Business Overview and History Columbia Financial, Inc. (NASDAQ:CLBK) is a mid-tier holding company for Columbia Bank, a federally chartered savings bank. The company has navigated through various challenges over the years, emerging stronger and more resilient. With a focus on strategic initiatives and a commitment to serving its customers, Columbia Financial is well-positioned to capitalize on new opportunities and drive long-term growth.
Columbia Financial was founded in 1927 and has a rich history of serving the financial needs of its local communities. The company operates primarily in New Jersey, with a presence in the metropolitan areas surrounding New York City and Philadelphia. Columbia Financial has grown organically and through strategic acquisitions, including the acquisitions of Atlantic Stewardship Bank in 2019, Roselle Bank in 2022, and Freehold Bank in 2021.
The company's core business activities include traditional banking services, such as deposit-taking, lending, and wealth management. Columbia Financial's loan portfolio is diversified, consisting of multifamily and commercial real estate loans, one-to-four family residential mortgages, commercial business loans, and consumer loans. The company's fee-based businesses, including title insurance and insurance agency operations, further contribute to its revenue streams.
In March 1997, Columbia Bank underwent a mutual holding company reorganization, with Columbia Financial, Inc. becoming the wholly-owned subsidiary of Columbia Bank, MHC. This structure remained in place until the company's minority public offering in 2018. Currently, Columbia Financial operates 68 full-service banking offices across 12 counties in New Jersey.
The acquisitions of Stewardship, Roselle, and Freehold allowed Columbia Financial to expand its branch network and customer base in New Jersey. However, the integrations did present some operational challenges, requiring significant time and resources from management. The company worked to streamline operations and realize cost synergies in the years following these mergers.
In addition to its branching and M&A initiatives, Columbia Financial has also focused on diversifying its revenue streams. The company has grown its title insurance, insurance agency, and wealth management businesses to complement its traditional commercial and consumer banking activities. This has helped reduce the company's reliance on net interest income amid a prolonged low interest rate environment.
Financials As of December 31, 2024, Columbia Financial reported total assets of $10.48 billion, with a net income of -$11.65 million and revenue of $179.88 million for the full year. The company's net interest margin stood at 1.82%, while its efficiency ratio was 100.81%. Columbia Financial's return on average assets and return on average equity were -0.11% and -1.09%, respectively, for the year ended December 31, 2024.
In the fourth quarter of 2024, Columbia Financial reported revenue of $57.31 million and a net loss of $21.22 million. The net loss in Q4 2024 was primarily attributable to a decrease in net interest income of $27.9 million, an increase in provision for credit losses of $9.7 million, and a decrease in non-interest income of $25.5 million. These were partially offset by a decrease in non-interest expense of $1.1 million and a decrease in income tax expense of $14.2 million.
Liquidity The company's liquidity position remains strong, with a cash and cash equivalents balance of $289.22 million as of December 31, 2024. Columbia Financial's capital ratios also exceed regulatory requirements, with a total risk-based capital ratio of 14.20% and a tier 1 leverage ratio of 10.02% as of the same date.
Columbia Financial also has access to additional borrowing capacity from the Federal Home Loan Bank of New York and the Federal Reserve Bank of New York, based on its ability to collateralize such borrowings. As of December 31, 2024, the company had $1.08 billion in total borrowings, consisting primarily of FHLB advances.
Lending Activities Columbia Bank offers a variety of loan products, including commercial, residential, and consumer loans. At December 31, 2024, the company's total gross loans stood at $7.87 billion. The largest segments of the loan portfolio were one-to-four family real estate loans ($2.71 billion or 34.4% of the total), multifamily loans ($1.46 billion or 18.6%), and commercial real estate loans ($2.34 billion or 29.7%). Commercial business loans totaled $622 million (7.9% of total), while home equity loans and advances were $259 million (3.3%).
The company has continued to emphasize commercial lending, with a focus on expanding its commercial real estate, multifamily, and commercial business loan portfolios. Over the past year, the commercial business loan portfolio increased by 16.7%, reflecting the company's strategic shift towards this higher-yielding segment.
Deposit Activities and Other Sources of Funding Columbia Bank's primary source of funds is its deposit base, which totaled $8.10 billion as of December 31, 2024. The deposit portfolio is composed of non-interest-bearing demand deposits (17.8% of total deposits), interest-bearing demand deposits (25.0%), money market accounts (15.3%), savings and club deposits (8.1%), and certificates of deposit (33.8%).
The company has focused on growing its core deposit base, including non-interest-bearing demand deposits and interest-bearing demand deposits, which together accounted for 42.8% of total deposits at the end of 2024. This shift in deposit mix has helped the company manage its funding costs in the rising interest rate environment.
Securities Activities Columbia Bank maintains a securities portfolio that includes U.S. government and agency obligations, mortgage-backed securities, collateralized mortgage obligations, municipal obligations, corporate debt securities, and equity securities. As of December 31, 2024, the company's total securities portfolio was $1.38 billion, consisting of $1.03 billion in available-for-sale securities and $392.8 million in held-to-maturity securities.
The available-for-sale securities portfolio was primarily composed of mortgage-backed securities and CMOs (60.7% of the total), followed by U.S. government and agency obligations (30.7%) and corporate debt securities (8.4%). The held-to-maturity portfolio was also heavily weighted towards mortgage-backed securities and CMOs, which accounted for 88.6% of the total.
Recent Developments and Outlook In December 2024, Columbia Financial announced a strategic repositioning of its balance sheet, selling $352.3 million of lower-yielding debt securities and using the proceeds to fund loan growth, purchase higher-yielding securities, and prepay higher-cost borrowings. This move was aimed at improving the company's net interest margin and earnings potential.
The COVID-19 pandemic presented significant challenges for the banking industry, and Columbia Financial was not immune to its effects. The company experienced increased provision for credit losses and pressure on net interest income due to the low-interest-rate environment. However, the company has demonstrated resilience, implementing cost-cutting measures and capitalizing on growth opportunities, such as the acquisitions of Roselle Bank and Freehold Bank.
Looking ahead, Columbia Financial is focused on expanding its commercial lending activities, growing its fee-based businesses, and enhancing its digital capabilities to better serve its customers. The company's management team has a proven track record of navigating through economic cycles and is well-positioned to guide the organization through the current challenges and into a new phase of growth.
Risks and Concerns Despite the company's efforts to diversify its revenue streams and manage risk, Columbia Financial remains exposed to certain challenges. The highly competitive banking environment, potential regulatory changes, and the ongoing impact of the COVID-19 pandemic could pose risks to the company's financial performance and growth prospects.
Additionally, the company's concentration in the New Jersey and metropolitan New York and Philadelphia markets makes it vulnerable to regional economic conditions. Potential declines in real estate values or increases in unemployment within its primary market area could adversely affect the company's loan portfolio and asset quality.
Conclusion Columbia Financial has navigated through various challenges, including the impact of the COVID-19 pandemic, and has emerged as a stronger and more resilient organization. The company's strategic initiatives, such as the recent balance sheet repositioning, are aimed at improving its financial performance and positioning it for long-term growth.
While the company faces certain risks, including competition, regulatory changes, and regional economic conditions, Columbia Financial's experienced management team, diversified business model, and strong capital position suggest that it is well-prepared to capitalize on new opportunities and deliver value to its shareholders. As the banking industry continues to evolve, Columbia Financial is poised to adapt and thrive in the years to come.