COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (continued)
(In thousands)
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2022 | | 2021 | | 2020 |
Acquisitions: | | | | | |
Non-cash assets acquired: | | | | | |
Debt securities available for sale | $ | 79,024 | | | $ | 118,017 | | | $ | 51,479 | |
Debt securities held to maturity | — | | | — | | | 13,418 | |
Equity securities | 1,075 | | | — | | | 1,796 | |
Federal Home Loan Bank stock | 906 | | | 3,032 | | | 2,010 | |
Loans receivable | 335,501 | | | 158,912 | | | 171,593 | |
Accrued interest receivable | 910 | | | 867 | | | 679 | |
Office properties and equipment, net | 7,296 | | | 5,934 | | | 5,774 | |
Bank-owned life insurance | 13,033 | | | 8,661 | | | 17,245 | |
Goodwill and intangibles | 9,780 | | | 42 | | | — | |
Other assets | 6,356 | | | 616 | | | 7,964 | |
Total non-cash assets acquired | $ | 453,881 | | | $ | 296,081 | | | $ | 271,958 | |
Liabilities assumed: | | | | | |
Deposits | $ | 502,732 | | | $ | 210,117 | | | $ | 333,234 | |
Borrowings | 5,762 | | | 59,908 | | | 37,728 | |
Advance payments by borrowers for taxes and insurance | 1,341 | | | 495 | | | 982 | |
Accrued expenses and other liabilities | 10,568 | | | 4,822 | | | 5,400 | |
Total liabilities assumed | $ | 520,403 | | | $ | 275,342 | | | $ | 377,344 | |
Net non-cash (liabilities assumed) assets acquired | $ | (66,522) | | | $ | 20,739 | | | $ | (105,386) | |
Net cash and cash equivalents acquired in acquisitions | $ | 140,769 | | | $ | 20,417 | | | $ | 155,248 | |
| | | | | |
See notes to consolidated financial statements. |
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) Business
On April 1, 2020, the Company completed its acquisition of RSB Bancorp, MHC, RSB Bancorp, Inc. and Roselle Bank (collectively, the "Roselle Entities" or "Roselle"). Pursuant to the terms of the Merger Agreement, RSB Bancorp, MHC merged with and into the MHC, with the MHC as the surviving entity; RSB Bancorp, Inc. merged with and into Columbia Financial, with Columbia Financial as the surviving entity; and Roselle Bank merged with and into the Bank, with the Bank as the surviving institution. Under the terms of the merger agreement, depositors of Roselle Bank became depositors of the Bank and have the same rights and privileges in the MHC as if their accounts had been established at the Bank on the date established at Roselle Bank. The Company issued 4,759,048 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, at the effective time of the merger.
On December 1, 2021, the Company completed its acquisition of Freehold Bancorp, MHC, Freehold Bancorp, Inc. and Freehold Bank (collectively, the "Freehold Entities" or "Freehold"). Pursuant to the terms of the Merger Agreement, Freehold Bancorp, MHC merged with and into the MHC, with the MHC as the surviving entity; and Freehold Bancorp, Inc. merged with and into Columbia Financial, with Columbia Financial as the surviving entity. In connection with the merger, Freehold Bank converted to a federal savings bank and will operate as a wholly-owned subsidiary of Columbia Financial until November 6, 2023, the effective date of the merger of Freehold Bank into Columbia Bank. Under the terms of the merger agreement, depositors of Freehold Bank became depositors of the Bank and have the same rights and privileges in the MHC as if their accounts had been established at Columbia Bank on the date established at Freehold Bank. The Company issued 2,591,007 shares of its common stock to the MHC, representing an amount equal to the fair value of the Freehold Entities as determined by an independent appraiser, at the effective time of the holding company mergers.
On May 1, 2022, the Company completed its acquisition of RSI Bancorp, MHC, RSI Bancorp, Inc. and RSI Bank (collectively, the “RSI Entities”). Pursuant to the terms of the merger agreement, RSI Bancorp, M.H.C. merged with and into the MHC, with the MHC as the surviving entity; RSI Bancorp, Inc. merged with and into Columbia Financial, with Columbia Financial as the surviving entity; and RSI Bank merged with and into Columbia Bank, with Columbia Bank as the surviving institution. Under the terms of the merger agreement, depositors of RSI Bank became depositors of Columbia Bank and have the same rights and privileges in the MHC as if their accounts had been established at Columbia Bank on the date established at RSI Bank. The Company issued 6,086,314 shares of its common stock to the MHC, representing an amount equal to the discounted fair value of the RSI Entities as determined by an independent appraiser, at the effective time of the merger.
(2) Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of Columbia Financial, Inc., its wholly-owned subsidiaries, Columbia Bank ("Columbia"), Freehold Bank ("Freehold"), and Highlander Investment Co. (inactive), and Columbia's wholly-owned subsidiaries, Columbia Investment Services, Inc., 2500 Broadway Corp., 1901 Residential Management Co. LLC, Plaza Financial Services, Inc., First Jersey Title Services, Inc., Real Estate Management Corp. LLC, 1901 Commercial Management Co. LLC, Stewardship Realty LLC, CSB Realty Corp., and RSI Insurance Agency, Inc., (collectively, the “Company”). The accounts of the MHC are not consolidated in the consolidated financial statements of the Company. In consolidation, all intercompany accounts and transactions are eliminated. Certain reclassifications have been made in the consolidated financial statements to conform with current year classifications.
The Bank's wholly owned subsidiary, Stewardship Realty, LLC, incorporated as a New Jersey corporation in 2005 was acquired in the Company's merger with Stewardship in November 2019. It is a service corporation originally organized to hold and manage property in Midland Park which was previously occupied by Atlantic Stewardship Bank.
The Company also owns 100% of the common stock of Stewardship Statutory Trust I, which is a trust incorporated in Delaware which was also acquired in the Company's merger with Stewardship in November 2019. In accordance with ASC Topic 810, Consolidation, this Trust was classified as a variable interest entity and did not satisfy the conditions for consolidation. Accordingly, this Trust, which owns $7.0 million of trust preferred securities, which represents 100% of the assets, is treated as an unconsolidated subsidiary.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(2) Summary of Significant Accounting Policies (continued)
Basis of Financial Statement Presentation
The consolidated financial statements of the Company have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), including the elimination of all significant intercompany accounts and transactions during consolidation. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the dates of the Consolidated Statements of Financial Condition, and Consolidated Statements of Income for the periods presented. Actual results could differ from these estimates. Material estimates that are particularly susceptible to change are the determination of the adequacy of the allowance for credit losses, evaluation of goodwill for impairment, evaluation of other-than-temporary impairment on securities, evaluation of the need for valuation allowances on deferred tax assets, and determination of liabilities related to retirement and other post-retirement benefits, among others. These estimates and assumptions are evaluated on an ongoing basis using factors, including the current economic environment, which management believes to be reasonable under the circumstances. Such estimates and assumptions are adjusted when facts and circumstances dictate. Illiquid credit markets, volatile securities markets, and declines in the housing market and the economy generally have combined to increase the uncertainty inherent in such estimates and assumptions. Changes in estimates resulting from continuing changes in the economic environment will be reflected in the consolidated financial statements in future periods.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, amounts due from banks, interest-bearing deposits at other financial institutions and short-term investments.
Securities
Securities are classified as available for sale and held to maturity. Management determines the appropriate classification of securities at the time of purchase. Securities that management has the positive intent and ability to hold to maturity are classified as held to maturity and reported at amortized cost. Securities not classified as held to maturity are classified as available for sale and carried at estimated fair value, with unrealized holding gains or losses, net of taxes, reported as a separate component of accumulated other comprehensive income or loss ("OCI") included in stockholders' equity.
Effective January 1, 2022, the Company adopted the provisions of ASC 326 and modified its accounting policy for the assessment of available for sale securities for impairment. Under ASC 326 for available for sale securities, the Company first assesses whether a loss is from credit or other factors and considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency and adverse conditions related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows is less than the amortized cost, a credit loss would be recorded through an allowance for credit losses, limited by the amount that the fair value is less than the amortized cost basis.
The fair values of these securities are based on market quotations or matrix pricing as discussed in note 17. The Company evaluates securities for other-than-temporary impairment at each reporting period and more frequently when economic or market conditions warrant such evaluation. In this evaluation, if such declines were deemed other-than temporary, management would measure the total credit-related component of the unrealized loss, and recognize that portion of the loss as a charge to current period earnings. The remaining portion of the unrealized loss would be recognized as an adjustment to OCI. The fair value of the securities portfolio is significantly affected by changes in interest rates. In general, as interest rates rise, the fair value of fixed-rate securities decreases and as interest rates fall, the fair value of fixed-rate securities increases. The Company determines if it has the intent to sell securities or if it more likely than not that the Company would be required to sell the securities before the anticipated recovery. If either exists, the decline in value is considered other-than-temporary and would be recognized in current period earnings.
Premiums and discounts on securities are generally amortized and accreted to income over the contractual lives of the securities using the level-yield method. Premiums on callable securities are amortized to the earliest call date. Dividend and interest income are recognized when earned. Realized gains and losses are recognized when securities are sold or called based on the specific identification method.
In the ordinary course of business, securities are pledged as collateral in conjunction with the Company’s borrowings, lines of credit, and public funds on deposit.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(2) Summary of Significant Accounting Policies (continued)
Federal Home Loan Bank Stock
The Banks, as members of the Federal Home Loan Bank of New York (the "FHLB"), are required to hold shares of capital stock of the FHLB based on its activities, primarily its outstanding borrowings. The investment is carried at cost, or par value, which approximates fair value. Cash dividends are reported as income.
Loans Held-for-Sale
Loans held-for-sale consists of loans intended for sale in the secondary market. These loans are carried at the lower of cost or estimated fair value, less costs to sell, as determined on an individual loan basis. Net unrealized losses, if any, are recognized in a valuation allowance through a charge to earnings. Origination fees and costs on loans held-for-sale are deferred and recognized on settlement dates as a component of the gain or loss on sale. Loans held-for-sale are generally sold with loan servicing rights retained by Columbia Bank.
Loans Receivable
Loans receivable are carried at unpaid principal balances adjusted by unamortized premiums and unearned discounts, net deferred origination fees and costs, purchase accounting fair value adjustments and the allowance for credit losses. The Company defers loan origination fees and certain direct loan origination costs and accretes such amounts as an adjustment to the yield over the expected lives of the related loans using the level-yield method. Interest income on loans is accrued on unpaid principal balances and credited to income as earned. Premiums and discounts on loans purchased are amortized or accreted as an adjustment to yield over the contractual lives of the related loans using methodologies which approximate the level-yield method.
A loan is considered delinquent when payment has not been received within 30 days of its contractual due date. Generally, a loan in designated as a non-accrual loan when the payment of interest is 90 days or more in arrears of its contractual due date. When a loan is placed on non-accrual status, any interest accrued but not received is reversed against interest income. Payments received on a non-accrual loan are either applied to the outstanding principal balance or recorded as interest income, depending on an assessment of the ability to collect the loan. Non-accruing loans are returned to accrual status after there has been a sustained period of repayment performance (generally six consecutive months of payment) and both principal and interest are deemed collectible. The Company identifies loans that may need to be charged-off as a loss, by reviewing all delinquent loans, classified loans and other loans that management may have concerns about collectability.
On a case-by-case basis, the Company may evaluate individual loans for which it is probable, based on current information, that the Company will not collect all amounts due under the contractual terms of the loan agreement. The Company considers the population of loans in its analysis to include all multifamily and commercial real estate, construction, and commercial business loans with an outstanding balance greater than $500,000 and not accruing interest, and loans modified in a troubled debt restructuring. The Company also considers residential real estate, and home equity loans and advances that are not accruing or modified in a troubled debt restructuring. Other loans may be included in the population of loans to be evaluated if management has specific information of a collateral shortfall. Loans individually analyzed are measured based on the present value of expected future cash flows discounted at the loan's effective interest rate or, as a practical expedient, at the loan's observable market price or the fair value of the collateral if the loan is collateral dependent. Payments received on individually analyzed loans are recognized on a cash basis.
Purchased Credit-Deteriorated ("PCD") Loans
Loans acquired in a business combination that have experienced more-than-insignificant deterioration in credit quality since origination are considered purchased with credit deterioration (“PCD”) loans. The Company evaluated acquired loans for deterioration in credit quality based on any of, but not limited to, the following: (1) non-accrual status; (2) troubled debt restructured designation; (3) risk ratings of special mention, substandard or doubtful; and (4) delinquency status. At the acquisition date, an estimate of expected credit losses was made for groups of PCD loans with similar risk characteristics and individual PCD loans without similar risk characteristics. This initial allowance for credit losses is allocated to individual PCD loans and added to the purchase price or acquisition date fair values to establish the initial amortized cost basis of the PCD loans. As the initial allowance for credit losses is added to the purchase price, there is no credit loss expense recognized upon acquisition of a PCD loan. Any difference between the unpaid principal balance of PCD loans and the amortized cost basis is considered to relate to noncredit factors and results in a discount or premium. Discounts and premiums are recognized through interest income on a level-yield method over the life of the loans. For acquired loans not deemed PCD at acquisition, the differences between the initial fair value and the unpaid principal balance are recognized as interest income on a level-yield basis over the lives of the related loans. At the acquisition date, an initial allowance for expected credit losses is estimated and recorded as credit loss expense.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(2) Summary of Significant Accounting Policies (continued)
Allowance for Credit Losses on Loans Receivable
The calculation of the allowance for credit losses (“ACL”) on loans is a critical accounting policy of the Company because of the high degree of judgment involved, the subjectivity of the assumptions used, and the potential for changes in the economic environment that could result in changes to the ACL amount of the recorded allowance. 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.
Portfolio segments are defined as the level at which an entity develops and documents a systematic methodology to determine its allowance for credit losses. Management developed segments for estimating losses based on the type of borrower and collateral which is generally based upon federal call report segmentation. The segments have been combined or sub-segments have been added as needed to ensure loans of similar risk profiles are appropriately pooled.
We maintain a loan review system that provides a periodic review of the loan portfolio and the identification of individually analyzed loans. The ACL for individually analyzed loans is based on the fair value of collateral or cash flows. While management uses the best information available to make such evaluations, future adjustments to the allowance may be necessary if economic conditions differ substantially from the assumptions used in making the evaluations.
The ACL quantitative allowance for each segment is measured using a discounted cash flow methodology incorporating an econometric, probability of default (“PD”) and loss given default (“LGD”) with distinct segment-specific multi-variant regression models applied. Expected credit losses are estimated over the life of the loans by measuring the difference between the net present value of modeled cash flows and amortized cost basis. Contractual cash flows over the contractual life of the loans are the basis for the modeled cash flows, adjusted for model defaults and expected prepayments and discounted at the loan-level effective interest rate. The contractual term excludes expected extensions, renewals, and modifications.
Management estimates the ACL using relevant and reliable information from internal and external sources, related to past events, current conditions, and a reasonable and supportable forecast. Historical credit loss experience for both the Company and its segment-specific peers provide the basis for the estimate of expected credit losses. Credit losses over a defined period are converted to PD rate curves through the use of segment-specific LGD risk factors that convert default rates to loss severity based on industry-level, observed relationships between the two variables for each segment, primarily due to the nature of the underlying collateral. These risk factors were assessed for reasonableness against the Company’s own loss experience and adjusted in certain cases when the relationship between the Company’s historical default and loss severity deviate from that of the wider industry. The historical PD curves, together with corresponding economic conditions, establish a quantitative relationship between economic conditions and loan performance through an economic cycle.
Using the historical relationship between economic conditions and loan performance, management’s expectation of future loan performance is incorporated using a single economic forecast of macroeconomic variables (i.e. unemployment, gross domestic product, vacancy, and home price index). This forecast is applied over a period that management has determined to be reasonable and supportable. Beyond the period over which management can develop or source a reasonable and supportable forecast, the model reverts to long-term average historical loss rates using a straight-line, time-based methodology. The Company's current forecast period is six quarters, with a four-quarter reversion period to long-term average historical loss rates.
After quantitative considerations, management applies additional qualitative adjustments that consider the expected impact of certain factors not fully captured in the quantitative reserve. Qualitative adjustments include but are not limited to concentrations of large loan balances, delinquency trends, change in collateral values within segments, and other considerations.
The ACL is established through the provision for credit losses that are charged to income, which is based upon an evaluation of estimated losses in the current loan portfolio, including the evaluation of individually analyzed loans. Charge-offs against the ACL are taken on loans where management determines that the collection of loan principal and interest is unlikely. Recoveries made on loans that have been charged-off are credited to the ACL. Although we believe we have established and maintained the ACL on loans at appropriate levels, changes in reserves may be necessary if actual economic and other conditions differ substantially from the forecast used in estimating the ACL.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(2) Summary of Significant Accounting Policies (continued)
Allowance for Credit Losses on Loans Receivable (continued)
Our financial results are affected by the changes in and the level of the ACL. This process involves our analysis of internal and external variables, and it requires that we exercise judgment to estimate an appropriate ACL. As a result of the uncertainty associated with this subjectivity, we cannot assure the precision of the amount reserved, should we experience sizable loan losses in any particular period and/or significant changes in assumptions or economic condition. We believe the primary risks inherent in the portfolio are a general decline in the economy, a decline in real estate market values, rising unemployment, increasing vacancy rates, and increases in interest rates in the absence of economic improvement or any other such factors. Any one or a combination of these events may adversely affect a borrower's ability to repay its loan, resulting in increased delinquencies and loan losses. Accordingly, we have recorded loan credit losses at a level which is estimated to represent the current risk in its loan portfolio.
Most of our non-performing assets are collateral dependent loans which are written down to the fair value of the collateral less estimated costs to sell. We continue to assess the collateral of these loans and update our appraisals on these loans on an annual basis. To the extent the property values decline, there could be additional losses on these non-performing assets, which may be material. Management considered these market conditions in deriving the estimated ACL. Should economic difficulties occur, the ultimate amount of loss could vary from our current estimate.
Allowance for Credit Losses on Unfunded Commitments
The Company is required to include unfunded commitments that are expected to be funded in the future within the allowance for credit loss calculation, other than those that are unconditionally cancellable. To arrive at that reserve, the reserve percentage for each applicable segment is applied to the unused portion of the expected commitment balance and is multiplied by the expected funding rate. To determine the expected funding rate, the Company uses a historical utilization rate for each segment. The allowance for credit losses for off-balance-sheet exposures is reported in other liabilities in the Consolidated Statements of Financial Condition. The liability represents an estimate of expected credit losses arising from off-balance-sheet exposures such as unfunded commitments.
Troubled Debt Restructurings
Troubled debt restructured loans are those loans where the Company has granted a concession it would not otherwise consider because of economic or legal reasons pertaining to a debtor’s financial difficulties. A concession could include a reduced interest rate below a market rate, an extension of the term of the loan, or a combination of the two methods, but generally does not result in the forgiveness of principal or accrued interest. Not all concessions granted by the Company constitute a troubled debt restructuring. Once an obligation has been restructured and designated as a troubled debt restructuring, it continues to be designed as a restructured loan until paid in full. The Company records an impairment charge equal to the difference between the present value of expected future cash flows under the restructured terms discounted at the loan’s original effective interest rate, and the loan’s carrying value.
Restructured loans that were accruing prior to the restructuring, where income was reasonably assured subsequent to the restructuring, maintain their accrual status. Restructured 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 restructured 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.
In March 2020, various regulatory agencies, including the Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corporations issued an interagency statement on loan modifications and reporting for financial institutions working with customers affected by COVID-19. The interagency statement was effective immediately and impacted accounting for loan modifications. Section 4013 of the CARES Act, “Temporary Relief from Troubled Debt Restructurings,” allowed banks to temporarily suspend certain requirements under GAAP related to TDRs for a limited period of time to account for the effects of COVID-19. The Banks each elected to account for modifications on certain loans under Section 4013 of the CARES Act or, if the loan modification was not eligible under Section 4013, used the criteria in the COVID-19 guidance to determine when the loan modification was not a TDR in accordance with ASC 310-40. Guidance noted that modification or deferral programs mandated by the federal or a state government related to COVID-19 would not be in the scope of ASC 310-40, such as a state program that requires all institutions within that state to suspend mortgage payments for a specified period. These short-term loan modifications were not treated as a troubled debt restructuring during the short-term modification period if the loan was not in arrears at December 31, 2019. Furthermore, based on current evaluations, generally, we continued the accrual of interest on these loans during the short-term modification period.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(2) Summary of Significant Accounting Policies (continued)
Troubled Debt Restructurings (continued)
The Consolidated Appropriations Act, 2021, which was enacted in late December 2020, extended certain provisions of the CARES Act through January 1, 2022, including provisions permitting loan deferral extension requests to not be treated as troubled debt restructurings. Subsequent modifications to these loans are evaluated for troubled debt restructuring accounting treatment.
Loans Sold and Serviced
The Company has entered into Guarantor Swaps with Freddie Mac to improve its liquidity. In these types of transactions, the Company sells mortgage loans in exchange for Freddie Mac Mortgage Participation Certificates backed exclusively by the loans sold. The Company retains the servicing of these loans. The Company also periodically sells loans to investors and continues to service such loans for a fee. Gains or losses on the sale of loans are recorded on trade date using the specific-identification method.
Office Properties and Equipment
Land is carried at cost. Office properties, land and building improvements, furniture and equipment, and leasehold improvements are carried at cost, less accumulated depreciation and amortization. Depreciation and amortization of office properties and equipment is computed on a straight-line basis over their estimated useful lives (generally 40 years for buildings, 10 years to 20 years for land and building improvements, 3 years to 10 years for furniture and equipment). Leasehold improvements, carried at cost, net of accumulated depreciation, are amortized over the terms of the related leases or the estimated useful lives of the assets, whichever is shorter. Major improvements are capitalized, while repairs and maintenance costs are charged to expense as incurred. Upon retirement or sale, any gain or loss is recognized as incurred.
Bank-owned Life Insurance ("BOLI")
Bank-owned life insurance is accounted for using the cash surrender value method and is recorded at its net realizable value. The change in the net asset value is recorded as a component of non-interest income. A deferred liability has been recorded for the estimated cost of post-retirement life insurance benefits accruing to applicable employees and directors covered by an endorsement split-dollar life insurance arrangement.
Goodwill and Intangible Assets
Intangible assets of the Company consist of goodwill, core deposit intangibles and mortgage servicing rights. Goodwill represents the excess of the purchase price over the fair value of net assets acquired in purchase acquisitions. In accordance with GAAP, goodwill with an indefinite useful life is not amortized, but is evaluated for impairment on an annual basis, or more frequently if events or changes in circumstances indicate potential impairment between annual measurement dates. As permitted by GAAP, the Company prepares a qualitative assessment in determining whether goodwill may be impaired. The factors considered in the assessment include macroeconomic conditions, industry and market conditions and overall financial performance of the Company, among others. The Company completed its annual goodwill impairment test as of December 31, 2022 based upon its qualitative assessment of goodwill and concluded that goodwill was not impaired and no further quantitative analysis was warranted.
Core deposit intangibles represent the intangible value of depositor relationships acquired by the Company through purchase acquisitions of Stewardship, Freehold and RSI. The premiums ascribed to these deposits are amortized over their estimated useful lives.
Mortgage servicing rights are recorded when purchased or when originated mortgage loans are sold, with servicing rights retained. Mortgage servicing rights are amortized on an accelerated method based upon the estimated lives of the related loans, and generally adjusted for prepayments. Mortgage servicing rights are carried at the lower of amortized cost or fair value.
Leases
The Company determines if an arrangement is a lease at inception. The Company's leases primarily relate to real estate property for branches and office space. All the Company's leases are classified as operating leases and the related right-of-use asset ("ROU") and lease liability are included in other assets and other liabilities, respectively on the Consolidated Statements of Financial Condition.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(2) Summary of Significant Accounting Policies (continued)
Leases (continued)
ROU assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease arrangements. The calculated amounts of the ROU asset and lease liabilities are impacted by the length of the lease term and the discount rate used to calculate the present value of minimum lease payments. As the Company's leases do not provide an implicit rate, the discount rate used in determining the lease liability for each individual lease is the Company's incremental borrowing rate. The present value of the lease liability may include the impact of options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options provided in the lease terms. Lease expense is recognized on a straight-line basis over the expected lease term. Lease agreements that include lease and non-lease components, such as common area maintenance charges, are accounted for separately.
Post-retirement Benefits
The Company provides certain health care and life insurance benefits to eligible retired employees under a Post-retirement Plan. The Company accrues the cost of retiree health care and other benefits during the employee's period of active service. Effective January 1, 2019, the Post-retirement Plan has been closed to new hires.
Through the acquisition of the RSI Entities, the Company acquired a non-funded post-retirement plan. The defined benefit post-retirement healthcare plan covers substantially all retirees and employees.
Employee Benefit Plans
The Company maintains a single employer, tax-qualified defined benefit pension plan (the "Pension Plan") which covers full-time employees that satisfy the Pension Plan's eligibility requirements. The benefits are based on years of service and the employee's average compensation for the highest five consecutive years of employment. Effective October 1, 2018, newly hired employees are not eligible to participate in the Pension Plan as the Pension Plan has been closed to new employees as of that date.
The policy is to fund at least the minimum contribution required by the Employee Retirement Income Security Act of 1974. GAAP requires an employer to: (a) recognize in its statement of financial position the over-funded or under-funded status of a defined benefit post-retirement plan measured as the difference between the fair value of plan assets and the benefit obligation; (b) measure a plan’s assets and its obligations that determine its funded status at the end of the employer’s fiscal year (with limited exceptions); and (c) recognize as a component of other comprehensive income (loss), net of tax, the actuarial gains and losses and the prior service costs and credits that arise during the period. The assets of the plan are primarily invested in fixed income and equity funds.
Through the acquisition of the RSI Entities on May 1, 2022, the Company acquired a funded pension plan The benefits are based on years of service and the employee’s compensation, as defined. The Plan was amended effective March 31, 2011, to freeze the Plan so that no employee shall commence or recommence participation in the Plan, that there shall be no further benefit accruals under the Plan, and that compensation received after the effective date shall not be recognized for any purpose under the Plan.
The Company also maintains a Retirement Income Maintenance Plan (the "RIM Plan") which is a non-qualified defined benefit plan which provides benefits to all employees of the Company if their benefits under the Pension Plan are limited by Internal Revenue Code Sections 415 and 401(a)(17).
Columbia Bank and Freehold Bank each have a 401(k) plan covering substantially all employees. Columbia Bank may match a percentage of the first 3.00% to 4.50% contributed by participants. Columbia's matching contribution, if any, is determined by their Board of Directors in its sole discretion. Freehold does not presently match any portion of employee contribution, but may provide an annual match determined by their Board of Directors in its sole discretion.
Columbia Bank has an Employee Stock Ownership Plan ("ESOP"). The funds borrowed by the ESOP from the Company to purchase the Company's common stock are being repaid from Columbia Bank's contributions over a period of 20 years. The Company's common stock not allocated to participants is recorded as a reduction of stockholders' equity at cost. Compensation expense for the ESOP is based on the average price of the Company's stock and the amount of shares committed to be allocated during each period.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(2) Summary of Significant Accounting Policies (continued)
Employee Benefit Plans (continued)
Columbia Bank has a Supplemental Executive Retirement Plan ("SERP"). The SERP is a non-qualified plan which provides supplemental retirement benefits to eligible officers (those designated by the Board of Directors) of the Company who are prevented from receiving the full benefits contemplated by the ESOP's benefit formulas under tax law limits for tax-qualified plans. In addition, the Company maintains a stock based deferral plan (the "Stock Based Deferral Plan") for certain executives and directors. The Company records a deferred compensation equity account and corresponding contra-equity account for the cost of the shares held by the Stock Based Deferral and SERP Plans.
Columbia Bank also maintains a non-qualified savings income maintenance deferred compensation plan (the "SIM Plan") that provides supplemental benefits to certain executives who are prevented from receiving the full benefits contemplated by the 401(k) Plan under tax law limits for tax-qualified plans, and a Deferred Compensation Plan for directors.
