Business Overview
Columbia Financial, Inc. operates as a Delaware-organized mid-tier stock holding company for Columbia Bank (the “Bank”). The Company is a majority-owned subsidiary of Columbia Bank, MHC. Columbia Bank is a federally chartered savings bank headquartered in Fair Lawn, New Jersey. The Bank operates 70 full-service banking offices. Through this network, the Company offers traditional financial services to consumers and businesses within its market area. The consolidated financial results include the accounts of Columbia Financial, Inc., Columbia Bank, and the Bank’s wholly-owned subsidiaries.
Key Financial Performance Highlights
For the first quarter ended March 31, 2026, Columbia Financial reported significant year-over-year earnings growth, driven primarily by net interest margin expansion and a negative provision for credit losses.
- Net Income and EPS: The Company reported net income of $13.1 million for the quarter ended March 31, 2026. This represents an increase of $4.2 million from the $8.9 million reported for the quarter ended March 31, 2025. Earnings per basic and diluted share were $0.13, up from $0.09 in the prior-year period. Core net income, a non-GAAP measure adjusting for severance and merger-related expenses net of tax, was $14.9 million, compared to $9.1 million in the prior year.
- Net Interest Income (NII): NII for the first quarter was $60.4 million, an increase of $10.1 million, or 20.0%, from $50.3 million in the first quarter of 2025. This improvement was driven by a $6.7 million increase in interest income and a $3.4 million decrease in interest expense on deposits and borrowings.
- Interest Income: Total interest income reached $118.9 million. The increase was primarily due to growth in the average balances of loans and securities, alongside higher average loan yields.
- Interest Expense: Total interest expense was $58.5 million, down 5.4% from $61.8 million in the first quarter of 2025. A 75 basis point decrease in market interest rates during 2025 facilitated lower rates paid on new and repricing deposits and borrowings.
- Provision for Credit Losses: The Company recorded a provision for credit losses of $1.0 million for the quarter ended March 31, 2026. This represented a decrease of $2.0 million, or 67.4%, from the $2.9 million provision recorded in the quarter ended March 31, 2025. The reduction was largely attributable to an influx of net recoveries on loans and a lower overall loan receivable balance.
- Non-Interest Income: Non-interest income was $6.7 million, decreasing by $1.7 million, or 20.4%, from $8.5 million in the prior-year quarter. The decline was heavily influenced by a $1.5 million decrease in the change in fair value of equity securities and lower income from interest rate swaps.
- Non-Interest Expense: Non-interest expense increased by $3.6 million, or 8.3%, to $47.5 million. Key drivers included a $2.5 million increase in compensation and employee benefits and a $1.8 million rise in merger-related expenses, offset by a $1.1 million decrease in professional fees.
- Income Tax Expense: Income tax expense was $5.6 million, up from $3.1 million in the first quarter of 2025. The effective tax rate increased to 29.9% from 25.9%, largely due to non-deductible merger-related expenses and higher pre-tax income.
Segment-wise and Balance Sheet Performance
The Company’s balance sheet remained relatively flat, with total assets decreasing slightly by $8.3 million, or 0.1%, to $11.0 billion as of March 31, 2026, compared to December 31, 2025.
Asset Portfolio Composition:
- Cash and Cash Equivalents: Decreased by $63.9 million to $276.9 million, primarily deployed toward purchases of securities and loan originations.
- Securities: Debt securities available for sale increased by $76.9 million, or 6.8%, to $1.2 billion, driven by $138.2 million in purchases of U.S. government obligations and mortgage-backed securities. Conversely, debt securities held to maturity decreased by $18.4 million to $377.8 million due to maturities and repayments.
- Loans Receivable: Net loans decreased by $33.9 million, or 0.4%, to $8.2 billion. The contraction included declines in commercial real estate loans ($40.3 million), one-to-four family loans ($14.7 million), commercial business loans ($14.5 million), multifamily loans ($8.4 million), and home equity loans ($5.6 million). These declines were partially offset by a $51.3 million increase in construction loans. The Company reported total multifamily and commercial real estate loans of $4.1 billion, representing 57.3% of gross loans with a weighted average loan-to-value ratio of 51.9% and a debt service coverage ratio of 1.74.
Liability and Equity Composition:
- Deposits: Total deposits decreased by $72.1 million, or 0.9%, to $8.37 billion. Interest-bearing demand deposits experienced a notable decrease of $102.9 million due to seasonal outflows of municipal deposits. Non-interest-bearing demand deposits and money market accounts also decreased by $9.4 million and $13.8 million, respectively. Conversely, certificates of deposit increased by $52.4 million, and savings/club accounts increased by $1.6 million.
- Borrowings: Total borrowings increased by $60.0 million, or 5.1%, to $1.24 billion. This was driven by a net increase in short-term borrowings of $35.0 million and new long-term borrowings of $40.0 million, offset by $15.0 million in long-term borrowing repayments.
- Stockholders’ Equity: Total stockholders’ equity increased by $13.0 million, or 1.1%, to $1.2 billion, primarily bolstered by the $13.1 million in net income for the quarter.
