2024. Multifamily, construction and commercial business loans have increased in 2024, as we continue our increased focus on commercial business lending. The increase in commercial business loans included an increase in equipment financing and asset based lending.
The following tables present the loan portfolio for the periods indicated:
At December 31,
2024 2023
Amount Percent Amount Percent
(Dollars in thousands)
Real estate loans:
One-to-four family $ 2,710,937 34.4 % $ 2,792,833 35.7 %
Multifamily 1,460,641 18.6 1,409,187 18.0
Commercial real estate 2,339,883 29.7 2,377,077 30.4
Construction 473,573 6.0 443,094 5.7
Total real estate loans 6,985,034 88.8 7,022,191 89.8
Commercial business loans 622,000 7.9 533,041 6.8
Consumer loans:
Home equity loans and advances 259,009 3.3 266,632 3.4
Other consumer loans 3,404 - 2,801 -
Total consumer loans 262,413 3.3 269,433 3.4
Total gross loans 7,869,447 100.0 % 7,824,665 100.0 %
Purchased credit-deteriorated loans 11,686 15,089
Net deferred loan costs, fees and purchased premiums and discounts 35,795 34,783
Allowance for credit losses (59,958) (55,096)
Loans receivable, net $ 7,856,970 $ 7,819,441
Loan Maturity
The following table sets forth certain information at December 31, 2024 regarding the dollar amount of loan principal repayments becoming due during the periods indicated. The table does not include any estimate of prepayments that significantly shorten the average life of all loans and may cause our actual repayment experience to differ from that shown below. The table reflects final maturities for construction loans that convert to permanent loans and includes PCD loans. Demand loans having no stated schedule of repayments or maturity are reported as due in one year or less.
December 31, 2024
Real Estate
One-to-four Family Multifamily Commercial Real Estate Construction Commercial Business Home Equity Loans and Advances Other Consumer Loans Total
(In thousands)
Amounts due in:
One year or less $ 1,122 $ 116,627 $ 213,790 $ 322,680 $ 286,576 $ 459 $ 3,189 $ 944,443
More than one year to five years 42,876 600,443 720,979 140,492 198,746 17,670 215 1,721,421
More than five years to fifteen years 449,774 658,025 1,181,614 1,943 130,702 103,198 - 2,525,256
More than fifteen years 2,218,980 85,546 232,925 8,458 6,276 137,828 - 2,690,013
Total $ 2,712,752 $ 1,460,641 $ 2,349,308 $ 473,573 $ 622,300 $ 259,155 $ 3,404 $ 7,881,133
The following table sets forth all loans at December 31, 2024 that are due after December 31, 2025 and have either fixed interest rates or floating or adjustable interest rates:
Due After December 31, 2025
Fixed Rates Floating or Adjustable Rates Total
(In thousands)
Real estate loans:
One-to-four family $ 2,411,696 $ 299,934 $ 2,711,630
Multifamily 565,795 778,219 1,344,014
Commercial real estate 868,948 1,266,570 2,135,518
Construction 7,628 143,265 150,893
Commercial business loans 197,739 137,985 335,724
Consumer loans:
Home equity loans and advances 155,326 103,370 258,696
Other consumer loans 215 - 215
Total loans $ 4,207,347 $ 2,729,343 $ 6,936,690
Loan Originations and Sales
The following table shows loans originated, purchased, sold and other reductions in loans during the periods indicated:
Years Ended December 31,
2024 2023 2022
(In thousands)
Total loans at beginning of period $ 7,874,537 $ 7,677,564 $ 6,360,601
Originations:
Real estate loans:
One-to-four family 123,399 215,266 869,716
Multifamily 87,476 124,660 265,629
Commercial real estate 21,837 146,303 399,562
Construction 295,052 335,749 444,027
Total real estate loans 527,764 821,978 1,978,934
Commercial business loans 227,262 209,003 201,876
Consumer loans:
Home equity loans and advances 79,515 80,396 112,008
Other consumer loans 90 182 320
Total consumer loans 79,605 80,578 112,328
Total loans originated 834,631 1,111,559 2,293,138
Purchases 78,719 14,729 8,315
Loans acquired - - 335,501
Less:
Principal payments, repayments, and other items, net (832,011) (686,988) (1,300,891)
Loan sales (18,895) (121,372) (9,639)
Transfer of loans receivable to loans held-for-sale (18,079) (120,955) (9,461)
Transfer to real estate owned (1,974) - -
Total loans receivable at end of period $ 7,916,928 $ 7,874,537 $ 7,677,564
Deposits
Our primary source of funds is our deposits, which are comprised of non-interest-bearing and interest-bearing transaction accounts, money market deposit accounts, savings and club deposits and certificates of deposit.
Deposits increased $249.6 million, or 3.2%, to $8.1 billion at December 31, 2024 from $7.8 billion at December 31, 2023. The increase in balances of non-interest-bearing demand, interest-bearing demand, and certificates of deposit was heavily attributed to a shift in balances from savings and club deposits and money market accounts as well as new deposits attained. Columbia Bank has priced select certificates of deposit accounts very competitively to the market, but there continues to be strong competition for funds from other banks and non-bank investment products. Municipal deposits totaled $969.4 million at December 31, 2024 compared to $861.8 million at December 31, 2023. We continue our efforts to emphasize deposit taking though various channels, including brokered deposits and reciprocal deposit arrangement with third parties.
During 2024, non-interest-bearing demand accounts increased $669,000, interest-bearing demand accounts increased $54.8 million, or 2.8%, savings and club deposits decreased $47.8 million, or 6.8%, money market accounts decreased $13.8 million, or 1.1%, and certificates of deposits increased $255.8 million, or 10.3%. We have focused on obtaining deposit products by offering attractive pricing and promotions and by deepening our existing customer relationships.
The following table sets forth the deposit balances as of the periods indicated:
At December 31,
2024 2023 2022
Amount Percent of Total Deposits Amount Percent of Total Deposits Amount Percent of Total Deposits
(Dollars in thousands)
Non-interest-bearing demand $ 1,438,030 17.8 % $ 1,437,361 18.3 % $ 1,806,152 22.6 %
Interest-bearing demand 2,021,312 25.0 1,966,463 25.1 2,592,884 32.4
Money market accounts 1,241,691 15.3 1,255,528 16.0 718,524 9.0
Savings and club deposits 652,501 8.1 700,348 8.9 913,738 11.4
Certificates of deposit 2,742,615 33.8 2,486,856 31.7 1,969,861 24.6
Total deposits $ 8,096,149 100.0 % $ 7,846,556 100.00 % $ 8,001,159 100.0 %
We are required to pledge securities or other financial instruments to secure municipal deposits. At December 31, 2024 and 2023, we had pledged securities totaling $500.9 million and $240.8 million, respectively, and had FHLB irrevocable standby letters of credits totaling $350.6 million and $575.6 million at December 31, 2024 and 2023, respectively, collateralizing public funds on deposit.
The following table sets forth the deposit activity for the periods indicated:
Years Ended December 31,
2024 2023 2022
(In thousands)
Beginning balance $ 7,846,556 $ 8,001,159 $ 7,570,216
Increase (decrease) before interest credited 47,210 (279,765) 403,065
Interest credited 202,383 125,162 27,878
Net increase (decrease) in deposits 249,593 (154,603) 430,943
Ending balance $ 8,096,149 $ 7,846,556 $ 8,001,159
At December 31, 2024, the aggregate amount of uninsured deposits (deposits in amounts greater than or equal to $250,000, which is the maximum amount for federal deposit insurance) was $3.1 billion. This amount included municipal deposits of $924.5 million, which are collateralized, and intercompany deposits of $16.5 million.
The maturities of uninsured amounts included in time deposits at December 31, 2024 are as follows:
Balance
(In thousands)
Maturity Period:
Three months or less $ 189,606
Over three through six months 199,585
Over six through twelve months 236,314
Over twelve months 51,746
Total $ 677,251
The following table sets forth all of our certificates of deposit classified by interest rate as of the dates indicated:
At December 31,
2024 2023 2022
(In thousands)
Less than 0.50% $ 25,394 $ 81,654 $ 594,280
0.50% to 0.99% 37,194 135,402 402,691
1.00% to 1.49% 27,758 74,502 129,892
1.50% to 1.99% 20,162 71,178 136,444
2.00% to 2.49% 10,513 69,973 205,575
2.50% to 2.99% 75,459 143,095 113,226
3.00% to 3.49% 82,033 62,272 224,223
3.50% to 3.99% 356,192 318,582 108,342
4.00% to 4.49% 1,096,800 431,891 25,188
4.50% to 4.99% 732,306 572,736 30,000
5.00% and greater 278,804 525,571 -
Total $ 2,742,615 $ 2,486,856 $ 1,969,861
The following table sets forth the amount and maturities of our certificates of deposit by interest rate at December 31, 2024:
Period to Maturity
One Year or Less More Than One Year to Two Years More Than Two Years to Three Years More Than Three Years to Four Years More Than Four Years Total Percentage of Certificate Accounts
(Dollars in thousands)
Less than 0.50% $ 19,753 $ 4,939 $ 702 $ - $ - $ 25,394 0.8 %
0.50% to 0.99% 15,962 16,453 3,571 1,013 195 37,194 1.4
1.00% to 1.49% 22,435 1,221 3,654 219 229 27,758 1.0
1.50% to 1.99% 11,412 5,225 2,932 579 14 20,162 0.7
2.00% to 2.49% 8,935 1,262 - 126 190 10,513 0.4
2.50% to 2.99% 53,178 4,967 9,948 1,539 5,827 75,459 2.8
3.00% to 3.49% 55,575 18,791 1,102 4,717 1,848 82,033 3.0
3.50% to 3.99% 173,784 182,408 - - - 356,192 13.0
4.00% to 4.49% 1,071,737 25,063 - - - 1,096,800 40.0
4.50% to 4.99% 713,512 18,794 - - - 732,306 26.7
5.00% and greater 275,966 2,838 - - - 278,804 10.2
Total $ 2,422,249 $ 281,961 $ 21,909 $ 8,193 $ 8,303 $ 2,742,615 100.0 %
The following tables set forth the average balances and weighted average rates of our deposit products at the dates indicated:
For the Years Ended December 31,
2024 2023
Average Balance Percent Weighted Average Rate Average Balance Percent Weighted Average Rate
(Dollars in thousands)
Non-interest-bearing demand $ 1,420,104 17.98 % - % $ 1,539,354 20.00 % - %
Interest-bearing demand 1,986,215 25.15 2.79 2,183,333 28.37 1.73
Money market accounts 1,235,495 15.65 2.67 951,174 12.36 2.55
Savings and club deposits 667,836 8.46 0.77 793,303 10.31 0.28
Certificates of deposit 2,587,360 32.76 4.21 2,229,042 28.96 2.73
Total $ 7,897,010 100.00 % 2.56 % $ 7,696,206 100.00 % 1.63 %
For the Year Ended December 31,
Average Balance Percent Weighted Average Rate
(Dollars in thousands)
Non-interest-bearing demand $ 1,742,607 22.11 % - %
Interest-bearing demand 2,685,675 34.07 0.42
Money market accounts 695,849 8.83 0.37
Savings and club deposits 922,916 11.71 0.05
Certificates of deposit 1,834,876 23.28 0.74
Total $ 7,881,923 100.00 % 0.35 %
Borrowings
We have the ability to utilize advances and overnight lines of credit from the FHLB to supplement our liquidity. As a member bank, we are required to own capital stock in the FHLB and are authorized to apply for advances on the security of such stock and certain mortgage loans and other assets, provided certain standards related to creditworthiness have been met. Advances are made under several different programs, each having its own interest rate and range of maturities. We can also utilize securities sold under agreements to repurchase to provide funding. We maintain access to the Federal Reserve Bank’s, discount window and federal funds lines with correspondent banks for additional contingency funding. To secure our borrowings, we generally pledge securities and/or loans. The types of securities pledged for borrowings include, but are not limited to, government-sponsored enterprises ("GSE") including notes and government agency mortgage-backed securities and CMOs. The types of loans pledged for borrowings include, but are not limited to, one-to-four family real estate loans home equity loans and multifamily and commercial real estate loans.
