Columbia Financial - 10-Q quarterly report FY2018 Q2

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)



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

For the quarterly period ended June 30, 2018



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

Commission File Number 001-38456

Columbia Financial, Inc.

(Exact name of registrant as specified in its charter)



Delaware (State or other jurisdiction of incorporation or organization)		22-3504946 (I.R.S. Employer Identification Number)

19-01 Route 208 North, Fair Lawn, New Jersey (Address of principal executive offices)		07410 (Zip Code)

(800) 522-4167

(Registrant’s telephone number, including area code)

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

ý Yes ¨ No

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

ý Yes ¨ No

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



Large accelerated filer	¨	Accelerated filer	¨	Smaller reporting company	¨
Non-accelerated filer	ý	Emerging growth company	ý

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

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

¨ Yes ý No

115,889,175 of the Registrant's common stock, par value of $0.01 per share, were issued and outstanding as of August 14, 2018.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Index to Form 10-Q



Item Number		Page Number

PART I.	Financial Information

Item 1.	Financial Statements
	Consolidated Balance Sheets as of June 30, 2018 (unaudited) and December 31, 2017 (unaudited)	2
	Consolidated Statements of Operations for the three and six months ended June 30, 2018 and 2017 (unaudited)	3
	Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2018 and 2017 (unaudited)	4
	Consolidated Statements of Changes in Stockholder's Equity for the six months ended June 30, 2018 and 2017 (unaudited)	5
	Consolidated Statements of Cash Flows for the six months ended June 30, 2018 and 2017 (unaudited)	6
	Notes to Unaudited Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis	38
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	43
Item 4.	Controls and Procedures	46

PART II.	Other Information
	Item 1. Legal Proceedings	47
	Item 1A. Risk Factors	47
	Item 2. Unregistered Sales of Equity Securities	47
	Item 3. Defaults Upon Senior Securities	47
	Item 4. Mine Safety Disclosures	47
	Item 5. Other Information	47
	Item 6. Exhibit	47

	Exhibit Index	48

	SIGNATURES	49

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Consolidated Balance Sheets



	(Unaudited)			(Unaudited)
	June 30,			December 31,
	2018			2017
	(In thousands)
Assets
Cash and cash equivalents	$	67,055		$	65,334
Short-term investments	128			164
Total cash and cash equivalents	67,183			65,498

Securities available-for-sale, at fair value	932,070			710,570
Securities held-to-maturity, at amortized cost (fair value of $244,239 and $236,125 at June 30, 2018 and December 31, 2017, respectively)	254,801			239,618
Federal Home Loan Bank stock	45,009			44,664
Loans receivable, net	4,649,054			4,400,470
Accrued interest receivable	17,067			15,915
Real estate owned	660			959
Office properties and equipment, net	46,623			42,620
Bank-owned life insurance	151,837			150,521
Goodwill and intangible assets	5,957			5,997
Other assets	107,142			89,668
Total assets	$	6,277,403		$	5,766,500

Liabilities and Stockholders' Equity
Liabilities:
Deposits	$	4,294,832		$	4,263,315
Borrowings	930,618			929,057
Advance payments by borrowers for taxes and insurance	30,995			25,563
Accrued expenses and other liabilities	79,661			76,495
Total liabilities	5,336,106			5,294,430

Stockholders' equity:
Preferred stock, $0.01 par value. Authorized 10,000,000 shares; none issued and outstanding at June 30, 2018 and December 31, 2017	—			—
Common stock, $0.01 par value. Authorized 500,000,000 shares; 115,889,175 shares issued and outstanding at June 30, 2018 and none at December 31, 2017	1,159			—
Additional paid-in capital	526,332			—
Retained earnings	534,522			537,480
Accumulated other comprehensive loss	(75,736		)	(65,410		)
Unallocated common stock held by the Employee Stock Ownership Plan	(44,980		)	—
Total stockholders' equity	941,297			472,070
Total liabilities and stockholders' equity	$	6,277,403		$	5,766,500

See accompanying notes to unaudited consolidated financial statements.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Consolidated Statements of Operations (Unaudited)

(Dollars in thousands, except for per share data)



	Three Months Ended June 30,					Six Months Ended June 30,
	2018			2017		2018			2017
Interest and dividend income:
Loans receivable	$	45,865		$	41,981	$	89,706		$	82,583
Securities available-for-sale	4,922			4,354		11,336			8,692
Securities held-to-maturity	2,991			—		3,455			—
Federal funds and interest earning deposits	584			66		1,072			89
Federal Home Loan Bank stock dividends	657			449		1,244			914
Total interest and dividend income	55,019			46,850		106,813			92,278
Interest expense:
Deposits	9,194			6,382		17,293			12,454
Borrowings	4,810			4,829		9,442			9,408
Total interest expense	14,004			11,211		26,735			21,862