Freehold Bank also sponsors a directors retirement plan, a director and executive deferred compensation plan, and a supplemental executive retirement plan for certain current and former directors and officers of the Bank.
Through the acquisition of the RSI Entities, the Company also acquired an executive incentive retirement plan, a board of director and executive deferred compensation plan, a supplemental executive retirement plan, a key life insurance plan and a split-dollar life insurance plan for certain current and former directors and officers of the Bank.
Derivatives
The Company uses derivative financial instruments as components of its market risk management, principally to manage interest rate risk. Certain derivatives are entered into in connection with transactions with commercial customers. Derivatives are not used for speculative purposes. All derivatives are recognized as either assets or liabilities in the Consolidated Statements of Financial Condition, reported at fair value and presented on a gross basis. Until a derivative is settled, a favorable change in fair value results in an unrealized gain that is recognized as an asset, while an unfavorable change in fair value results in an unrealized loss that is recognized as a liability.
The Company generally applies hedge accounting to its derivatives used for market risk management purposes. Hedge accounting is permitted only if specific criteria are met, including a requirement that a highly effective relationship exists between the derivative instrument and the hedged item, both at inception of the hedge and on an ongoing basis. Changes in the fair value of effective fair value hedges are recognized in current earnings (with the change in fair value of the hedged asset or liability also recognized in earnings). Changes in the fair value of effective cash flow hedges are recognized in other comprehensive income (loss) until earnings are affected by the variability in cash flows of the designated hedged item. Ineffective portions of hedge results are recognized in current earnings. Changes in the fair value of derivatives for which hedge accounting is not applied are recognized in current earnings.
The Company formally documents at inception all relationships between the derivative instruments and the hedged items, as well as its risk management objectives and strategies for undertaking the hedge transactions. This process includes linking all derivatives that are designated as hedges to specific assets and liabilities, or to specific firm commitments. The Company also formally assesses, both at inception of the hedge and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in the fair values or cash flows of the hedged items. If it is determined that a derivative is not highly effective or has ceased to be a highly effective hedge, the Company would discontinue hedge accounting prospectively. Gains or losses resulting from the termination of a derivative accounted for as a cash flow hedge remain in other comprehensive income (loss) and is (accreted) amortized to earnings over the remaining period of the former hedging relationship.
Certain derivative financial instruments are offered to certain commercial banking customers to manage their risk of exposure and risk management strategies. These derivative instruments consist primarily of currency forward contracts and interest rate swap contracts. The risks associated with these transactions is mitigated by simultaneously entering into similar transactions having essentially offsetting terms with a third party. In addition, the Company executes interest rate swaps with third parties in order to hedge the interest rate risk of short-term FHLB advances.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(2) Summary of Significant Accounting Policies (continued)
Income Taxes
The Company and its subsidiaries file consolidated federal income tax returns. Federal income taxes are allocated to each entity based on their respective contributions to taxable income of the consolidated income tax returns. Separate state income taxes are filed for the Company and its subsidiaries on either a consolidated or unconsolidated basis as required by each jurisdiction.
The Company records income taxes in accordance with ASC Topic 740, Income Taxes, using the asset and liability method. Federal and state income taxes have been provided on the basis of the Company's income or loss as reported in accordance with GAAP. The amounts reflected on the Company's federal and state income tax returns differ from these provisions due principally to temporary differences in the reporting of certain items for consolidated financial statement reporting and income tax reporting purposes. Accordingly, deferred tax assets and liabilities: (i) are recognized for the estimated future tax consequences of events that have been recognized in the financial statements or tax returns; (ii) are attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases; and (iii) 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. Where applicable, deferred tax assets are reduced by a valuation allowance for any portions determined not likely to be realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income tax expense in the period that includes the enactment date. The valuation allowance is adjusted, by a charge or credit to income tax expense, as changes in facts and circumstances warrant.
The Company did not have any liabilities for uncertain tax positions or any known unrecognized tax benefits at December 31, 2022 and 2021. The Company policy is to recognize interest and penalties related to unrecognized tax benefits in income tax expense in the Consolidated Statements of Income. The Company did not recognize any interest and penalties during the years ended December 31, 2022, 2021 and 2020.
On July 1, 2018, New Jersey enacted legislation which adds to the state’s 9.0% Corporation Business Tax rate (i) a 2.5% surtax for periods beginning in 2018 and 2019 and (ii) a 1.5% surtax for periods beginning in 2020 and 2021. Subsequently, on September 12, 2020, New Jersey enacted legislation that restored and extended the 2.5% Corporation Business Tax surcharge to apply retroactively from January 1, 2020 through December 31, 2023. These surtaxes apply to corporations with more than $1.0 million of net income allocated to New Jersey.
Comprehensive Income (Loss)
Comprehensive income (loss) consists of net income and other comprehensive income (loss). Other comprehensive income (loss) includes items recorded in equity, such as unrealized gains and losses on debt securities available for sale, the noncredit component of other than temporary impairment losses on debt securities, unrealized gains and losses on derivatives, and the unfunded status and reclassification of actuarial net (loss) gain associated with the Company's benefit plans. Comprehensive income is presented in a separate Consolidated Statement of Comprehensive Income (Loss).
Segment Reporting
The Company’s operations are substantially in the financial services industry and include providing traditional banking and other financial services to its customers. The Company operates primarily in New Jersey. Management makes operating decisions and assesses performance based on an ongoing review of the Company’s consolidated financial results. Therefore, the Company has a single operating segment for financial reporting purposes.
Earnings Per Share ("EPS")
Basic EPS is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period. For purposes of calculating basic EPS, weighted average common shares outstanding excludes treasury stock, unallocated employee stock ownership plan shares that have not been committed for release and deferred compensation obligations required to be settled in shares of Company stock.
Diluted EPS is computed using the same method as basic EPS and reflects the potential dilution which could occur if stock options and unvested shares were exercised and converted into common stock. The potentially diluted shares would then be included in the weighted average number of shares outstanding for the period using the treasury stock method. Shares issued and reacquired during any period are weighted for the portion of the period that they were outstanding.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(2) Summary of Significant Accounting Policies (continued)
Stock Compensation Plans
Compensation expense related to stock options and non-vested restricted stock awards is based on the fair value of the award on the measurement date with expense recognized on a straight line basis over the requisite performance or service period. The fair value of stock options is estimated utilizing the Black-Scholes option pricing model. The fair value of non-vested restricted stock awards is generally the closing market price of the Company's common stock on the date of grant. The Company accounts for forfeitures as they occur.
Pending Accounting Pronouncements
In March 2022, the FASB issued ASU 2022-02, Financial Instruments-Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures. ASU 2022-02 addresses areas identified by the FASB as part of its post-implementation review of the credit losses standard (ASU 2016-13) that introduced the CECL model. The amendments eliminate the accounting guidance for troubled debt restructurings by creditors that have adopted the CECL model and enhance the disclosure requirements for loan refinancing and restructurings made with borrowers experiencing financial difficulty. In addition, the amendments require a public business entity to disclose current period gross write-offs for financing receivables and net investment in leases by year of origination in the vintage disclosures. For entities that have adopted ASU 2016-13, this ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted. The Company adopted this pronouncement effective January 1, 2023. The update will be applied on a prospective basis to disclosures and did not have a significant impact on the Company's consolidated financial statements.
Accounting Pronouncements Adopted
In June 2016, the FASB issued ASU 2016-13, Financial Instruments- Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("CECL"), further amended by ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. Topic 326 pertains to the measurement of credit losses on financial instruments. This update requires the measurement of all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better determine their credit loss estimates. This update is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. This update was effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2019.
The Company elected to defer the adoption of the CECL methodology until December 31, 2020 as permitted by the enacted Coronavirus Aid, Relief and Economic Security Act ("CARES Act"). In late December 2020, the Consolidated Appropriations Act, 2021 was enacted, and extended certain provisions of the CARES Act, which allowed the Company to extend the adoption of CECL until January 1, 2022. The Company elected to extend its adoption of CECL in accordance with this legislation, and adopted the above mentioned ASUs related to Financial Instruments -Credit Losses (Topic 326) using a modified retrospective approach.
The Company adopted ASU 2016-13 on January 1, 2022 for all financial assets measured at amortized cost and off-balance- sheet credit exposures. Results for the year ended December 31, 2022 are presented under Accounting Standards Codification 326, Financial Instruments - Credit Losses, while prior period amounts continue to be reported with previously applicable GAAP and have not been restated. Effective January 1, 2022, the Company recorded a $12.1 million decrease in the allowance for credit losses on loans (previously allowance for loan losses), established a $353,000 allowance for credit losses on debt securities available for sale, and recorded a $5.5 million increase in the liability for off-balance-sheet credit exposures, which resulted in a total cumulative effect adjustment of $6.2 million, net of tax, and an increase to retained earnings.
In August 2018, the FASB issued ASU 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20): Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans. The amendments in this update modify the disclosure requirements for employers that sponsor defined benefit pension or other post-retirement plans by removing disclosures that no longer are considered cost beneficial, clarifying the specific requirements of disclosures, and adding disclosure requirements identified as relevant. Among other changes, the ASU adds disclosure requirements to Topic 715-20 for the weighted-average interest crediting rates for cash balance plans and other plans with promised interest crediting rates and an explanation of the reasons for significant gains and losses related to changes in benefit obligation for the period. The amendments remove disclosure requirements for the amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit cost over the next fiscal year, the amount and timing of plan assets expected to be returned to the employer, and the effects of a one-percentage-point change in assumed health care cost trend rates on the (a) aggregate of the service
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(2) Summary of Significant Accounting Policies (continued)
Accounting Pronouncements Adopted (continued)
and interest cost components of net periodic benefit costs and (b) benefit obligation for post-retirement health care benefits. ASU 2018-14 is effective for fiscal years beginning after December 15, 2020, including interim reporting periods within that reporting period, with early adoption permitted. The Company adopted this ASU effective January 1, 2021. The update was applied on a retrospective basis to disclosures with regard to employee benefit plans. The adoption of this update did not have a significant impact on the Company's consolidated financial statements.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(3) Acquisitions
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" or "Roselle"). Pursuant to the terms of the Merger Agreement, RSB Bancorp, MHC merged with and into the MHC, with the MHC as the surviving entity; RSB Bancorp, Inc. merged with and into Columbia Financial, with Columbia Financial as the surviving entity; and Roselle Bank merged with and into the Bank, with the Bank as the surviving institution. Under the terms of the merger agreement, depositors of Roselle Bank became depositors of the Bank and have the same rights and privileges in the MHC as if their accounts had been established at the Bank on the date established at Roselle Bank. The Company issued 4,759,048 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, at the effective time of the merger.
Merger-related expenses are recorded in the Consolidated Statements of Income and are expensed as incurred. Direct acquisition and other charges incurred in connection with the acquisition of the Entities totaled $597,000 for the year ended December 31, 2020. There were no merger expenses recorded for the years ended December 31, 2022 and 2021.
The following table sets forth assets acquired and liabilities assumed in the acquisition of the Roselle Entities , at their estimated fair values as of the closing date of the transaction:
| | | | | | | | |
| | April 1, 2020 |
Assets acquired: | (In thousands) |
Cash and cash equivalents | | $ | 155,248 | |
Debt securities available for sale | | 51,479 | |
Debt securities held to maturity | | 13,418 | |
Equity securities | | 1,796 | |
Federal Home Loan Bank stock | | 2,010 | |
Loans receivable | | 171,593 | |
Accrued interest receivable | | 679 | |
Office properties and equipment, net | | 5,774 | |
Bank-owned life insurance | | 17,245 | |
Deferred tax assets, net | | 1,334 | |
Other assets | | 1,489 | |
Total assets acquired | | $ | 422,065 | |
| | |
Liabilities assumed: | | |
Deposits | | $ | 333,234 | |
Borrowings | | 37,728 | |
Advance payments by borrowers for taxes and insurance | | 982 | |
Accrued expenses and other liabilities | | 5,400 | |
Total liabilities assumed | | $ | 377,344 | |
| | |
Net assets acquired | | $ | 44,721 | |
Fair market value of stock issued to Columbia Bank MHC for purchase | | 68,530 | |
Goodwill recorded at merger | | $ | 23,809 | |
The assets acquired and liabilities assumed have been accounted for under the acquisition method of accounting. The assets and liabilities were recorded at their fair values as of April 1, 2020, and resulted in the recognition of goodwill of $23.8 million. The determination of the fair value of assets acquired and liabilities assumed required management to make estimates about discount rates, future expected cash flows, market conditions, and other future events that are highly subjective in nature and subject to change. During the quarter ended March 31, 2021, the Company recorded a final adjustment of $1.1 million to deferred income taxes, net, and a corresponding decrease in goodwill. At December 31, 2022, goodwill related to the Roselle acquisition totaled $17.6 million.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(3) Acquisitions (continued)
Freehold Bank
On December 1, 2021, the Company completed its acquisition of Freehold Bancorp, MHC, Freehold Bancorp, Inc. and Freehold Bank (collectively, the "Freehold Entities" or "Freehold"). Pursuant to the terms of the Merger Agreement, Freehold Bancorp, MHC merged with and into the MHC, with the MHC as the surviving entity; and Freehold Bancorp, Inc. merged with and into Columbia Financial, with Columbia Financial as the surviving entity. In connection with the merger, Freehold Bank converted to a federal savings bank and will operate as a wholly-owned subsidiary of Columbia Financial until November 6, 2023, the effective date of the merger of Freehold Bank into Columbia Bank. Under the terms of the merger agreement, depositors of Freehold Bank became depositors of the Bank and have the same rights and privileges in the MHC as if their accounts had been established at Columbia Bank on the date established at Freehold Bank. The Company issued 2,591,007 shares of its common stock to the MHC, representing an amount equal to the fair value of the Freehold Entities as determined by an independent appraiser, at the effective time of the holding company mergers.
Merger-related expenses are recorded in the Consolidated Statements of Income and are expensed as incurred. Direct acquisition and other charges incurred in connection with the Freehold acquisition totaled $11,000 and $350,000 for the year ended December 31, 2022 and 2021, respectively. There were no merger expenses recorded for the year ended December 31, 2020.
The following table sets forth assets acquired and liabilities assumed in the acquisition of Freehold, at their estimated fair values as of the closing date of the transaction:
| | | | | | | | |
| | December 1, 2021 |
Assets acquired: | (In thousands) |
Cash and cash equivalents | | $ | 20,417 | |
| | |
Debt securities available for sale | | 118,017 | |
| | |
Federal Home Loan Bank stock | | 3,032 | |
Loans receivable | | 158,912 | |
| | |
Accrued interest receivable | | 867 | |
Office properties and equipment, net | | 5,934 | |
Bank-owned life insurance | | 8,661 | |
Deferred tax assets, net | | 454 | |
Core deposit intangibles | | 42 | |
Other assets | | 162 | |
Total assets acquired | | $ | 316,498 | |
| | |
Liabilities assumed: | | |
Deposits | | $ | 210,117 | |
Borrowings | | 59,908 | |
Advance payments by borrowers for taxes and insurance | | 495 | |
Accrued expenses and other liabilities | | 4,822 | |
Total liabilities assumed | | $ | 275,342 | |
| | |
Net assets acquired | | $ | 41,156 | |
Fair market value of stock issued to Columbia Bank MHC for purchase | | 47,260 | |
Goodwill recorded at merger | | $ | 6,104 | |
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(3) Acquisitions (continued)
Freehold Bank (continued)
The assets acquired and liabilities assumed have been accounted for under the acquisition method of accounting. The assets and liabilities were recorded at their fair values as of December 1, 2021, and resulted in the recognition of goodwill of $6.1 million. The determination of the fair value of assets acquired and liabilities assumed required management to make estimates about discount rates, future expected cash flows, market conditions, and other future events that are highly subjective in nature and subject to change. During the third quarter of 2022, the Company completed all tax returns related to the operations of Freehold Bank and its impact on the Company's income taxes, which resulted in an adjustment of $82,000 to deferred income taxes, net, and a corresponding decrease in goodwill. At December 31, 2022, goodwill related to the Freehold acquisition totaled $6.0 million.
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”). Pursuant to the terms of the merger agreement, RSI Bancorp, M.H.C. merged with and into the MHC, with the MHC as the surviving entity; RSI Bancorp, Inc. merged with and into Columbia Financial, with Columbia Financial as the surviving entity; and RSI Bank merged with and into Columbia Bank, with Columbia Bank as the surviving institution. Under the terms of the merger agreement, depositors of RSI Bank became depositors of Columbia Bank and have the same rights and privileges in the MHC as if their accounts had been established at Columbia Bank on the date established at RSI Bank. The Company issued 6,086,314 shares of its common stock to the MHC, representing an amount equal to the discounted fair value of the RSI Entities as determined by an independent appraiser, at the effective time of the merger.
Merger-related expenses are recorded in the Consolidated Statements of Income and are expensed as incurred. Direct acquisition and other charges incurred in connection with the acquisition of the RSI Entities totaled $2.8 million and $196,000 for the year ended December 31, 2022 and 2021, respectively. There were no merger expenses recorded for the year ended December 31, 2020.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(3) Acquisitions (continued)
RSI Bank (continued)
The following table sets forth assets acquired and liabilities assumed in the acquisition of the RSI Entities, at their estimated
fair values as of the closing date of the transaction:
| | | | | | | | |
| | May 1, 2022 |
Assets acquired: | (In thousands) |
Cash and cash equivalents | | $ | 140,769 | |
Debt securities available for sale | | 79,024 | |
Equity securities | | 1,075 | |
Federal Home Loan Bank stock | | 906 | |
Loans receivable | | 335,501 | |
Accrued interest receivable | | 910 | |
Office properties and equipment, net | | 7,296 | |
Bank-owned life insurance | | 13,033 | |
Deferred tax assets, net | | 3,633 | |
Core deposit intangibles | | 10,271 | |
Other assets | | 2,723 | |
Total assets acquired | | $ | 595,141 | |
| | |
Liabilities assumed: | | |
Deposits | | 502,732 | |
Borrowings | | 5,762 | |
Advance payments by borrowers for taxes and insurance | | 1,341 | |
Accrued expenses and other liabilities | | 10,568 | |
Total liabilities assumed | | $ | 520,403 | |
| | |
Net assets acquired | | $ | 74,738 | |
Fair market value of stock issued to Columbia Bank MHC for purchase | | 102,741 | |
Goodwill recorded at merger | | $ | 28,003 | |
The assets acquired and liabilities assumed have been accounted for under the acquisition method of accounting. The assets and liabilities were recorded at their fair values as of May 1, 2022, and resulted in the recognition of goodwill of $28.0 million. The determination of the fair value of assets acquired and liabilities assumed required management to make estimates about discount rates, future expected cash flows, market conditions, and other future events that are highly subjective in nature and subject to change. During the third quarter of 2022, the Company completed all tax returns related to the operation of RSI Bank and its impact on the Company's income taxes, which resulted in a $2.0 million adjustment to deferred income taxes, net, and a corresponding decrease in goodwill. During the fourth quarter of, 2022, the Company recorded an adjustment of $490,922 to the original discounted fair value, which resulted in a decrease in additional paid-in-capital, and a corresponding decrease in goodwill. The fair value estimates are subject to change for up to one year after the closing date of the transaction if additional information (existing at the date of closing) relative to closing date fair values becomes available. As the Company continues to analyze the acquired assets and assumed liabilities, there may be additional adjustments to the recorded carrying values. However, management does not expect significant future adjustments to the recorded amounts. At December 31, 2022, goodwill related to the acquisition of the RSI Entities totaled $25.5 million.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(3) Acquisitions (continued)
Fair Value Measurement of Assets Acquired and Liabilities Assumed
Described below are the methods used to determine the fair values of the significant assets acquired and liabilities assumed in the Roselle, Freehold and RSI acquisitions (if applicable):
Cash and cash equivalents. The estimated fair values of cash and cash equivalents approximate their stated face amounts, as these financial instruments are either due on demand or have short-term maturities.
Debt securities available for sale or held for maturity. The estimated fair values of the debt securities were calculated mostly utilizing Level 2 inputs. The majority of the acquired securities were fixed income instruments that are not quoted on an exchange, but are traded in active markets. The prices for these instruments are obtained through an independent pricing service when available, or dealer market participants with whom the Company has historically transacted with for both purchases and sales of securities. The prices are derived from market quotations and matrix pricing. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, and the bond's terms and conditions, among other things. Management reviewed the data and assumptions used in pricing securities by its third party provider to ensure the highest level of significant inputs are derived from market observable data.
Loans receivable. The acquired loan portfolio was segregated into pools for valuation purposes primarily based on loan type, non-accrual status, and credit risk rating. The estimated fair values were computed by discounting the expected cash flows from the respective pools. Cash flows were estimated by using valuation models that incorporated estimates of current key assumptions such as prepayment speeds, default rates, and loss severity rates. The process included: (1) projecting monthly principal and/or interest cash flows based on the contractual terms of the loans, including both maturity and contractual amortization; (2) adjusting projected cash flows for expected losses and prepayments, where appropriate; (3) developing a discount rate based on the relative risk of the cash flows, considering the loan type, liquidity risk, the maturity of the loans, servicing costs, and a required return on capital; and (4) discounting the projected cash flows to a present value, to arrive at the calculated value of the loans.
The methods used to estimate the fair values of loans are extremely sensitive to the assumptions and estimates used. While management attempted to use assumptions and estimates that best reflected the acquired loan portfolios and current market conditions, a greater degree of subjectivity is inherent in the values than in those determined in active markets.
Office properties and equipment, net. The fair value of land and buildings was estimated using current appraisals. Acquired equipment was not material. Buildings are amortized over their estimated useful lives. Equipment is amortized or depreciated over their estimated useful lives usually ranging from three to fifteen years.
Bank-owned life insurance. Bank-owned life insurance is accounted for using the cash surrender value method and is recorded at its net realizable value.
Goodwill. Goodwill is not amortized for book purposes: however, it is reviewed at least annually for impairment and is not deductible for tax purposes.
Core deposit intangibles. Core deposit intangibles ("CDI") are the measure of the value of non-maturity deposits in a business combination. The fair value of the CDI was calculated utilizing the cost savings approach, the expected cost savings attributable to the core deposits funding relative to an alternative source of funding, using a discounted cash flow present value methodology. Key inputs and assumptions utilized in the discounted cash flow present value methodology include core deposit balances and rates paid, the cost of an additional funding source, the aggregate life of deposits and truncation points, non-interest deposit costs, and the immediate deposit outflow assumption.
Deposits. The fair values of deposit liabilities with no stated maturity (i.e., non-interest bearing and interest-bearing demand deposit accounts, money market and savings and club deposits) are equal to the carrying amounts payable on demand. The fair value of certificates of deposit represent contractual cash flows, discounted to present value using interest rates currently offered on deposits with similar characteristics and remaining maturities.
Borrowings. The fair values of borrowings consisting of FHLB advances were estimated by discounting future cash flows using market discount rates for borrowings with similar characteristics, terms and remaining maturities.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(4) Debt Securities Available for Sale
Debt securities available for sale at December 31, 2022 and 2021 are summarized as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2022 |
| Amortized Cost | | Gross Unrealized Gains | | Gross Unrealized (Losses) | | Fair Value |
| | | (In thousands) | | |
| | | | | | | |
U.S. government and agency obligations | $ | 67,771 | | | $ | — | | | $ | (4,205) | | | $ | 63,566 | |
Mortgage-backed securities and collateralized mortgage obligations | 1,351,929 | | | 135 | | | (170,337) | | | 1,181,727 | |
Municipal obligations | 3,697 | | | — | | | (122) | | | 3,575 | |
Corporate debt securities | 92,544 | | | 6 | | | (12,784) | | | 79,766 | |
| | | | | | | |
| $ | 1,515,941 | | | $ | 141 | | | $ | (187,448) | | | $ | 1,328,634 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 |
| Amortized Cost | | Gross Unrealized Gains | | Gross Unrealized (Losses) | | Fair Value |
| | | (In thousands) | | |
| | | | | | | |
U.S. government and agency obligations | $ | 34,711 | | | $ | 404 | | | $ | (236) | | | $ | 34,879 | |
Mortgage-backed securities and collateralized mortgage obligations | 1,553,491 | | | 14,141 | | | (13,273) | | | 1,554,359 | |
Municipal obligations | 4,159 | | | 20 | | | — | | | 4,179 | |
Corporate debt securities | 109,018 | | | 2,378 | | | (966) | | | 110,430 | |
Trust preferred securities | — | | | — | | | — | | | — | |
| $ | 1,701,379 | | | $ | 16,943 | | | $ | (14,475) | | | $ | 1,703,847 | |
The amortized cost and fair value of debt securities available for sale at December 31, 2022, by contractual final maturity, is shown below. Expected maturities may differ from contractual maturities due to prepayment or early call options exercised by the issuer.
| | | | | | | | | | | |
| December 31, 2022 |
| Amortized Cost | | Fair Value |
| (In thousands) |
| | | |
One year or less | $ | 921 | | | $ | 906 | |
More than one year to five years | 84,351 | | | 79,080 | |
More than five years to ten years | 78,740 | | | 66,921 | |
| | | |
| $ | 164,012 | | | $ | 146,907 | |
Mortgage-backed securities and collateralized mortgage obligations | 1,351,929 | | | 1,181,727 | |
| $ | 1,515,941 | | | $ | 1,328,634 | |
Mortgage-backed securities and collateralized mortgage obligations totaling $1.4 billion at amortized cost and $1.2 billion at fair value, are not classified by maturity in the table above as their expected lives are likely to be shorter than the contractual maturity date due to principal prepayments.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(4) Debt Securities Available for Sale (continued)
During the year ended December 31, 2022, proceeds from the sale of debt securities available for sale totaled $126.8 million, resulting in gross gains of $710,000 and $500,000 of gross losses. There were no calls and $915,000 in maturities of debt securities available for sale during the ended December 31, 2022.
During the year ended December 31, 2021, proceeds from the sale of debt securities available for sale totaled $90.3 million, resulting in gross gains of $2.1 million and gross losses of $439,000. Proceeds from called debt securities available for sale totaled $14.0 million resulting in no gross gains or losses. Proceeds from matured debt securities available for sale totaled $210,000.
During the year ended December 31, 2020, proceeds from the sale of debt securities available for sale totaled $20.8 million, resulting in gross gains of $369,000 and no gross losses. Proceeds from called debt securities available for sale totaled $11.6 million resulting in gross gains of $1,000 and no gross losses. Proceeds from matured debt securities available for sale totaled $10.9 million.
Debt securities available for sale having a carrying value of $724.0 million and $587.7 million, at December 31, 2022 and 2021, respectively, were pledged as security for public funds on deposit at Columbia Bank as required and permitted by law, pledged for outstanding borrowings at the Federal Home Loan Bank, and pledged for potential borrowings at the Federal Reserve Bank of New York. Debt securities available for sale having a carrying value of $28.3 million and $44.1 million, at December 31, 2022 and 2021, were pledged by Freehold Bank for outstanding borrowings at the Federal Home Loan Bank, and for potential borrowings at the Federal Reserve Bank of New York.