The following table sets forth the outstanding borrowings and weighted averages at the dates or for the periods indicated:
Years Ended December 31,
2024 2023 2022
(Dollars in thousands)
Maximum amount outstanding at any month-end during the year:
Lines of credit $ 26,500 $ 168,800 $ 174,000
FHLB advances 1,676,705 1,659,706 1,090,159
Notes payable - 29,934 36,368
Junior subordinated debentures 7,036 6,962 6,994
Average outstanding balance during the year:
Lines of credit $ 339 $ 18,036 $ 75,197
FHLB advances 1,454,335 1,297,365 471,961
Notes payable - 22,780 30,084
Junior subordinated debentures 7,023 7,054 6,984
Other borrowings 55 - 55
Weighted average interest rate during the year:
Lines of credit 5.31 % 9.26 % 2.58 %
FHLB advances 4.84 4.68 2.44
Notes payable - 4.03 3.97
Junior subordinated debentures 9.11 8.85 5.30
Other borrowings 5.45 - 3.64
Balance outstanding at end of the year:
Lines of credit $ - $ - $ -
FHLB advances 1,073,564 1,521,733 1,090,159
Notes payable - - 29,894
Junior subordinated debentures 7,036 6,962 6,994
Weighted average interest rate at end of year:
Lines of credit - % - % - %
FHLB advances 4.42 4.92 4.37
Notes payable - - 3.35
Junior subordinated debentures 7.56 8.59 7.69
Comparison of Financial Condition at December 31, 2023 and 2022
For a comparison of the Company’s financial condition at December 31, 2023 and 2022, please see the section captioned “Comparison of Financial Condition at December 31, 2023 and 2022” in Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
Results of Operations for the Year Ended December 31, 2024
Financial Highlights
A net loss of $11.7 million was recorded for the year ended December 31, 2024, a decrease of $47.7 million, compared to net income of $36.1 million for the year ended December 31, 2023. The decrease was primarily attributable to a decrease in net interest income of $27.9 million, or 13.5%, an increase in provision for credit losses of $9.7 million, or 201.9%, and a decrease in non-interest income of $25.5 million, or 93.1%, partially offset by a decrease in non-interest expense of $1.1 million, or 0.6%, and a decrease in income tax expense of $14.2 million, or 142.7%. In 2024, the decrease in net interest income was primarily attributable to an $84.3 million increase in interest expense on deposits and borrowings, partially offset by a $56.4 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 market interest rate increases in 2023. The increase in interest expense on deposits and borrowings was driven by these same rate increases coupled with intense competition for deposits in the market and the repricing of existing deposits into higher cost products along with higher balances. The increase in interest expense on borrowings was also impacted by the increase in interest rates for new borrowings along with an increase in the average balance of borrowings.
The provision for credit losses of $14.5 million recorded for the year ended December 31, 2024 as compared to $4.8 million recorded for the year ended December 31, 2023, was primarily due to net charge-offs totaling $9.6 million and an increase in loan performance qualitative factors.
The decrease in non-interest income of $25.5 million was primarily attributable to an increase in loss on securities transactions of $25.0 million, and a decrease in bank-owned life insurance income of $2.8 million, attributable to death benefits in 2023, partially offset by a $1.9 million increase in the fair value of Federal Home Loan Mortgage Corporation and Federal National Mortgage Association preferred stock included in equity securities.
The decrease of $1.1 million in non-interest expense was primarily attributable to a decrease in compensation and employee benefits expense of $11.4 million, partially offset by an increase in professional fees of $4.3 million, an increase in merger-related expenses of $1.1 million and an increase in loss on extinguishment of debt of $3.1 million, resulting primarily from the repositioning transaction, and an increase in other non-interest expense of $2.0 million. The decrease in compensation and employee benefits expense was the result of lower incentive compensation and a workforce reduction related to cost cutting strategies implemented during 2023 and 2024. The increase in professional fees was primarily related to an increase in legal, regulatory and compliance-related costs while the increase in other non-interest expense related to swap transactions.
Income tax benefit of $4.3 million was recorded for the year ended December 31, 2024, a decrease of $14.2 million, as compared to an expense of $10.0 million for the year ended December 31, 2023, mainly due to a decrease in pre-tax income. The Company's effective tax rate was 26.8% and 21.6% for the years ended December 31, 2024 and 2023, respectively.
Summary Income Statements
The following table sets forth the income summary for the periods indicated:
Years Ended December 31,
Change 2024/2023
2024 2023 $ %
(Dollars in thousands)
Net interest income $ 177,982 $ 205,876 $ (27,894) (13.5) %
Provision for credit losses 14,451 4,787 9,664 201.9
Non-interest income 1,894 27,379 (25,485) (93.1)
Non-interest expense 181,335 182,417 (1,082) (0.6)
Income tax expense (4,257) 9,965 (14,222) (142.7)
Net income $ (11,653) $ 36,086 $ (47,739) (132.3) %
Return on average assets (0.11) % 0.35 %
Return on average equity (1.11) % 3.29 %
Net Interest Income
For the year ended December 31, 2024, net interest income decreased $27.9 million, or 13.5%, to $178.0 million from $205.9 million for the year ended December 31, 2023. For the year ended December 31, 2024, total interest income increased $56.4 million, or 14.3%, to $451.4 million, from $395.0 million for the year ended December 31, 2023. The increase in total interest income was primarily attributable to an increase in the average balances of total interest earning assets coupled with an increase in average yields. The yield on the loan portfolio for the year ended December 31, 2024 increased 46 basis points compared to the year ended December 31, 2023, while the yield on the securities portfolio for the year ended December 31, 2024 increased 40 basis points compared to the year ended December 31, 2023. The average yield on other interest-earning assets for the year ended December 31, 2024 increased 73 basis points compared to the year ended December 31, 2023. Increases in average yields on these portfolios for the year ended December 31, 2024 were influenced by market rates increasing 100 basis points throughout the 2023 period and remaining at elevated levels until reductions occurred during the last four months of 2024.
The average cost of our interest-bearing liabilities increased 92 basis points to 3.44% for the year ended December 31, 2024, from 2.52% for the year ended December 31, 2023, primarily as a result of an increases in the average cost of interest-bearing deposits and borrowings and increase in the average balances of interest-bearing deposits and borrowings. For the year ended December 31, 2024, the average cost of interest-bearing deposits increased 109 basis points. For the year ended December 31, 2024, total interest expense increased $84.3 million, or 44.6%, to $273.4 million from $189.1 million for the year ended December 31, 2023. During 2024, the average cost of borrowings increased 11 basis points, and there was an increase in the average balance of borrowings. The higher interest rate environment coupled with the higher cost of repricing deposits caused the overall increase in interest expense.
A provision for credit losses of $14.5 million was recorded for the year ended December 31, 2024 as compared to $4.8 million for the year ended December 31, 2023. The increase in provision for credit losses during the 2024 year was primarily attributable to net charge-offs recorded and an increase in loan performance qualitative factors. Net charge-offs totaled $9.6 million for the year ended December 31, 2024, as compared to $2.5 million for the year ended December 31, 2023. Charge-offs are recorded on loans where management determines that the collection of loan principal and interest is unlikely. The provision for credit losses was determined by management to be an amount necessary to maintain a balance of allowance for credit losses at a level that uses relevant and reliable information from internal and external sources, related past events, current conditions, and a reasonable and supportable forecast. Changes in the provision were based on management’s analysis of various factors within the qualitative and quantitative components of the allowance for credit losses calculation. At December 31, 2024, the allowance for credit losses totaled $60.0 million, or 0.76% of total gross loans outstanding, compared to $55.1 million, or 0.70% of total gross loans outstanding, as of December 31, 2023. An analysis of the changes in the allowance for credit losses is presented under “Risk Management-Analysis and Determination of the Allowance for Credit Losses” below.
Non-Interest Income
The following table sets forth a summary of non-interest income for the periods indicated:
Years Ended December 31,
2024 2023
(In thousands)
Demand deposit account fees $ 6,507 $ 5,145
Bank-owned life insurance 7,319 10,126
Title insurance fees 2,505 2,400
Loan fees and service charges 4,483 4,510
(Loss) on securities transactions (35,851) (10,847)
Change in fair value of equity securities 2,594 695
Gain on sale of loans 906 1,214
Other non-interest income 13,431 14,136
Total $ 1,894 $ 27,379
For the year ended December 31, 2024, non-interest income decreased $25.5 million, or 93.1%, to $1.9 million from $27.4 million for the year ended December 31, 2023. The decrease was primarily attributable to an increase in the loss on securities transactions of $25.0 million, and a decrease in bank-owned life insurance income of $2.8 million, attributable to death benefits in 2023, partially offset by a $1.9 million increase in the fair value of Federal Home Loan Mortgage Corporation and Federal National Mortgage Association preferred stock included in equity securities.
Non-Interest Expense
The following table sets forth an analysis of non-interest expense for the periods indicated:
Years Ended December 31,
2024 2023
(In thousands)
Compensation and employee benefits $ 109,489 $ 120,846
Occupancy 23,482 22,927
Federal deposit insurance premiums 7,581 8,639
Advertising 2,510 2,805
Professional fees 14,164 9,824
Data processing and software expenses 15,578 15,039
Merger-related expenses 1,665 606
Loss on extinguishment of debt 3,447 300
Other non-interest expense 3,419 1,431
Total $ 181,335 $ 182,417
For the year ended December 31, 2024, non-interest expense decreased $1.1 million, or 0.6%, to $181.3 million from $182.4 million for the year ended December 31, 2023. The decrease was primarily attributable to a decrease in compensation and employee benefits expense of $11.4 million, partially offset by an increase in professional fees of $4.3 million, an increase in merger-related expenses of $1.1 million and an increase in loss on extinguishment of debt of $3.1 million, resulting primarily from the repositioning transaction, and an increase in other non-interest expense of $2.0 million. The decrease in compensation and employee benefits expense was the result of lower incentive compensation and a workforce reduction related to cost cutting strategies implemented during 2023 and 2024. The increase in professional fees was primarily related to an increase in legal, regulatory and compliance-related costs, while the increase in other non-interest expense related to swap transactions. During the quarter ended December 31, 2024, the Company prepaid $170.0 million of FHLB borrowings as part of the previously discussed balance sheet repositioning transaction which resulted in a $3.3 million loss on the extinguishment of debt.