Net interest income	41,015			35,639		80,078			70,416

Provision for loan losses	2,400			375		4,400			751

Net interest income after provision for loan losses	38,615			35,264		75,678			69,665

Non-interest income:
Demand deposit account fees	976			922		1,920			1,837
Bank-owned life insurance	1,493			1,059		2,557			2,758
Title insurance fees	1,255			949		2,029			1,916
Loan fees and service charges	451			532		922			1,027
Gain on securities transactions, net	—			—		116			—
Gain on sale of loans receivable, net	15			69		15			170
(Loss) Gain on sale of real estate owned	(13		)	39		(13		)	248
Other non-interest income	1,233			1,198		2,366			2,571
Total non-interest income	5,410			4,768		9,912			10,527

Non-interest expense:
Compensation and employee benefits expense	16,750			15,304		33,275			31,283
Occupancy expense	3,518			3,465		7,234			6,895
Federal insurance premiums expense	473			412		901			825
Advertising expense	1,292			1,122		2,139			1,803
Professional fees expense	399			379		613			558
Data processing expense	672			577		1,314			1,144
Charitable contribution to foundation	34,767			154		34,767			454
Other non-interest expense	3,857			3,413		7,460			6,717
Total non-interest expense	61,728			24,826		87,703			49,679

(Loss) Income before income tax expense	(17,703		)	15,206		(2,113		)	30,513

Income tax (benefit) expense	(2,961		)	5,934		845			10,946

Net (loss) income	$	(14,742	)	$	9,272	$	(2,958	)	$	19,567

Basic and diluted earnings per share	$	(0.13	)	N/A		$	(0.03	)	N/A
Weighted average shares outstanding	111,346,897			N/A		111,346,897			N/A

See accompanying notes to unaudited consolidated financial statements.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

(Dollars in thousands)



	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017

Net (loss) income	$	(14,742	)	$	9,272		$	(2,958	)	$	19,567

Other comprehensive (loss) income, net of tax:
Unrealized (losses) gains on securities available-for-sale	(2,860		)	1,739			(12,828		)	2,134
Accretion of unrealized gain on securities reclassified as held-to-maturity	(3		)	—			(2		)	—
Reclassification adjustment for gains included in net income	—			—			87			—
	(2,863		)	1,739			(12,743		)	2,134

Derivatives, net of tax
Unrealized gain (loss) on swap contracts	164			(37		)	506			(31		)
	164			(37		)	506			(31		)

Employee benefit plans, net of tax:
Amortization of prior service cost included in net income	—			—			118			—
Reclassification adjustment of actuarial net loss included in net income	—			(2		)	527			(5		)
Change in funded status of retirement obligations	2,323			72			1,266			(74		)
	2,323			70			1,911			(79		)

Total other comprehensive (loss) income	(376		)	1,772			(10,326		)	2,024

Total comprehensive (loss) income, net of tax	$	(15,118	)	$	11,044		$	(13,284	)	$	21,591

See accompanying notes to unaudited consolidated financial statements.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Consolidated Statements of Changes in Stockholders' Equity (Unaudited)



	Common stock		Additional paid-in-capital		Retained earnings			Accumulated other comprehensive loss, net of tax			Unallocated common stock held by the employee stock ownership plan			Total stockholders' equity
	(In thousands)

Balance at December 31, 2016	$	—	$	—	$	501,014		$	(66,162	)	$	—		$	434,852
Net income	—		—		19,567			—			—			19,567
Other comprehensive income	—		—		—			2,024			—			2,024
Balance at June 30, 2017	$	—	$	—	$	520,581		$	(64,138	)	$	—		$	456,443

Balance at December 31, 2017	$	—	$	—	$	537,480		$	(65,410	)	$	—		$	472,070
Net loss	—		—		(2,958		)	—			—			(2,958		)
Other comprehensive loss	—		—		—			(10,326		)	—			(10,326		)
Issuance of common stock to Columbia Bank, MHC	626		—		—			—			—			626
Issuance of common stock in initial public offering	498		491,304		—			—			—			491,802
Issuance of shares to Columbia Bank Foundation	35		34,732		—			—			—			34,767
Purchase of Employee Stock Ownership Plan shares	—		—		—			—			(45,428		)	(45,428		)
Employee Stock Ownership Plan shares committed to be released	—		296		—			—			448			744
Balance at June 30, 2018	$	1,159	$	526,332	$	534,522		$	(75,736	)	$	(44,980	)	$	941,297

See accompanying notes to unaudited consolidated financial statements.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited)