The following tables summarize the fair value and gross unrealized losses of those securities that reported an unrealized loss at December 31, 2022 and 2021 and if the unrealized loss position was continuous for the twelve months prior to those respective dates:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2022 |
| Less Than 12 Months | | 12 Months or Longer | | Total |
| Fair Value | | Gross Unrealized (Losses) | | Fair Value | | Gross Unrealized (Losses) | | Fair Value | | Gross Unrealized (Losses) |
| (In thousands) |
| | | | | | | | | | | |
U.S. government and agency obligations | $ | 47,956 | | | $ | (2,359) | | | $ | 15,610 | | | $ | (1,846) | | | $ | 63,566 | | | $ | (4,205) | |
Mortgage-backed securities and collateralized mortgage obligations | 424,328 | | | (29,013) | | | 741,515 | | | (141,324) | | | 1,165,843 | | | (170,337) | |
Municipal obligations | 3,574 | | | (122) | | | — | | | — | | | 3,574 | | | (122) | |
Corporate debt securities | 46,751 | | | (5,792) | | | 31,008 | | | (6,992) | | | 77,759 | | | (12,784) | |
| | | | | | | | | | | |
| $ | 522,609 | | | $ | (37,286) | | | $ | 788,133 | | | $ | (150,162) | | | $ | 1,310,742 | | | $ | (187,448) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 |
| Less Than 12 Months | | 12 Months or Longer | | Total |
| Fair Value | | Gross Unrealized (Losses) | | Fair Value | | Gross Unrealized (Losses) | | Fair Value | | Gross Unrealized (Losses) |
| (In thousands) |
| | | | | | | | | | | |
U.S. government and agency obligations | $ | 14,488 | | | $ | (236) | | | $ | — | | | $ | — | | | $ | 14,488 | | | $ | (236) | |
Mortgage-backed securities and collateralized mortgage obligations | 820,746 | | | (11,892) | | | 62,407 | | | (1,381) | | | 883,153 | | | (13,273) | |
| | | | | | | | | | | |
Corporate debt securities | 29,221 | | | (671) | | | 4,705 | | | (295) | | | 33,926 | | | (966) | |
| | | | | | | | | | | |
| $ | 864,455 | | | $ | (12,799) | | | $ | 67,112 | | | $ | (1,676) | | | $ | 931,567 | | | $ | (14,475) | |
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(4) Debt Securities Available for Sale (continued)
The number of securities in an unrealized loss position at December 31, 2022 totaled 455, compared with 219 at December 31, 2021. All temporarily impaired securities were investment grade as of December 31, 2022 and 2021.
For available for sale securities, the Company assesses whether a loss is from credit or other factors and considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency and adverse conditions related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows is less than the amortized cost, a credit loss would be recorded through an allowance for credit losses, limited by the amount that the fair value is less than the amortized cost basis.
The following table presents the activity in the allowance for credit losses on debt securities available for sale for the year ended December 31, 2022:
| | | | | | | | |
| | December 31, 2022 |
| | (In thousands) |
Allowance for Credit Losses: | | |
Beginning balance | | $ | — | |
Impact of adopting ASU 2016-13 (CECL) effective January 1, 2022 | | 490 | |
(Reversal of) credit losses | | (490) | |
Balance at December 31, 2022 | | $ | — | |
The Company made an accounting policy election to exclude accrued interest receivable from the amortized cost basis of debt securities available for sale. Accrued interest receivable on debt securities available for sale is reported as a component of accrued interest receivable in the Consolidated Statement of Financial Condition, which totaled $3.2 million at December 31, 2022, and is excluded from the estimate of credit losses.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(5) Debt Securities Held to Maturity
Debt securities held to maturity at December 31, 2022 and 2021 are summarized as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2022 |
| Amortized Cost | | Gross Unrealized Gains | | Gross Unrealized (Losses) | | Allowance for Credit Losses | | Fair Value |
| (In thousands) |
| | | | | | | | | |
U.S. government and agency obligations | $ | 49,871 | | | $ | — | | | $ | (7,304) | | | $ | — | | | $ | 42,567 | |
Mortgage-backed securities and collateralized mortgage obligations | 371,652 | | | — | | | (43,828) | | | — | | | 327,824 | |
| $ | 421,523 | | | $ | — | | | $ | (51,132) | | | $ | — | | | $ | 370,391 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 |
| Amortized Cost | | Gross Unrealized Gains | | Gross Unrealized (Losses) | | Fair Value |
| (In thousands) |
| | | | | | | |
U.S. government and agency obligations | $ | 44,870 | | | $ | — | | | $ | (759) | | | $ | 44,111 | |
Mortgage-backed securities and collateralized mortgage obligations | 384,864 | | | 6,741 | | | (927) | | | 390,678 | |
| $ | 429,734 | | | $ | 6,741 | | | $ | (1,686) | | | $ | 434,789 | |
The amortized cost and fair value of debt securities held to maturity at December 31, 2022, by contractual final maturity, is shown below. Expected maturities may differ from contractual maturities due to prepayment or early call options exercised by the issuer.
| | | | | | | | | | | |
| December 31, 2022 |
| Amortized Cost | | Fair Value |
| (In thousands) |
| | | |
More than one year to five years | $ | 19,875 | | | $ | 18,399 | |
More than five years to ten years | 19,996 | | | 16,703 | |
More than ten years | 10,000 | | | 7,465 | |
| 49,871 | | | 42,567 | |
Mortgage-backed securities and collateralized mortgage obligations | 371,652 | | | 327,824 | |
| $ | 421,523 | | | $ | 370,391 | |
Mortgage-backed securities and collateralized mortgage obligations totaling $371.7 million at amortized cost, and $327.8 million at fair value at December 31, 2022, are not classified by maturity in the table above as their expected lives are likely to be shorter than the contractual maturity date due to principal prepayments.
During the year ended December 31, 2022, there were no sales, calls or maturities of debt securities held to maturity.
During the years ended December 31, 2021 and 2020, there were no sales of debt securities held to maturity. During the year ended December 31, 2021, proceeds from called debt securities held to maturity totaled $5.1 million, resulting in no gross gains or losses. During the year ended December 31, 2020, proceeds from called debt securities held to maturity totaled $20.0 million, resulting in no gross gains or losses.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(5) Debt Securities Held to Maturity (continued)
Debt securities held to maturity having a carrying value of $228.8 million and $252.4 million, at December 31, 2022 and 2021, respectively, were pledged as security for public funds on deposit at Columbia Bank as required and permitted by law, pledged for outstanding borrowings at the Federal Home Loan Bank, and pledged for potential borrowings at the Federal Reserve Bank of New York.
The following tables summarize the fair value and gross unrealized losses of those securities that reported an unrealized loss at December 31, 2022 and 2021 and if the unrealized loss position was continuous for the twelve months prior to those respective dates:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2022 |
| Less Than 12 Months | | 12 Months or Longer | | Total |
| Fair Value | | Gross Unrealized (Losses) | | Fair Value | | Gross Unrealized (Losses) | | Fair Value | | Gross Unrealized (Losses) |
| (In thousands) |
| | | | | | | | | | | |
U.S. government and agency obligations | $ | 4,956 | | | $ | (44) | | | $ | 37,611 | | | $ | (7,260) | | | $ | 42,567 | | | $ | (7,304) | |
Mortgage-backed securities and collateralized mortgage obligations | 275,107 | | | (33,000) | | | 52,717 | | | (10,828) | | | 327,824 | | | (43,828) | |
| $ | 280,063 | | | $ | (33,044) | | | $ | 90,328 | | | $ | (18,088) | | | $ | 370,391 | | | $ | (51,132) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 |
| Less than 12 months | | 12 months or longer | | Total |
| Fair Value | | Gross Unrealized (Losses) | | Fair Value | | Gross Unrealized (Losses) | | Fair Value | | Gross Unrealized (Losses) |
| (In thousands) |
| | | | | | | | | | | |
U.S. government and agency obligations | $ | 44,111 | | | $ | (759) | | | $ | — | | | $ | — | | | $ | 44,111 | | | $ | (759) | |
Mortgage-backed securities and collateralized mortgage obligations | 79,036 | | | (927) | | | — | | | — | | | 79,036 | | | (927) | |
| $ | 123,147 | | | $ | (1,686) | | | $ | — | | | $ | — | | | $ | 123,147 | | | $ | (1,686) | |
The number of securities in an unrealized loss position at December 31, 2022 totaled 116, compared with 25 at December 31, 2021. All temporarily impaired securities were investment grade as of December 31, 2022 and 2021.
For held to maturity securities, management measures expected credit losses on a collective basis by major security type. All
of the mortgage-backed securities are issued by U.S. government agencies and are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies and have a long history of no credit losses and, therefore, the expectation of non-payment is zero and the Company is not required to estimate an allowance for credit losses on these securities under the CECL standard. All these securities reflect a credit quality rating of AAA by Moody's Investors Service.
The Company made an accounting policy election to exclude accrued interest receivable from the amortized cost basis of debt securities held to maturity. Accrued interest receivable on debt securities held to maturity is reported as a component of accrued interest receivable in the Consolidated Statement of Financial Condition, which totaled $1.0 million at December 31, 2022, and is excluded from the estimate of credit losses.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(6) Equity Securities at Fair Value
The Company has an equity securities portfolio which consists of stock in other financial institutions, a payment technology company, a community bank correspondent services company, preferred stock in U.S. Government agencies, and a community reinvestment act qualifying bond fund which are reported at fair value on the Company's Consolidated Statements of Financial Condition. The fair value of the equities portfolio at December 31, 2022 and 2021 was $3.4 million and $2.7 million, respectively.
The Company recorded a net decrease in the fair value of equity securities of $401,000 and $1.8 million during the years ended December 31, 2022 and 2021, respectively, as a component of non-interest income.
During the years ended December 31, 2022 and 2020, there were no sales of equity securities. During the year ended December 31, 2021, sales of equity securities totaled $1.4 million, resulting in gross gains of $383,000 and no gross losses.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(7) Loans Receivable and Allowance for Credit Losses
Loans receivable at December 31, 2022 and 2021 are summarized as follows:
| | | | | | | | | | | |
| December 31, |
| 2022 | | 2021 |
| (In thousands) |
Real estate loans: | | | |
One-to-four family | $ | 2,860,184 | | | $ | 2,092,317 | |
Multifamily | 1,239,207 | | | 1,041,108 | |
Commercial real estate | 2,413,394 | | | 2,170,236 | |
Construction | 336,553 | | | 295,047 | |
Commercial business loans | 497,469 | | | 452,232 | |
Consumer loans: | | | |
Home equity loans and advances | 274,302 | | | 276,563 | |
Other consumer loans | 3,425 | | | 1,428 | |
Total gross loans | 7,624,534 | | | 6,328,931 | |
Purchased credit-deteriorated loans | 17,059 | | | 6,791 | |
Net deferred loan costs, fees and purchased premiums and discounts | 35,971 | | | 24,879 | |
Loans receivable | $ | 7,677,564 | | | $ | 6,360,601 | |
| | | |
The Company had no loans held-for-sale at December 31, 2022 and 2021. During the year ended December 31, 2022, the Company sold $2.7 million, $2.8 million, and $4.1 million of one-to-four family real estate loans, SBA loans included in the commercial business loans, and construction loans held-for sale, respectively, resulting in gross gains of $242,000 and gross losses of $64,000. During the year ended December 31, 2021, the Company sold $18.5 million, $19.1 million, $6.4 million, and $258.1 million of one-to-four family real estate loans and home equity loans, commercial real estate loans, construction loans, and commercial business and SBA loans held-for-sale, respectively, resulting in gross gains of $8.6 million and gross losses of $24,000. During the year ended December 31, 2020, the Company sold $111.8 million of one-to-four family real estate loans held-for-sale, resulting gross gains of $1.7 million and no gross losses.
During the years ended December 31, 2022 and 2021, no loans included in loans receivable were sold by the Company. During the year ended December 31, 2020, the Company sold $15.1 million, $13.0 million, and $7.6 million of one-to-four family real estate loans and home equity loans, construction loans, and commercial business loans, respectively, included in loans receivable, resulting in gross gains of $161,000 and no gross losses.
During the year ended December 31, 2022, the Company purchased $8.3 million of one-to-four family real estate loans from third parties. During the year ended December 31, 2021 the Company purchased $11.8 million of one-to-four family real estate loans and $73.6 million of commercial real estate loans from third parties. During the year ended December 31, 2020 there were no loans purchased by the Company.
At December 31, 2022 and 2021, commercial business loans included $1.6 million, and $44.9 million, respectively, in SBA Payroll Protection Program ("PPP") loans and net deferred fees related to these loans totaling $13,000 and $1.2 million, respectively.
At December 31, 2022 and 2021, the carrying value of loans serviced by the Company for investors was $497.1 million and $519.5 million, respectively. These loans are not included in the Consolidated Statements of Financial Condition. Servicing income totaled $1.3 million, $1.5 million, and $1.4 million for the years ended December 31, 2022, 2021 and 2020.
The Company has entered into guarantor swaps with Freddie Mac which results in improved liquidity. During the year ended December 31, 2022, no loans were exchanged for Freddie Mac mortgage participation certificates. During the year ended December 31, 2021, the Company exchanged $99.6 million of loans for Freddie Mac mortgage participation certificates, resulting in gross gains of $2.3 million and no gross losses. During the year ended December 31, 2020, the Company exchanged $117.3 million of loans for a Freddie Mac mortgage participation certificates, resulting in gross gains of $3.5 million gross gains and no gross losses. The Company retained servicing of these loans.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(7) Loans Receivable and Allowance for Credit Losses (continued)
The Company has granted loans to certain officers and directors of the Company and its subsidiaries and to their associates. At December 31, 2022 and 2021, such loans totaled approximately $9.3 million and $8.9 million, respectively. During the years ended December 31, 2022, 2021 and 2020 the Columbia Bank granted two new loans to a related party totaling $751,000, one new loan to a related party for $522,700, and.one new loan to a related party for $300,000, respectively. These loans are performing in accordance with their original terms.
The following tables summarize the aging of loans receivable by portfolio segment, including non-accrual loans and excluding PCD loans, at December 31, 2022 and 2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2022 |
| 30-59 Days | | 60-89 Days | | 90 Days or More | | Total Past Due | | Non-accrual | | Current | | Total |
| (In thousands) |
Real estate loans: | | | | | | | | | | | | | |
One-to-four family | $ | 4,063 | | | $ | 1,149 | | | $ | 1,808 | | | $ | 7,020 | | | $ | 2,730 | | | $ | 2,853,164 | | | $ | 2,860,184 | |
Multifamily | — | | | — | | | — | | | — | | | — | | | 1,239,207 | | | 1,239,207 | |
Commercial real estate | — | | | 853 | | | 2,892 | | | 3,745 | | | 2,892 | | | 2,409,649 | | | 2,413,394 | |
Construction | 5,218 | | | — | | | — | | | 5,218 | | | — | | | 331,335 | | | 336,553 | |
Commercial business loans | 220 | | | — | | | 474 | | | 694 | | | 801 | | | 496,775 | | | 497,469 | |
Consumer loans: | | | | | | | | | | | | | |
Home equity loans and advances | 465 | | | 33 | | | 286 | | | 784 | | | 286 | | | 273,518 | | | 274,302 | |
Other consumer loans | 3 | | | 1 | | | 12 | | | 16 | | | 12 | | | 3,409 | | | 3,425 | |
Total loans | $ | 9,969 | | | $ | 2,036 | | | $ | 5,472 | | | $ | 17,477 | | | $ | 6,721 | | | $ | 7,607,057 | | | $ | 7,624,534 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 |
| 30-59 Days | | 60-89 Days | | 90 Days or More | | Total Past Due | | Non-accrual | | Current | | Total |
| (In thousands) |
Real estate loans: | | | | | | | | | | | | | |
One-to-four family | $ | 3,131 | | | $ | 1,976 | | | $ | 373 | | | $ | 5,480 | | | $ | 1,416 | | | $ | 2,086,837 | | | $ | 2,092,317 | |
Multifamily | — | | | — | | | — | | | — | | | — | | | 1,041,108 | | | 1,041,108 | |
Commercial real estate | 2,189 | | | — | | | 1,561 | | | 3,750 | | | 1,561 | | | 2,166,486 | | | 2,170,236 | |
Construction | — | | | — | | | — | | | — | | | — | | | 295,047 | | | 295,047 | |
Commercial business loans | 412 | | | — | | | 203 | | | 615 | | | 761 | | | 451,617 | | | 452,232 | |
Consumer loans: | | | | | | | | | | | | | |
Home equity loans and advances | 108 | | | 53 | | | 81 | | | 242 | | | 201 | | | 276,321 | | | 276,563 | |
Other consumer loans | — | | | 4 | | | — | | | 4 | | | — | | | 1,424 | | | 1,428 | |
Total loans | $ | 5,840 | | | $ | 2,033 | | | $ | 2,218 | | | 10,091 | | | $ | 3,939 | | | $ | 6,318,840 | | | $ | 6,328,931 | |
The Company considers a loan to be delinquent when we have not received a payment within 30 days of its contractual due date. Generally, a loan is designated as a non-accrual loan when the payment of interest is 90 days or more in arrears of its contractual due date. Non-accruing loans are returned to an accrual status after there has been a sustained period of repayment performance (generally six consecutive months of payments) and both principal and interest are deemed collectible. The Company identifies loans that may need to be charged-off as a loss, by reviewing all delinquent loans, classified loans and other loans that management may have concerns about collectability. At December 31, 2022 and 2021, non-accrual loans totaled $6.7 million and $3.9 million, respectively. Included in non-accrual loans at December 31, 2022 and 2021, are 7 and 10 loans totaling $1.2 million and $1.7 million which are less than 90 days in arrears.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(7) Loans Receivable and Allowance for Credit Losses (continued)
If non-accrual loans had performed in accordance with their original terms, interest income would have increased by $392,000, $190,000, and $426,000 for the years ended December 31, 2022, 2021 and 2020, respectively. The amount of cash basis interest income that was recognized on these loans during the years ended December 31, 2022, 2021 and 2020, was $161,000, $242,000, and $410,000, respectively.
At December 31, 2022, there were no loans past due 90 days or more still accruing interest. At December 31, 2021, there were no loans past due 90 days or more still accruing interest other than COVID-19 related loan forbearance and deferrals. In accordance with the CARES Act, these loans were not included in the aging of loans receivable by portfolio segment in the table above, and the Company continued to accrue interest income during the forbearance or deferral period.
Purchased credit impaired loans ("PCI") were loans acquired at a discount primarily due to deteriorated credit quality. These loans were initially recorded at fair value at acquisition, based upon the present value of expected future cash flows, with no related allowance for credit losses. In connection with the adoption of CECL on January 1, 2022, all loans considered PCI loans prior to that date were converted to purchase credit-deteriorated ("PCD") loans. Loans acquired in a business combination after January 1, 2022 are recorded in accordance with ASC Topic 326, which requires loans as of the acquisition date, that have experienced a more than insignificant deterioration in credit quality since origination to be classified as PCD loans.
At December 31, 2022 and 2021, loans acquired in the Stewardship Financial Corporation acquisition totaled $2.0 million and $2.7 million, respectively, PCD loans acquired in the Roselle Bank acquisition totaled $184,000 at both dates, and PCD loans acquired in the Freehold Bank acquisition totaled $3.7 million and $3.9 million, respectively. At December 31, 2022, loans acquired in the RSI Bank acquisition totaled $11.3 million. An initial allowance for credit losses of $633,000 was recorded through a gross-up adjustment to fair values of PCD loans related to the loans acquired in connection with the RSI Bank acquisition.
We may obtain physical possession of real estate collateralizing a residential mortgage loan via foreclosure or through an in-substance repossession. At December 31, 2022 and 2021, the Company had no real estate owned. At December 31, 2022 and 2021, we had two home equity loans and one residential mortgage loans, respectively, with carrying values of $81,000 and $87,000, respectively, collateralized by residential real estate which were in the process of foreclosure.
On January 1, 2022, the Company adopted CECL (ASC Topic 326), which replaced the historical incurred loss methodology with an expected loss methodology. The loan portfolio segmentation was expanded to seven portfolio segments taking into consideration common loan attributes and risk characteristics, as well as historical reporting metrics and data availability. Disclosures at and for the period ended December 31, 2021, are presented in accordance with the expanded segmentation adopted in conjunction with CECL, when appropriate. The Company made an accounting policy election to exclude accrued interest receivable from the amortized cost basis of loans receivable. Accrued interest receivable on loans receivable is reported as a component of accrued interest receivable in the Consolidated Statement of Financial Condition, which totaled $29.4 million at December 31, 2022, and is excluded from the estimate of credit losses. Refer to note 2, Summary of Significant Accounting Policies for additional information on the adoption of Topic 326 and CECL methodology.
Although management believes that the Company has established and maintained the allowance for credit losses at appropriate levels, reserve levels may change if future economic, organizational, and portfolio conditions differ from the forecast. Management evaluates its estimates and assumptions on an ongoing basis, and the estimates and assumptions are adjusted when facts and circumstances necessitate a re-valuation of the estimate. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Although management uses the best information available, the level of the allowance for credit losses remains an estimate that is subject to significant judgment.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(7) Loans Receivable and Allowance for Credit Losses (continued)
The following tables summarize loans receivable (including PCD loans) and allowance for credit losses (previously the allowance for loan losses) by portfolio segment and impairment method at December 31, 2022 and 2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2022 |
| One-to-Four Family | | Multifamily | | Commercial Real Estate | | Construction | | Commercial Business | | Home Equity Loans and Advances | | Other Consumer Loans | | Total |
| (In thousands) |
Allowance for credit losses: | | | | | | | | | | | | | | | |
Individually analyzed loans | $ | 201 | | | $ | 3 | | | $ | 99 | | | $ | — | | | $ | 10 | | | $ | 26 | | | $ | — | | | $ | 339 | |
Collectively analyzed loans | 11,591 | | | 7,874 | | | 17,961 | | | 6,415 | | | 6,876 | | | 1,654 | | | 10 | | | 52,381 | |
Loans acquired with deteriorated credit quality | 10 | | | — | | | 51 | | | 10 | | | 11 | | | 1 | | | — | | | 83 | |
Total | $ | 11,802 | | | $ | 7,877 | | | $ | 18,111 | | | $ | 6,425 | | | $ | 6,897 | | | $ | 1,681 | | | $ | 10 | | | $ | 52,803 | |
| | | | | | | | | | | | | | | |
Total loans: | | | | | | | | | | | | | | | |
Individually analyzed loans | $ | 4,164 | | | $ | 457 | | | $ | 16,729 | | | $ | — | | | $ | 1,173 | | | $ | 697 | | | $ | — | | | $ | 23,220 | |
Collectively analyzed loans | 2,856,020 | | | 1,238,750 | | | 2,396,665 | | | 336,553 | | | 496,296 | | | 273,605 | | | 3,425 | | | 7,601,314 | |
Loans acquired with deteriorated credit quality | 2,158 | | | — | | | 13,116 | | | 1,040 | | | 496 | | | 249 | | | — | | | 17,059 | |
Total loans | $ | 2,862,342 | | | $ | 1,239,207 | | | $ | 2,426,510 | | | $ | 337,593 | | | $ | 497,965 | | | $ | 274,551 | | | $ | 3,425 | | | $ | 7,641,593 | |
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(7) Loans Receivable and Allowance for Credit Losses (continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 |
| One-to-Four Family | | Multifamily | | Commercial Real Estate | | Construction | | Commercial Business | | Home Equity Loans and Advances | | Other Consumer Loans | | Total |
| (In thousands) |
Allowance for credit losses: | | | | | | | | | | | | | | | |
Individually analyzed loans | $ | 258 | | | $ | — | | | $ | 97 | | | $ | — | | | $ | 16 | | | $ | 7 | | | $ | — | | | $ | 378 | |
Collectively analyzed loans | 8,540 | | | 7,741 | | | 16,017 | | | 8,943 | | | 20,198 | | | 866 | | | 6 | | | 62,311 | |
Loans acquired with deteriorated credit quality | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Total | $ | 8,798 | | | $ | 7,741 | | | $ | 16,114 | | | $ | 8,943 | | | $ | 20,214 | | | $ | 873 | | | $ | 6 | | | $ | 62,689 | |
| | | | | | | | | | | | | | | |
Total loans: | | | | | | | | | | | | | | | |
Individually analyzed loans | $ | 5,184 | | | $ | 762 | | | $ | 15,830 | | | $ | — | | | $ | 1,806 | | | $ | 705 | | | $ | — | | | $ | 24,287 | |
Collectively analyzed loans | 2,087,133 | | | 1,040,346 | | | 2,154,406 | | | 295,047 | | | 450,426 | | | 275,858 | | | 1,428 | | | 6,304,644 | |
Loans acquired with deteriorated credit quality | 431 | | | — | | | 5,426 | | | — | | | 934 | | | — | | | — | | | 6,791 | |
Total loans | $ | 2,092,748 | | | $ | 1,041,108 | | | $ | 2,175,662 | | | $ | 295,047 | | | $ | 453,166 | | | $ | 276,563 | | | $ | 1,428 | | | $ | 6,335,722 | |
Loan modifications to borrowers experiencing financial difficulties that are considered troubled debt restructurings ("TDRs") primarily involve the lowering of the monthly payments on such loans through either a reduction in interest rate below a market rate, an extension of the term of the loan without a corresponding adjustment to the risk premium reflected in the interest rate, or a combination of these two methods. These modifications generally do not result in the forgiveness of principal or accrued interest. In addition, the Company attempts to obtain additional collateral or guarantor support when modifying such loans. Non-accruing restructured loans may be returned to accrual status when there has been a sustained period of repayment performance (generally six consecutive months of payments) and both principal and interest are deemed collectible.
Section 4013 of the CARES Act, “Temporary Relief from Troubled Debt Restructurings,” allows banks to temporarily suspend certain requirements under GAAP related to TDRs for a limited period of time to account for the effects of COVID-19. The Company elected to account for modifications on certain loans under Section 4013 of the CARES Act or, if the loan modification was not eligible under Section 4013, used the criteria in the COVID-19 guidance to determine when the loan modification was not a TDR in accordance with ASC 310-40. Guidance noted that modification or deferral programs mandated by the federal or a state government related to COVID-19 would not be in the scope of ASC 310-40, such as a state program that requires all institutions within that state to suspend mortgage payments for a specified period. These short-term loan modifications were not treated as troubled debt restructurings during the short-term modification period if the loan was not in arrears at December 31, 2019. Furthermore, based on current evaluations, generally, we have continued the accrual of interest on these loans during the short-term modification period. The Consolidated Appropriations Act, 2021, which was enacted in late December 2020, extended certain provisions of the CARES Act through January 1, 2022, including provisions permitting loan deferral extension requests to not be treated as troubled debt restructurings.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(7) Loans Receivable and Allowance for Credit Losses (continued)
The following tables present the number of loans modified as TDRs during the years ended December 31, 2022, 2021 and 2020, along with their balances immediately prior to the modification date and post-modification. Post-modification recorded investment represents the net book balance immediately following modification.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Years Ended December 31, |
| 2022 | | 2021 |
| No. of Loans | | Pre-modification Recorded Investment | | Post-modification Recorded Investment | | No. of Loans | | Pre-modification Recorded Investment | | Post-modification Recorded Investment |
| (Dollars in thousands) |
Troubled Debt Restructurings | | | | | | | | | | | |
Real estate loans: | | | | | | | | | | | |
One-to-four family | — | | | $ | — | | | $ | — | | | 2 | | | $ | 285 | | | $ | 388 | |
Commercial real estate | — | | | — | | | — | | | 1 | | | 192 | | | 211 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Consumer loans: | | | | | | | | | | | |
Home equity loans and advances | 1 | | | 119 | | | 119 | | | — | | | — | | | — | |
| | | | | | | | | | | |
Total restructured loans | 1 | | | $ | 119 | | | $ | 119 | | | 3 | | | $ | 477 | | | $ | 599 | |
| | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, |
| 2020 |
| No. of Loans | | Pre-modification Recorded Investment | | Post-modification Recorded Investment |
| | | (Dollars in thousands) |
Troubled Debt Restructurings | | | | | |
Real estate loans: | | | | | |
Commercial real estate | 5 | | | $ | 17,022 | | | $ | 17,022 | |
| | | | | |
Commercial business loans | 2 | | | 11,507 | | | 12,802 | |
| | | | | |
| | | | | |
| | | | | |
Total restructured loans | 7 | | | $ | 28,529 | | | $ | 29,824 | |
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(7) Loans Receivable and Allowance for Credit Losses (continued)
The activity in the allowance for credit losses on loans for the years ended December 31, 2022, 2021 and 2020, are as follows:
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2022 | | 2021 | | 2020 |
| (In thousands) |
| | | | | |
Balance at beginning of period | $ | 62,689 | | | $ | 74,676 | | | $ | 61,709 | |
Impact of Adopting ASU No. 2016-13 ("CECL") effective January 1, 2022 | (16,443) | | | — | | | — | |
Initial allowance related to PCD loans | 633 | | | — | | | — | |
Provision for (reversal of) credit losses | 5,969 | | | (9,953) | | | 18,447 | |
Recoveries | 593 | | | 1,530 | | | 823 | |
Charge-offs | (638) | | | (3,564) | | | (6,303) | |
Balance at end of period | $ | 52,803 | | | $ | 62,689 | | | $ | 74,676 | |
The decrease in the reserves was primarily attributable to the impact of the adoption of ASU 2016-13, offset by an increase in loan balances and consideration of current and projected economic conditions.