Income Tax Expense
Income tax benefit of $4.3 million was recorded for the year ended December 31, 2024, reflecting an effective tax rate of 26.8%, compared to income tax expense of $10.0 million for 2023, reflecting an effective tax rate of 21.6%.
As of December 31, 2024, we had a net deferred tax asset totaling $12.4 million. We regularly evaluate the realizability of deferred tax asset positions. In determining whether a valuation allowance is necessary, we consider the level of taxable income in prior years to the extent that carrybacks are permitted under current tax laws, as well as estimates of future pre-tax and taxable income and tax planning strategies that would, if necessary, be implemented. As of December 31, 2024, it was concluded that no valuation allowance was required on the deferred tax assets related to the Bank’s state net operating losses.
Results of Operations for the Year Ended December 31, 2023
Financial Highlights
Net income was $36.1 million for the year ended December 31, 2023 as compared to $86.2 million for the year ended December 31, 2022, a decrease of $50.1 million, or 58.1%. The decrease was attributable to a decrease in net interest income of $60.9 million, or 22.8%, a decrease in non-interest income of $3.0 million, or 9.9%, and an increase in non-interest expense of $7.6 million, or 4.3%, partially offset by a decrease in provision for credit losses of $698,000 or 12.7%, and a decrease in income tax expense of $20.7 million, or 67.5%. In 2023, the decrease in net interest income was primarily attributable to a $146.2 million increase in interest expense on deposits and borrowings, partially offset by a $85.3 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 market interest rate increases in 2022 and 2023. The increase in interest expense on deposits and borrowings was driven by these same rate increases coupled with intense competition for deposits in the market and the repricing of existing deposits into higher cost products. The increase in interest expense on borrowings was also impacted by the significant increase in interest rates for new borrowings since interest rates began rising in March 2022, along with an increase in the average balance of borrowings.
The provision for credit losses of $4.8 million recorded for the year ended December 31, 2023 as compared to $5.5 million recorded for the year ended December 31, 2022, was primarily attributable to a decrease in loan loss rates, partially offset by an increase in the outstanding balance of loans.
The decrease in non-interest income was primarily attributable to an increase in the loss on securities transactions of $11.1 million, partially offset by an increase in bank-owned life insurance income of $2.7 million due to death benefit claims, an increase in the change in fair value of equity securities of $1.1 million, an increase in the gain on sale of loans of $1.0 million and an increase in other non-interest income of $3.8 million, primarily related to swap income.
The increase in non-interest expense was primarily attributable to an increase in compensation and employee benefits expense of $3.9 million, an increase in federal deposit insurance premiums of $6.0 million, and a loss on extinguishment of debt of $300,000, resulting from the prepayment of a term note. These increases were partially offset by a decrease in merger-related expenses of $2.2 million and a decrease in other non-interest expense of $4.1 million. The increase in compensation and employee benefits expense for the 2023 period was due to normal annual increases in employee related compensation, increased staff levels due to the May 2022 merger with RSI Bank, and severance expense recorded in June 2023 as a result of a workforce reduction. The federal deposit insurance premium expense increased due to the one-time Federal Deposit Insurance Corporation special assessment recorded in December 2023, and an increase in the assessment rate imposed by the FDIC effective January 1, 2023. The decrease in other non-interest expense was primarily related to non-recurring litigation settlements included in the 2022 period and the decrease in expenses related to swap transactions.
Income tax expense was $10.0 million for the year ended December 31, 2023, a decrease of $20.7 million, or 67.5%, as compared to $30.7 million for the year ended December 31, 2022, was 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 21.6% and 26.3% for the years ended December 31, 2023 and 2022, respectively. The effective tax rate for the 2023 period was primarily impacted by lower net interest income and the loss on the sale of securities, and higher tax-exempt income.
Summary Income Statements
The following table sets forth the income summary for the periods indicated:
Years Ended December 31,
Change 2023/2022
2023 2022 $ %
(Dollars in thousands)
Net interest income $ 205,876 $ 266,777 $ (60,901) (22.8) %
Provision for (reversal of) credit losses 4,787 5,485 (698) (12.7)
Non-interest income 27,379 30,400 (3,021) (9.9)
Non-interest expense 182,417 174,816 7,601 4.3
Income tax expense 9,965 30,703 (20,738) (67.5)
Net income $ 36,086 $ 86,173 $ (50,087) (58.1) %
Return on average assets 0.35 % 0.88 %
Return on average equity 3.29 % 8.09 %
Net Interest Income
For the year ended December 31, 2023, net interest income decreased $60.9 million, or 22.8%, to $205.9 million from $266.8 million for the year ended December 31, 2022. For the year ended December 31, 2023, total interest income increased $85.3 million, or 27.5%, to $395.0 million, from $309.7 million for the year ended December 31, 2022. The increase in total interest income was primarily attributable to an increase in the average balances of loans and other interest-earning assets, coupled with increases in yields on all interest-earning assets, due to rising rates, partially offset by a decrease in the average balance of securities The yield on the loan portfolio for the year ended December 31, 2023 increased 64 basis points compared to the year ended December 31, 2022, while the yield on the securities portfolio for the year ended December 31, 2023 increased 20 basis points compared to the year ended December 31, 2022. The average yield on other interest-earning assets for the year ended December 31, 2023 increased 267 basis points compared to the year ended December 31, 2022. Increases in average yields on these portfolios for the year ended December 31, 2023 were influenced by the rise in interest rates in 2023.
The average cost of our interest-bearing liabilities increased 188 basis points to 2.52% for the year ended December 31, 2023, from 0.64% for the year ended December 31, 2022, primarily as a result of an increase in the average cost of interest-bearing deposits and borrowings and an increase in the average balances of interest-bearing deposits and borrowings. For the year ended December 31, 2023, the average cost of interest-bearing deposits increased 158 basis points. For the year ended December 31, 2023, total interest expense increased $146.2 million, or 340.9%, to $189.1 million from $42.9 million for the year ended December 31, 2022. During 2023, the average cost of borrowings increased 218 basis points, and there was a significant increase in the average balance of borrowings. The higher interest rate environment coupled with the higher cost of repricing deposits caused the overall increase in interest expense.
A provision for credit losses of $4.8 million was recorded for the year ended December 31, 2023 as compared to $5.5 million recorded for the year ended December 31, 2022. The decrease in provision for credit losses during the 2023 year was primarily attributable to a decrease in loan loss rates, partially offset by an increase in the outstanding balance of loans. Net charge-offs totaled $2.5 million for the year ended December 31, 2023, as compared to $45,000 for the year ended December 31, 2022. We charge-off any collateral or cash flow deficiency on all classified loans once they are 90 days delinquent or earlier where management determines that the collection of loan principal and interest is unlikely. The provision for credit losses was determined by management to be an amount necessary to maintain a balance of allowance for credit losses at a level that uses relevant and reliable information from internal and external sources, related past events, current conditions, and a reasonable and supportable forecast. Changes in the provision were based on management’s analysis of various factors within the qualitative and quantitative components of the allowance for credit losses calculation. At December 31, 2023, the allowance for credit losses totaled $55.1 million, or 0.70% of total gross loans outstanding, compared to $52.8 million, or 0.69% of total gross loans outstanding, as of December 31, 2022. An analysis of the changes in the allowance for credit losses is presented under “Risk Management-Analysis and Determination of the Allowance for Credit Losses” below.
Non-Interest Income
The following table sets forth a summary of non-interest income for the periods indicated:
Years Ended December 31,
2023 2022
(In thousands)
Demand deposit account fees $ 5,145 $ 5,293
Bank-owned life insurance 10,126 7,393
Title insurance fees 2,400 3,423
Loan fees and service charges 4,510 3,924
(Loss) gain on securities transactions (10,847) 210
Change in fair value of equity securities 695 (401)
Gain on sale of loans 1,214 178
Other non-interest income 14,136 10,380
Total $ 27,379 $ 30,400
For the year ended December 31, 2023, non-interest income decreased $3.0 million, or 9.9%, to $27.4 million from $30.4 million for the year ended December 31, 2022. In 2023, the decrease was primarily attributable to an increase in the loss on securities transactions of $11.1 million, partially offset by an increase in bank-owned life insurance income of $2.7 million due to death benefit claims, an increase in the change in fair value of equity securities of $1.1 million, an increase in the gain on sale of loans of $1.0 million and an increase in other non-interest income of $3.8 million, primarily related to swap income.
Non-Interest Expense
The following table sets forth an analysis of non-interest expense for the periods indicated:
Years Ended December 31,
2023 2022
(In thousands)
Compensation and employee benefits $ 120,846 $ 116,926
Occupancy 22,927 22,589
Federal deposit insurance premiums 8,639 2,591
Advertising 2,805 2,865
Professional fees 9,824 8,158
Data processing and software expenses 15,039 13,362
Merger-related expenses 606 2,810
Loss on extinguishment of debt 300 -
Other non-interest expense 1,431 5,515
Total $ 182,417 $ 174,816
For the year ended December 31, 2023, non-interest expense increased $7.6 million, or 4.3%, to $182.4 million from $174.8 million for the year ended December 31, 2022. The increase was primarily attributable to an increase in compensation and employee benefits expense of $3.9 million, an increase in federal deposit insurance premiums of $6.0 million, and a loss on extinguishment of debt of $300,000, resulting from the prepayment of a term note. These increases were partially offset by a decrease in merger-related expenses of $2.2 million and a decrease in other non-interest expense of $4.1 million. The increase in compensation and employee benefits expense for the 2023 period was due to normal annual increases in employee related compensation, increased staff levels due to the May 2022 merger with RSI Bank, and severance expense recorded in June 2023 as a result of a workforce reduction. The federal deposit insurance premium expense increased due to the one-time Federal Deposit Insurance Corporation special assessment recorded in December 2023, and an increase in the assessment rate imposed by the FDIC effective January 1, 2023. The decrease in other non-interest expense was primarily related to non-recurring litigation settlements included in the 2022 period and the decrease in expenses related to swap transactions.
Income Tax Expense
We recorded income tax expense of $10.0 million for the year ended December 31, 2023, reflecting an effective tax rate of 21.6%, compared to income tax expense of $30.7 million for 2022, reflecting an effective tax rate of 26.3%.
As of December 31, 2023, we had a net deferred tax asset totaling $25.5 million. We regularly evaluate the realizability of deferred tax asset positions. In determining whether a valuation allowance is necessary, we consider the level of taxable income in prior years to the extent that carrybacks are permitted under current tax laws, as well as estimates of future pre-tax and taxable income and tax planning strategies that would, if necessary, be implemented. We have provided a valuation allowance of $26,000 as of December 31, 2023 on the deferred tax assets related to the Bank’s state net operating losses.