	Six Months Ended June 30,
	2018			2017
	(In thousands)
Cash flows from operating activities:
Net (loss) income	$	(2,958	)	$	19,567
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Amortization of deferred loan origination fees and costs	837			597
Net amortization of premiums and discounts on securities	707			687
Amortization on mortgage servicing rights	40			53
Amortization of debt issuance costs	312			27
Depreciation and amortization of office properties and equipment	1,834			1,849
Provision for loan losses	4,400			751
Gain on securities transactions, net	(116		)	—
Gain on sale of loans receivable, net	(15		)	(170		)
Loss (gain) on real estate owned, net	13			(248		)
Deferred tax expense (benefit)	6,811			(1,327		)
Increase in accrued interest receivable	(1,152		)	(341		)
Increase in cash surrender value of bank-owned life insurance	(2,127		)	(2,105		)
Increase in other assets	(17,474		)	(1,885		)
Increase in accrued expenses and other liabilities	3,166			148
Contribution of common stock to Columbia Bank Foundation	34,767			—
Employee stock ownership plan expense	744			—
Net cash provided by operating activities	29,789			17,603

Cash flows from investing activities:
Proceeds from sales/calls of securities available-for-sale	9,966			—
Proceeds from principal pay downs / maturities on securities available-for-sale	29,541			35,828
Proceeds from principal pay downs / maturities on securities held-to-maturity	4,453			—
Purchases of securities available-for-sale	(278,610		)	(28,947		)
Purchases of securities held-to-maturity	(19,761		)	—
Proceeds from sales of loans receivable	3,695			31,237
Purchases of loan receivables	(4,715		)	(7,358		)
Loan originations, net of principal payments	(252,786		)	(243,759		)
Proceeds from bank-owned life insurance	811			977
Proceeds from sales of Federal Home Loan Bank stock	40,226			16,983
Purchases of Federal Home Loan Bank stock	(40,571		)	(20,649		)
Additions to office properties and equipment	(5,837		)	(4,013		)
Proceeds from sales of real estate owned	286			1,186
Net cash used in investing activities	(513,302		)	(218,515		)

Cash flows from financing activities:
Net increase in deposits	31,517			131,730
Proceeds from long-term borrowings	184,049			161,200
Payments for maturities, calls, and payoffs on borrowings	(7,399,600		)	(3,161,950		)
Increase in short-term borrowings	7,216,800			3,079,450
Increase in advance payments by borrowers for taxes and insurance	5,432			3,836
Issuance of common stock	492,428			—
Purchase of employee stock ownership plan shares	(45,428		)	—
Net cash provided by financing activities	485,198			214,266

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited)



	Six Months Ended June 30,
	2018		2017
	(In thousands)

Net increase in cash and cash equivalents	1,685		13,354

Cash and cash equivalents at beginning of year	65,498		40,561
Cash and cash equivalents at end of period	$	67,183	$	53,915

Cash paid during the period for:
Interest	$	26,947	$	21,833
Income tax payments, net	$	9,435	$	15,903

Non-cash investing and financing activities:
Transfer of loans receivable to real estate owned	$	—	$	538

See accompanying notes to unaudited consolidated financial statements.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

1.Basis of Financial Statement Presentation

The accompanying unaudited consolidated financial statements include the accounts of Columbia Financial, Inc., its wholly-owned subsidiary Columbia Bank (the "Bank") and the Bank's wholly-owned subsidiaries (collectively, the “Company”). In consolidation, all significant inter-company accounts and transactions are eliminated.

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

The Company owns 100% of the common stock of a Delaware statutory basis trust, Columbia Capital Trust I (the "Trust"). The trust is classified as a variable interest entity and is not consolidated as it does not satisfy the conditions for consolidation.

In preparing the interim unaudited consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated balance sheets and consolidated statements of income for the periods presented. Material estimates that are particularly susceptible to change are: the allowance for loan losses, the valuation of securities, the valuation of post-retirement benefits and the valuation of deferred tax assets. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the consolidated financial statements in the period they are deemed necessary. While management uses its best judgment, actual amounts or results could differ significantly from those estimates.

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

In the opinion of management, all adjustments and disclosures considered necessary for the fair presentation of the accompanying unaudited consolidated financial statements have been included. Interim results are not necessarily reflective of the results of the entire year.

2.Earnings per Share

Basic earnings per share is computed by dividing net income available to common shareholders by the weighted average number of shares outstanding during the period. For purposes of calculating basic earnings per share, weighed average common shares outstanding excludes unallocated employee stock ownership plan shares that have not been committed for release.