The activity in the allowance for credit losses by portfolio segment for the years ended December 31, 2022, 2021 and 2020, are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2022 |
| One-to-Four Family | | Multifamily | | Commercial Real Estate | | Construction | | Commercial Business | | Home Equity Loans and Advances | | Other Consumer Loans | | Total |
| (In thousands) |
| | | | | | | | | | | | | | | |
Balance at beginning of period | $ | 8,798 | | | $ | 7,741 | | | $ | 16,114 | | | $ | 8,943 | | | $ | 20,214 | | | $ | 873 | | | $ | 6 | | | $ | 62,689 | |
Impact of adopting ASU No. 2016-13 | (2,308) | | | (2,030) | | | (4,227) | | | (2,346) | | | (5,302) | | | (229) | | | (1) | | | (16,443) | |
Initial allowance related to PCD loans | 131 | | | — | | | 474 | | | 3 | | | 19 | | | 6 | | | — | | | 633 | |
Provision for (reversal of) credit losses | 5,225 | | | 2,166 | | | 5,750 | | | (175) | | | (8,052) | | | 1,019 | | | 36 | | | 5,969 | |
Recoveries | 338 | | | — | | | — | | | — | | | 208 | | | 45 | | | 2 | | | 593 | |
Charge-offs | (382) | | | — | | | — | | | — | | | (190) | | | (33) | | | (33) | | | (638) | |
Balance at end of period | $ | 11,802 | | | $ | 7,877 | | | $ | 18,111 | | | $ | 6,425 | | | $ | 6,897 | | | $ | 1,681 | | | $ | 10 | | | $ | 52,803 | |
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(7) Loans Receivable and Allowance for Credit Losses (continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2021 |
| One-to-Four Family | | Multifamily | | Commercial Real Estate | | Construction | | Commercial Business | | Home Equity Loans and Advances | | Other Consumer Loans | | Total |
| (In thousands) |
| | | | | | | | | | | | | | | |
Balance at beginning of period | $ | 13,586 | | | $ | 8,799 | | | $ | 21,882 | | | $ | 11,271 | | | $ | 17,384 | | | $ | 1,748 | | | $ | 6 | | | $ | 74,676 | |
Provision for (reversal of) credit losses | (4,037) | | | (978) | | | (6,376) | | | (2,330) | | | 4,384 | | | (623) | | | 7 | | | (9,953) | |
Recoveries | 22 | | | 216 | | | 1,015 | | | 2 | | | 219 | | | 56 | | | — | | | 1,530 | |
Charge-offs | (773) | | | (296) | | | (407) | | | — | | | (1,773) | | | (308) | | | (7) | | | (3,564) | |
Balance at end of period | $ | 8,798 | | | $ | 7,741 | | | $ | 16,114 | | | $ | 8,943 | | | $ | 20,214 | | | $ | 873 | | | $ | 6 | | | $ | 62,689 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2020 |
| One-to-Four Family | | Multifamily | | Commercial Real Estate | | Construction | | Commercial Business | | Home Equity Loans and Advances | | Other Consumer Loans | | Total |
| (In thousands) |
| | | | | | | | | | | | | | | |
Balance at beginning of period | $ | 13,780 | | | $ | 6,434 | | | $ | 16,546 | | | $ | 7,435 | | | $ | 15,836 | | | $ | 1,669 | | | $ | 9 | | | $ | 61,709 | |
Provision for (reversal of) credit losses | 1,299 | | | 2,365 | | | 5,348 | | | 3,835 | | | 5,360 | | | 239 | | | 1 | | | 18,447 | |
Recoveries | 438 | | | — | | | 16 | | | 1 | | | 308 | | | 60 | | | — | | | 823 | |
Charge-offs | (1,931) | | | — | | | (28) | | | — | | | (4,120) | | | (220) | | | (4) | | | (6,303) | |
Balance at end of period | $ | 13,586 | | | $ | 8,799 | | | $ | 21,882 | | | $ | 11,271 | | | $ | 17,384 | | | $ | 1,748 | | | $ | 6 | | | $ | 74,676 | |
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(7) Loans Receivable and Allowance for Credit Losses (continued)
The following tables present individually analyzed loans by segment, excluding PCD loans, at December 31, 2022 and 2021:
| | | | | | | | | | | | | | | | | |
| At December 31, 2022 |
| Recorded Investment | | Unpaid Principal Balance | | Specific Allowance |
| (In thousands) |
With no allowance recorded: | | | | | |
Real estate loans: | | | | | |
One-to-four family | $ | 1,296 | | | $ | 1,644 | | | $ | — | |
Multifamily | 59 | | | 63 | | | — | |
Commercial real estate | 14,836 | | | 15,699 | | | — | |
Commercial business loans | 143 | | | 400 | | | — | |
Consumer loans: | | | | | |
Home equity loans and advances | 223 | | | 315 | | | — | |
| 16,557 | | | 18,121 | | | — | |
With a specific allowance recorded: | | | | | |
Real estate loans: | | | | | |
One-to-four family | 2,868 | | | 2,887 | | | 201 | |
Multifamily | 398 | | | 397 | | | 3 | |
Commercial real estate | 1,893 | | | 1,896 | | | 99 | |
Commercial business loans | 1,030 | | | 1,030 | | | 10 | |
Consumer loans: | | | | | |
Home equity loans and advances | 474 | | | 474 | | | 26 | |
| 6,663 | | | 6,684 | | | 339 | |
Total: | | | | | |
Real estate loans: | | | | | |
One-to-four family | 4,164 | | | 4,531 | | | 201 | |
Multifamily | 457 | | | 460 | | | 3 | |
Commercial real estate | 16,729 | | | 17,595 | | | 99 | |
Commercial business loans | 1,173 | | | 1,430 | | | 10 | |
Consumer loans: | | | | | |
Home equity loans and advances | 697 | | | 789 | | | 26 | |
Total loans | $ | 23,220 | | | $ | 24,805 | | | $ | 339 | |
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(7) Loans Receivable and Allowance for Credit Losses (continued)
| | | | | | | | | | | | | | | | | |
| At December 31, 2021 |
| Recorded Investment | | Unpaid Principal Balance | | Specific Allowance |
| (In thousands) |
With no allowance recorded: | | | | | |
Real estate loans: | | | | | |
One-to-four family | $ | 1,882 | | | $ | 2,421 | | | $ | — | |
Multifamily | 762 | | | 765 | | | — | |
Commercial real estate | 13,861 | | | 14,586 | | | — | |
Commercial business loans | 573 | | | 573 | | | — | |
Consumer loans: | | | | | |
Home equity loans and advances | 202 | | | 308 | | | — | |
| 17,280 | | | 18,653 | | | — | |
With a specific allowance recorded: | | | | | |
Real estate loans: | | | | | |
One-to-four family | 3,302 | | | 3,321 | | | 258 | |
| | | | | |
Commercial real estate | 1,969 | | | 1,971 | | | 97 | |
Commercial business loans | 1,233 | | | 1,233 | | | 16 | |
Consumer loans: | | | | | |
Home equity loans and advances | 503 | | | 503 | | | 7 | |
| 7,007 | | | 7,028 | | | 378 | |
Total: | | | | | |
Real estate loans: | | | | | |
One-to-four family | 5,184 | | | 5,742 | | | 258 | |
Multifamily | 762 | | | 765 | | | — | |
Commercial real estate | 15,830 | | | 16,557 | | | 97 | |
Commercial business loans | 1,806 | | | 1,806 | | | 16 | |
Consumer loans: | | | | | |
Home equity loans and advances | 705 | | | 811 | | | 7 | |
Total loans | $ | 24,287 | | | $ | 25,681 | | | $ | 378 | |
Specific allocations of the allowance for credit losses attributable to individually analyzed loans totaled $339,000 and $378,000 at December 31, 2022 and 2021, respectively. At December 31, 2022 and 2021, impaired loans for which there was no related allowance for credit losses totaled $16.6 million and $17.3 million, respectively.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(7) Loans Receivable and Allowance for Credit Losses (continued)
The following table presents interest income recognized for individually analyzed loans by loan segment, excluding PCD loans, for the years ended December 31, 2022, 2021 and 2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Years Ended December 31, |
| 2022 | | 2021 | | 2020 |
| Average Recorded Investment | | Interest Income Recognized | | Average Recorded Investment | | Interest Income Recognized | | Average Recorded Investment | | Interest Income Recognized |
| (In thousands) | | | | |
Real estate loans: | | | | | | | | | | | |
One-to-four family | $ | 4,385 | | | $ | 203 | | | $ | 5,738 | | | $ | 285 | | | $ | 7,946 | | | $ | 305 | |
Multifamily | 598 | | | 28 | | | 8,420 | | | 371 | | | — | | | — | |
Commercial real estate | 16,479 | | | 733 | | | 16,913 | | | 467 | | | 23,701 | | | 1,091 | |
| | | | | | | | | | | |
Commercial business loans | 1,289 | | | 88 | | | 2,121 | | | 139 | | | 4,963 | | | 216 | |
Consumer loans: | | | | | | | | | | | |
Home equity loans and advances | 785 | | | 39 | | | 1,119 | | | 43 | | | 1,909 | | | 100 | |
Totals | $ | 23,536 | | | $ | 1,091 | | | $ | 34,311 | | | $ | 1,305 | | | $ | 38,519 | | | $ | 1,712 | |
The recorded investment in TDRs totaled $19.9 million at December 31, 2022, of which one loan with a balance of $23,000 was over 90 days past due. The remaining loans modified were current at the time of restructuring and have complied with the terms of their restructure agreement at December 31, 2022. The recorded investment in TDRs totaled $21.3 million at December 31, 2021, of which no loans were over 90 days past due, and one loan with a balance of $36,000 was 30-59 days past due. The remaining loans modified were current at the time of restructuring and have complied with the terms of their restructure agreement at December 31, 2021.
Management prepares an analysis each quarter that categorizes the entire loan portfolio by certain risk characteristics such as loan type (residential mortgage, commercial mortgage, construction, commercial business, etc.) and loan risk rating. The categorization of loans into risk categories is based upon relevant information about the borrower's ability to service their debt.
The Company utilizes an eight-point risk rating system to summarize its loan portfolio into categories with similar risk characteristics. Loans deemed to be “acceptable quality” are rated 1 through 4 (Pass), with a rating of 1 established for loans with minimal risk. Loans that are deemed to be of “questionable quality” are rated 5 (Special Mention) or 6 (Substandard). Loans with adverse classifications are rated 7 (Doubtful) or 8 (Loss). The risk ratings are also confirmed through periodic loan review examinations which are currently performed by both an independent third-party and the Company's credit risk review department. The Company requires an annual review be performed above certain dollar thresholds, depending on loan type, to help determine the appropriate risk ratings. Results from examinations are presented to the Audit Committee of the Board of Directors.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(7) Loans Receivable and Allowance for Credit Losses (continued)
The following table summarizes the Company's loans by year of origination and internally assigned credit risk rating, excluding PCD loans, at December 31, 2022 and 2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Loans by Year of Origination at December 31, 2022 |
| 2022 | | 2021 | | 2020 | | 2019 | | 2018 | | Prior | | Revolving Loans | | Revolving Loans to Term Loans | | Total |
| (In thousands) |
One-to-Four Family | | | | | | | | | | | | | | | | | |
Pass | $ | 829,363 | | | $ | 836,355 | | | $ | 294,721 | | | $ | 177,114 | | | $ | 125,057 | | | $ | 595,097 | | | $ | — | | | $ | — | | | $ | 2,857,707 | |
Special mention | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Substandard | — | | | 641 | | | — | | | 681 | | | 320 | | | 835 | | | — | | | — | | | 2,477 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Total One-to-Four Family | 829,363 | | | 836,996 | | | 294,721 | | | 177,795 | | | 125,377 | | | 595,932 | | | — | | | — | | | 2,860,184 | |
| | | | | | | | | | | | | | | | | |
Multifamily | | | | | | | | | | | | | | | | | |
Pass | 315,157 | | | 309,611 | | | 167,955 | | | 205,608 | | | 38,849 | | | 197,489 | | | — | | | — | | | 1,234,669 | |
Special mention | — | | | — | | | — | | | — | | | — | | | 4,538 | | | — | | | — | | | 4,538 | |
Substandard | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Total Multifamily | 315,157 | | | 309,611 | | | 167,955 | | | 205,608 | | | 38,849 | | | 202,027 | | | — | | | — | | | 1,239,207 | |
| | | | | | | | | | | | | | | | | |
Commercial Real Estate | | | | | | | | | | | | | | | | | |
Pass | 448,313 | | | 392,689 | | | 170,125 | | | 260,268 | | | 231,868 | | | 852,104 | | | — | | | — | | | 2,355,367 | |
Special mention | — | | | 478 | | | 1,843 | | | 892 | | | 15,498 | | | 20,939 | | | — | | | — | | | 39,650 | |
Substandard | — | | | — | | | 1,286 | | | 1,607 | | | — | | | 15,484 | | | — | | | — | | | 18,377 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Total Commercial Real Estate | 448,313 | | | 393,167 | | | 173,254 | | | 262,767 | | | 247,366 | | | 888,527 | | | — | | | — | | | 2,413,394 | |
| | | | | | | | | | | | | | | | | |
Construction | | | | | | | | | | | | | | | | | |
Pass | 159,751 | | | 104,339 | | | 28,058 | | | 14,216 | | | 870 | | | 29,319 | | | — | | | — | | | 336,553 | |
Special mention | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Substandard | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Total Construction | $ | 159,751 | | | $ | 104,339 | | | $ | 28,058 | | | $ | 14,216 | | | $ | 870 | | | $ | 29,319 | | | $ | — | | | $ | — | | | $ | 336,553 | |
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(7) Loans Receivable and Allowance for Credit Losses (continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Loans by Year of Origination at December 31, 2022 |
| 2022 | | 2021 | | 2020 | | 2019 | | 2018 | | Prior | | Revolving Loans | | Revolving Loans to Term Loans | | Total |
| (In thousands) |
Commercial Business | | | | | | | | | | | | | | | | | |
Pass | $ | 58,631 | | | $ | 32,880 | | | $ | 32,788 | | | $ | 20,705 | | | $ | 24,634 | | | $ | 27,277 | | | $ | 280,857 | | | $ | — | | | $ | 477,772 | |
Special mention | — | | | 110 | | | 63 | | | 1,137 | | | 1,030 | | | 38 | | | 10,761 | | | — | | | 13,139 | |
Substandard | — | | | 224 | | | 60 | | | — | | | 2,085 | | | 315 | | | 3,874 | | | — | | | 6,558 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Total Commercial Business | 58,631 | | | 33,214 | | | 32,911 | | | 21,842 | | | 27,749 | | | 27,630 | | | 295,492 | | | — | | | 497,469 | |
| | | | | | | | | | | | | | | | | |
Home Equity Loans and Advances | | | | | | | | | | | | | | | | | |
Pass | 22,903 | | | 20,476 | | | 13,770 | | | 12,070 | | | 11,126 | | | 88,251 | | | 105,005 | | | 457 | | | 274,058 | |
Special mention | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Substandard | — | | | — | | | — | | | — | | | — | | | 188 | | | 56 | | | — | | | 244 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Total Home Equity Loans and Advances | 22,903 | | | 20,476 | | | 13,770 | | | 12,070 | | | 11,126 | | | 88,439 | | | 105,061 | | | 457 | | | 274,302 | |
| | | | | | | | | | | | | | | | | |
Other Consumer Loans | | | | | | | | | | | | | | | | | |
Pass | 2,669 | | | 87 | | | 100 | | | 102 | | | 30 | | | 96 | | | 341 | | | — | | | 3,425 | |
Special mention | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Substandard | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Total Other Consumer Loans | 2,669 | | | 87 | | | 100 | | | 102 | | | 30 | | | 96 | | | 341 | | | — | | | 3,425 | |
| | | | | | | | | | | | | | | | | |
Total Loans | $ | 1,836,787 | | | $ | 1,697,890 | | | $ | 710,769 | | | $ | 694,400 | | | $ | 451,367 | | | $ | 1,831,970 | | | $ | 400,894 | | | $ | 457 | | | $ | 7,624,534 | |
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(7) Loans Receivable and Allowance for Credit Losses (continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Loans by Year of Origination at December 31, 2021 |
| 2021 | | 2020 | | 2019 | | 2018 | | 2017 | | Prior | | Revolving Loans | | Revolving Loans to Term Loans | | Total |
| (In thousands) |
One-to-Four Family | | | | | | | | | | | | | | | | | |
Pass | $ | 793,848 | | | $ | 298,815 | | | $ | 196,244 | | | $ | 138,215 | | | $ | 134,811 | | | $ | 525,615 | | | $ | — | | | $ | — | | | $ | 2,087,548 | |
Special mention | — | | | — | | | — | | | — | | | — | | | 203 | | | — | | | — | | | 203 | |
Substandard | — | | | — | | | 1,463 | | | 1,420 | | | 360 | | | 1,323 | | | — | | | — | | | 4,566 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Total One-to-Four family | 793,848 | | | 298,815 | | | 197,707 | | | 139,635 | | | 135,171 | | | 527,141 | | | — | | | — | | | 2,092,317 | |
| | | | | | | | | | | | | | | | | |
Multifamily | | | | | | | | | | | | | | | | | |
Pass | 312,738 | | | 181,285 | | | 231,252 | | | 47,024 | | | 131,169 | | | 137,640 | | | — | | | — | | | 1,041,108 | |
Special mention | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Substandard | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Total Multifamily | 312,738 | | | 181,285 | | | 231,252 | | | 47,024 | | | 131,169 | | | 137,640 | | | — | | | — | | | 1,041,108 | |
| | | | | | | | | | | | | | | | | |
Commercial Real Estate | | | | | | | | | | | | | | | | | |
Pass | 381,222 | | | 161,136 | | | 278,581 | | | 241,669 | | | 222,752 | | | 803,945 | | | — | | | — | | | 2,089,305 | |
Special mention | — | | | — | | | 1,303 | | | 16,070 | | | 1,885 | | | 34,788 | | | — | | | — | | | 54,046 | |
Substandard | — | | | 386 | | | — | | | 1,561 | | | 1,276 | | | 23,662 | | | — | | | — | | | 26,885 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Total Commercial Real Estate | 381,222 | | | 161,522 | | | 279,884 | | | 259,300 | | | 225,913 | | | 862,395 | | | — | | | — | | | 2,170,236 | |
| | | | | | | | | | | | | | | | | |
Construction | | | | | | | | | | | | | | | | | |
Pass | 107,070 | | | 77,549 | | | 37,498 | | | 41,591 | | | 28,814 | | | 2,418 | | | — | | | — | | | 294,940 | |
Special mention | — | | | — | | | 107 | | | — | | | — | | | — | | | — | | | — | | | 107 | |
Substandard | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Total Construction | $ | 107,070 | | | 77,549 | | | $ | 37,605 | | | $ | 41,591 | | | $ | 28,814 | | | $ | 2,418 | | | $ | — | | | $ | — | | | $ | 295,047 | |
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(7) Loans Receivable and Allowance for Credit Losses (continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Loans by Year of Origination at December 31, 2021 |
| 2021 | | 2020 | | 2019 | | 2018 | | 2017 | | Prior | | Revolving Loans | | Revolving Loans to Term Loans | | Total |
| (In thousands) |
Commercial Business | | | | | | | | | | | | | | | | | |
Pass | $ | 84,113 | | | $ | 36,115 | | | $ | 25,156 | | | $ | 30,670 | | | $ | 21,762 | | | $ | 26,515 | | | $ | 210,597 | | | $ | — | | | $ | 434,928 | |
Special mention | 246 | | | 15 | | | 1,729 | | | 1,369 | | | 18 | | | 46 | | | 3,291 | | | — | | | 6,714 | |
Substandard | 192 | | | 71 | | | 352 | | | 1,084 | | | 371 | | | 609 | | | 7,911 | | | — | | | 10,590 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Total Commercial Business | 84,551 | | | 36,201 | | | 27,237 | | | 33,123 | | | 22,151 | | | 27,170 | | | 221,799 | | | — | | | 452,232 | |
| | | | | | | | | | | | | | | | | |
Home Equity Loans and Advances | | | | | | | | | | | | | | | | | |
Pass | 22,393 | | | 15,977 | | | 15,906 | | | 13,146 | | | 12,023 | | | 100,870 | | | 95,484 | | | 426 | | | 276,225 | |
Special mention | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Substandard | — | | | — | | | — | | | — | | | — | | | 246 | | | 92 | | | — | | | 338 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Total Home Equity Loans and Advances | 22,393 | | | 15,977 | | | 15,906 | | | 13,146 | | | 12,023 | | | 101,116 | | | 95,576 | | | 426 | | | 276,563 | |
| | | | | | | | | | | | | | | | | |
Other Consumer Loans | | | | | | | | | | | | | | | | | |
Pass | 659 | | | 58 | | | 284 | | | 60 | | | 9 | | | 5 | | | 353 | | | — | | | 1,428 | |
Special mention | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Substandard | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Total Other Consumer Loans | 659 | | | 58 | | | 284 | | | 60 | | | 9 | | | 5 | | | 353 | | | — | | | 1,428 | |
| | | | | | | | | | | | | | | | | |
Total Loans | $ | 1,702,481 | | | $ | 771,407 | | | $ | 789,875 | | | $ | 533,879 | | | $ | 555,250 | | | $ | 1,657,885 | | | $ | 317,728 | | | $ | 426 | | | $ | 6,328,931 | |
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(8) Office Properties and Equipment, net
Office properties and equipment less accumulated depreciation at December 31, 2022 and 2021 are summarized as follows:
| | | | | | | | | | | |
| December 31, |
| 2022 | | 2021 |
| (In thousands) |
| | | |
Land | $ | 16,534 | | | $ | 12,900 | |
Buildings | 39,097 | | | 36,897 | |
Land and building improvements | 40,501 | | | 36,683 | |
Leasehold improvements | 23,555 | | | 22,636 | |
Furniture and equipment | 34,747 | | | 36,157 | |
| 154,434 | | | 145,273 | |
Less accumulated depreciation and amortization | (70,557) | | | (66,565) | |
Total office properties and equipment, net | $ | 83,877 | | | $ | 78,708 | |
Land and building improvements at December 31, 2022 and 2021 included $4.5 million and $923,000, respectively, in construction in progress for the renovation of various office facilities. During the year ended December 31, 2022, the Bank acquired and sold $1.7 million included in buildings classified as held-for-sale.
Depreciation and amortization expense for the years ended December 31, 2022, 2021 and 2020, amounted to $7.3 million, $6.7 million, $6.5 million, respectively.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(9) Leases
The Company leases real estate property for branches and office space. At December 31, 2022 and 2021, all of the Company's leases are classified as operating leases.
The Company determines if an arrangement is a lease at inception. Topic 842 requires lessees to recognize a right-of-use asset and a lease liability, measured at the present value of the future minimum lease payments, at the lease commencement date. The calculated amount of the right-of-use asset and lease liabilities are impacted by the length of the lease term and the discount rate used to calculate the present value of minimum lease payments.
At December 31, 2022 and 2021, the weighted average remaining lease term for operating leases was 6.5 years and 7.0 years, respectively, and the weighted average discount rate used in the measurement of operating lease liabilities was 2.35% and 2.13%, respectively.
The Company elected to account for the lease and non-lease components separately since such amounts are readily determinable under the Company's lease contracts. Operating lease expense is recognized on a straight-line basis over the lease term, while variable lease payments are recognized as incurred. Variable lease payments include common area maintenance charges, real estate taxes, repairs and maintenance costs and utilities. Operating and variable lease expenses are recorded in occupancy expense in the Consolidated Statements of Income. During the years ended December 31, 2022 and 2021, operating and variable lease expenses totaled approximately $2.7 million and $2.4 million, respectively.
There were no sale and leaseback transactions, leveraged leases or lease transactions with related parties during the years ended December 31, 2022 and 2021. At December 31, 2022, the Company had no leases which had not yet commenced.
The following table summarizes lease payment obligations for each of the next five years and thereafter as follows:
| | | | | | | | | | | | | | |
| | Lease Payment Obligations at December 31, |
| | 2022 | | 2021 |
| | (In thousands) |
| | | | |
One year or less | | $ | 4,290 | | | $ | 4,198 | |
After one year to two years | | 3,745 | | | 3,950 | |
After two years to three years | | 3,075 | | | 3,150 | |
After three years to four years | | 2,773 | | | 2,479 | |
After four years to five years | | 2,000 | | | 2,177 | |
Thereafter | | 4,345 | | | 5,340 | |
Total undiscounted cash flows | | 20,228 | | | 21,294 | |
Discount on cash flows | | (1,613) | | | (1,709) | |
Total lease liability | | $ | 18,615 | | | $ | 19,585 | |
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(10) Goodwill and Intangible Assets
Intangible assets at December 31, 2022 and 2021 are summarized as follows:
| | | | | | | | | | | |
| December 31, |
| 2022 | | 2021 |
| (In thousands) |
| | | |
Goodwill | $ | 110,715 | | | $ | 85,324 | |
Core deposit intangibles | 13,505 | | | 5,214 | |
Mortgage servicing rights | 922 | | | 1,155 | |
| $ | 125,142 | | | $ | 91,693 | |
Mortgage servicing rights' amortization expense for the years ended December 31, 2022, 2021, and 2020 amounted to $233,000, $266,000, and $130,000, respectively. Core deposit intangible amortization expense for the years ended December 31, 2022, 2021, and 2020 amounted to $2.0 million, $1.0 million and $1.0 million, respectively.
Scheduled amortization of core deposit intangibles for each of the next five years and thereafter is as follows:
| | | | | | | | |
Year Ended December 31, | | Core Deposit Intangible Amortization |
| | (In thousands) |
| | |
2023 | | $ | 2,350 | |
2024 | | 2,190 | |
2025 | | 2,018 | |
2026 | | 1,829 | |
2027 | | 1,615 | |
Thereafter | | 3,503 | |
Total | | $ | 13,505 | |
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(11) Deposits
Deposits at December 31, 2022 and 2021 are summarized as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, |
| 2022 | | 2021 |
| Balance | | Weighted Average Rate | | Balance | | Weighted Average Rate |
| (Dollars in thousands) |
| | | | | | | |
Non-interest-bearing demand | $ | 1,806,152 | | | — | % | | $ | 1,712,061 | | | — | % |
Interest-bearing demand | 2,592,884 | | | 0.75 | | | 2,599,987 | | | 0.25 | |
Money market accounts | 718,524 | | | 0.93 | | | 657,156 | | | 0.22 | |
Savings and club deposits | 913,738 | | | 0.06 | | | 822,833 | | | 0.06 | |
Certificates of deposit | 1,969,861 | | | 2.16 | | | 1,778,179 | | | 0.73 | |
Total deposits | $ | 8,001,159 | | | 0.86 | % | | $ | 7,570,216 | | | 0.28 | % |
Included in the above balance at December 31, 2021 are certificates of deposit obtained through brokers totaling $5.0 million that were acquired from Stewardship.
The aggregate amount of certificates of deposit that meet or exceed $100,000 totaled approximately $1.1 billion and $932.4 million at December 31, 2022 and 2021, respectively.