Results of Operations for the Fiscal Year Ended December 31, 2022
For a comparison of the Company’s results of operations for the year ended December 31, 2022, please see the section captioned “Results of Operations for the Fiscal Year Ended December 31, 2022” in Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
Average Balances and Yields
The following tables present information regarding average balances of assets and liabilities, as well as the total dollar amounts of interest income and dividends from average interest-earning assets, and interest expense on average interest-bearing liabilities, and the resulting annualized average yields and costs. The yields and costs for the periods indicated are derived by dividing income or expense by the average daily balances of assets or liabilities, respectively, for the periods presented. Loan (fees) costs, including prepayment fees, are included in interest income on loans and are not material. Non-accrual loans and PCD loans are included in the average balances and are not material. Yields are not presented on a tax-equivalent basis. Any adjustments necessary to present yields on a tax-equivalent basis are insignificant.
Years Ended December 31,
2024 2023
Average Balance Interest Yield / Cost Average Balance Interest Yield / Cost
(Dollars in thousands)
Interest earning assets:
Loans (1) $ 7,801,939 $ 382,266 4.90 % $ 7,748,096 $ 343,770 4.44 %
Securities (2) 1,622,519 46,377 2.86 % 1,540,726 37,828 2.46 %
Other interest-earning assets 363,370 22,783 6.27 % 241,520 13,380 5.54 %
Total interest-earning assets 9,787,828 $ 451,426 4.61 % 9,530,342 $ 394,978 4.14 %
Non-interest-earning assets 865,684 840,215
Total assets $ 10,653,512 $ 10,370,557
Interest-bearing liabilities:
Interest-bearing demand $ 1,986,215 $ 55,360 2.79 % $ 2,183,333 $ 37,774 1.73 %
Money market accounts 1,235,495 32,977 2.67 % 951,174 24,296 2.55 %
Savings and club deposits 667,836 5,130 0.77 % 793,303 2,231 0.28 %
Certificates of deposit 2,587,360 108,916 4.21 % 2,229,042 60,861 2.73 %
Total interest-bearing deposits 6,476,906 202,383 3.12 % 6,156,852 125,162 2.03 %
FHLB advances 1,454,674 70,418 4.84 % 1,315,401 62,398 4.74 %
Notes payable - - - % 22,780 918 4.03 %
Junior subordinated debentures 7,023 640 9.11 % 7,054 624 8.85 %
Other borrowings 55 3 5.45 % - - - %
Total borrowings 1,461,752 71,061 4.86 % 1,345,235 63,940 4.75 %
Total interest-bearing liabilities 7,938,658 $ 273,444 3.44 % 7,502,087 $ 189,102 2.52 %
Non-interest-bearing liabilities:
Non-interest-bearing deposits 1,420,104 1,539,354
Other non-interest-bearing liabilities 242,290 231,018
Total liabilities 9,601,052 9,272,459
Total stockholders' equity 1,052,460 1,098,098
Total liabilities and stockholders' equity $ 10,653,512 $ 10,370,557
Net interest income $ 177,982 $ 205,876
Interest rate spread (3) 1.17 % 1.62 %
Net interest-earning assets (4) $ 1,849,170 $ 2,028,255
Net interest margin (5) 1.82 % 2.16 %
Ratio of interest-earning assets to interest-bearing liabilities 123.29 % 127.04 %
(1) Includes loans held-for-sale, non-accrual and PCD loan balances.
(2) Includes debt securities available for sale, debt securities held to maturity and equity securities.
(3) Interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.
(4) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.
(5) Net interest margin represents net interest income divided by average total interest-earning assets.
Year Ended December 31,
Average Balance Interest Yield / Cost
(Dollars in thousands)
Interest earning assets:
Loans (1) $ 6,939,419 $ 263,559 3.80 %
Securities (2) 1,943,459 43,915 2.26 %
Other interest-earning assets 76,500 2,196 2.87 %
Total interest-earning assets 8,959,378 $ 309,670 3.46 %
Non-interest-earning assets 782,444
Total assets $ 9,741,822
Interest-bearing liabilities:
Interest-bearing demand $ 2,685,675 $ 11,307 0.42 %
Money market accounts 695,849 2,593 0.37 %
Savings and club deposits 922,916 466 0.05 %
Certificates of deposit 1,834,876 13,512 0.74 %
Total interest-bearing deposits 6,139,316 27,878 0.45 %
FHLB advances 547,158 13,449 2.46 %
Notes payable 30,084 1,194 3.97 %
Junior subordinated debentures 6,984 370 5.30 %
Other borrowings 55 2 3.64 %
Total borrowings 584,281 15,015 2.57 %
Total interest-bearing liabilities 6,723,597 $ 42,893 0.64 %
Non-interest-bearing liabilities:
Non-interest-bearing deposits 1,742,607
Other non-interest-bearing liabilities 210,280
Total liabilities 8,676,484
Total stockholders' equity 1,065,338
Total liabilities and stockholders' equity $ 9,741,822
Net interest income $ 266,777
Interest rate spread (3) 2.82 %
Net interest-earning assets (4) $ 2,235,781
Net interest margin (5) 2.98 %
Ratio of interest-earning assets to interest-bearing liabilities 133.25 %
(1) Includes loans held-for-sale, non-accrual and PCD loan balances.
(2) Includes debt securities available for sale, debt securities held to maturity and equity securities.
(3) Interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.
(4) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.
(5) Net interest margin represents net interest income divided by average total interest-earning assets.
Rate/Volume Analysis
The following table sets forth the effects of changing rates and volumes on our net interest income. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The total column represents the sum of the prior columns.
Year Ended 12/31/2024 Compared to Year Ended 12/31/2023 Year Ended 12/31/2023 Compared to Year Ended 12/31/2022
Increase (Decrease) Due to Increase (Decrease) Due to
Volume Rate Total Volume Rate Total
(In thousands)
Interest income:
Loans $ 2,389 $ 36,107 $ 38,496 $ 30,714 $ 49,497 $ 80,211
Securities 2,008 6,541 8,549 (9,100) 3,013 (6,087)
Other interest-earning assets 6,750 2,653 9,403 4,737 6,447 11,184
Total interest-earning assets $ 11,147 $ 45,301 $ 56,448 $ 26,351 $ 58,957 $ 85,308
Interest expense:
Interest-bearing demand $ (3,410) $ 20,996 $ 17,586 $ (2,115) $ 28,582 $ 26,467
Money market accounts 7,262 1,419 8,681 951 20,752 21,703
Savings and club deposits (353) 3,252 2,899 (65) 1,830 1,765
Certificates of deposit 9,783 38,272 48,055 2,903 44,446 47,349
Total interest-bearing deposits 13,282 63,939 77,221 1,674 95,610 97,284
FHLB advances 6,607 1,413 8,020 18,920 30,029 48,949
Notes payable (918) - (918) (290) 14 (276)
Junior subordinated debentures (3) 19 16 (27) 281 254
Other borrowings - 3 3 (2) - (2)
Total interest-bearing liabilities $ 18,968 $ 65,374 $ 84,342 $ 20,275 $ 125,934 $ 146,209
Net change in net interest income $ (7,821) $ (20,073) $ (27,894) $ 6,076 $ (66,977) $ (60,901)
Risk Management
Overview. Managing risk is an essential part of successfully managing a financial institution. Our most prominent risk exposures are credit risk, interest rate risk, liquidity risk, and market risk. Credit risk is the risk of not collecting the interest and/or the principal balance of a loan or investment when it is due. Interest rate risk is the potential reduction of interest income as a result of changes in interest rates. Liquidity risk is the possible inability to fund obligations to depositors, lenders or borrowers. Market risk arises from fluctuations in interest rates that may result in changes in the values of financial instruments, such as available for sale securities that are accounted for at fair value. Other risks that we face are operational risk, liquidity risk and reputation risk. Operational risk includes risks related to fraud, regulatory compliance, processing errors, cyber attacks, and disaster recovery. Liquidity risk is the possible inability to fund obligations to depositors, lenders or borrowers. Reputation risk is the risk that negative publicity or press, whether true or not, could cause a decline in our customer base or revenue.
We maintain a Risk Management Division comprised of our Risk Management, Compliance, Credit Risk Review, Collateral Risk, and Security Departments. Our Risk Management Division is led by our Senior Executive Vice President and Chief Risk Officer, who reports quarterly to Columbia Bank’s Risk Committee, which is comprised of the full board of directors. The current structure of our Risk Management Division is designed to monitor and address, among other things, financial, credit, collateral, consumer compliance, operational, Bank Secrecy Act, fraud, cyber security, vendor and insurable risks. The Risk Management Division utilizes a number of enterprise risk assessment tools, including stress testing, credit concentration reviews, peer analyses, industry considerations and individual risk assessments, to identify and report potential risks that we face in connection with our business operations.
Credit Risk Management. The objective of our credit risk management strategy is to quantify and manage credit risk and to limit the risk of loss resulting from an individual customer default. Our credit risk management strategy focuses on conservatism, diversification within the loan portfolio and monitoring. Our lending practices include conservative exposure limits and underwriting, documentation and collection standards. Our credit risk management strategy also emphasizes diversification on an industry and customer level as well as regular credit examinations and monthly management reviews of large credit exposures and loans experiencing deterioration in credit quality. Our credit risk review function provides objective assessments of the quality of
underwriting and documentation, the accuracy of risk ratings and the charge-off, non-accrual and impact on the reserve analysis process. Our credit review process and overall assessment of credit defaults and charge-offs on our allowance for credit losses is analyzed quarterly or as necessary. We use these assessments to identify potential problem loans within the portfolio, maintain an adequate reserve and take any necessary charge-offs when deemed appropriate.
When a borrower fails to make a required payment, we take a number of steps to have the borrower cure the delinquency and restore the loan to current status. Generally, our collection department follows the guidelines for servicing loans as prescribed by applicable law or the appropriate investor. Collection activities include, but are not limited to, phone calls to borrowers and collection letters, which include a late charge notice based on the contractual requirements of the specific loan. Additional calls and notices are mailed in compliance with state and federal regulations including, but not limited to, the Fair Debt Collection Practices Act. After the 90th day of delinquency for a residential mortgage or consumer loan, or on a different date as allowable by law or contract, the collection department will forward the account to counsel and begin the collection litigation which typically includes foreclosure proceedings, or we may periodically sell a delinquent loan to a third- party. If a foreclosure action is instituted and the loan is not in at least the early stages of a workout by the scheduled sale date, the real property securing the loan generally is sold at a sheriff sale. If we determine that there is a possibility of a settlement, pay-off or reinstatement, the sheriff sale may be postponed.
We charge off loans where management determines that the collection of loan principal and interest is unlikely. In addition to the individual review of larger commercial loans that exhibit probable or observed credit weaknesses, the commercial credit review process includes the use of an enhanced risk rating system. Historical portfolio performance metrics, current economic conditions and delinquency monitoring are factors used to assess the credit risk in our homogeneous commercial, residential and consumer loan portfolios.