Operational Metrics and Key Drivers
- Net Interest Margin (NIM): The Company reported a NIM of 2.42% for the quarter ended March 31, 2026. This reflects a 31 basis point expansion compared to 2.11% in the first quarter of 2025, and a 6 basis point sequential increase from 2.36% in the fourth quarter of 2025.
- Yield on Interest-Earning Assets: The weighted average yield increased 7 basis points year-over-year to 4.76%. The average yield on loans increased 12 basis points to 5.01%. The average yield on securities decreased 7 basis points to 3.38%, while the yield on other interest-earning assets dropped 97 basis points to 4.78%, driven by a 165 basis point decrease in the dividend rate received on Federal Home Loan Bank stock.
- Cost of Funds: The average cost of interest-bearing liabilities decreased 29 basis points to 2.92%. The cost of interest-bearing deposits decreased 30 basis points to 2.71%, and the average cost of borrowings decreased 32 basis points to 4.12%.
- Asset Quality: Non-performing loans at March 31, 2026, totaled $41.4 million, or 0.50% of total gross loans, up from $38.0 million, or 0.46%, at December 31, 2025. The $3.4 million increase was largely tied to a $10.6 million commercial real estate loan on a six-story mixed-use building added to non-performing status. This was partially mitigated by a $5.9 million decrease in non-performing construction loans, driven by a property transfer to other real estate owned. Net recoveries totaled $604,000 for the quarter, compared to net charge-offs of $857,000 in Q1 2025. The allowance for credit losses (ACL) increased to $68.8 million, representing 0.84% of total gross loans, driven by increased qualitative loss rates reflecting current and projected economic conditions.
- Profitability Ratios: Return on average assets (ROAA) was 0.48%, and core ROAA was 0.55%. Return on average equity (ROAE) was 4.55%, and core return on average tangible equity was 5.75%. The Company’s efficiency ratio was 70.73%, while the core efficiency ratio stood at 68.02%.
- Capital Adequacy: At the Company level, the estimated total capital to risk-weighted assets ratio stood at 15.14%. The Tier 1 capital to risk-weighted assets ratio was 14.23%, and the common equity tier 1 capital ratio was 14.14%. Book value per share was $11.27, and tangible book value per share was $10.15.
Management Commentary and Strategic Updates
Management noted that the first quarter was pivotal for Columbia Financial’s strategic trajectory. President and CEO Thomas J. Kemly highlighted the announcement of the Company’s intention to execute its second-step conversion offering, concurrently with a significant merger with Northfield Bancorp, Inc.
According to management, these dual transactions are expected to transform the franchise. The strategic rationale includes expanding the Company’s geographic footprint into new markets within the New York metro area, acquiring a lower-cost deposit base, and securing abundant capital to fuel future growth. Management confirmed that internal teams are actively engaged in integration planning to ensure a seamless customer transition. However, the completion of both the second-step conversion and the merger remains subject to standard closing conditions, including regulatory, stockholder, and member approvals.
Regarding underlying operational performance, CEO Kemly emphasized that core net income growth was driven by net interest margin expansion and a lower provision for credit losses. While the balance sheet remained relatively flat sequentially, management noted that elevated commercial loan prepayments offset solid loan production. Furthermore, the Company successfully reduced its cost of deposits by 6 basis points sequentially, despite operating in a highly competitive deposit market.
Notable Risks and Challenges
The Company’s forward-looking statements detailed several significant risk factors that could materially impact future results and the execution of its strategic initiatives:
Merger and Conversion Risks:
- Deal Termination: The risk of events, changes, or circumstances that could give either Columbia Financial or Northfield Bancorp the right to terminate the merger agreement.
- Regulatory Hurdles: The failure to obtain necessary regulatory approvals, the potential imposition of adverse conditions by regulators, or delays in receiving stockholder/member approvals.
- Integration and Execution: The possibility that integrating Northfield Bancorp may be more difficult, costly, or time-consuming than anticipated. Furthermore, anticipated cost savings and strategic benefits from the merger may not be realized.
- Second-Step Conversion: Risks related to the successful completion of the second-step conversion, including the possibility that the final independent appraisal will differ from the preliminary appraisal.
- Dilution and Market Reaction: Potential adverse reactions from customers or employees, changes in share prices before closing, and the dilutive effect of issuing common stock in the proposed transaction.
Macroeconomic and Industry Risks:
- Economic Conditions: Adverse changes in national and local economic conditions, including the impact of higher inflation, which could adversely affect borrowers’ ability to service and repay loans.
- Interest Rates and Monetary Policy: Vulnerability to changes in interest rates and shifts in monetary/fiscal policies by the U.S. Treasury and the Federal Reserve.
- Asset Quality and Real Estate: Fluctuations in real estate values, changes in loan default and charge-off rates, and the subsequent adequacy of loan loss reserves.
- Liquidity and Funding: Decreases in deposit levels that could necessitate increased, potentially higher-cost, borrowing to fund loans and securities.
- Operational Threats: The risk of cyber-attacks, technological breaches, and the inability of third-party service providers to perform.