Scheduled maturities of certificates of deposit accounts at December 31, 2022 and 2021 are summarized as follows:
| | | | | | | | | | | |
| December 31, |
| 2022 | | 2021 |
| (In thousands) |
| | | |
One year or less | $ | 1,189,826 | | | $ | 1,087,631 | |
After one year to two years | 610,965 | | | 418,515 | |
After two years to three years | 92,120 | | | 143,950 | |
After three years to four years | 48,981 | | | 36,277 | |
After four years | 27,969 | | | 91,806 | |
| $ | 1,969,861 | | | $ | 1,778,179 | |
Interest expense on deposits for the years ended December 31, 2022, 2021, and 2020 are summarized as follows:
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2022 | | 2021 | | 2020 |
| (In thousands) |
| | | | | |
Demand (including money market accounts) | $ | 13,900 | | | $ | 10,077 | | | $ | 15,556 | |
Savings and club deposits | 466 | | | 731 | | | 1,023 | |
Certificates of deposit | 13,512 | | | 18,301 | | | 38,667 | |
| $ | 27,878 | | | $ | 29,109 | | | $ | 55,246 | |
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(12) Borrowings
Borrowings at December 31, 2022 and 2021 are summarized as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, |
| 2022 | | 2021 | | 2022 | | 2021 |
| Balance | | Weighted Average Interest Rate |
| (In thousands) | | | | |
| | | | | | | |
| | | | | | | |
FHLB advances | $ | 1,090,159 | | | $ | 340,495 | | | 4.37 | % | | 1.17 | % |
Notes payable | 29,894 | | | 29,841 | | | 3.35 | | | 3.35 | |
| | | | | | | |
Junior subordinated debentures | 6,994 | | | 6,973 | | | 7.69 | | | 3.07 | |
| $ | 1,127,047 | | | $ | 377,309 | | | 4.36 | % | | 1.38 | % |
At December 31, 2022 and 2021, the Company had no outstanding overnight lines of credit with the FHLB. Interest expense on overnight advances for the years ended December 31, 2022, 2021, and 2020, were $1.9 million, $7,000, and $425,000, respectively.
At December 31, 2022, each of the Banks could borrow funds from the FHLB under an overnight advance program up to the Bank's maximum borrowing capacities based on their ability to collateralize such borrowings. Members in good standing 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. Additionally, at both December 31, 2022 and 2021, Columbia Bank had unused correspondent bank lines of credit with an aggregate overnight borrowing capacity of $339.0 million and $250.0 million, respectively, and Freehold Bank had an unused correspondent line of credit with an aggregate overnight borrowing capacity of $15.0 million.
At December 31, 2022, FHLB advances were at fixed rates with maturities between January 2023 and August 2027 and at December 31, 2021, FHLB advances were at fixed rates with maturities between January 2022 and August 2027. At December 31, 2022 and 2021, FHLB advances were collateralized by FHLB capital stock owned by each of the banks, and Columbia Bank loans with carrying values totaling $1.6 billion and $1.9 billion, respectively. At December 31, 2022 and 2021, FHLB advances were collateralized with Freehold loans with carrying values totaling $35.0 million and $25.1 million, respectively. Loans securing advances consists of one-to-four family, multifamily and commercial and home equity real estate loans. At December 31, 2022 and 2021, FHLB advances were also collateralized by Columbia securities with carrying values totaling $87.7 million and $148.1 million, respectively. At December 31, 2022 and 2021, FHLB advances were also collateralized by Freehold securities with carrying values totaling $28.3 million and $44.1 million, respectively. Interest expense on fixed rate FHLB advances for the years ended December 31, 2022, 2021, and 2020, were $11.5 million, $7.6 million, and $17.7 million, respectively.
At December 31, 2022 and 2021, short-term FHLB advances totaling $290.0 million and $190.0 million, respectively, were designated as hedged items as part of a cash flow hedging program. See note 21 for information regarding these transactions.
Scheduled maturities of FHLB advances at December 31, 2022 are summarized as follows:
| | | | | |
| Year Ended December 31, 2022 |
| (In thousands) |
| |
One year or less | $ | 676,420 | |
After one year to two years | 335,036 | |
After two years to three years | 67,454 | |
After three years to four years | 7,140 | |
After four years | 4,109 | |
Total FHLB advances | $ | 1,090,159 | |
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(12) Borrowings (continued)
During 2021, the Company entered into a $30.0 million unsecured term note with a third party at a fixed interest rate of 3.35% and a maturity date of December 21, 2024. At December 31, 2022 the carrying value of a term note was $29.9 million. Interest expense on the term note, for the years ended December 31, 2022 and 2021 were $1.1 million and $25,000, respectively.
During 2021, the Company also established a $30.0 million unsecured revolving credit facility with a third party at a variable rate indexed to the prime rate as published by the Wall Street Journal. During 2022, the Company utilized $6.5 million of the line and repaid in full as of December 31, 2022. Interest expense on the revolving credit facility for the year ended December 31, 2022 was $122,000. The Company did not draw on this facility during 2021.
At both December 31, 2022 and 2021, the carrying value of junior subordinated debt balances was $7.0 million. The balance outstanding at December 31, 2022 and 2021 represents debentures issued in 2003 by Stewardship Statutory Trust (the "Trust"), a statutory business trust that was acquired in the Stewardship merger. These floating rate debentures mature on September 17, 2033 and adjust quarterly at a rate of three month LIBOR plus 2.95%. At December 31, 2022 and 2021 the rate of interest was 7.69% and 3.07%, respectively. Interest expense for the years ended December 31, 2022, 2021, and 2020 were $370,000, $245,000, $295,000, respectively.
The balance of subordinated notes acquired in the Stewardship merger were prepaid in September 2020. The subordinated notes had a maturity date of August 25, 2025, and included a right of prepayment, without penalty, on or after August 28, 2020. Interest expense for the year ended December 31, 2020 was $448,000. There was no interest expense for the years ended December 31, 2022 and 2021.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(13) Stockholders' Equity
Regulatory Capital
The Company and its subsidiary banks (Columbia Bank and Freehold Bank) are subject to various regulatory capital requirements administered by the federal banking regulators, including a risk-based capital measure. The Federal Reserve establishes capital requirements, including well capitalized standards, for the consolidated financial holding company, and the Office of the Comptroller of the Currency (the "OCC") has similar requirements for the Company's subsidiary banks. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company's Consolidated Statements of Financial Condition.
Federal regulators require federally insured depository institutions to meet several minimum capital standards: (1) total capital to risk-weighted assets of 8.0%; (2) tier 1 capital to risk-weighted assets of 6.0%; (3) common equity tier 1 capital to risk-weighted assets of 4.5%; and (4) tier 1 capital to adjusted total assets of 4.0%. In addition to establishing the minimum regulatory capital requirements, the regulations limit capital distributions and certain discretionary bonus payments to management if the institution does not hold a "capital conservation buffer" consisting of 2.5% of common equity tier 1 capital to risk-weighted assets above the amount necessary to meet its minimum risk-based capital requirements. The regulators established a framework for the classification of savings institutions into five categories: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized. Generally, an institution is considered well capitalized if it has: a total capital to risk-weighted assets ratio of at least 10.0%, a tier 1 capital to risk-weighted assets ratio of at least 8.0%, a common tier 1 capital to risk-weighted assets ratio of at least 6.5%, and a tier 1 capital to adjusted total assets ratio of at least 5.0%. As of December 31, 2022 and 2021, each of the Company and the banks exceeded all capital adequacy requirements to which it is subject.
Based upon most recent notification from federal banking regulators, the banks were categorized as well capitalized under the regulatory framework for prompt corrective action. There are no conditions existing or events which have occurred since notification that management believes have changed the Bank's category.
The following tables present the Company's, Columbia Bank's and Freehold Bank's actual capital amounts and ratios at December 31, 2022 and 2021 compared to the Federal Reserve Bank minimum capital adequacy requirements and the Federal Reserve Bank requirements for classification as a well-capitalized institution:
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(13) Stockholders' Equity (continued)
Regulatory Capital (continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Actual | | Minimum Capital Adequacy Requirements | | Minimum Capital Adequacy Requirements With Capital Conservation Buffer | | To Be Well Capitalized Under Prompt Corrective Action Provisions |
| Amount | | Ratio | | Amount | | Ratio | | Amount | | Ratio | | Amount | | Ratio |
Company | (In thousands, except ratio data) |
At December 31, 2022: | | | | | | | | | | | | | | | |
Total capital (to risk-weighted assets) | $ | 1,145,331 | | | 15.39 | % | | $ | 595,313 | | | 8.00 | % | | $ | 781,348 | | | 10.50 | % | | N/A | | N/A |
Tier 1 capital (to risk-weighted assets) | 1,085,665 | | | 14.59 | | | 446,484 | | | 6.00 | | | 632,520 | | | 8.50 | | | N/A | | N/A |
Common equity tier 1 capital (to risk-weighted assets) | 1,078,448 | | | 14.49 | | | 334,863 | | | 4.50 | | | 520,899 | | | 7.00 | | | N/A | | N/A |
Tier 1 capital (to adjusted total assets) | 1,085,665 | | | 10.68 | | | 406,643 | | | 4.00 | | | 406,643 | | | 4.00 | | | N/A | | N/A |
| | | | | | | | | | | | | | | |
At December 31, 2021: | | | | | | | | | | | | | | | |
Total capital (to risk-weighted assets) | $ | 1,104,863 | | | 17.13 | % | | $ | 515,924 | | | 8.00 | % | | $ | 677,151 | | | 10.50 | % | | N/A | | N/A |
Tier 1 capital (to risk-weighted assets) | 1,041,650 | | | 16.15 | | | 386,943 | | | 6.00 | | | 548,170 | | | 8.50 | | | N/A | | N/A |
Common equity tier 1 capital (to risk-weighted assets) | 1,034,433 | | | 16.04 | | | 290,207 | | | 4.50 | | | 451,434 | | | 7.00 | | | N/A | | N/A |
Tier 1 capital (to adjusted total assets) | 1,041,650 | | | 11.23 | | | 370,909 | | | 4.00 | | | 370,909 | | | 4.00 | | | N/A | | N/A |
| | | | | | | | | | | | | | | |
Columbia Bank | | | | | | | | | | | | | | | |
At December 31, 2022: | | | | | | | | | | | | | | | |
Total capital (to risk-weighted assets) | $ | 1,019,850 | | | 14.12 | % | | $ | 577,656 | | | 8.00 | % | | $ | 758,173 | | | 10.50 | % | | $ | 722,070 | | | 10.00 | % |
Tier 1 capital (to risk-weighted assets) | 961,613 | | | 13.32 | | | 433,242 | | | 6.00 | | | 613,759 | | | 8.50 | | | 577,656 | | | 8.00 | |
Common equity tier 1 capital (to risk-weighted assets) | 961,613 | | | 13.32 | | | 324,931 | | | 4.50 | | | 505,449 | | | 7.00 | | | 469,345 | | | 6.50 | |
Tier 1 capital (to adjusted total assets) | 961,613 | | | 9.74 | | | 394,968 | | | 4.00 | | | 394,968 | | | 4.00 | | | 493,711 | | | 5.00 | |
| | | | | | | | | | | | | | | |
At December 31, 2021: | | | | | | | | | | | | | | | |
Total capital (to risk-weighted assets) | $ | 962,137 | | | 15.39 | % | | $ | 500,127 | | | 8.00 | % | | $ | 656,417 | | | 10.50 | % | | $ | 625,159 | | | 10.00 | % |
Tier 1 capital (to risk-weighted assets) | 898,935 | | | 14.38 | | | 375,095 | | | 6.00 | | | 531,385 | | | 8.50 | | | 500,127 | | | 8.00 | |
Common equity tier 1 capital (to risk-weighted assets) | 898,935 | | | 14.38 | | | 281,322 | | | 4.50 | | | 437,611 | | | 7.00 | | | 406,353 | | | 6.50 | |
Tier 1 capital (to adjusted total assets) | 898,935 | | | 9.80 | | | 366,961 | | | 4.00 | | | 366,961 | | | 4.00 | | | 458,701 | | | 5.00 | |
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(13) Stockholders' Equity (continued)
Regulatory Capital (continued) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Actual | | Minimum Capital Adequacy Requirements | | Minimum Capital Adequacy Requirements With Capital Conservation Buffer | | To Be Well Capitalized Under Prompt Corrective Action Provisions |
| Amount | | Ratio | | Amount | | Ratio | | Amount | | Ratio | | Amount | | Ratio |
Freehold Bank | (In thousands, except ratio data) |
At December 31, 2022: | | | | | | | | | | | | | | | |
Total capital (to risk-weighted assets) | $ | 44,725 | | | 22.92 | % | | $ | 15,609 | | | 8.00 | % | | $ | 20,486 | | | 10.50 | % | | $ | 19,511 | | | 10.00 | % |
Tier 1 capital (to risk-weighted assets) | 43,298 | | | 22.19 | | | 11,706 | | | 6.00 | | | 16,584 | | | 8.50 | | | 15,609 | | | 8.00 | |
Common equity tier 1 capital (to risk-weighted assets) | 43,298 | | | 22.19 | | | 8,780 | | | 4.50 | | | 13,657 | | | 7.00 | | | 12,682 | | | 6.50 | |
Tier 1 capital (to adjusted total assets) | 43,298 | | | 15.19 | | | 11,399 | | | 4.00 | | | 11,399 | | | 4.00 | | | 14,249 | | | 5.00 | |
| | | | | | | | | | | | | | | |
At December 31, 2021: | | | | | | | | | | | | | | | |
Total capital (to risk-weighted assets) | $ | 41,549 | | | 22.87 | % | | $ | 14,534 | | | 8.00 | % | | $ | 19,076 | | | 10.50 | % | | $ | 18,168 | | | 10.00 | % |
Tier 1 capital (to risk-weighted assets) | 41,537 | | | 22.86 | | | 10,901 | | | 6.00 | | | 15,443 | | | 8.50 | | | 14,534 | | | 8.00 | |
Common equity tier 1 capital (to risk-weighted assets) | 41,537 | | | 22.86 | | | 8,176 | | | 4.50 | | | 12,717 | | | 7.00 | | | 11,809 | | | 6.50 | |
Tier 1 capital (to adjusted total assets) | 41,537 | | | 13.71 | | | 12,118 | | | 4.00 | | | 12,118 | | | 4.00 | | | 15,147 | | | 5.00 | |
Stock Repurchase Program
On September 10, 2020, the Company announced that its Board of Directors authorized the Company's second stock repurchase program for the purchase of up to 5,000,000 shares, or approximately 4.3%, of the Company's then issued and outstanding common stock, commencing on September 15, 2020. On February 5, 2021, the Company completed the repurchases under the second stock repurchase program.
On February 1, 2021, the Company announced that its Board of Directors authorized the Company's third stock repurchase program to acquire up to 5,000,000 shares, or approximately 4.5%, of the Company's then issued and outstanding common stock, commencing upon the completion of the Company's second stock repurchase program. On December 21, 2021, the Company completed the repurchases under the third stock repurchase program.
On December 6, 2021, the Company announced that its Board of Directors authorized the Company's fourth stock repurchase program to acquire up to 5,000,000 shares, or approximately 4.6%, of the Company's then issued and outstanding common stock, commencing upon the completion of the Company's third stock repurchase program. As of December 31, 2022, there were 349,534 shares remaining to be repurchased under this program.
On December 14, 2022 the Company announced that its Board of Directors authorized the Company's fifth stock repurchase program to acquire up to 3,000,000 shares, or approximately 2.7%, of the Company's then issued and outstanding common stock, commencing upon the completion of the Company’s fourth stock repurchase program. As of December 31, 2022, no shares have been purchased under this program.
During the years ended December 31, 2022, 2021, and 2020 the Company repurchased 4,464,405 shares at a cost of approximately $94.0 million, or $21.05 per share, and 6,055,119 shares at a cost of approximately $107.8 million, or $17.80 per share, and 7,587,142 shares at a cost of approximately $108.2 million, or $14.26 respectively, under these programs. Repurchased shares are held as treasury stock and are available for general corporate purposes.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(14) Employee Benefit Plans
Pension Plan, Retirement Income Maintenance Plan (the "RIM Plan"), Post-retirement Plan, Split-Dollar Life Insurance Plans
The Company maintains a single employer, tax-qualified defined benefit pension plan (the "Pension Plan") which covers full-time employees that satisfy the Pension Plan's eligibility requirements. The benefits are based on years of service and the employee's average compensation for the highest five consecutive years of employment. Effective October 1, 2018, newly hired employees hired are not eligible to participate in Columbia Bank's Pension Plan as the plan has been closed to new employees as of that date.
The Company's policy is to fund at least the minimum contribution required by the Employee Retirement Income Security Act of 1974. GAAP requires an employer to: (a) recognize in its statement of financial position the over-funded or under-funded status of a defined benefit post-retirement plan measured as the difference between the fair value of plan assets and the benefit obligation; (b) measure a plan’s assets and its obligations that determine its funded status at the end of the employer’s fiscal year (with limited exceptions); and (c) recognize as a component of other comprehensive income (loss), net of tax, the actuarial gains and losses and the prior service costs and credits that arise during the period. The assets of the plan are primarily invested in fixed income and equity funds.
The Company also maintains a Retirement Income Maintenance Plan (the "RIM" Plan), which is a non-qualified defined benefit plan which provides benefits to all employees of the Company if their benefits under the Pension Plan are limited by Internal Revenue Code 415 and 401(a)(17).
In addition, the Company provides certain health care and life insurance benefits to eligible retired employees under a Post-retirement Plan. The Company accrues the cost of retiree health care and other benefits during the employees’ period of active service. Effective January 1, 2019, the Post-retirement Plan has been closed to new hires. The Company also provides life insurance benefits to eligible employees under an endorsement split-dollar life insurance program.
The Company also provides life insurance benefits to eligible employees under an endorsement split-dollar life insurance program. The Company recognizes a liability for future benefits applicable to endorsement split-dollar life insurance arrangements that provide death benefits post-retirement. Through its mergers, the Company recognized additional liability for future benefits applicable to endorsement split-dollar life insurance arrangements that provide death benefits post-retirement under those respective Bank's program.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(14) Employee Benefit Plans (continued)
Pension Plan, Retirement Income Maintenance Plan (the "RIM Plan") Post-retirement Plan, Split-Dollar Life Insurance Plans (cont'd)
The following table sets forth information regarding the Pension, RIM, Post-retirement and Split-Dollar Life Insurance Plans at December 31, 2022 and 2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| At December 31, |
| 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 |
| Pension Plan | | RIM Plan | | Post-retirement Plan | | Split-Dollar Life Insurance |
| (In thousands) |
Change in benefit obligation: | | | | | | | | | | | | | | | |
Benefit obligation at beginning of year | $ | 310,416 | | | $ | 312,440 | | | $ | 15,650 | | | $ | 16,530 | | | $ | 26,335 | | | $ | 30,621 | | | $ | 20,140 | | | $ | 19,981 | |
Acquired | — | | | — | | | — | | | — | | | — | | | — | | | 1,503 | | | — | |
Service cost | 6,466 | | | 8,044 | | | 372 | | | 398 | | | 346 | | | 520 | | | 511 | | | 562 | |
Interest cost | 9,510 | | | 7,317 | | | 389 | | | 343 | | | 600 | | | 562 | | | 612 | | | 500 | |
Actuarial gain | (88,943) | | | (9,023) | | | (3,505) | | | (1,292) | | | (6,849) | | | (4,805) | | | (6,534) | | | (903) | |
Benefits paid | (15,317) | | | (8,362) | | | (296) | | | (329) | | | (649) | | | (563) | | | (255) | | | — | |
Benefit obligation at end of year | 222,132 | | | 310,416 | | | 12,610 | | | 15,650 | | | 19,783 | | | 26,335 | | | 15,977 | | | 20,140 | |
| | | | | | | | | | | | | | | |
Change in plan assets: | | | | | | | | | | | | | | | |
Fair value of plan assets at beginning of year | 492,132 | | | 411,907 | | | — | | | — | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | | | | |
Actuarial (loss) return on plan assets | (83,063) | | | 53,587 | | | — | | | — | | | — | | | — | | | — | | | — | |
Employer contributions | 10,000 | | | 35,000 | | | 296 | | | 329 | | | 649 | | | 563 | | | 255 | | | — | |
Benefits paid | (15,317) | | | (8,362) | | | (296) | | | (329) | | | (649) | | | (563) | | | (255) | | | — | |
Fair value of plan assets at end of year | 403,752 | | | 492,132 | | | — | | | — | | | — | | | — | | | — | | | — | |
Funded status at end of year | $ | 181,620 | | | $ | 181,716 | | | $ | (12,610) | | | $ | (15,650) | | | $ | (19,783) | | | $ | (26,335) | | | $ | (15,977) | | | $ | (20,140) | |
| | | | | | | | | | | | | | | |
At December 31, 2022 and 2021, the unfunded liability for the RIM Plan and Post-retirement Plan of $12.6 million and $19.8 million, and $15.7 million and $26.3 million, respectively, were included in other liabilities in the Consolidated Statements of Financial Condition, and the over-funded pension benefits associated with the Pension Plan totaling $181.6 million and $181.7 million respectively, were included in other assets in the Consolidated Statements of Financial Condition.
The significant increase in actuarial gains related to the change in benefit obligations for the year ended December 31, 2022 resulted from a substantial increase in discount rates.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(14) Employee Benefit Plans (continued)
Pension Plan, Retirement Income Maintenance Plan (the "RIM Plan") Post-retirement Plan, Split-Dollar Life Insurance Plans (cont'd)
The components of accumulated other comprehensive income related to the Pension Plan, RIM Plan, and Post-retirement Plan and Split-Dollar Life Insurance Plans on a pre-tax basis, at December 31, 2022, 2021, and 2020, are summarized in the following table:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| At December 31, |
| 2022 | | 2021 |
| Pension Plan | | RIM Plan | | Post-retirement Plan | | Split-Dollar Life Insurance | | Pension Plan | | RIM Plan | | Post-retirement Plan | | Split-Dollar Life Insurance |
| (In thousands) | | |
| | | | | | | | | | | | | | | |
Unrecognized prior service costs | $ | — | | | $ | — | | | $ | — | | | $ | 294 | | | $ | — | | | $ | — | | | $ | — | | | $ | 350 | |
Unrecognized net actuarial loss (income) | 60,970 | | | 1,781 | | | (161) | | | (65) | | | 38,909 | | | 5,730 | | | 6,999 | | | 7,071 | |
Total accumulated other comprehensive loss (income) | $ | 60,970 | | | $ | 1,781 | | | $ | (161) | | | $ | 229 | | | $ | 38,909 | | | $ | 5,730 | | | $ | 6,999 | | | $ | 7,421 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| At December 31, 2020 |
| Pension Plan | | RIM Plan | | Post-retirement Plan | | Split-Dollar Life Insurance |
| (In thousands) | | |
| | | | | | | |
Unrecognized prior service costs | $ | — | | | $ | — | | | $ | — | | | $ | 405 | |
Unrecognized net actuarial loss | 76,686 | | | 7,686 | | | 12,417 | | | 8,741 | |
Total accumulated other comprehensive loss | $ | 76,686 | | | $ | 7,686 | | | $ | 12,417 | | | $ | 9,146 | |
Net periodic (income) benefit cost for the Pension Plan, RIM Plan, Post-retirement Plan and Split-Dollar Life Insurance plan benefits for the years ended December 31, 2022 and 2021, and 2020, includes the following components:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2022 | | |
| Pension Plan | | RIM Plan | | Post-retirement Plan | | Split-Dollar Life Insurance | | Affected Line Item in the Consolidated Statements of Income |
| (In thousands) | | |
| | | | | | | | | |
Service cost | $ | 6,466 | | | $ | 372 | | | $ | 346 | | | $ | 511 | | | Compensation and employee benefits |
Interest cost | 9,510 | | | 389 | | | 600 | | | 612 | | | Other non-interest expense |
Expected return on plan assets | (29,262) | | | — | | | — | | | — | | | Other non-interest expense |
Amortization: | | | | | | | | | |
Prior service cost | — | | | — | | | — | | | 56 | | | Other non-interest expense |
Net loss | 1,320 | | | 444 | | | 311 | | | 602 | | | Other non-interest expense |
Net periodic (income) benefit cost | $ | (11,966) | | | $ | 1,205 | | | $ | 1,257 | | | $ | 1,781 | | | |
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(14) Employee Benefit Plans (continued)
Pension Plan, Retirement Income Maintenance Plan (the "RIM Plan") Post-retirement Plan, Split-Dollar Life Insurance Plans (cont'd)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2021 | | |
| Pension Plan | | RIM Plan | | Post-retirement Plan | | Split-Dollar Life Insurance | | Affected Line Item in the Consolidated Statements of Income |
| (In thousands) | | |
| | | | | | | | | |
Service cost | $ | 8,044 | | | $ | 398 | | | $ | 520 | | | $ | 562 | | | Compensation and employee benefits |
Interest cost | 7,317 | | | 343 | | | 562 | | | 500 | | | Other non-interest expense |
Expected return on plan assets | (26,833) | | | — | | | — | | | — | | | Other non-interest expense |
Amortization: | | | | | | | | | |
Prior service cost | — | | | — | | | — | | | 56 | | | Other non-interest expense |
Net loss | 2,001 | | | 664 | | | 613 | | | 765 | | | Other non-interest expense |
Net periodic (income) benefit cost | $ | (9,471) | | | $ | 1,405 | | | $ | 1,695 | | | $ | 1,883 | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2020 | | |
| Pension Plan | | RIM Plan | | Post-retirement Plan | | Split-Dollar Life Insurance | | Affected Line Item in the Consolidated Statements of Income |
| (In thousands) | | |
| | | | | | | | | |
Service cost | $ | 7,985 | | | $ | 267 | | | $ | 394 | | | $ | 467 | | | Compensation and employee benefits |
Interest cost | 7,608 | | | 405 | | | 683 | | | 507 | | | Other non-interest expense |
Expected return on plan assets | (23,375) | | | — | | | — | | | — | | | Other non-interest expense |
Amortization: | | | | | | | | | |
Prior service cost | — | | | — | | | — | | | 56 | | | Other non-interest expense |
Net loss | 4,902 | | | 397 | | | 309 | | | 454 | | | Other non-interest expense |
Net periodic (income) benefit cost | $ | (2,880) | | | $ | 1,069 | | | $ | 1,386 | | | $ | 1,484 | | | |
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(14) Employee Benefit Plans (continued)
Pension Plan, Retirement Income Maintenance Plan (the "RIM Plan") Post-retirement Plan, Split-Dollar Life Insurance Plans (cont'd)
The weighted average actuarial assumptions used in the plan determinations at and for the years ended December 31, 2022, 2021, and 2020 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| At and For the Years Ended December 31, 2022 |
| Pension Plan | | RIM Plan | | Post-retirement Plan | | Split-Dollar Life Insurance |
Weighted average assumptions used to determine benefit obligation: | | | | | | | |
Discount rate | 5.260 | % | | 5.210 | % | | 5.180 | % | | 5.310 | % |
Rate of compensation increase | 3.750 | | | 3.750 | | | N/A | | 3.750 | |
Weighted average assumptions used to determine net periodic benefit cost: | | | | | | | |
Discount Rates: | | | | | | | |
Benefit obligation | 3.140 | % | | 2.970 | % | | 2.900 | % | | 3.300 | % |
Remeasurement rate | 4.860 | | | N/A | | N/A | | N/A |
Service cost | 3.320 | | | 3.160 | | | 3.190 | | | 3.490 | |
Remeasurement rate | 4.950 | | | N/A | | N/A | | N/A |
Interest cost | 2.660 | | | 2.520 | | | 2.340 | | | 2.950 | |
Remeasurement rate | 4.580 | | | N/A | | N/A | | N/A |
Expected rate of return on plan assets | 6.200 | | | N/A | | N/A | | N/A |
Remeasurement rate | 7.000 | | | N/A | | N/A | | N/A |
Rate of compensation increase | 3.750 | | | 3.750 | | | N/A | | 3.750 | |
| | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| At and For the Years Ended December 31, 2021 |
| Pension Plan | | RIM Plan | | Post-retirement Plan | | Split-Dollar Life Insurance |
Weighted average assumptions used to determine benefit obligation: | | | | | | | |
Discount rate | 3.140 | % | | 2.970 | % | | 2.900 | % | | 3.220 | % |
Rate of compensation increase | 3.750 | | | 3.750 | | | N/A | | 3.750 | |
Weighted average assumptions used to determine net periodic benefit cost: | | | | | | | |
Discount Rates: | | | | | | | |
Benefit obligation | 2.920 | % | | 2.670 | % | | 2.590 | % | | 3.010 | % |
Remeasurement rate | 3.200 | | | N/A | | N/A | | N/A |
Service cost | 3.210 | | | 2.930 | | | 2.960 | | | 3.260 | |
Remeasurement rate | 3.460 | | | N/A | | N/A | | N/A |
Interest cost | 2.280 | | | 2.100 | | | 1.880 | | | 2.530 | |
Remeasurement rate | 2.550 | | | N/A | | N/A | | N/A |
Expected rate of return on plan assets | 6.200 | | | N/A | | N/A | | N/A |
Rate of compensation increase | 3.750 | | | 3.750 | | | N/A | | 3.750 | |
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(14) Employee Benefit Plans (continued)
Pension Plan, Retirement Income Maintenance Plan (the "RIM Plan") Post-retirement Plan, Split-Dollar Life Insurance Plans (cont'd)
| | | | | | | | | | | | | | | | | | | | | | | |
| At and For the Years Ended December 31, 2020 |
| Pension Plan | | RIM Plan | | Post-retirement Plan | | Split-Dollar Life Insurance |
Weighted average assumptions used to determine benefit obligation: | | | | | | | |
Discount rate | 2.920 | % | | 2.670 | % | | 2.590 | % | | 3.010 | % |
Rate of compensation increase | 3.750 | | | 3.750 | | | N/A | | 3.750 | |
Weighted average assumptions used to determine net periodic benefit cost: | | | | | | | |
Discount Rates: | | | | | | | |
Benefit obligation | 3.490 | % | | 3.330 | % | | 3.270 | % | | 3.540 | % |
Remeasurement rate | 2.740 | | | N/A | | N/A | | N/A |
Service cost | 3.660 | | | 3.460 | | | 3.520 | | | 3.710 | |
Remeasurement rate | 2.970 | | | N/A | | N/A | | N/A |
Interest cost | 3.120 | | | 3.000 | | | 2.850 | | | 3.280 | |
Remeasurement rate | 2.220 | | | N/A | | N/A | | N/A |
Expected rate of return on plan assets | 6.500 | | | N/A | | N/A | | N/A |
Rate of compensation increase | 3.500 | | | 3.500 | | | N/A | | 3.500 | |
The Company provides its actuaries with certain rate assumptions used in measuring the respective benefit obligations. The most significant of these is the discount rate used to calculate the period-end present value of the benefit obligations, and the expense to be included in the following year's consolidated financial statements. A lower discount rate will result in a higher benefit obligation and expense, while a higher discount rate will result in a lower benefit obligation and expense. The discount rate assumption was determined based on a cash flow-yield curve model specific to the Company's pension and post-retirement plans.