Analysis of Non-Performing, Modification of Loans and Classified Assets. We consider repossessed assets and loans to be non-performing assets if they are 90 days or more in arrears of their contractual due date, or if the following criteria are met: i) the current debt-service coverage ratio is equal to or is in excess of 1.0x; ii) the guarantor does not demonstrate the capacity to support the annual debt service requirement; and iii) the loan-to-value percentage is greater than 90%. Non-accruing residential and consumer loans are returned to accrual status after there has been a sustained period of repayment performance (generally six months of payments) and both principal and interest are deemed collectible. Non-accruing commercial loans are returned to accrual status after there has been a sustained period of repayment performance and both principal and interest are deemed collectible.
Real estate that we acquire through foreclosure or by deed in lieu of foreclosure is classified as real estate owned until it is sold. When an asset is acquired, the excess of the loan balance over fair value less estimated costs to sell is charged to the allowance for credit losses. Operating results from real estate owned, including rental income, operating expenses, and gains and losses realized from the sales of real estate owned are recorded as incurred.
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.
Modified loans that were accruing prior to their modification where income was reasonably assured subsequent to the modification, maintain their accrual status. Modified loans for which collectability was not reasonably assured, are placed on non-accrual status, interest accruals cease, and uncollected accrued interest is reversed and charged against current income. Non-accruing modified loans may be returned to accrual status when there is a sustained period of repayment performance (generally six consecutive months of payments), and both principal and interest are deemed collectible.
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. See note 7 to our consolidated financial statements for further information on modification of loans.
The following table sets forth information with respect to our non-performing assets at the dates indicated, excluding PCD loans. We did not have any accruing loans past due 90 days or more at any of the dates indicated.
At December 31,
2024 2023 2022
(Dollars in thousands)
Non-accrual loans:
Real estate loans:
One-to-four family $ 8,750 $ 3,139 $ 2,730
Commercial real estate 2,920 2,740 2,892
Total real estate loans 11,670 5,879 5,622
Commercial business loans 9,785 6,518 801
Consumer loans:
Home equity loans and advances 246 221 286
Other consumer loans - - 12
Total consumer loans 246 221 298
Total non-accrual loans (1) 21,701 12,618 6,721
Total non-performing loans 21,701 12,618 6,721
Real estate owned 1,334 - -
Total non-performing assets $ 23,035 $ 12,618 $ 6,721
Total non-performing loans to total loans 0.28 % 0.16 % 0.09 %
Total non-performing assets total assets 0.22 % 0.12 % 0.06 %
(1) Includes $3.1 million and $237,000 of loan modifications on non-accrual status as of December 31, 2024 and 2023, respectively, and $23,000 of TDRs on non-accrual status as of December 31, 2022.
Non-performing assets increased $10.4 million to $23.0 million, or 0.22% of total assets, at December 31, 2024 from $12.6 million, or 0.12% of total assets, at December 31, 2023. The $10.4 million increase in non-performing assets was primarily attributable to an increase in non-performing commercial business loans of $3.3 million and an increase in nonperforming one-to-four family real estate loans of $5.6 million. The increase in non-performing commercial business loans primarily consists of two loans totaling $6.4 million at December 31, 2024, partially offset by the charge-off of a $3.7 million loan to a technology company during 2024. The increase in non-performing one-to-four family real estate loans was due to an increase in the number of loans from 17 non-performing loans at December 31, 2023 to 32 loans at December 31, 2024. Charge-offs are taken on loans where management determines that the collection of loan principal and interest is unlikely. We consider the population of loans in our impairment analysis to include all loan segments and not accruing interest, loans modified in a troubled debt restructuring if applicable, and other loans if there is specific information of a collateral shortfall. We continue to rigorously review our loan portfolio to ensure that the collateral values remain sufficient to support the outstanding balances.
Non-performing assets increased $5.9 million to $12.6 million, or 0.12% of total assets, at December 31, 2023 from $6.7 million, or 0.06% of total assets, at December 31, 2022. The $5.9 million increase in non-performing loans was primarily attributable to an increase in non-performing commercial business loans of $5.7 million and an increase in nonperforming one-to-four family real estate loans of $410,000. The increase in non-performing commercial business loans was due to an increase in the number of loans from three non-performing loans at December 31, 2022 to ten loans at December 31, 2023, including a $3.7 million loan to a technology company. The increase in non-performing one-to-four family real estate loans was due to an increase in the number of loans from 12 non-performing loans at December 31, 2022 to 17 loans at December 31, 2023. Non-performing assets as a percentage of total assets totaled 0.12% at December 31, 2023 as compared to 0.06% at December 31, 2022.
Federal regulations require us to review and classify our assets on a regular basis. In addition, our banking regulators have the authority to identify problem assets and, if appropriate, require them to be classified. Our credit review process includes a risk classification of all commercial and residential loans that includes four levels of pass, special mention, substandard, doubtful and loss. A loan is classified as pass when payments are current and it is performing under the original contractual terms. A loan is classified as special mention when the borrower exhibits potential credit weakness or a downward trend which, if not checked or corrected, will weaken the asset or inadequately protect our position. While potentially weak, the borrower is currently marginally acceptable; no loss of principal or interest is envisioned. A loan is classified as substandard when the borrower has a well-defined weakness or weaknesses that jeopardize the orderly liquidation of the debt. A substandard loan is inadequately protected by the current net worth and paying capacity of the obligor, normal repayment from this borrower is in jeopardy, and there is a distinct possibility that a partial
loss of interest and/or principal will occur if the deficiencies are not corrected. A loan is classified as doubtful when a borrower has all weaknesses inherent in a substandard loan with the added provision that: (1) the weaknesses make collection of debt in full on the basis of currently existing facts, conditions and values highly questionable and improbable; (2) serious problems exist to the point where a partial loss of principal is likely; and (3) the possibility of loss is extremely high, but because of certain important, reasonably specific pending factors that may work to the advantage and strengthening of the assets, its classification as an estimated loss is deferred until its more exact status may be determined. Pending factors include proposed merger, acquisition, or liquidation procedures, capital injection, perfecting liens and additional refinancing plans. A loan is classified as loss when all or a portion of the loan is considered uncollectible and of such little value that its continuance on our books without establishment of a specific valuation allowance or charge off is not warranted. This classification does not necessarily mean that the loan has no recovery or salvage value. Rather, it indicates that there is significant doubt about whether, how much or when recovery will occur.
A loan is considered delinquent when payment has not been received within 30 days of its contractual due date, or when the Company does not expect to receive all principal and interest payments owned substantially in accordance with the terms of the loan agreement, regardless of the past due status. Generally, a loan is designated as a non-accrual loan when the payment is 90 days or more in arrears of its contractual due date, or if the following criteria are met: i) the current debt-service coverage ratio is equal to or is
in excess of 1.0x; ii) the guarantor does not demonstrate the capacity to support the annual debt service requirement; and iii) the loan-to-value percentage is greater than 90%. Non-accruing residential and consumer loans are returned to accrual status after there has been a sustained period of repayment performance (generally six months of payments) and both principal and interest are deemed collectible. Non-accruing commercial loans are returned to accrual status after there has been a sustained period of repayment performance and both principal and interest are deemed collectible. The following tables summarize the aging of loans receivable by portfolio segment at the dates indicated:
At December 31,
2024 2023 2022
30-59 Days 60-89 Days 90 Days or More 30-59 Days 60-89 Days 90 Days or More 30-59 Days 60-89 Days 90 Days or More
(In thousands)
Real estate loans:
One-to-four family $ 11,685 $ 6,250 $ 3,729 $ 11,079 $ 4,254 $ 1,558 $ 4,063 $ 1,149 $ 1,808
Multifamily 13,626 - - - - - - - -
Commercial real estate 4,394 632 - 1,711 2,472 2,740 - 853 2,892
Construction 6,205 - - - - - 5,218 - -
Commercial business loans 3,713 2,643 2,365 1,727 4,917 6,518 220 - 474
Consumer loans:
Home equity loans and advances 1,026 372 126 779 14 170 465 33 286
Other consumer loans - 3 - 1 - - 3 1 12
Total $ 40,649 $ 9,900 $ 6,220 $ 15,297 $ 11,657 $ 10,986 $ 9,969 $ 2,036 $ 5,472
The following tables present criticized and classified assets by credit quality risk indicator at the dates indicated:
At December 31,
2024 2023 2022
(In thousands)
Classified loans:
Substandard $ 166,148 $ 47,604 $ 27,656
Doubtful - - -
Total classified loans 166,148 47,604 27,656
Special mention 40,386 36,778 57,327
Total criticized loans $ 206,534 $ 84,382 $ 84,983
All impaired loans classified as substandard and doubtful are written down to the fair value of their underlying collateral, less estimated costs to sell or liquidate, if the loan is collateral dependent.
Analysis and Determination of the Allowance for Credit Losses
The allowance for credit losses on loans is a valuation account that reflects management's evaluation of estimated losses in the current loan portfolio. We evaluate the need to establish allowances against losses on loans on a quarterly basis. When additional allowances are necessary, a provision for credit losses is charged to earnings. 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.
Individually Analyzed Loans. Management regularly monitors the condition of borrowers and assesses both internal and external factors in determining whether any relationships have deteriorated, considering factors such as historical loss experience, trends in delinquency and non-performing loans, changes in risk composition and underwriting standards, and regional and national economic conditions and trends.
Our loan officers and loan servicing staff identify and manage potential problem loans within our commercial loan portfolio. Non-performing assets within the commercial loan portfolio are transferred to the Special Assets Department for workout or litigation. The Special Assets Department reports directly to the Chief Executive Officer. Changes in management, financial or operating performance, company behavior, industry factors and external events and circumstances are evaluated on an ongoing basis to determine whether potential impairment is evident and additional analysis is needed. For our commercial loan portfolio, risk ratings are assigned to each individual loan to differentiate risk within the portfolio and are reviewed on an ongoing basis by credit management and the Credit Risk Review Department and revised, if needed, to reflect the borrower’s current risk profiles and the related collateral positions.
The risk ratings consider factors such as financial condition, debt capacity and coverage ratios, market presence and quality of management. When a credit’s risk rating is downgraded to a certain level, the relationship must be reviewed and detailed reports completed that document risk management strategies for the credit going forward, and the appropriate accounting actions to take in accordance with generally accepted accounting principles in the United States. When credits are downgraded beyond a certain level, our Special Assets and Loan Servicing Departments become responsible for managing the credit risk.
The Asset Classification Committee reviews risk rating actions (specifically downgrades or upgrades between pass and the criticized and classified categories) recommended by Lending, Loan Servicing, Commercial Credit, Credit Risk Review and/or Special Assets Departments on a quarterly basis. Our Commercial Credit, Credit Risk Review, Lending, and Loan Servicing Departments monitor our commercial, residential and consumer loan portfolios for credit risk and deterioration considering factors such as delinquency, loan to value ratios and credit scores.