The Company compares this rate to certain market indices, such as long-term treasury bonds, or pension liability indices, for reasonableness. The Company's expected return on plan assets assumption is based on historical investment return rate experience, evaluation of input from the trustee managing the pension plan's assets and Columbia Bank's Pension Committee which has responsibility for managing these assets. The expected return on pension plan assets is also impacted by the target allocation of assets, which is based on the Company's goal of earning the highest rate of return while maintaining risk at acceptable levels.
Estimated future benefit payments, which reflect expected future service, as appropriate for the next five years and thereafter are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
For the Year Ended December 31, | | Pension Plan | | RIM Plan | | Post-retirement Plan | | Split-Dollar Life Insurance |
| | (In thousands) | | |
| | | | | | | | |
2023 | | $ | 9,842 | | | $ | 431 | | | $ | 1,325 | | | $ | 427 | |
2024 | | 10,610 | | | 604 | | | 1,390 | | | 463 | |
2025 | | 11,331 | | | 735 | | | 1,458 | | | 508 | |
2026 | | 11,989 | | | 795 | | | 1,527 | | | 566 | |
2027 | | 12,653 | | | 829 | | | 1,571 | | | 624 | |
2028 - 2032 | | 73,758 | | | 4,628 | | | 7,683 | | | 3,774 | |
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(14) Employee Benefit Plans (continued)
Pension Plan, Retirement Income Maintenance Plan (the "RIM Plan") Post-retirement Plan, Split-Dollar Life Insurance Plans (cont'd)
The weighted average asset allocation of pension assets at December 31, 2022 and 2021 were as follows:
| | | | | | | | | | | |
| December 31, |
| 2022 | | 2021 |
| | | |
Domestic equities | 38.4 | % | | 44.2 | % |
Foreign equities | 11.1 | | | 12.2 | |
Fixed income | 49.0 | | | 40.7 | |
Real estate | — | | | 2.4 | |
Cash | 1.5 | | | 0.5 | |
Total | 100.0 | % | | 100.0 | % |
Management, under the direction of Columbia Bank's Pension Committee, strives to have pension assets sufficiently diversified so that adverse or unexpected results from one security class will not have a significant detrimental impact on the entire portfolio. The target allocation of assets and acceptable ranges around the targets are as follows:
| | | | | |
| Allowable Range |
Equities | 35-70% |
Fixed income | 40-60% |
Real estate | 0-10% |
Cash | 0-15% |
Columbia Bank's Pension Committee engages an investment management advisory firm to regularly monitor the performance of the asset managers and ensure they are within compliance with policy. The maximum and minimum of the range for each class is based on the fair value of the assets in the fund. If changes in fair value should lead to allocations outside these boundaries, management shall adjust exposure back to the established guidelines within 90 days or reevaluate the guidelines.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(14) Employee Benefit Plans (continued)
Pension Plan, Retirement Income Maintenance Plan (the "RIM Plan") Post-retirement Plan, Split-Dollar Life Insurance Plans (cont'd)
The following tables present the assets that are measured at fair value on a recurring basis by level within the U.S. GAAP fair value hierarchy as reported on the Statements of Net Assets Available for Plan Benefits at December 31, 2022 and 2021, respectively. A financial instrument's level within the fair value hierarchy's is based on the lowest level of input that is significant to the fair value measurement.
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2022 |
| | | Fair Value Measurements |
| Fair Value | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
| (In thousands) |
| | | | | | | |
Money market mutual funds | $ | 6,247 | | | $ | 6,247 | | | $ | — | | | $ | — | |
Mutual funds - value stock fund | 32,764 | | | 32,764 | | | — | | | — | |
Mutual funds - fixed income | 197,680 | | | 197,680 | | | — | | | — | |
Mutual funds - international stock | 44,833 | | | 44,833 | | | — | | | — | |
Mutual funds - institutional stock index | 122,228 | | | 122,228 | | | — | | | — | |
| | | | | | | |
| $ | 403,752 | | | $ | 403,752 | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 |
| | | Fair Value Measurements |
| Fair value | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
| (In thousands) |
| | | | | | | |
Money market mutual funds | $ | 2,537 | | | $ | 2,537 | | | $ | — | | | $ | — | |
Mutual funds - value stock fund | 36,477 | | | 36,477 | | | — | | | — | |
Mutual funds - fixed income | 200,349 | | | 200,349 | | | — | | | — | |
Mutual funds - international stock | 60,042 | | | 60,042 | | | — | | | — | |
Mutual funds - institutional stock index | 181,013 | | | 181,013 | | | — | | | — | |
Commingled real estate funds | 11,714 | | | — | | | 11,714 | | | — | |
| $ | 492,132 | | | $ | 480,418 | | | $ | 11,714 | | | $ | — | |
Money market and other mutual funds are reported at fair value in the tables above utilizing exchange quoted prices in active markets for identical instruments (Level 1 inputs). The commingled real estate funds are reported at their respective net asset values (Level 2 inputs).
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(14) Employee Benefit Plans (continued)
Pension Plan and Post-retirement Plan Acquired-RSI
Through the acquisition of the RSI Entities on May 1, 2022, the Company acquired a funded pension plan and a non-funded post-retirement plan. The benefits are based on years of service and the employee’s compensation, as defined. The Plan was amended effective March 31, 2011, to freeze the Plan so that no employee shall commence or recommence participation in the Plan, that there shall be no further benefit accruals under the Plan, and that compensation received after the effective date shall not be recognized for any purpose under the Plan. The defined benefit post-retirement healthcare plan covers substantially all retirees and employees.
The following table sets forth information regarding the Pension Plan and Post-retirement Plan at December 31, 2022:
| | | | | | | | | | | |
| At December 31, |
| 2022 | | 2022 |
| Pension Plan | | Post-retirement Plan |
| (In thousands) |
Change in benefit obligation: | | | |
Benefit obligation at beginning of year | $ | — | | | $ | — | |
Acquired | 7,202 | | | 3,163 | |
Service cost | — | | | 93 | |
Interest cost | 198 | | | 93 | |
Actuarial gain | (1,009) | | | (1,298) | |
Benefits paid | (129) | | | (4) | |
Settlements | (205) | | | — | |
Benefit obligation at end of year | 6,057 | | | 2,047 | |
| | | |
Change in plan assets: | | | |
Fair value of plan assets at beginning of year | — | | | — | |
Acquired | 7,819 | | | — | |
Actuarial return on plan assets | (424) | | | — | |
Employer contributions | — | | | 4 | |
Benefits paid | (129) | | | (4) | |
Settlements | (205) | | | — | |
Fair value of plan assets at end of year | 7,061 | | | — | |
Funded status at end of year | $ | 1,004 | | | $ | (2,047) | |
At December 31, 2022, the unfunded liability for the Post-retirement Plan of $2.0 million was included in other liabilities in the Consolidated Statements of Financial Condition, and the over-funded pension benefits associated with the Pension Plan totaling $1.0 million, was included in other assets in the Consolidated Statements of Financial Condition.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(14) Employee Benefit Plans (continued)
Pension Plan and Post-retirement Plan Acquired-RSI (cont'd)
The components of accumulated other comprehensive income related to the Pension Plan and Post-retirement Plan on a pre-tax basis, at December 31, 2022 are summarized in the following table:
| | | | | | | | | | | |
| At December 31, 2022 |
| Pension Plan | | Post-retirement Plan |
| (In thousands) |
| | | |
Unrecognized prior service costs | $ | — | | | $ | — | |
Unrecognized net actuarial (income) | (281) | | | (868) | |
Total accumulated other comprehensive (income) | $ | (281) | | | $ | (868) | |
Net periodic (income) benefit cost for the Pension Plan and Post-retirement Plan for the year ended December 31, 2022 includes the following components:
| | | | | | | | | | | | | | | | | |
| For the Year Ended | | |
| December 31, 2022 | | |
| Pension Plan | | Post-retirement Plan | | Affected Line Item in the Consolidated Statements of Income |
| (In thousands) | | |
| | | | | |
Service cost | $ | — | | | $ | 93 | | | Compensation and employee benefits |
Interest cost | 198 | | | 93 | | | Other non-interest expense |
Expected return on plan assets | (295) | | | — | | | Other non-interest expense |
| | | | | |
| | | | | |
| | | | | |
Settlements/curtailments | (10) | | | (430) | | | Other non-interest expense |
Net periodic (income) benefit cost | $ | (107) | | | $ | (244) | | | |
The weighted average actuarial assumptions used in the assumed determinations at and for the year ended December 31, 2022 were as follows:
| | | | | | | | | | | |
| At and For the Years Ended December 31, 2022 |
| Pension Plan | | RIM Plan |
Weighted average assumptions used to determine benefit obligation: | | | |
Discount rate | 5.240 | % | | 5.360 | % |
Rate of compensation increase | N/A | | N/A |
Weighted average assumptions used to determine net periodic benefit cost: | | | |
Discount Rates: | | | |
Benefit obligation | 4.210 | % | | 4.580 | % |
| | | |
| | | |
| | | |
| | | |
| | | |
Expected rate of return on plan assets | 5.750 | % | | N/A |
| | | |
| | | |
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(14) Employee Benefit Plans (continued)
Pension Plan and Post-retirement Plan Acquired-RSI (cont'd)
Estimated future benefit payments, which reflect expected future service, as appropriate for the next five years and thereafter are as follows:
| | | | | | | | | | | | | | |
For the Year Ended December 31, | | Pension Plan | | Post-retirement Plan |
| | (In thousands) |
| | | | |
2023 | | $ | 209 | | | $ | 15 | |
2024 | | 224 | | | 27 | |
2025 | | 237 | | | 37 | |
2026 | | 260 | | | 45 | |
2027 | | 308 | | | 54 | |
2028 - 2032 | | 2,058 | | | 407 | |
The weighted average asset allocation of pension assets at December 31, 2022 were as follows:
| | | | | |
| December 31, |
| 2022 |
| |
Equities | 66.8 | % |
| |
Fixed income | 32.2 | |
| |
Cash | 1.0 | |
Total | 100.0 | % |
The long-term investment objectives of the plan are to maintain plan assets at a level that will sufficiently cover long-term obligations and to generate a return on plan assets that will meet or exceed the rate at which long-term obligations will grow. A broadly diversified combination of equity and fixed income portfolios and various risk management techniques are used to help achieve these objectives. The Plan's asset allocation targets are as follows:
| | | | | |
| Targets |
Equities | 65 | % |
Fixed income | 34 | % |
Cash | 1 | % |
The investment goal is to achieve investment results that will contribute to the proper funding of the pension plan by exceeding the rate of inflation over the long-term. In addition, investment managers for the trust are expected to provide above average performance when compared to their peer managers. Performance volatility is also monitored. Risk / volatility is further managed by the distinct investment objectives of each of the trust funds and the diversification within each fund.
The long-term rate-of-return-on-assets assumption was based on historical returns earned by equities and fixed income securities, adjusted to reflect expectations of future returns as applied to the Plan’s target allocation of asset classes.
The following tables present the assets that are measured at fair value on a recurring basis by level within the U.S. GAAP fair value hierarchy as reported on the Statements of Net Assets Available for Plan Benefits at December 31, 2022. A financial instrument's level within the fair value hierarchy's is based on the lowest level of input that is significant to the fair value measurement.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(14) Employee Benefit Plans (continued)
Pension Plan and Post-retirement Plan Acquired-RSI (cont'd)
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2022 |
| | | Fair Value Measurements |
| Fair Value | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
| (In thousands) |
| | | | | | | |
Money market mutual fund | $ | 70 | | | $ | 70 | | | $ | — | | | $ | — | |
Equities - long term growth | 4,720 | | | — | | | 4,720 | | | — | |
Fixed income - long duration | 2,271 | | | — | | | 2,271 | | | — | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| $ | 7,061 | | | $ | 70 | | | $ | 6,991 | | | $ | — | |
Money market funds are reported at fair value in the table above utilizing exchange quoted prices in active markets for identical instruments (Level 1 inputs). The other investments are reported at their respective net asset values (Level 2 inputs).
Bank-owned life insurance ("BOLI")
The Company has BOLI which is a tax-advantaged transaction that is used to partially fund obligations associated with employee compensation and benefit programs. Policies are purchased insuring officers of the Company using a single premium method of payment. BOLI is accounted for using the cash surrender value and the increase in cash surrender value is included in non-interest income in the Consolidated Statements of Income. At December 31, 2022 and 2021, the Company had $264.9 million and $247.5 million, respectively, in BOLI. BOLI income for the years ended December 31, 2022, 2021, and 2020 was $7.4 million, $6.0 million, and $6.6 million, respectively.
Savings Income Maintenance Deferred Compensation Plan (the "SIM Plan")
Columbia Bank also maintains a non-qualified defined contribution plan that provides supplemental benefits to certain executives who are prevented from receiving the full benefits contemplated by the 401(k) Plan under tax law limits for tax-qualified plans. The contribution expense for the years ended December 31, 2022, 2021, and 2020 was approximately $73,000, $12,000, and $4,000, respectively.
401(k) Plans
Columbia Bank and Freehold Bank both have a 401(k) plan covering substantially all employees of each Bank. Columbia Bank may match a percentage of the first 3.00% to 4.50% contributed by participants. Columbia’s matching contribution, if any, is determined by the Board of Directors in its sole discretion. Freehold does not presently match any portion, but provided an annual match, as determined by their Board Directors, of $204,000 and $213,000 for the years ended December 31, 2022 and 2021. The Company expense for the years ended December 31, 2022, 2021, and 2020 was approximately $2.4 million, $2.1 million, and $1.7 million, respectively.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(14) Employee Benefit Plans (continued)
Employee Stock Ownership Plan ("ESOP")
Effective upon the consummation of the Company's reorganization in April 2018, an ESOP was established for all eligible employees. The ESOP used $45.4 million in proceeds from a 20 years term loan obtained from the Company to purchase 4,542,855 shares of Company common stock. The term loan principal is payable in installments through April 2038. Interest on the term loan is fixed at a rate of 4.75%.
Each year, Columbia Bank makes discretionary contributions to the ESOP, which are equal to principal and interest payments required on the term loan. Shares purchased with the loan proceeds were initially pledged as collateral for the term loan and is held in a suspense account for future allocation among participants. Contributions to the ESOP and shares released form the suspense account are allocated among the participants on the basis of compensation, as described by the ESOP in the year of allocation.
The ESOP shares pledged as collateral are reported as unearned ESOP shares in the Consolidated Statements of Financial Condition. As shares are committed to be released from collateral, the Company reports compensation expense equal to the average market price of the shares during the year, and the shares become outstanding for basic net income per common share computations. ESOP compensation expense for the years ended December 31, 2022, 2021, and 2020 was $4.9 million, $4.1 million and $3.2 million, respectively.
The ESOP shares were as follows:
| | | | | | | | | | | |
| At December 31, |
| 2022 | | 2021 |
| (In thousands) |
| | | |
Allocated shares | 1,005 | | | 802 | |
Unearned shares | 3,475 | | | 3,702 | |
Total ESOP shares | 4,480 | | | 4,504 | |
Fair value of unearned ESOP shares | $ | 75,129 | | | $ | 77,226 | |
SERP Plans
Columbia Bank has a SERP, which is a non-qualified plan which provides supplemental retirement benefits to eligible officers (those designated by the Board of Directors) of the Company who are prevented from receiving the full benefits contemplated by the ESOP's benefit formulas under tax law limits for tax-qualified plans. SERP compensation expense for the years ended December 31, 2022, 2021, and 2020 was $455,000, $348,000, and $215,000, respectively.
Through the acquisition of Roselle, the Company acquired a non-contributory defined benefit supplemental executive retirement plan with the only participant being the former president of Roselle Bank. For the years ended December 31, 2022, 2021, and 2020 the Company recorded a net periodic benefit cost of $12,000, $9,000, and $11,000, respectively, in connection with this plan.
Freehold Bank has a non-contributory defined benefit supplemental executive plan with the only participant being the former president of Freehold Bank. For the years ended December 31, 2022 and 2021, the Company recorded a net periodic benefit cost of $8,000 and $1,000 in connection with this plan.
Through the acquisition of RSI Bank, the Company acquired a non-contributory defined benefit supplemental executive retirement plan with the only participant being the former president of RSI Bank. For the year ended December 31, 2022, the Company recorded a net periodic benefit cost of $38,000.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
14) Employee Benefit Plans (continued)
Director Retirement Income Plan
Freehold Bank maintains a Director Retirement Income Plan, which provides directors a benefit equal to $12,000 per annum, payable in equal installments over 120 months when the director reaches Emeritus Age as defined by the plan. At December 31, 2022 and 2021, the Company had an accrued liability of $390,000 and $459,000, respectively, related to this plan. For the years ended December 31, 2022 and 2021, the net periodic benefit cost recorded in connection with this plan was $9,000 and $1,000, respectively.
Director Deferred Retirement Plan
Freehold Bank maintains a Director Deferred Retirement Plan, which provides directors a portion of their deferred director fees and a 10% return on all deferrals, payable in monthly installments over 120 months, when the director reaches benefit eligibility age as defined by the plan. At December 31, 2022 and 2021, the Company had an accrued liability of $399,000 and $765,000, respectively, related to this plan. For the years ended December 31, 2022 and 2021, there was no expense recorded under this plan.
Executive Incentive Retirement Plan
Through the acquisition of RSI, the Company acquired an executive incentive retirement plan. At December 31, 2022, the Company had an accrued liability of $257,000, related to this plan. For the year ended December 31, 2022, the expense recorded in connection with this plan was $7,000.
Board of Directors and Executive Deferred Compensation Plan and Key Life Insurance Plan
Through the acquisition of RSI, the Company acquired a deferred compensation plan for the former Board of Directors and executives. Under the terms of the plan, for directors who elected not to receive directors fees for a period of five years, their fees were used to purchase Key insurance on the life of each director in the amount calculated to meet the Company's obligations under the plan. Benefits payable under the plan, which accrue in accordance with a ten-year schedule, consist of monthly payments commencing at age 65 or five years from the date the plan was implemented for those participants who already reached age 65. At December 31, 2022, the Company had an accrued liability of $351,000, related to this plan. For the year ended December 31, 2022, the expense recorded in connection with this plan was $8,000.
Stock Based Deferral Plan and Directors Deferred Compensation Plan
In addition, Columbia Bank maintains a stock based deferral plan for certain executives and directors, and a cash based deferred compensation plan for directors. The Company records a deferred compensation equity account and corresponding contra-equity account for the cost of the shares held by the Stock Based Deferral Plan. Periodic adjustments to market are not required as participants do not have the option to take the distribution in cash. The Company records a liability for the amount deferred under the Directors Deferred Compensation Plan. There were no expenses recorded under these plans.
Stock Based Compensation
At the Company's annual meeting of stockholders held on June 6, 2019, stockholders approved the Columbia Financial, Inc. 2019 Equity Incentive Plan ("2019 Plan") which provides for the issuance of up to 7,949,996 shares (2,271,427 restricted stock awards and 5,678,569 stock options) of common stock.
On March 22, 2021, 50,203 shares of restricted stock were awarded, with a grant fair value of $17.86 per share. To fund the grant of restricted common stock, the Company reissued shares from treasury stock.
On March 2, 2022, 51,746 shares of restricted stock were awarded, with a grant date fair value of $21.79 per share. To fund the grant of restricted common stock, the Company issued shares from authorized unissued shares.
On October 31, 2022, 38,730 shares of restricted stock were awarded, with a grant date fair value of $20.54 per share. To fund the grant of restricted common stock, the Company issued shares from authorized unissued shares.
On November 21, 2022, 13,722 shares of restricted stock were awarded, with a grant date fair value of $21.86 per share. To fund the grant of restricted common stock, the Company issued shares from authorized unissued shares.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
14) Employee Benefit Plans (continued)
Stock Based Compensation (continued)
On December 19, 2022, 18,984 shares of restricted stock were awarded, with a grant date fair value of $21.07 per share. To fund the grant of restricted common stock, the Company issued shares from authorized unissued shares.
Restricted shares granted under the 2019 Plan generally vest in equal installments, over the performance or service periods ranging from 1 year to 5 years, beginning 1 year from the date of grant. A portion of restricted shares previously awarded were performance awards, which vested upon the satisfactory attainment of certain corporate financial targets during the year ended December 31, 2022. Management recognizes compensation expense for the fair value of restricted shares on a straight line basis over the requisite performance or service period. During the years ended December 31, 2022, 2021, and 2020, approximately $4.3 million, $5.7 million, and $5.6 million, respectively, in expense was recognized in regard to these awards. The expected future compensation expense related to the 430,954 non-vested restricted shares outstanding at December 31, 2022 is approximately $6.0 million over a weighted average period of 1.8 years.
The following is a summary of the Company's restricted stock activity during the years ended December 31, 2022 and 2021:
| | | | | | | | | | | |
| Number of Restricted Shares | | Weighted Average Grant Date Fair Value |
| | | |
Non-vested at January 1, 2021 | 1,263,169 | | | $ | 15.66 | |
Grants | 50,203 | | | 17.86 | |
Vested | (193,528) | | | 15.58 | |
Forfeited | (65,509) | | | 15.62 | |
Non-vested at December 31, 2021 | 1,054,335 | | | $ | 15.78 | |
Grants | 123,182 | | | 21.29 | |
Vested | (677,886) | | | 15.73 | |
Forfeited | (68,677) | | | 16.54 | |
Non-vested at December 31, 2022 | 430,954 | | | $ | 17.31 | |
| | | |
On March 22, 2021, options to purchase 109,654 shares of Company common stock were awarded with a grant date fair value of $4.91 per option. Stock options granted under the 2019 Plan vest in equal installments over the service period of three years beginning one year from the date of grant. These stock options were granted at an exercise price of $17.86, which represents the fair value of the Company's common stock price on the grant date based on the closing market price, and have an expiration period of 10 years. The fair value of stock options granted was estimated utilizing the Black-Scholes option pricing model using the following assumptions: expected life of six years, risk-free rate of return of 1.11%, volatility of 25.98%, and a dividend yield of 0.00%.
On March 21, 2022, options to purchase 130,951 shares of Company common stock were awarded with a grant date fair value of $6.51 per option. Stock options granted under the 2019 Plan vest in equal installments over the service period of three years beginning one year from the date of grant. These stock options were granted at an exercise price of $21.79, which represents the fair value of the Company's common stock price on the grant date based on the closing market price, and have an expiration period of 10 years. The fair value of stock options granted was estimated utilizing the Black-Scholes option pricing model using the following assumptions: expected life of seven years, risk-free rate of return of 2.34%, volatility of 25.31%, and a dividend yield of 0.00%.
On October 31, 2022, options to purchase 173,766 shares of Company common stock were awarded with a grant date fair value of $7.22 per option. Stock options granted under the 2019 Plan vest in equal installments over the service period of three years beginning one year from the date of grant. These stock options were granted at an exercise price of $20.54, which represents the fair value of the Company's common stock price on the grant date based on the closing market price, and have an expiration period of 10 years. The fair value of stock options granted was estimated utilizing the Black-Scholes option pricing model using the following assumptions: expected life of six years, risk-free rate of return of 4.19%, volatility of 26.25%, and a dividend yield of 0.00%.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
14) Employee Benefit Plans (continued)
Stock Based Compensation (continued)
On December 19, 2022, options to purchase 58,912 shares of Company common stock were awarded with a grant date fair value of $6.79 per option. Stock options granted under the 2019 Plan generally vest in equal installments over the service period of one year beginning one year from the date of grant. These stock options were granted at an exercise price of $21.07, which represents the fair value of the Company's common stock price on the grant date based on the closing market price, and have an expiration period of approximately 10 years. The fair value of stock options granted was estimated utilizing the Black-Scholes option pricing model using the following assumptions: expected life of 5.5 years, risk-free rate of return of 3.71%, volatility of 26.11%, and a dividend yield of 0.00%.
The expected life of the options represents the period of time that stock options are expected to be outstanding and is estimated using the simplified approach, which assumes that all outstanding options will be exercised at the midpoint of the vesting date and full contractual term. The risk-free rate of return is based on the rates on the grant date of a U.S. Treasury Note with a term equal to the expected option life. Since the Company recently converted to a public company and does not have sufficient historical price data, the expected volatility is based on the historical daily stock prices of Company stock plus a peer group of similar entities based on factors such as industry, stage of life cycle, size and financial leverage. The Company has not paid any cash dividends on its common stock.
Management recognizes expense for the fair value of these awards on a straight line basis over the requisite service period. During the years ended December 31, 2022, 2021, and 2020, approximately $3.2 million, $3.2 million, and $3.2 million, respectively, in expense was recognized in regard to these awards. The expected future compensation expense related to the 1,623,998 non-vested options outstanding at December 31, 2022 is $6.4 million over a weighted average period of 2.6 years.
The following is a summary of the Company's option activity during the years ended December 31, 2022 and 2021:
| | | | | | | | | | | | | | | | | | | | | | | |
| Number of Stock Options | | Weighted Average Exercise Price | | Weighted Average Remaining Contractual Term (in years) | | Aggregate Intrinsic Value |
| | | | | | | |
Outstanding January 1, 2021 | 3,708,628 | | | $ | 15.66 | | | 8.6 | | $ | — | |
Granted | 109,654 | | | 17.86 | | | — | | | — | |
Exercised | (28,522) | | | 15.60 | | | — | | | — | |
Expired | (20,894) | | | 15.60 | | | — | | | — | |
Forfeited | (131,324) | | | 15.66 | | | — | | | — | |
Outstanding, December 31, 2021 | 3,637,542 | | | $ | 15.78 | | | 7.6 | | $ | 18,654,905 | |
Granted | 363,629 | | | 21.08 | | | — | | | — | |
Exercised | (315,703) | | | 15.76 | | | — | | | — | |
Expired | (10,116) | | | 15.60 | | | — | | | — | |
Forfeited | (238,483) | | | 16.20 | | | — | | | — | |
Outstanding, December 31, 2022 | 3,436,869 | | | $ | 16.26 | | | 6.9 | | $ | 18,435,239 | |
Options exercisable at December 31, 2022 | 1,812,871 | | | $ | 15.68 | | | 6.6 | | $ | 10,767,256 | |
The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value, the difference between the Company's closing stock price on the last trading day of the period and the exercise price, multiplied by the number of in-the-money options.