When problem loans are identified that are secured with collateral, management examines the loan files to evaluate the nature and type of collateral supporting the loans. Management documents the collateral type, date of the most recent valuation, and whether any liens exist, to determine the value to compare against the committed loan amount. If a loan is identified as impaired and is collateral dependent, an updated appraisal is obtained to provide a baseline in determining the property’s fair value. A collateral dependent impaired loan is written down to its appraised value and a specific allowance is established to cover potential selling costs. If the collateral value is subject to significant volatility (due to location of asset, obsolescence, etc.) an appraisal is obtained more frequently. In-house revaluations are typically performed on a quarterly basis and updated appraisals are obtained annually, if determined necessary.
When we determine that the value of an impaired loan is less than its carrying amount, we recognize impairment through a charge-off to the allowance for credit losses. We perform these assessments on an ongoing basis. Charge-offs against the ACL are taken on loans where management determines that the collection of loan principal and interest is unlikely.
Collectively Analyzed Loans. Additionally, we reserve for certain inherent, but undetected, losses that are probable within the loan portfolio. This is due to several factors, such as, but not limited to, inherent delays in obtaining information regarding a customer’s financial condition or changes in their unique business conditions and the interpretation of economic trends. While this analysis is conducted at least quarterly, we have the ability to revise the allowance factors whenever necessary to address improving or deteriorating credit quality trends or specific risks associated with a given loan pool classification.
A comprehensive analysis of the allowance for credit losses on loans is performed on a quarterly basis. The entire allowance for credit losses on loans is available to absorb losses in the loan portfolio irrespective of the amount of each separate element of the ACL. Our principal focus, therefore, is on the adequacy of the total allowance for credit losses.
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. See note 2 to our consolidated financial statements for a detailed discussion of our accounting policies and methodologies for establishing the ACL.
The allowance for credit losses is subject to review by our banking regulators. On an annual basis our primary bank regulator conducts an examination of the allowance for credit losses and makes an assessment regarding its adequacy and the methodology employed in its determination.
At December 31,
2024 2023 2022
Amount % of Allowance to Total Allowance % of Allowance to Loans in Category Amount % of Allowance to Total Allowance % of Allowance to Loans in Category Amount % of Allowance to Total Allowance % of Allowance to Loans in Category
(Dollars in thousands)
Real estate loans:
One-to-four family $ 13,173 22.0 % 0.5 % $ 13,017 23.6 % 0.5 % $ 11,802 22.3 % 0.4 %
Multifamily 9,542 15.9 0.7 8,742 15.9 0.6 7,877 14.9 0.6
Commercial real estate 15,969 26.6 0.7 15,757 28.6 0.7 18,111 34.3 0.7
Construction 6,703 11.2 1.4 7,758 14.1 1.8 6,425 12.2 1.9
Commercial business 13,112 21.9 2.1 7,923 14.4 1.5 6,897 13.1 1.4
Consumer loans:
Home equity loans and advances 1,452 2.4 0.6 1,892 3.4 0.7 1,681 3.2 0.6
Other consumer loans 7 - 0.2 7 - 0.2 10 - 0.3
Total allowance for credit losses $ 59,958 100.0 % 0.8 % $ 55,096 100.0 % 0.7 % $ 52,803 100.0 % 0.7 %
Total Loans. During the year ended December 31, 2024, the balance of the allowance for credit losses increased by $4.9 million to $60.0 million, or 0.76% of total gross loans at December 31, 2024, from $55.1 million, or 0.70% of total gross loans at December 31, 2023. The increase in the total loan coverage ratio for the year ended December 31, 2024 was primarily attributable to net charge-offs of $9.6 million and an increase in loan performance qualitative factors.
One-to-Four Family Loan Portfolio. The portion of the allowance for credit losses related to the one-to-four family real estate loan portfolio totaled $13.2 million, or 0.5%, of one-to-four family loans at December 31, 2024, as compared to $13.0 million, or 0.5%, of one-to-four family real estate loans at December 31, 2023. Our one-to-four family non-accrual loans increased $5.6 million, or 178.8%, to $8.8 million at December 31, 2024 from $3.1 million at December 31, 2023. Net charge-offs were $9,000 for the year ended December 31, 2024 compared to $568,000 for the year ended December 31, 2023. We believe the one-to-four family real estate loan reserve ratio was appropriate given the continued low levels of charge-offs.
Multifamily Loan Portfolio. The portion of the allowance for credit losses related to the multifamily real estate loan portfolio totaled $9.5 million, or 0.7%, of multifamily loans at December 31, 2024, as compared to $8.7 million, or 0.6%, of multifamily loans at December 31, 2023. There were no multifamily non-accrual loans at December 31, 2024 and 2023. There were no charge-offs or recoveries for the years ended December 31, 2024 and 2023. We believe the multifamily loan reserve ratio was appropriate as there were no non-accrual loans or charge-offs.
Commercial Real Estate Loan Portfolio. The portion of the allowance for credit losses related to the commercial real estate loan portfolio totaled $16.0 million, or 0.7%, of commercial real estate loans at December 31, 2024, as compared to $15.8 million, or 0.7%, of commercial real estate loans at December 31, 2023. Commercial real estate non-accrual loans increased to $2.9 million at December 31, 2024, from $2.7 million at December 31, 2023. Net charge-offs were $84,000 for the year ended December 31, 2024 and $129,000 for the year ended December 31, 2023. We believe the commercial real estate loan reserve ratio was appropriate given the continued low balance of non-accrual loans along with low levels of charge-offs.
Construction Loan Portfolio. The portion of the allowance for credit losses related to the construction loan portfolio totaled $6.7 million, or 1.4%, of construction loans at December 31, 2024, as compared to $7.8 million, or 1.8%, of construction loans at December 31, 2023. At both December 31, 2024 and 2023, we had no non-accrual construction loans. There were no charge-offs and recoveries were $4,000 for the year ended December 31, 2024 and there were no charge-offs for the year ended December 31, 2023.
We believe the construction loan reserve ratio was appropriate as there were no non-accrual loans and no charge-offs, considering the inherent credit risk associated with this portfolio.
Commercial Business Loan Portfolio. The portion of the allowance for credit losses related to the commercial business loan portfolio totaled $13.1 million, or 2.1%, of commercial business loans at December 31, 2024, as compared to $7.9 million, or 1.5%, of commercial business loans at December 31, 2023. Commercial business non-accrual loans increased to $9.8 million at December 31, 2024, from $6.5 million at December 31, 2023. Net charge-offs were $9.3 million for the year ended December 31, 2024 compared to net recoveries of $1.7 million for the year ended December 31, 2023. We continue to take charge-offs where management determines that the collection of loan principal and interest is unlikely or for any collateral deficiency for non-performing loans. We believe the commercial business loan reserve ratio was appropriate given the inherent credit risk of commercial business loans.
Home Equity Loans and Advances. The portion of the allowance for credit losses related to the home equity loan portfolio totaled $1.5 million, or 0.6%, of home equity loans at December 31, 2024, as compared to $1.9 million, or 0.7%, of home equity loans at December 31, 2023. Home equity non-accrual loans increased to $246,000 at December 31, 2024, from $221,000 at December 31, 2023. Net recoveries were $19,000 for the year ending December 31, 2024 and $51,000 for the year ending December 31, 2023. We believe the home equity loan reserve was appropriate based upon the insignificant amount of delinquencies, non-accrual loans and charge-offs.
The following table sets forth an analysis of the activity in the allowance for credit losses for the periods indicated:
At or For the Years Ended December 31,
2024 2023 2022
(Dollars in thousands)
Allowance at beginning of period $ 55,096 $ 52,803 $ 62,689
Effect of the adopting ASU No. 2016-13 ("CECL") - - (16,443)
Initial allowance related to PCD loans - - 633
Provision for credit losses 14,451 4,787 5,969
Charge-offs:
Real estate loans:
One-to-four family (2) (585) (382)
Commercial real estate (120) (150) -
Total real estate loans (122) (735) (382)
Commercial business loans (9,814) (2,618) (190)
Consumer loans:
Home equity loans and advances - (26) (33)
Other consumer loans (262) (115) (33)
Total consumer loans (262) (141) (66)
Total charge-offs (10,198) (3,494) (638)
Recoveries:
Real estate loans:
One-to-four family 11 17 338
Commercial real estate 36 21 -
Construction 4 - -
Total real estate loans 51 38 338
Commercial business loans 536 879 208
Consumer loans:
Home equity loans and advances 19 77 45
Other consumer loans 3 6 2
Total consumer loans 22 83 47
Total recoveries 609 1,000 593
Net charge-offs (9,589) (2,494) (45)
Allowance at end of period: $ 59,958 $ 55,096 $ 52,803
Total gross loans outstanding $ 7,869,447 $ 7,824,665 $ 7,624,534
Average gross loans outstanding $ 7,801,939 $ 7,748,096 $ 6,939,419
ACL to total non-performing loans 276.29 % 436.65 % 785.64 %
ACL to total gross loans at end of period 0.76 % 0.70 % 0.69 %
Net charge-offs to average outstanding loans 0.12 % 0.03 % - %
The following table sets forth the ratio of net charge-offs (recoveries) to average loans outstanding by segment for the periods indicated:
For the Years Ended December 31,
2024 2023 2022
Real estate loans:
One-to-four family - % 0.02 % - %
Commercial real estate - 0.01 -
Commercial business loans 1.66 0.34 -
Consumer loans:
Home equity loans and advances (0.01) (0.02) -
Other consumer 9.11 4.07 1.45
Total loans 0.12 % 0.03 % - %
Interest Rate Risk Management
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. Depending on a bank’s asset/liability structure, adverse movements in interest rates could be either rising or falling interest rates. For example, a bank with predominantly long-term fixed-rate assets and short-term liabilities could have an adverse earnings exposure to a rising rate environment. Conversely, a short-term or variable-rate asset base funded by longer-term liabilities could be negatively affected by falling rates. This is referred to as re-pricing or maturity mismatch risk.
Interest rate risk also arises from changes in the slope of the yield curve (yield curve risk), from imperfect correlations in the adjustment of rates earned and paid on different instruments with otherwise similar re-pricing characteristics (basis risk), and from interest rate related options embedded in our assets and liabilities (option risk).
Our objective is to manage our interest rate risk by determining whether a given movement in interest rates affects our net interest income and the market value of our portfolio equity in a positive or negative way and to execute strategies to maintain interest rate risk within established limits. The results at December 31, 2024 indicate a level of risk within the parameters of our model. Our management believes that the December 31, 2024 results indicate a profile that reflects an acceptable level of interest rate risk exposures in both rising and declining rate environments for both net interest income and economic value.
Model Simulation Analysis. We view interest rate risk from two different perspectives. The traditional accounting perspective, which defines and measures interest rate risk as the change in net interest income and earnings caused by a change in interest rates, provides the best view of short-term interest rate risk exposure. We also view interest rate risk from an economic perspective, which defines and measures interest rate risk as the change in the market value of portfolio equity caused by changes in the values of assets and liabilities, which fluctuate due to changes in interest rates. The market value of portfolio equity, also referred to as the economic value of equity, is defined as the present value of future cash flows from existing assets, minus the present value of future cash flows from existing liabilities.