During the years ended December 31, 2022 and 2021, the aggregate intrinsic value of options exercised was $1.8 million and $59,991. There were no stock option exercises during the year ended December 31, 2020.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(15) Income Taxes
The components of income tax expense for the years ended December 31, 2022, 2021, and 2020 are as follows:
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2022 | | 2021 | | 2020 |
| (In thousands) |
Current: | | | | | |
Federal | $ | 13,253 | | | $ | 12,443 | | | $ | 5,072 | |
State | 4,681 | | | 3,980 | | | 3,844 | |
Total current | 17,934 | | | 16,423 | | | 8,916 | |
| | | | | |
Deferred: | | | | | |
Federal | 9,222 | | | 12,594 | | | 9,847 | |
State | 3,547 | | | 5,115 | | | (109) | |
Total deferred | 12,769 | | | 17,709 | | | 9,738 | |
Total income tax expense | $ | 30,703 | | | $ | 34,132 | | | $ | 18,654 | |
The Company reported deferred tax expense (benefit) of $53.4 million, $8.0 million, and $(5.6) million for the years ended December 31, 2022, 2021, and 2020, respectively, related to the unrealized gains (losses) on securities available for sale, which is reported in accumulated other comprehensive income (loss), net of tax. Additionally, the Company recorded a deferred tax (benefit) expense of $749,000, $1.1 million, and $900,000, respectively, related to the reclassification adjustment of actuarial net (loss) gain on employee benefit obligations, which is reported in accumulated other comprehensive income, net of tax. Deferred tax assets and/or liabilities for the years ended December 31, 2022, 2021, and 2020 also includes $9.6 million, $1.5 million, and $5.4 million respectively, recorded as a result of purchase accounting related to the RSI, Freehold, Roselle and Stewardship acquisitions. Deferred tax assets for the year ended December 31, 2022 also includes $2.4 million related to the adoption of CECL on January 1, 2022.
A reconciliation between the amount of reported total income tax expense and the amount computed by multiplying the applicable statutory federal income tax rate of 21% is as follows:
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2022 | | 2021 | | 2020 |
| (In thousands) |
| | | | | |
Tax expense at applicable statutory rate | $ | 24,544 | | | $ | 26,498 | | | $ | 16,013 | |
Increase (decrease) in taxes resulting from: | | | | | |
State tax, net of federal income tax benefit | 6,449 | | | 7,185 | | | 2,951 | |
ESOP fair market value adjustment | 540 | | | 375 | | | 187 | |
Tax exempt interest income | (31) | | | (15) | | | (11) | |
Income from Bank-owned life insurance | (1,179) | | | (863) | | | (1,075) | |
Dividend received deduction | (10) | | | (14) | | | (9) | |
Non-deductible merger-related expenses | 40 | | | 53 | | | 42 | |
| | | | | |
Other, net | 350 | | | 913 | | | 556 | |
Total income tax expense | $ | 30,703 | | | $ | 34,132 | | | $ | 18,654 | |
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(15) Income Taxes (continued)
The net deferred tax asset/liability is included in other assets/liabilities in the Consolidated Statements of Financial Condition. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2022 and 2021 are as follows:
| | | | | | | | | | | |
| At December 31, |
| 2022 | | 2021 |
| (In thousands) |
Deferred tax assets: | | | |
Allowance for credit losses | $ | 14,990 | | | $ | 17,486 | |
Post-retirement benefits | 6,002 | | | 5,974 | |
Deferred compensation | 3,619 | | | 3,519 | |
| | | |
Retirement Income Maintenance plan | 3,062 | | | 2,767 | |
ESOP | 990 | | | 810 | |
Stock-based compensation | 2,386 | | | 2,288 | |
Reserve for uncollected interest | 35 | | | 28 | |
Net unrealized losses on debt securities and defined benefit plans | 70,060 | | | 17,809 | |
Federal and State NOLs | 13,333 | | | 9,667 | |
Alternative minimum assessment carryforwards | 2,156 | | | 2,156 | |
Charitable contribution carryforward | 3,514 | | | 4,529 | |
Purchase accounting | 2,805 | | | 1,551 | |
Lease liability | 5,264 | | | 5,462 | |
Other items | 7,002 | | | 4,077 | |
Gross deferred tax assets | 135,218 | | | 78,123 | |
Valuation allowance | (1,965) | | | (1,965) | |
| 133,253 | | | 76,158 | |
Deferred tax liabilities: | | | |
Pension expense | 68,825 | | | 61,530 | |
Depreciation | 5,945 | | | 6,655 | |
Deferred loan costs | 14,724 | | | 10,630 | |
Intangible assets | 1,616 | | | 1,594 | |
Lease right-of-use asset | 4,958 | | | 5,191 | |
Other items | 286 | | | 307 | |
Total gross deferred tax liabilities | 96,354 | | | 85,907 | |
Net deferred tax asset (liability) | $ | 36,899 | | | $ | (9,749) | |
Retained earnings at December 31, 2022 and 2021 includes approximately $21.5 million for which no provision for income tax has been made. This amount represents an allocation of income to bad debt deductions for tax purposes only. Events that would result in taxation of these reserves include the failure to qualify as a bank for tax purposes, distributions in complete or partial liquidation, stock redemptions and excess distributions to stockholders.
Management believes that not all existing net deductible temporary differences that comprise the net deferred tax asset will reverse during periods in which the Company generates sufficient net taxable income. Accordingly, management has established a valuation allowance. Significant changes in the Company's operations and or economic conditions could affect the benefits of the recognized net deferred tax assets. Management believes, based on current facts, that it is more likely than not that there will be sufficient taxable income in future years to realize federal deferred tax assets and that it is more likely than not that the benefits from certain state temporary differences will not be realized, and therefore, a valuation allowance was established for the portion of the state tax benefit that is not more likely than not to be realized. At both December 31, 2022 and 2021, the Company's valuation allowance totaled $2.0 million. Based upon projections of future taxable income and the ability to carryforward net operating losses indefinitely, management believes it is more likely than not the Company will realize the remaining deferred tax assets.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(15) Income Taxes (continued)
The Company had federal net operating losses from the acquisition of Roselle of approximately $7.8 million and $9.9 million at December 31, 2022 and 2021, respectively. Roselle net operating losses are subject to a 20 year carryforward. The Company also had federal net operating losses from the acquisition of RSI of approximately $8.6 million at December 31, 2022. RSI net operating losses have an indefinite carryover subject to an 80% taxable income utilization. These net operating losses are subject to an annual limitation under Code Section 382 and will begin to expire in 2036 if not used.
The Company had New Jersey net operating loss carryforwards of $147.0 million and $116.1 million, respectively, at December 31, 2022 and 2021. If not utilized, these carryforwards will expire periodically through 2042. At both December 31, 2022 and 2021, the Company had approximately $2.2 million of New Jersey AMA Tax Credits. These credits do not expire.
The Company files income tax returns in the United States federal jurisdiction and in the states of New Jersey, New York and Pennsylvania. At December 31, 2022, the Company is no longer subject to federal income tax examination for the years prior to 2019. Columbia Bank MHC and its subsidiaries' New York returns are currently under audit for the tax years 2016 through 2019. The Company is open for examination by the State of New Jersey for years after 2018 and by the State of Pennsylvania for years after 2017.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(16) Financial Transactions with Off-Balance-Sheet Risk and Concentrations of Credit Risk
The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business in order to meet the financing needs of its customers. These financial instruments consist of commitments to extend credit and involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the Consolidated Statements of Financial Condition.
At December 31, 2022 and 2021, the following commitments existed which are not reflected in the Consolidated Statements of Financial Condition:
| | | | | | | | | | | |
| December 31, |
| 2022 | | 2021 |
| (In thousands) |
Loan commitments: | | | |
Residential real estate | $ | 55,852 | | | $ | 115,998 | |
Multifamily real estate | 50,175 | | | 19,770 | |
Commercial real estate | 17,621 | | | 54,178 | |
Commercial business | 24,846 | | | 27,773 | |
Construction | 100,430 | | | 58,069 | |
Consumer including home equity loans and advances | 5,477 | | | 9,154 | |
Total loan commitments | $ | 254,401 | | | $ | 284,942 | |
Unused lines of credit consisting of home equity lines, and undisbursed business and construction lines totaled approximately $1.2 billion and $899.2 million as of December 31, 2022 and 2021, respectively. Amounts drawn on the unused lines of credit are predominantly assessed interest at rates that fluctuate with the base rate.
The Company uses the same credit policies and collateral requirements in making commitments and conditional obligations as it does for on-balance-sheet loans. Commitments to extend credit are agreements to lend to customers as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since the commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer's creditworthiness on a case-by-case basis. 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.
The Company principally grants residential real estate loans, multifamily real estate loans, commercial real estate loans, construction loans, commercial business loans, home equity loans and advances and other consumer loans to borrowers primarily throughout New Jersey, New York and Pennsylvania, and to a much lesser extent in a few other east coast states. Its borrowers' abilities to repay their obligations are dependent upon various factors, including the borrowers' income and net worth, cash flows generated by the underlying collateral, if any, or from business operations, value of the underlying collateral and priority of the Company's lien on the property. These factors are dependent on various economic conditions and circumstances beyond the Company's control, and as a result, the Company is subject to the risk of loss. The Company believes that its lending policies and procedures adequately minimize the potential exposure to such risks and adequate provisions for loan losses are provided for all probable and estimable losses. In the normal course of business, the Company sells residential real estate loans to third parties. These loan sales are subject to customary representations and warranties. In the event that the Company is found to be in breach of these representations and warranties, it may be obligated to repurchase certain of these loans.
The Company has entered into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company's derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company's known or expected cash receipts and its known or expected cash payments principally related to the Company's borrowings. These derivatives were used to hedge the variability in cash flows associated with certain short-term funding transactions. The fair value of the derivatives as of December 31, 2022 and 2021 was a net liability of $684,000 and $7.9 million, respectively, net of accrued interest and variation margin posted in accordance with the Chicago Mercantile Exchange.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(16) Financial Transactions with Off-Balance-Sheet Risk and Concentrations of Credit Risk (continued)
In connection with its mortgage banking activities, at December 31, 2022 and 2021 the Company had no commitments to sell loans, and no commitments classified as held-for-sale.
The Company is also a party to standby letters of credit, which are conditional commitments issued to guarantee the performance of a customer to a third party. These guarantees generally extend for a term of up to one year and may be secured or unsecured. The balance of standby letters of credit totaled $20.4 million and $12.9 million at December 31, 2022 and 2021, respectively.
The FHLB also has issued an irrevocable standby letter of credit totaling $600,000 at December 31, 2022 and 2021, respectively, for the purposes of collateralizing Freehold Bank's retention of New Jersey public funds on deposit as required by the New Jersey Governmental Unit Deposit Protection Act. This letter is renewable on an annual basis and is securitized by Freehold Bank's available borrowing line at the FHLB.
The Company and its subsidiaries are also party to litigation which arises primarily in the ordinary course of business. In the opinion of management, these legal actions and claims are not expected to have a material adverse impact on the consolidated financial position of the Company.
The Company is required to include unfunded commitments that are expected to be funded in the future within the allowance calculation, other than those that are unconditionally cancellable. To arrive at that reserve, the reserve percentage for each applicable segment is applied to the unused portion of the expected commitment balance and is multiplied by the expected funding rate. To determine the expected funding rate, the Company uses a historical utilization rate for each segment. The allowance for credit losses on off-balance-sheet exposures is reported in other liabilities in the Consolidated Statements of Financial Condition. The liability represents an estimate of expected credit losses arising from off-balance-sheet exposures such as unfunded commitments. At December 31, 2022, the balance of the allowance for credit losses on unfunded commitments, included in other liabilities, totaled $7.0 million. The Company recorded a reversal of provision for credit losses on unfunded commitments, included in other non-interest expense in the Consolidated Statements of Income, of $1.2 million for the year ended December 31, 2022.
The following table presents the activity in the allowance for credit losses on off-balance-sheet exposures for year ended December 31, 2022:
| | | | | |
| Year Ended |
| December 31, 2022 |
| (In thousands) |
Allowance for Credit Losses: | |
Balance at January 1, 2022 | $ | 524 | |
Impact of adopting ASU 2016-13 ("CECL") effective January 1, 2022 | 7,674 | |
(Reversal of) provision for credit losses | (1,228) | |
Balance at December 31, 2022 | $ | 6,970 | |
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(17) Fair Value Measurements
The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. The determination of fair values of financial instruments often requires the use of estimates. Where quoted market values in an active market are not readily available, the Company utilizes various valuation techniques to estimate fair value.
Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure the fair values:
Level 1: Unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access on the measurement date.
Level 2: Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar instruments in markets that are active or not active, or inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.
Level 3: Prices or valuation techniques that require unobservable inputs that are both significant to the fair value measurement and unobservable (i.e., supported by minimal or no market activity). Valuation techniques include the use of option pricing models, discounted cash flow models and similar techniques.
A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The methods described below were used to measure fair value of financial instruments as reflected in the tables below on a recurring basis as of December 31, 2022 and 2021.
Debt Securities Available for Sale, at Fair Value
For debt securities available for sale, fair value was estimated using a market approach. The majority of these securities are fixed income instruments that are not quoted on an exchange, but are traded in active markets. Prices for these instruments are obtained through third-party data service providers or dealer market participants with which the Company has historically transacted both purchases and sales of securities. Prices obtained from these sources include market quotations, matrix pricing and discounted cash flow pricing. Matrix pricing, a Level 2 input, is a mathematical technique used principally to value certain securities to a benchmark or to comparable securities. The Company evaluates the quality of Level 2 matrix pricing through comparison to similar assets with greater liquidity and evaluation of projected cash flows. Discounted cash flows, a Level 3 input, is estimated by discounting the expected future cash flows using the current rates for securities with similar credit ratings and similar remaining maturities. As the Company is responsible for the determination of fair value, it performs quarterly analysis on the prices received from the pricing service to determine whether the prices are reasonable estimates of fair value. Specifically, the Company compares the prices received from the pricing service to a secondary pricing source. Additionally, the Company compares changes in the reported market values and returns to relevant market indices to assess the reasonableness of the reported prices. The Company’s internal price verification procedures and review of fair value methodology documentation provided by independent pricing services has not historically resulted in an adjustment in the prices obtained from the pricing service. The Company may hold debt instruments issued by the U.S. government and U.S. government-sponsored agencies that are traded in active markets with readily accessible quoted market prices that are considered Level 1 inputs. The Company classifies the estimated fair value of its loan portfolio as Level 3.
Equity Securities, at Fair Value
The Company holds equity securities that are traded in active markets with readily accessible quoted market prices that are considered Level 1 inputs. A trust preferred security that is not traded in an active market and Federal Home Loan Mortgage Corporation ("FHLMC") and Federal National Mortgage Association ("FNMA") preferred stock, are considered Level 2 instruments. In addition, Level 2 instruments include Atlantic Community Bankers Bank ("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.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(17) Fair Value Measurements (continued)
Derivatives
The Company records all derivatives included in other assets and liabilities in the Consolidated Statements of Financial Condition at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting, and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. See note 21 for disclosures related to the accounting treatment for derivatives.
The fair value of the Company's derivatives is determined using discounted cash flow analysis using observable market-based inputs, which are considered Level 2 inputs.
The following tables present the assets and liabilities reported in the Consolidated Statements of Financial Condition at their fair values as of December 31, 2022 and 2021, by level within the fair value hierarchy:
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2022 |
| | | Fair Value Measurements |
| Fair Value | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
| (In thousands) |
Debt securities available for sale: | | | | | | | |
U.S. government and agency obligations | $ | 63,566 | | | $ | 55,178 | | | $ | 8,388 | | | $ | — | |
Mortgage-backed securities and collateralized mortgage obligations | 1,181,727 | | | — | | | 1,181,727 | | | — | |
Municipal obligations | 3,575 | | | — | | | 897 | | | 2,678 | |
Corporate debt securities | 79,766 | | | — | | | 70,321 | | | 9,445 | |
| | | | | | | |
Total debt securities available for sale | 1,328,634 | | | 55,178 | | | 1,261,333 | | | 12,123 | |
Equity securities | 3,384 | | | 3,053 | | | 331 | | | — | |
Derivative assets | 19,756 | | | — | | | 19,756 | | | — | |
| $ | 1,351,774 | | | $ | 58,231 | | | 1,281,420 | | | $ | 12,123 | |
| | | | | | | |
Derivative liabilities | $ | 19,072 | | | $ | — | | | $ | 19,072 | | | $ | — | |
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(17) Fair Value Measurements (continued)
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 |
| | | Fair Value Measurements |
| Fair Value | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
| (In thousands) |
Debt securities available for sale: | | | | | | | |
U.S. government and agency obligations | $ | 34,879 | | | $ | 34,879 | | | $ | — | | | $ | — | |
Mortgage-backed securities and collateralized mortgage obligations | 1,554,359 | | | — | | | 1,554,359 | | | — | |
Municipal obligations | 4,179 | | | — | | | 4,179 | | | — | |
Corporate debt securities | 110,430 | | | — | | | 110,430 | | | — | |
| | | | | | | |
Total debt securities available for sale | 1,703,847 | | | 34,879 | | | 1,668,968 | | | — | |
Equity securities | 2,710 | | | 2,364 | | | 346 | | | — | |
Derivative assets | 9,492 | | | — | | | 9,492 | | | — | |
| $ | 1,716,049 | | | $ | 37,243 | | | $ | 1,678,806 | | | $ | — | |
| | | | | | | |
Derivative liabilities | $ | 17,366 | | | $ | — | | | $ | 17,366 | | | $ | — | |
The table below provides activity of assets reported as Level 3 for the period ended December 31, 2022:
| | | | | |
| Significant Unobservable Inputs (Level 3) |
| (In thousands) |
| |
Debt securities available for sale: | |
Balance of recurring Level 3 assets - December 31, 2021 | $ | — | |
Transfers into Level 3 assets | 13,539 | |
| |
Maturity of Level 3 asset | (914) | |
Change in fair value of Level 3 assets | (502) | |
| |
| |
Balance of recurring Level 3 assets - December 31, 2022 | $ | 12,123 | |
The fair value of investments placed in Level 3 is estimated by discounting the expected future cash flows using reasonably available current rates for comparable new issue securities with similar structure, including original maturity, call date, and assumptions about risk. Discounted cash flow estimated valuations are subsequently validated against comparable structures as an approximation of value.
Expected cash flows were projected based on contractual cash flows. Two private placement corporate debt securities classified as available for sale and four private placement municipal obligations classified as available for sale were transferred from Level 2 to Level 3 during the year ended December 31, 2022. There were no transfers to Level 3 assets during the year ended December 31, 2021.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(17) Fair Value Measurements (continued)
Private placement debt security cash flows were discounted to a market yield of 8.75% (weighted average is 8.75%), and the cash flows for private placement municipal obligations were discounted to a market yield ranging from 3.25% to 3.64% (weighted average is 3.39%).
The period end valuations were support by an analysis prepared by an independent third party market participant and approved by management.
There were no Level 3 assets measured at fair value on a recurring basis at December 31, 2021.
Assets Measured at Fair Value on a Non-Recurring Basis
The valuation techniques described below were used to estimate fair value of financial instruments measured on a non-recurring basis as of December 31, 2022 and 2021.
Individually Analyzed Collateral Dependent Loans/Impaired Loans
The fair value of collateral dependent loans that are individually analyzed or were previously deemed impaired is measured based on the present value of expected future cash flows discounted at the loan's effective interest rate or, as a practical expedient, at the loan's observable market price or the fair value of the collateral if the loan is collateral dependent. For individually analyzed loans measured for impairment based on the fair value of the underlying collateral, fair value was estimated using a market approach. The Company measures the fair value of collateral underlying impaired loans primarily through obtaining independent appraisals that rely upon quoted market prices for similar assets in active markets. These appraisals include adjustments, on an individual case-by-case basis, to comparable assets based on the appraisers’ market knowledge and experience, as well as adjustments for estimated costs to sell between 6% and 8%. For non-collateral dependent loans, management estimates fair value using discounted cash flows based on inputs that are largely unobservable. The Company classifies these loans as Level 3 within the fair value hierarchy.
Mortgage Servicing Rights, Net ("MSR"s")
Mortgage servicing rights are carried at the lower of cost or estimated fair value. The estimated fair value of MSRs is obtained through an analysis of future cash flows, incorporating assumptions that market participants would use in determining fair value including market discount rates, prepayments speeds, servicing income, servicing costs, default rates and other market driven data, including the market's perception of future interest rate movements. The prepayment speed and the discount rate are considered two of the most significant inputs in the model. A significant degree of judgment is involved in valuing the mortgage servicing rights using Level 3 inputs. The use of different assumptions could have a significant effect on this fair value estimate.
The following tables present the assets and liabilities reported in the Consolidated Statements of Financial Condition at their fair values on a non-recurring basis at December 31, 2022 and 2021, by level within the fair value hierarchy:
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2022 |
| | | Fair Value Measurements |
| Fair Value | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
| (In thousands) |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Mortgage servicing rights | $ | 2,107 | | | $ | — | | | $ | — | | | $ | 2,107 | |
| $ | 2,107 | | | $ | — | | | $ | — | | | $ | 2,107 | |
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(17) Fair Value Measurements (continued)
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 |
| | | Fair Value Measurements |
| Fair Value | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
| (In thousands) |
| | | | | | | |
Impaired loans | $ | 1,213 | | | $ | — | | | $ | — | | | $ | 1,213 | |
| | | | | | | |
Mortgage servicing rights | 1,906 | | | — | | | — | | | 1,906 | |
| $ | 3,119 | | | $ | — | | | $ | — | | | $ | 3,119 | |
The following table presents information for Level 3 assets measured at fair value on a non-recurring basis at December 31, 2022 and 2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2022 |
| Fair Value | | Valuation Methodology | | Unobservable Inputs | | Range of Inputs | | Weighted Average |
| (Dollars in thousands) |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
Mortgage servicing rights | $ | 2,107 | | | Discounted cash flow | | Prepayment speeds and discount rates (1) | | 5.5% - 27.1% | | 8.6 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 |
| Fair Value | | Valuation Methodology | | Unobservable Inputs | | Range of Inputs | | Weighted Average |
| (Dollars in thousands) |
| | | | | | | | | |
Impaired loans | $ | 1,213 | | | Estimated cash flow | | Contracted sales price of collateral | | —% | | —% |
| | | | | | | | | |
Mortgage servicing rights | $ | 1,906 | | | Discounted cash flow | | Prepayment speeds and discount rates (2) | | 7.5% - 24.9% | | 12.7 | % |
| | | | | | | | | |
|
|
|
(1) Value of SBA servicing rights based on a discount rate of 14.50%. |
(2) Value of SBA servicing rights based on a discount rate of 10.25%. |
Other Fair Value Disclosures
The Company is required to disclose estimated fair value of financial instruments, both assets and liabilities on and off the balance sheet, for which it is practicable to estimate fair value. A description of the valuation methodologies used for those assets and liabilities not recorded at fair value on a recurring or non-recurring basis are set forth below.
Cash and Cash Equivalents
For cash and due from banks, federal funds sold and short-term investments, the carrying amount approximates fair value due to their nature and short-term maturities.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(17) Fair Value Measurements (continued)
Debt Securities Held to Maturity
For debt securities held to maturity, fair value was estimated using a market approach. The majority of the Company’s securities are fixed income instruments that are not quoted on an exchange, but are traded in active markets. Prices for these instruments are obtained through third-party data service providers or dealer market participants with which the Company has historically transacted both purchases and sales of securities. Prices obtained from these sources include market quotations and matrix pricing. Matrix pricing, a Level 2 input, is a mathematical technique used principally to value certain securities to benchmark or to compare securities. The Company evaluates the quality of Level 2 matrix pricing through comparison to similar assets with greater liquidity and evaluation of projected cash flows. As the Company is responsible for the determination of fair value, it performs quarterly analysis on the prices received from the pricing service to determine whether the prices are reasonable estimates of fair value. Specifically, the Company compares the prices received from the pricing service to a secondary pricing source. Additionally, the Company compares changes in the reported market values and returns to relevant market indices to assess the reasonableness of the reported prices. The Company’s internal price verification procedures and review of fair value methodology documentation provided by independent pricing services has not historically resulted in an adjustment in the prices obtained from the pricing service. The Company also holds debt instruments issued by the U.S. government and U.S. government sponsored agencies that are traded in active markets with readily accessible quoted market prices that are considered Level 1 inputs within the fair value hierarchy.
Federal Home Loan Bank Stock ("FHLB")
The fair value of FHLB stock is based on redemption at par value and can only be sold to the issuing FHLB, to other FHLBs, or to other member banks. As such, the Company's FHLB stock is recorded at cost, or par value, and is evaluated for impairment each reporting period by considering the ultimate recoverability of the investment rather than temporary declines in value. The Company classifies the estimated fair value as Level 2 within the fair value hierarchy.
Loans Receivable
Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type such as commercial mortgage, residential mortgage, commercial, construction, and consumer and other. Each loan category is further segmented into fixed and adjustable rate interest terms and into performing and non-performing categories.
The fair value of performing loans was estimated using a combination of techniques, including a discounted cash flow model that utilizes a discount rate that reflects the Company's current pricing for loans with similar characteristics and remaining maturity, adjusted by an amount for estimated credit losses inherent in the portfolio at the balance sheet date. The rates take into account the expected yield curve, as well as an adjustment for prepayment risk, when applicable. The Company classifies the estimated fair value of its loan portfolio as Level 3.
The fair value for significant non-performing loans was based on recent external appraisals of collateral securing such loans, adjusted for the timing of anticipated cash flows. The Company classifies the estimated fair value of its non-performing loan portfolio as Level 3.
Deposits
The fair value of deposits with no stated maturity, such as demand, money market, and savings and club deposits are payable on demand at each reporting date and classified as Level 2. The estimated fair value of certificates of deposit was based on the discounted value of contractual cash flows. The discount rate was estimated using the Company’s current rates offered for deposits with similar remaining maturities. The Company classifies the estimated fair value of its certificates of deposit portfolio as Level 2.
Borrowings
The fair value of borrowings was estimated by discounting future cash flows using rates available for debt with similar terms and maturities and is classified by the Company as Level 2 within the fair value hierarchy.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(17) Fair Value Measurements (continued)
Commitments to Extend Credit and Letters of Credit
The fair value of commitments to extend credit and letters of credit was estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counter-parties. For fixed rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair value estimates of commitments to extend credit and letters of credit are deemed immaterial.