These two perspectives give rise to income simulation and economic value simulation, each of which presents a unique picture of our risk of any movement in interest rates. Income simulation identifies the timing and magnitude of changes in income resulting from changes in prevailing interest rates over a short-term time horizon (usually one or two years). Economic value simulation reflects the interest rate sensitivity of assets and liabilities in a more comprehensive fashion, reflecting all future time periods. It can identify the quantity of interest rate risk as a function of the changes in the economic values of assets and liabilities, and the corresponding change in the economic value of equity of Columbia Bank. Both types of simulation assist in identifying, measuring, monitoring and managing interest rate risk and are employed by management to ensure that variations in interest rate risk exposure will be maintained within policy guidelines.
We produce these simulation reports and review them regularly with our management, Asset/Liability Committee and Board Risk Committee. The simulation reports compare baseline (no interest rate change) to the results of an interest rate shock, to illustrate the specific impact of the interest rate scenario tested on income and equity. The model, which incorporates all asset and liability rate information, simulates the effect of various interest rate movements on income and equity value. The reports identify and measure our interest rate risk exposure present in our current asset/liability structure. Management considers both a static (current position) and dynamic (forecast changes in volume) analysis as well as non-parallel and gradual changes in interest rates and the yield curve in assessing interest rate exposures.
If the results produce quantifiable interest rate risk exposure beyond our limits, then the testing will have served as a monitoring mechanism to allow us to initiate asset/liability strategies designed to reduce and therefore mitigate interest rate risk.
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 December 31, 2024, 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 its subsidiaries only and does not include any assets of the Company.
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 $ 225,292 $ 6,488 2.97 % $ 793,383 8.97 % (33.76) %
+300 224,245 5,441 2.49 898,640 9.91 (24.97)
+200 222,926 4,122 1.88 1,003,387 10.78 (16.22)
+100 221,112 2,308 1.05 1,103,512 11.55 (7.86)
Base 218,804 - - 1,197,695 12.22 -
-100 216,141 (2,663) (1.22) 1,281,894 12.73 7.03
-200 214,007 (4,797) (2.19) 1,347,230 13.04 12.49
-300 211,401 (7,403) (3.38) 1,391,163 13.12 16.15
-400 200,260 (18,544) (8.48) 1,353,653 12.43 13.02
As of December 31, 2024, based on the scenarios above, net interest income would increase by approximately 1.88% if rates were to rise 200 basis points, and would decrease by 2.19% 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 the net portfolio value through the use of immediate and sustained interest rate shocks. As of December 31, 2024, 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 16.22%. If rates were to decrease 200 basis points, the model forecasts a 12.49% increase in the NPV.
Overall, our December 31, 2024 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
Liquidity risk is the risk of being unable to meet future financial obligations as they come due at a reasonable funding cost. We mitigate this 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 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 December 31, 2024, the potential liquidity from these sources is an amount we believe currently exceeds any contingent liquidity need.
Uses of Funds. Our primary uses of funds include the extension of loans and credit, the purchase of securities, working capital, and debt and capital management. In addition, contingent uses of funds may arise from events such as financial market disruptions.
We regularly adjust our investments in liquid assets based upon our assessment of: (1) expected loan demand, (2) expected deposit flows, (3) yields available on interest-earning deposits and securities, (4) repayment of borrowings, and (5) the objectives of our asset/liability management program. Excess liquid assets are generally invested in fed funds.
Sources of Funds. Our most liquid assets are cash and cash equivalents. The levels of these assets are dependent on our operating, investing and financing activities during any given period. At December 31, 2024, total cash and cash equivalents totaled $289.2 million. Debt securities classified as available for sale, and equity securities, which provide additional sources of liquidity, totaled $1.0 billion, and $6.7 million, respectively, at December 31, 2024. At December 31, 2024, we had $1.1 billion in Federal Home Loan Bank fixed rate advances. In addition, if Columbia Bank requires funds beyond its ability to generate them internally, it can borrow additional funds under an overnight advance program up to its maximum borrowing capacity based on their ability to collateralize such borrowings.
Our primary sources of funds include a large, stable deposit base. Core deposits (consisting of demand, money market and savings and club deposits), primarily generated from our retail branch network, are our largest and most cost-effective source of funding. Core deposits totaled $5.4 billion at both December 31, 2024 and 2023. We also maintain access to a diversified base of wholesale funding sources. These uncommitted sources include federal funds purchased from other banks, securities sold under agreements to repurchase, and FHLB advances. Aggregate wholesale funding totaled $1.1 billion at December 31, 2024, compared to $1.5 billion as of December 31, 2023. In addition, at December 31, 2024, we had the availability to borrow additional funds, subject to our ability to collateralize such borrowings from the FHLB of New York and the Federal Reserve Bank of New York.
A significant use of our liquidity is the funding of loan originations. At December 31, 2024, the Company had $125.0 million in loan commitments outstanding, which primarily consisted of commitments to fund loans of $9.8 million, $30.7 million, $33.0 million, $27.0 million, and $6.9 million, in one-to-four family real estate, commercial real estate, commercial business, construction, and home equity loans and advances, respectively. There was also $1.2 billion in unused commercial business, construction and consumer lines of credit, and $28.3 million in letters of credit. Since these commitments may expire without being drawn upon, and may have conditions, the total commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management's credit evaluation of the borrower. Another significant use of liquidity is the funding of deposit withdrawals. Certificates of deposit due within one year of December 31, 2024 totaled $2.4 billion, or 88.3% of total certificates of deposit. The large percentage of certificates of deposit that mature within one year reflects customers’ hesitancy to invest their funds for long periods. Management believes, however, based on past experience, that a significant portion of our certificates of deposit will be renewed. If these maturing deposits do not remain with us, we will be required to seek other sources of funds, including other certificates of deposit and borrowings. Depending on market conditions, we may be required to pay higher rates on such deposits and borrowings than we currently pay on the certificates of deposit due on or before December 31, 2024. We have the ability to attract and retain deposits by adjusting the interest rates offered.
Our primary investing activities are the origination of loans and the purchase of securities. Our primary financing activities consist of activity in deposit accounts, borrowings and treasury stock. Deposit flows are affected by the overall level of market interest rates, the interest rates and products offered by us, local competitors and other factors. We generally manage the pricing of our deposits to be competitive. Occasionally, we offer promotional rates on certain deposit products to attract deposits.
Columbia Financial is a separate legal entity from Columbia Bank and must provide for its own liquidity in addition to its operating expenses. Columbia Financial's primary source of income is dividends received from Columbia Bank. The amount of dividends Columbia Bank may declare and pay to Columbia Financial is generally restricted under federal regulations to the retained earnings of Columbia Bank. At December 31, 2024, on a stand-alone basis, Columbia Financial had liquid assets of $6.6 million.
Capital Management. We are subject to various regulatory capital requirements administered by our federal banking regulators, including a risk-based capital measure. The Federal Reserve establishes capital requirements, including well capitalized standards, for our consolidated financial holding company, and the OCC has similar requirements for our Company's subsidiary banks. The risk-based capital guidelines include both a definition of capital and a framework for calculating risk-weighted assets by assigning balance sheet assets and off-balance sheet items to broad risk categories. At December 31, 2024, we exceeded all of our regulatory capital requirements. We are considered “well capitalized” under regulatory guidelines. See “Item 1: Business - Regulation and Supervision - Federal Banking Regulations - Capital Requirements” and note 13 in the notes to the consolidated financial statements included in this report.
Off-Balance Sheet Arrangements. In the normal course of operations, we engage in a variety of financial transactions that, in accordance with generally accepted accounting principles, are not recorded in the consolidated financial statements. These transactions involve, to varying degrees, elements of credit, interest rate and liquidity risk. Such transactions are used primarily to manage customers’ requests for funding and take the form of loan commitments and lines of credit. For information about our loan commitments, see note 16 in the notes to the consolidated financial statements included in this report.
For the years ended December 31, 2024 and 2023, we did not engage in any off-balance sheet transactions reasonably likely to have a material effect on our financial condition, results of operations or cash flows.
Derivative Financial Instruments. Columbia Bank executes interest rate swaps with third parties in order to hedge the interest expense of short-term FHLB advances. Those interest rate swaps are simultaneous with entering into the short-term borrowings with the FHLB. These derivatives are designated as cash flow hedges and are not speculative. As these interest rate swaps meet the hedge accounting requirements, the effective portion of changes in the fair value are recognized in accumulated other comprehensive income. As of December 31, 2024, Columbia Bank had 31 interest rate swaps with notional amounts of $378.7 million hedging certain FHLB advances.
Columbia Bank presently offers interest rate swaps to commercial banking customers to manage their risk of exposure and risk management strategies. Those interest rate swaps are simultaneously hedged by offsetting interest rate swaps that Columbia Bank executes with a third-party, such that Columbia Bank would minimize its net risk exposure resulting from such transactions. These derivatives are not designated as hedges and are not speculative. Rather, these derivatives result from a service Columbia Bank offers to certain customers. As the interest rate swaps would not meet the hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting third-party swap contracts are recognized directly in earnings. At December 31, 2024, we had interest rate swaps in place with 84 commercial banking customers executed by offsetting interest rate swaps with third parties, with aggregated notional amounts of $298.8 million.
Columbia Bank offers currency forward contracts to certain commercial banking customers to facilitate international trade. Those forward contracts are simultaneously hedged by offsetting forward contracts that Columbia Bank would execute with a third- party, such that Columbia Bank would minimize its net risk exposure resulting from such transactions. These derivatives are not designated as hedges and are not speculative. Rather, these derivatives result from a service Columbia Bank offers to certain commercial customers. As the currency forward contract does not meet the hedge accounting requirements, changes in the fair value of both the customer forward contract and the offsetting forward contract is recognized directly in earnings. At December 31, 2024, Columbia Bank had no currency forward contracts in place with commercial banking customers.
The Company also uses interest rate swaps to manage its exposure to changes in fair value of certain of its fixed-rate pools of assets attributable to changes in the designated benchmark interest rate, of SOFR. At December 31, 2024, the Company had ten interest rate fair value swaps with notional amounts totaling $850.0 million.
Recent Accounting Pronouncements
For a discussion of the impact of recent accounting pronouncements, see note 2 in the notes to the consolidated financial statements included in this report.
Effect of Inflation and Changing Prices
The consolidated financial statements and related consolidated financial data presented in this report have been prepared in accordance with accounting principles generally accepted in the United States of America, which require the measurement of financial position and operating results in terms of historical dollars without considering changes in the relative purchasing power of money over time due to inflation. The primary impact of inflation on our operations is reflected in increased operating costs. Unlike most industrial companies, virtually all the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates generally have a more significant impact on a financial institution’s performance than do general levels of inflation. Interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services because such prices are affected by inflation to a larger extent than interest rates.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The information required by this item is incorporated herein by reference to the section captioned “Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financial Statements and Supplementary Data
The information required by this item is included beginning on page 74 of this report.
The following are included in this item:
(A) Report of Independent Registered Public Accounting Firm (PCAOB ID: 185)
(B) Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting
(C) Consolidated Financial Statements:
(1) Consolidated Statements of Financial Condition as of December 31, 2024 and 2023
(2) Consolidated Statements of Income for the years ended December 31, 2024, 2023 and 2022
(3) Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2024, 2023 and 2022
(4) Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31, 2024, 2023 and 2022
(5) Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023 and 2022
(6) Notes to the Consolidated Financial Statements
(D) Columbia Financial, Inc. Condensed Financial Statements
(1) Statements of Financial Condition as of December 31, 2024 and 2023
(2) Statements of Income and Comprehensive Income (Loss) for the years ended December 31, 2024, 2023 and 2022
(3) Statements of Cash Flows for the years ended December 31, 2024, 2023 and 2022

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. Change in and Disagreements With Accountants on Accounting and Financial Disclosure
None.

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ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. Controls and Procedures
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
An evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Exchange Act of 1934, as amended) as of December 31, 2024. 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 the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported as of the end of the period covered by this annual report.
Changes in Internal Control over Financial Reporting
There were no changes in the Company's internal control over financial reporting that occurred during the quarter ended December 31, 2024 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Management’s Report on Internal Control Over Financial Reporting
The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The Company's internal control system is a process designed to provide reasonable assurance to the Company's management and board of directors regarding the preparation and fair presentation of published financial statements.
The Company's internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; provide reasonable assurances that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted
accounting principles; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on its financial statements.
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those system determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness of future periods are subject to the risk that controls may be inadequate due to changes in conditions, or that the degree of compliance with policies and procedures may deteriorate.
As part of the Company’s program to comply with Section 404 of the Sarbanes-Oxley Act of 2002, our management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2024 (the “Assessment”). In making this Assessment, management used the control criteria framework of the Committee of Sponsoring Organizations (“COSO”) of the Treadway Commission published in its report entitled Internal Control - Integrated Framework (2013). Management’s Assessment included an evaluation of the design of the Company’s internal control over financial reporting and testing of the operational effectiveness of its internal control over financial reporting. Based on this assessment, the Company’s management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2024.
Report of Independent Registered Public Accounting Firm
The attestation report by the Company’s independent registered public accounting firm, KPMG LLP, on the Company’s internal control over financial reporting is included with the audited consolidated financial statements of the Company beginning on page 74 of this report.

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ITEM 9B. OTHER INFORMATION
Item 9B. Other Information
During the fiscal quarter ended December 31, 2024, none of the Company’s directors or officers informed the Company of the adoption or termination of a “Rule 10b5-1 trading arrangement or “non-Rule 10b5-1 trading arrangement,” as those terms are defined in Item 408 of Regulation S-K.

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. Directors, Executive Officers and Corporate Governance
Board of Directors
For information relating to the directors of the Company, the section captioned “Proposal 1-Election of Directors” in the Company’s Proxy Statement for the 2025 Annual Meeting of Stockholders is incorporated herein by reference.
Executive Officers
For information relating to officers of the Company, see Part I, Item 1, “Business-Information About Our Executive Officers” to this Annual Report on Form 10-K.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
For information regarding compliance with Section 16(a) of the Securities Exchange Act of 1934, section captioned “Stock Ownership” in the Company’s Proxy Statement for the 2025 Annual Meeting of Stockholders are incorporated herein by reference.
Disclosure of Code of Ethics
For information concerning the Company’s Code of Ethics, the information contained under the section captioned “Corporate Governance-Code of Ethics and Business Conduct” in the Company’s Proxy Statement for the 2025 Annual Meeting of Stockholders is incorporated by reference. A copy of the Code of Ethics and Business Conduct is available to stockholders on the Company’s website at www.columbiabankonline.com.
Corporate Governance
For information regarding the Audit Committee and its composition and the audit committee financial expert, the section captioned “Corporate Governance-Meetings and Committees of the Board of Directors-Audit Committee” in the Company’s Proxy Statement for the 2025 Annual Meeting of Stockholders is incorporated herein by reference. For information regarding the Company's insider trading policies and procedures, the section captioned "Corporate Governance-Insider Trading Policies and Procedures" in the Company's Proxy Statement for the 2025 Annual Meeting of Stockholders is incorporated herein by reference.

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ITEM 11. EXECUTIVE COMPENSATION
Item 11. Executive Compensation
For information regarding executive compensation, the sections captioned “Executive Compensation,” “Compensation Discussion & Analysis” and “Director Compensation” in the Company’s Proxy Statement for the 2025 Annual Meeting of Stockholders are incorporated herein by reference.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Information required by this item is incorporated herein by reference to the section captioned “Stock Ownership” in the Company’s Proxy Statement for the 2025 Annual Meeting of Stockholders.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain Relationships and Related Transactions and Director Independence
Certain Relationships and Related Transactions
For information regarding certain relationships and related transactions, the section captioned “Other Information-Transactions with Related Persons” in the Company’s Proxy Statement for the 2025 Annual Meeting of Stockholders is incorporated herein by reference.
Corporate Governance
For information regarding director independence, the section captioned “Proposal 1-Election of Directors” in the Company’s Proxy Statement for the 2025 Annual Meeting of Stockholders is incorporated herein by reference.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. Principal Accounting Fees and Services
For information regarding the principal accountant fees and expenses, the section captioned “Proposal 2-Ratification of Independent Registered Public Accounting Firm” in the Company’s Proxy Statement for the 2025 Annual Meeting of Stockholders is incorporated herein by reference.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits and Financial Statement Schedules
(1) The financial statements required in response to this item are incorporated herein by reference from Item 8 of this Annual Report on Form 10-K.
(2) All financial statement schedules are omitted because they are not required or applicable, or the required information is shown in the consolidated financial statements or the notes thereto.
(3) Exhibits
No. Description Location
3.1 Second Amended and Restated Certificate of Incorporation of Columbia Financial, Inc. Incorporated herein by reference to
Exhibit 3.1 to the Company’s Registration Statement on Form S-1 (File No. 333-221912), initially filed on December 5, 2017
3.2 Amended Bylaws of Columbia Financial, Inc.
Incorporated herein by reference to
Exhibit 3.1 to the Company’s Current Report on Form 8-K (File No. 001-38456), filed on May 23, 2024
4.0 Specimen Stock Certificate of Columbia Financial, Inc.
Incorporated herein by reference to
Exhibit 4.0 to the Company’s Registration Statement on Form S-1 (File No. 333-221912), initially filed on December 5, 2017
4.1 Description of Columbia Financial, Inc.'s Common Stock Registered Under Section 12 of the Securities Exchange Act of 1934
Incorporated herein by reference to
Exhibit 4.0 to the Company’s Registration Statement on Form S-1 (File No. 333-221912), initially filed on December 5, 2017
10.1 Employment Agreement between Columbia Financial, Inc., Columbia Bank and Thomas J. Kemly+
Incorporated herein by reference to
Exhibit 10.1 to the Company’s Registration Statement on Form S-1 (File No. 333-221912), initially filed on December 5, 2017
10.2 Employment Agreement between Columbia Financial, Inc., Columbia Bank and Dennis E. Gibney+
Incorporated herein by reference to
Exhibit 10.2 to the Company’s Registration Statement on Form S-1 (File No. 333-221912), initially filed on December 5, 2017
10.3 Employment Agreement between Columbia Financial, Inc., Columbia Bank and John Klimowich+ Incorporated herein by reference to
Exhibit 10.5 to the Company’s Registration Statement on Form S-1 (File No. 333-221912), initially filed on December 5, 2017
10.4 Employment Agreement between Columbia Financial, Inc., Columbia Bank and Allyson Schlesinger+ Incorporated herein by reference to
Exhibit 10.8 to the Company’s Annual Report on Form 10-K (File No. 001-38456), for the Year Ended December 31, 2018, filed on March 29, 2019
10.5 Employment Agreement between Columbia Financial, Inc., Columbia Bank and Oliver Lewis+ Incorporated herein by reference to Exhibit 10.10 to the Company’s Annual Report on Form 10-K (File No. 001-38456), for the Year Ended December 31, 2020, filed on March 1, 2021
10.6 Employment Agreement between Columbia Financial, Inc., Columbia Bank and W. Justin Jennings+ Incorporated herein by reference to
Exhibit 10.11 to the Company’s Annual Report on Form 10-K (File No. 001-38456), for the Year Ended December 31, 2021, filed on March 1, 2022
10.7 Employment Agreement between Columbia Financial, Inc., Columbia Bank and Jenifer W. Walden+
Incorporated herein by reference to
Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q (File No. 001-38456), for the Quarter Ended June 30, 2022 filed on August 9, 2022
10.8 Employment Agreement between Columbia Financial, Inc., Columbia Bank and Matthew Smith+ Filed herewith
10.9 Form of Columbia Bank Supplemental Executive Retirement Plan+
Incorporated herein by reference to
Exhibit 10.9 to the Company’s Registration Statement on Form S-1 (File No. 333-221912), initially filed on December 5, 2017
10.10 Columbia Bank Stock-Based Deferral Plan+
Incorporated herein by reference to
Exhibit 10.10 to the Company’s Registration Statement on Form S-1 (File No. 333-221912), initially filed on December 5, 2017
10.11 Columbia Bank Director Deferred Compensation Plan, as amended+ Incorporated herein by reference to
Exhibit 10.11 to the Company’s Registration Statement on Form S-1 (File No. 333-221912), initially filed on December 5, 2017
10.12 Columbia Bank Retirement Income Maintenance Plan+
Incorporated herein by reference to
Exhibit 10.12 to the Company’s Registration Statement on Form S-1 (File No. 333-221912), initially filed on December 5, 2017
10.13 Columbia Bank Non-Qualified Savings Income Maintenance Plan, as amended+
Incorporated herein by reference to
Exhibit 10.13 to the Company’s Registration Statement on Form S-1 (File No. 333-221912), initially filed on December 5, 2017
10.14 Columbia Financial, Inc. 2019 Equity Incentive Plan+
Incorporated by reference to Annex 1 to the Company's Definitive Proxy Materials on Schedule 14A (File No. 001-38456), filed on April 22, 2019
10.15 Amended and Restated Columbia Financial, Inc. Performance Achievement Incentive Plan+ Filed herewith
19.0 Insider Trading Policy Filed herewith
21.0 Subsidiaries Filed herewith
23.1 Consent of KPMG LLP Filed herewith
31.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
Filed herewith
31.2 Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
Filed herewith
32 Section 1350 Certification of Chief Executive Officer and Chief Financial Officer
Filed herewith
97 Columbia Financial, Inc. Incentive-Compensation Recoupment Policy Incorporated herein by reference to
Exhibit 97 to the Company’s Annual Report on Form 10-K(File No. 001-38456), for the Year Ended December 31, 2023, filed on February 29, 2024
101.0 The following materials from the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, 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 Statement of Changes in Stockholders’ Equity, (v) the Consolidated Statements of Cash Flows and (vi) the Notes to the Consolidated Financial Statements.
Filed herewithin
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+ Management contract or compensatory plan, contract or arrangement.