The following tables present the assets and liabilities reported in the Consolidated Statements of Financial Condition at their fair values as of December 31, 2022 and 2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2022 |
| | | Fair Value Measurements |
| Carrying Value | | Total Fair Value | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
| (In thousands) |
Financial assets: | | | | | | | | | |
Cash and cash equivalents | $ | 179,228 | | | $ | 179,228 | | | $ | 179,228 | | | $ | — | | | $ | — | |
Debt securities available for sale | 1,328,634 | | | 1,328,634 | | | 55,178 | | | 1,261,333 | | | 12,123 | |
Debt securities held to maturity | 421,523 | | | 370,391 | | | — | | | 370,391 | | | — | |
Equity securities | 3,384 | | | 3,384 | | | 3,053 | | | 331 | | | |
Federal Home Loan Bank stock | 58,114 | | | 58,114 | | | — | | | 58,114 | | | — | |
| | | | | | | | | |
Loans receivable, net | 7,624,761 | | | 6,771,095 | | | — | | | — | | | 6,771,095 | |
Derivative assets | 19,756 | | | 19,756 | | | — | | | 19,756 | | | — | |
| | | | | | | | | |
Financial liabilities: | | | | | | | | | |
Deposits | $ | 8,001,159 | | | $ | 7,942,782 | | | $ | — | | | $ | 7,942,782 | | | $ | — | |
Borrowings | 1,127,047 | | | 1,146,265 | | | — | | | 1,146,265 | | | — | |
Derivative liabilities | 19,072 | | | 19,072 | | | — | | | 19,072 | | | — | |
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(17) Fair Value Measurements (continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 |
| | | Fair Value Measurements |
| Carrying Value | | Total Fair Value | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
| (In thousands) |
Financial assets: | | | | | | | | | |
Cash and cash equivalents | $ | 70,963 | | | $ | 70,963 | | | $ | 70,963 | | | $ | — | | | $ | — | |
Debt securities available for sale | 1,703,847 | | | 1,703,847 | | | 34,879 | | | 1,668,968 | | | — | |
Debt securities held to maturity | 429,734 | | | 434,789 | | | — | | | 434,789 | | | — | |
Equity securities | 2,710 | | | 2,710 | | | 2,364 | | | 346 | | | — | |
Federal Home Loan Bank stock | 23,141 | | | 23,141 | | | — | | | 23,141 | | | — | |
| | | | | | | | | |
Loans receivable, net | 6,297,912 | | | 6,457,766 | | | — | | | — | | | 6,457,766 | |
Derivative assets | 9,492 | | | 9,492 | | | — | | | 9,492 | | | — | |
| | | | | | | | | |
Financial liabilities: | | | | | | | | | |
Deposits | $ | 7,570,216 | | | $ | 7,564,210 | | | $ | — | | | $ | 7,564,210 | | | $ | — | |
Borrowings | 377,309 | | | 378,810 | | | — | | | 378,810 | | | — | |
Derivative liabilities | 17,366 | | | 17,366 | | | — | | | 17,366 | | | — | |
Limitations
Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because limited markets exist for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
Fair value estimates are based on existing on and off-balance-sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Other significant assets and liabilities that are not considered financial assets or liabilities include goodwill and intangible assets, deferred tax assets and liabilities, office properties and equipment, and bank-owned life insurance.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(18) Earnings per Share
Basic earnings per share ("EPS") is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period. For purposes of calculating basic EPS, weighted average common shares outstanding excludes treasury stock, unallocated employee stock ownership plan shares that have not been committed for release and deferred compensation obligations required to be settled in shares of Company stock.
Diluted EPS is computed using the same method as basic EPS and reflects the potential dilution which could occur if stock options and unvested shares were exercised and converted into common stock. The potentially diluted shares would then be included in the weighted average number of shares outstanding for the period using the treasury stock method.
The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share calculations for the years ended December 31, 2022, 2021,and 2020:
| | | | | | | | | | | | | | | | | |
| December 31, |
| 2022 | | 2021 | | 2020 |
| (In thousands, except per share data) |
| | | | | |
Net income | $ | 86,173 | | | $ | 92,049 | | | $ | 57,603 | |
Shares: | | | | | |
Weighted average shares outstanding - basic | 105,580,823 | | | 104,156,112 | | | 109,755,924 | |
Weighted average dilutive shares outstanding | 612,338 | | | — | | | — | |
Weighted average shares outstanding - diluted | 106,193,161 | | | 104,156,112 | | | 109,755,924 | |
Earnings per share: | | | | | |
Basic | $ | 0.82 | | | $ | 0.88 | | | $ | 0.52 | |
Diluted | $ | 0.81 | | | $ | 0.88 | | | $ | 0.52 | |
For the years ended December 31, 2022, 2021, and 2020, the average number of stock options which could potentially dilute basic earnings per share in the future that were not included in the computation of diluted earnings per share because to do so would have been anti-dilutive totaled 129,049, 3,726,249, and 3,757,530 respectively.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(19) Parent-only Financial Information
The condensed financial statements of Columbia Financial, Inc. (parent company) are presented below:
| | | | | | | | | | | |
Statements of Financial Condition |
| | | |
| December 31, |
| 2022 | | 2021 |
| (In thousands) |
Assets | | | |
Cash and due from banks | $ | 59,754 | | | $ | 77,077 | |
Short-term investments | 131 | | | 261 | |
Total cash and cash equivalents | 59,885 | | | 77,338 | |
| | | |
| | | |
Equity securities, at fair value | 201 | | | 216 | |
Investment in subsidiaries | 979,841 | | | 981,922 | |
Loan receivable from Columbia Bank | 38,187 | | | 39,862 | |
Other assets | 13,760 | | | 15,608 | |
Total assets | $ | 1,091,874 | | | $ | 1,114,946 | |
| | | |
Liabilities and Stockholders' Equity | | | |
Liabilities: | | | |
Borrowings | $ | 36,888 | | | $ | 36,815 | |
Accrued expenses and other liabilities | 1,391 | | | 2,301 | |
Total liabilities | 38,279 | | | 39,116 | |
| | | |
Stockholders' equity | 1,053,595 | | | 1,075,830 | |
Total liabilities and stockholders' equity | $ | 1,091,874 | | | $ | 1,114,946 | |
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(19) Parent-only Financial Information (continued)
| | | | | | | | | | | | | | | | | |
Statements of Income and Comprehensive Income |
| | | | | |
| Years Ended December 31, |
| 2022 | | 2021 | | 2020 |
| (In thousands) |
Dividends from subsidiary | $ | 80,000 | | | $ | 65,000 | | | $ | 50,000 | |
| | | | | |
Interest income: | | | | | |
Loans receivable | 1,893 | | | 1,969 | | | 2,047 | |
Debt securities available for sale and equity securities | 10 | | | 43 | | | 51 | |
Interest-earning deposits | 7 | | | — | | | 1 | |
Total interest income | 81,910 | | | 67,012 | | | 52,099 | |
| | | | | |
Interest expense on borrowings | 1,600 | | | 427 | | | 863 | |
| | | | | |
Net interest income | 80,310 | | | 66,585 | | | 51,236 | |
| | | | | |
Equity earnings (loss) in subsidiaries | 9,132 | | | 27,652 | | | 8,027 | |
| | | | | |
Non-interest income: | | | | | |
Gain on securities transactions | — | | | 383 | | | 2 | |
Change in fair value of equity securities | (15) | | | (35) | | | (115) | |
Other non-interest income | 650 | | | — | | | — | |
Total non-interest income (loss) | 635 | | | 348 | | | (113) | |
| | | | | |
Non-interest expense: | | | | | |
| | | | | |
Merger-related expenses | 522 | | | 546 | | | 280 | |
Other non-interest expense | 2,861 | | | 2,203 | | | 1,377 | |
Total non-interest expense | 3,383 | | | 2,749 | | | 1,657 | |
| | | | | |
Income before income tax (benefit) | 86,694 | | | 91,836 | | | 57,493 | |
| | | | | |
Income tax (benefit) | 521 | | | (213) | | | 110 | |
| | | | | |
Net income | 86,173 | | | 92,049 | | | 57,603 | |
Other comprehensive income (loss) | (133,377) | | | 23,706 | | | (890) | |
Comprehensive income (loss) | $ | (47,204) | | | $ | 115,755 | | | $ | 56,713 | |
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(19) Parent-only Financial Information (continued)
| | | | | | | | | | | | | | | | | |
Statements of Cash Flows |
| Years Ended December 31, |
| 2022 | | 2021 | | 2020 |
| (In thousands) |
Cash flows from operating activities: | | | | | |
Net income | $ | 86,173 | | | $ | 92,049 | | | $ | 57,603 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | |
| | | | | |
Amortization of intangible assets | 73 | | | 21 | | | (278) | |
Gain on securities transactions | — | | | (383) | | | (2) | |
Change in fair value of equity securities | 15 | | | 35 | | | 115 | |
Deferred tax expense | 2,463 | | | 1,830 | | | 1,411 | |
( Increase) in other assets | (642) | | | (7,721) | | | (2,675) | |
(Decrease) increase in accrued expenses and other liabilities | (997) | | | 691 | | | (647) | |
| | | | | |
Equity in undistributed (earnings)of subsidiaries | (9,132) | | | (27,652) | | | (8,027) | |
Net cash provided by operating activities | $ | 77,953 | | | $ | 58,870 | | | $ | 47,500 | |
| | | | | |
Cash flows from investing activities: | | | | | |
| | | | | |
| | | | | |
Proceeds from sales of equity securities | — | | | 1,390 | | | — | |
Proceeds from paydowns/maturities/calls of debt securities available for sale | — | | | — | | | 1,498 | |
| | | | | |
Purchases of equity securities | — | | | (91) | | | — | |
| | | | | |
Repayment of loan receivable from Columbia Bank | 1,675 | | | 1,599 | | | 1,521 | |
Net cash acquired in acquisition | 31 | | | — | | | — | |
Net cash provided by investing activities | $ | 1,706 | | | $ | 2,898 | | | $ | 3,019 | |
| | | | | |
Cash flows from financing activities: | | | | | |
Payments of subordinated debt and trust preferred securities | $ | — | | | $ | — | | | $ | (16,600) | |
| | | | | |
Net proceeds from note payable | — | | | 29,841 | | | — | |
Purchase of treasury stock | (93,996) | | | (107,774) | | | (108,166) | |
Exercise of options | 325 | | | (25) | | | — | |
Issuance of common stock allocated to restricted stock award grants | 2,624 | | | — | | | — | |
Restricted stock forfeitures | (1,451) | | | (1,234) | | | (199) | |
Repurchase of shares for taxes | (4,614) | | | (357) | | | (181) | |
Issuance of treasury stock allocated to restricted stock award grants | — | | | 896 | | | 481 | |
Net cash (used in) financing activities | $ | (97,112) | | | $ | (78,653) | | | $ | (124,665) | |
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(19) Parent-only Financial Information (continued)
| | | | | | | | | | | | | | | | | |
Statements of Cash Flows |
| Years Ended December 31, |
| 2022 | | 2021 | | 2020 |
| (In thousands) |
| | | | | |
Net (decrease) in cash and cash equivalents | $ | (17,453) | | | $ | (16,885) | | | $ | (74,146) | |
Cash and cash equivalents at beginning of year | 77,338 | | | 94,223 | | | 168,369 | |
Cash and cash equivalents at end of period | 59,885 | | | 77,338 | | | 94,223 | |
Acquisition: | | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
Net cash and cash equivalents acquired in acquisition | $ | 31 | | | $ | — | | | $ | — | |
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(20) Other Comprehensive Income (Loss)
The following tables present the components of other comprehensive income (loss), both gross and net of tax, for the years ended December 31, 2022, 2021, and 2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Years Ended December 31, |
| 2022 | | 2021 |
| Before Tax | | Tax Effect | | After Tax | | Before Tax | | Tax Effect | | After Tax |
| (In thousands) |
Components of other comprehensive income (loss): | | | | | | | | | | | |
Unrealized (loss) on debt securities available for sale: | $ | (190,682) | | | $ | 53,427 | | | $ | (137,255) | | | $ | (39,000) | | | $ | 8,021 | | | $ | (30,979) | |
Accretion of unrealized (loss) on debt securities reclassified as held to maturity | (31) | | | 9 | | | (22) | | | (28) | | | 25 | | | (3) | |
Reclassification adjustment for gain included in net income | 210 | | | (59) | | | 151 | | | 2,025 | | | (427) | | | 1,598 | |
| (190,503) | | | 53,377 | | | (137,126) | | | (37,003) | | | 7,619 | | | (29,384) | |
| | | | | | | | | | | |
Derivatives: | | | | | | | | | | | |
Unrealized gain on swap contracts accounted for as cash flow hedges | 7,524 | | | (2,103) | | | 5,421 | | | 14,514 | | | (2,575) | | | 11,939 | |
| | | | | | | | | | | |
Employee benefit plans: | | | | | | | | | | | |
Amortization of prior service cost included in net income | (56) | | | 15 | | | (41) | | | (55) | | | 16 | | | (39) | |
Reclassification adjustment of actuarial net (loss) included in net income | (2,677) | | | 749 | | | (1,928) | | | (4,044) | | | 1,129 | | | (2,915) | |
Change in funded status of retirement obligations | 345 | | | (48) | | | 297 | | | 50,999 | | | (6,894) | | | 44,105 | |
| | | | | | | | | | | |
| (2,388) | | | 716 | | | (1,672) | | | 46,900 | | | (5,749) | | | 41,151 | |
Total other comprehensive income (loss) | $ | (185,367) | | | $ | 51,990 | | | $ | (133,377) | | | $ | 24,411 | | | $ | (705) | | | $ | 23,706 | |
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(20) Other Comprehensive Income (Loss) (continued)
| | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, |
| 2020 |
| Before Tax | | Tax Effect | | After Tax |
| (In thousands) |
Components of other comprehensive income (loss): | | | | | |
Unrealized gain on debt securities available for sale: | $ | 26,876 | | | $ | (5,640) | | | $ | 21,236 | |
Accretion of unrealized gain on debt securities reclassified as held to maturity | 160 | | | (34) | | | 126 | |
Reclassification adjustment for gain included in net income | 370 | | | (81) | | | 289 | |
| 27,406 | | | (5,755) | | | 21,651 | |
| | | | | |
Derivatives: | | | | | |
Unrealized (loss) on swap contracts accounted for as cash flow hedges | (10,605) | | | 2,223 | | | (8,382) | |
| | | | | |
Employee benefit plans: | | | | | |
Amortization of prior service cost included in net income | (56) | | | 12 | | | (44) | |
Reclassification adjustment of actuarial net (loss) included in net income | (4,284) | | | 900 | | | (3,384) | |
Change in funded status of retirement obligations | (13,583) | | | 2,852 | | | (10,731) | |
| | | | | |
| (17,923) | | | 3,764 | | | (14,159) | |
Total other comprehensive income (loss) | $ | (1,122) | | | $ | 232 | | | $ | (890) | |
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(20) Other Comprehensive Income (Loss) (continued)
The following tables present the changes in the components of accumulated other comprehensive income (loss), net of tax, for the years ended December 31, 2022, 2021, and 2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Years Ended December 31, |
| 2022 | | 2021 |
| Unrealized (Losses) on Debt Securities Available for Sale | | Unrealized Gains (Losses) on Swaps | | Employee Benefit Plans | | Accumulated Other Comprehensive (Loss) | | Unrealized Gains on Debt Securities Available for Sale | | Unrealized (Losses) on Swaps | | Employee Benefit Plans | | Accumulated Other Comprehensive (Loss) |
| (In thousands) |
| | | | | | | | | | | | | | | |
Balance at beginning of period | $ | 1,644 | | | $ | (4,917) | | | $ | (42,646) | | | $ | (45,919) | | | $ | 31,028 | | | $ | (16,856) | | | $ | (83,797) | | | $ | (69,625) | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Current period changes in other comprehensive income (loss) | (137,126) | | | 5,421 | | | (1,672) | | | (133,377) | | | (29,384) | | | 11,939 | | | 41,151 | | | 23,706 | |
Total other comprehensive income (loss) | $ | (135,482) | | | $ | 504 | | | $ | (44,318) | | | $ | (179,296) | | | $ | 1,644 | | | $ | (4,917) | | | $ | (42,646) | | | $ | (45,919) | |
| | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, |
| 2020 |
| Unrealized Gains on Debt Securities Available for Sale | | Unrealized (Losses) on Swaps | | Employee Benefit Plans | | Accumulated Other Comprehensive (Loss) |
| (In thousands) |
| | | | | | | |
Balance at beginning of period | $ | 9,377 | | | $ | (8,474) | | | $ | (69,638) | | | $ | (68,735) | |
| | | | | | | |
| | | | | | | |
Current period changes in other comprehensive income (loss) | 21,651 | | | (8,382) | | | (14,159) | | | (890) | |
Total other comprehensive income (loss) | $ | 31,028 | | | $ | (16,856) | | | $ | (83,797) | | | $ | (69,625) | |
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(20) Other Comprehensive Income (Loss) (continued)
The following tables reflect amounts reclassified from accumulated other comprehensive income (loss) in the Consolidated Statements of Income and the affected line item in the statement where net income is presented for the years ended December 31, 2022, 2021, and 2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Accumulated Other Comprehensive Income (Loss) Components | | |
| | For the Years Ended December 31, | | Affected Line Items in the Consolidated Statements of Income |
| | 2022 | | 2021 | | 2020 | | |
| | (In thousands) | | |
| | | | | | | | |
Reclassification adjustment for gain included in net income | | $ | 210 | | | $ | 2,025 | | | $ | 370 | | | Gain on securities transactions |
Reclassification adjustment of actuarial net (loss) included in net income | | (2,677) | | | (4,044) | | | (4,284) | | | Other non-interest expense |
Total before tax | | (2,467) | | | (2,019) | | | (3,914) | | | |
Income tax benefit | | 690 | | | 702 | | | 819 | | | |
Net of tax | | $ | (1,777) | | | $ | (1,317) | | | $ | (3,095) | | | |
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(21) Derivatives and Hedging Activities
The Company uses derivative financial instruments as components of its market risk management, principally to manage interest rate risk. Certain derivatives are entered into in connection with transactions with commercial customers. Derivatives are not used for speculative purposes. All derivatives are recognized as either assets or liabilities in the Consolidated Statements of Financial Condition, reported at fair value and presented on a gross basis. Until a derivative is settled, a favorable change in fair value results in an unrealized gain that is recognized as an asset, while an unfavorable change in fair value results in an unrealized loss that is recognized as a liability.
The Company generally applies hedge accounting to its derivatives used for market risk management purposes. Hedge accounting is permitted only if specific criteria are met, including a requirement that a highly effective relationship exists between the derivative instrument and the hedged item, both at inception of the hedge and on an ongoing basis. Changes in the fair value of effective fair value hedges are recognized in current earnings (with the change in fair value of the hedged asset or liability also recognized in earnings). Changes in the fair value of effective cash flow hedges are recognized in other comprehensive income (loss) until earnings are affected by the variability in cash flows of the designated hedged item. Ineffective portions of hedge results are recognized in current earnings. Changes in the fair value of derivatives for which hedge accounting is not applied are recognized in current earnings.
The Company formally documents at inception all relationships between the derivative instruments and the hedged items, as well as its risk management objectives and strategies for undertaking the hedge transactions. This process includes linking all derivatives that are designated as hedges to specific assets and liabilities, or to specific firm commitments. The Company also formally assesses, both at inception of the hedge and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in the fair values or cash flows of the hedged items. If it is determined that a derivative is not highly effective or has ceased to be a highly effective hedge, the Company would discontinue hedge accounting prospectively. Gains or losses resulting from the termination of a derivative accounted for as a cash flow hedge remain in other comprehensive income (loss) and is (accreted) amortized to earnings over the remaining period of the former hedging relationship.
Certain derivative financial instruments are offered to certain commercial banking customers to manage their risk of exposure and risk management strategies. These derivative instruments consist primarily of currency forward contracts and interest rate swap contracts. The risks associated with these transactions is mitigated by simultaneously entering into similar transactions having essentially offsetting terms with a third party. In addition, the Company executes interest rate swaps with third parties in order to hedge the interest rate risk of short-term FHLB advances.
Currency Forward Contracts. At December 31, 2022 and 2021, the Company had no currency forward contracts in place with commercial banking customers.
Interest Rate Swaps. At December 31, 2022 and December 31, 2021, the Company had 54 and 52 interest rate swaps in place with commercial banking customers executed by offsetting interest rate swaps with third parties, with aggregated notional amounts of $205.0 million and $183.4 million, respectively. These derivatives are not designated as hedges and are not speculative. These interest rate swaps do not meet hedge accounting requirements.
At December 31, 2022 and 2021, the Company had 20 and 14 interest rate swaps with notional amounts of $290.0 million and $190.0 million, respectively, hedging certain FHLB advances. These interest rate swaps meet the cash flow hedge accounting requirements. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counter-party in exchange for the Company making fixed-rate payments over the life of the agreements without the exchanges of the underlying notional amount. For the year ended December 31, 2021, interest rate swaps with notional amounts totaling $210.0 million were discontinued relative to the hedge, which resulted in a $996,000 loss on the early extinguishment of debt.
At December 31, 2022, the Company had two interest rate swaps hedged against pools of floating rate commercial loans
with notional amounts totaling $100.0 million. These swaps meet the cash flow hedge accounting requirements. Interest rate swaps
designated as cash flow hedges involve the receipt of variable amounts from a counter-party in exchange for the Company making
fixed-rate payments over the life of the agreements without the exchange of the underlying notional amount. At December 31, 2021,
the Company had no interest rate swaps hedged against pools of floating rate commercial loans.
For the years ended December 31, 2022, 2021, and 2020, the Company did not record any hedge ineffectiveness associated with these contracts.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(21) Derivatives and Hedging Activities (continued)
The tables below present the fair value of the Company’s derivative financial instruments as well as their classification in the Consolidated Statements of Financial Condition at December 31, 2022 and 2021:
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2022 |
| Asset Derivative | | Liability Derivative |
| Consolidated Statements of Financial Condition | | Fair Value | | Consolidated Statements of Financial Condition | | Fair Value |
| (In thousands) |
Derivatives: | | | | | | | |
Interest rate products - designated hedges | Other Assets | | $ | 4,290 | | | Other Liabilities | | $ | 3,918 | |
Interest rate products - non-designated hedges | Other Assets | | 15,466 | | | Other Liabilities | | 15,154 | |
Total derivative instruments | | | $ | 19,756 | | | | | $ | 19,072 | |
| | | | | | | |
| December 31, 2021 |
| Asset Derivative | | Liability Derivative |
| Consolidated Statements of Financial Condition | | Fair Value | | Consolidated Statements of Financial Condition | | Fair Value |
| (In thousands) |
Derivatives: | | | | | | | |
Interest rate products - designated hedges | Other Assets | | $ | — | | | Other Liabilities | | $ | 7,696 | |
Interest rate products - non-designated hedges | Other Assets | | 9,492 | | | Other Liabilities | | 9,670 | |
Total derivative instruments | | | $ | 9,492 | | | | | $ | 17,366 | |
For the years ended December 31, 2022, 2021, and 2020 gains (losses) of $489,000, $115,000, and $(306,000) respectively, were recorded for changes in fair value of interest rate swaps with third parties.
At December 31, 2022 and 2021, accrued interest was $22,000 and $567,000.
The Company has agreements with counterparties that contain a provision that if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default of its derivative obligations.
At December 31, 2022, the termination value of derivatives in a net asset position, which includes accrued interest, was $684,000. The Company has collateral posting thresholds with certain of its derivative counterparties, and has posted collateral of $760,000 against its obligations under these agreements.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(22) Revenue Recognition
The Company's revenue includes net interest income on financial instruments and non-interest income. Most of the Company's revenue is not within the scope of Accounting Standards Codification Topic 606 which does not apply to revenue associated with financial instruments, including interest income on loans and securities, which comprise the majority of the Company's revenue. Revenue-generating activities that are within the scope of this guidance are components of non-interest income. These revenue streams can generally be classified as demand deposit account fees, title insurance fees, insurance agency income and other fees.
The following table presents non-interest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the years ended December 31, 2022, 2021, and 2020.
| | | | | | | | | | | | | | | | | |
| For the Years Ended December 31, |
| 2022 | | 2021 | | 2020 |
| (In thousands) |
Non-interest income | | | | | |
In-scope of Topic 606: | | | | | |
Demand deposit account fees | $ | 5,293 | | | $ | 3,803 | | | $ | 3,633 | |
Title insurance fees | 3,423 | | | 6,088 | | | 5,034 | |
Insurance agency income | 141 | | | — | | | — | |
Other non-interest income | 8,666 | | | 7,600 | | | 6,472 | |
Total in-scope non-interest income | 17,523 | | | 17,491 | | | 15,139 | |
Total out-of-scope non-interest income | 12,877 | | | 21,340 | | | 16,131 | |
Total non-interest income | $ | 30,400 | | | $ | 38,831 | | | $ | 31,270 | |
Demand deposit account fees include monthly maintenance fees and service charges. These fees are generally derived as a result of either transaction-based or serviced-based services. The Company's performance obligation for these services is generally satisfied, and revenue recognized, at the time the transaction is completed or the service rendered. Fees for these services are generally received from the customer either at the time of the transaction or monthly.
Title insurance fees are generally recognized at the time the transaction closes or when the service is rendered.
RSI Insurance Agency, Inc. performs the function of an insurance intermediary, by introducing the policyholder and insurer for life and health, and property and casualty insurance, and is compensated by a commission fee for placement of an insurance policy. Commission and fees are generally recognized as of the effective date of the insurance policy. Commission revenues related to installment billings are recognized on the invoice date. Subsequent commission adjustments are recognized upon the receipt of notification from insurance companies concerning matters necessitating such adjustments.
Other non-interest income includes check printing fees, traveler's check fees, gift card fees, branch service fees, overdraft fees, account analysis fees, other deposit related fees, wealth management related fee income which includes annuity fees, brokerage commissions, and asset management fees. Wealth management related fee income represent fees earned from customers as consideration for asset management and investment advisory services provided by a third party. The Company's performance obligation is generally satisfied monthly and the resulting fees are recognized monthly based upon the month-end market value of the assets under management and the applicable fee rate. The Company does not earn performance-based incentives. The Company's performance obligation for these transaction-based services are generally satisfied, and related revenue recognized, at the time the transaction closes or when the service is rendered or a point in time when the service is completed.
Also included in other fees are debit card and ATM fees which are transaction-based. Debit card revenue is primarily comprised of interchange fees earned when a customer's Company card is processed through a card payment network. ATM fees are largely generated when a Company cardholder uses a non-Company ATM, or a non-Company cardholder uses a Company ATM. The Company's performance obligation for these services is satisfied when the service is rendered. Payment is generally received at time of transaction or monthly.
Out-of-scope non-interest income primarily consists of income from bank-owned life insurance, loan prepayment and servicing fees, net fees on loan level swaps, gains and losses on the sale of loans and securities, credit card interchange income, changes in the fair value of equity securities, and proceeds from an insurance settlement. None of these revenue streams are subject to the requirements of Topic 606.
COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(23) Subsequent Events
The Company has evaluated events subsequent to December 31, 2022 and through the financial statement issuance date of March 1, 2023, and concluded that no material events occurred that would require disclosure.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
COLUMBIA FINANCIAL, INC.
| | | | | | | | | | | |
Dated: | March 1, 2023 | By: | /s/Thomas J. Kemly |
| | | Thomas J. Kemly |
| | | President and Chief Executive Officer |
| | | (Principal Executive Officer) |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| | | | | | | | |
Name | Title | Date |
/s/Thomas J. Kemly | | |
Thomas J. Kemly | President and Chief Executive Officer and Director | March 1, 2023 |
| (Principal Executive Officer) | |
| | |
/s/Dennis E. Gibney | | |
Dennis E. Gibney | Executive Vice President and Chief Financial Officer | March 1, 2023 |
| (Principal Financial and Accounting Officer) | |
| | |
/s/Noel R. Holland | | |
Noel R. Holland | Chairman of the Board | March 1, 2023 |
| | |
/s/Michael Massood, Jr. | | |
Michael Massood, Jr. | Director | March 1, 2023 |
| | |
/s/Elizabeth E. Randall | | |
Elizabeth E. Randall | Director | March 1, 2023 |
| | |
/s/Robert Van Dyk | | |
Robert Van Dyk | Director | March 1, 2023 |
| | |
/s/Paul Van Ostenbridge | | |
Paul Van Ostenbridge | Director | March 1, 2023 |
| | |
/s/James Kuiken | | |
James Kuiken | Director | March 1, 2023 |
| | |
/s/Lucy Sorrentini | | |
Lucy Sorrentini | Director | March 1, 2023 |
| | |
/s/Daria Stacy-Walls Torres | | |
Daria Stacy-Walls Torres | Director | March 1, 2023 |
Grafico Azioni Columbia Financial (NASDAQ:CLBK)
Storico
Da Gen 2025 a Feb 2025
Grafico Azioni Columbia Financial (NASDAQ:CLBK)
Storico
Da Feb 2024 a Feb 2025