Diluted earnings per share is computed using the same method as basic earnings per share 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. For the three and six months ended June 30, 2018 and 2017, the Company did not have any stock options outstanding.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share calculations for the three and six months ended June 30, 2018 and 2017:



(Dollars in thousands, except per share amounts)	Three Months Ended June 30,
	2018			2017

Net income	$	(14,742	)	$	9,272

Basic earnings per share:
Income available to common stockholders	$	(14,742	)	$	9,272
Weighted average shares outstanding - basic	111,346,897			N/A
Basic earning per share	$	(0.13	)	N/A

Diluted earnings per share:
Income available to common stockholders	$	(14,742	)	$	9,272
Weighted average shares outstanding - diluted	111,346,897			N/A
Diluted earnings per share	$	(0.13	)	N/A


	For the Six Months Ended June 30,
	2018			2017

Net income	$	(2,958	)	$	19,567

Basic earnings per share:
Income available to common stockholders	$	(2,958	)	$	19,567
Weighted average shares outstanding - basic	111,346,897			N/A
Basic earning per share	$	(0.03	)	N/A

Diluted earnings per share:
Income available to common stockholders	$	(2,958	)	$	19,567
Weighted average shares outstanding - diluted	111,346,897			N/A
Diluted earnings per share	$	(0.03	)	N/A

3. Recent Accounting Pronouncements

As an “emerging growth company” as defined in Title 1 of the Jumpstart Our Business Startups (JOBS) Act, the Company has elected to use the extended transition period to delay the adoption of new or reissued accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies.

With respect to the accounting pronouncements noted below, the effective dates of adoption for the Company are delayed commensurate with the dates of adoption for private companies.

In February 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") No. 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220). The updated guidance allows a reclassification from accumulated other comprehensive income to retained earnings for the stranded tax effects resulting from the Tax Cuts and Jobs Act disclosed in Note 9. The purpose of the guidance is to improve the usefulness of the information reported to the financial statement users. The guidance is effective for all entities for fiscal years beginning after December 31, 2018 and interim periods within those fiscal years. Early adoption is permitted. The Company early adopted ASU No. 2018-02 for the period ended December 31, 2017 and the impact of the adoption resulted in a reclassification adjustment between accumulated other comprehensive income and retained earnings of $11.7 million.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities (ASU 2017-12). The purpose of this updated guidance is to better align a company’s financial reporting for hedging activities with the economic objectives of those activities. The effective date for this guidance is fiscal years beginning after December 15, 2018, with early adoption, including adoption in an interim period, permitted. ASU 2017-12 requires a modified retrospective transition method in which the Company will recognize the cumulative effect of the change on the opening balance of each affected component of equity in the statement of financial position as of the date of adoption. The Company is currently evaluating the impact of the new guidance on the Company’s consolidated financial statements.

In March 2017, the FASB issued ASU No. 2017-08, “Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities.” This guidance shortens the amortization period for premiums on callable debt securities by requiring that premiums be amortized to the first (or earliest) call date instead of as an adjustment to the yield over the contractual life. This change more closely aligns the accounting with the economics of a callable debt security and the amortization period with expectations that already are included in market pricing on callable debt securities. This guidance does not change the accounting for discounts on callable debt securities, which will continue to be amortized to the maturity date. This guidance includes only instruments that are held at a premium and have explicit call features. It does not include instruments that contain prepayment features, such as mortgage backed securities; nor does it include call options that are contingent upon future events or in which the timing or amount to be paid is not fixed. The effective date for this guidance is fiscal years beginning after December 15, 2018, including interim periods within the reporting period, with early adoption permitted. Transition is on a modified retrospective basis with an adjustment to retained earnings as of the beginning of the period of adoption. If early adopted in an interim period, adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The Company is currently evaluating the impact of the new guidance on the Company’s consolidated financial statements.

In March 2017, the FASB issued ASU No. 2017-07, "Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Post-retirement Benefit Cost", which requires that companies disaggregate the service cost component from other components of net benefit cost. This update calls for companies that offer post-retirement benefits to present the service cost, which is the amount an employer has to set aside each quarter or fiscal year to cover the benefits, in the same line item with other current employee compensation costs. Other components of net benefit cost will be presented in the income statement separately from service costs component and outside the subtotal of income from operations, if one is presented. This guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is currently evaluating the impact of the new guidance on the Company’s consolidated financial statements and does not anticipate the new guidance to have a material impact.

In January 2017, the FASB issued ASU No. 2017-04, “Simplifying the Test for Goodwill Impairment.” The main objective of this guidance is to simplify the accounting for goodwill impairment by requiring that impairment charges be based upon the first step in the current two-step impairment test under Accounting Standards Codification (ASC) 350. Currently, if the fair value of a reporting unit is lower than its carrying amount (Step 1), an entity calculates any impairment charge by comparing the implied fair value of goodwill with its carrying amount (Step 2). The implied fair value of goodwill is calculated by deducting the fair value of all assets and liabilities of the reporting unit from the reporting unit’s fair value as determined in Step 1. To determine the implied fair value of goodwill, entities estimate the fair value of any unrecognized intangible assets and any corporate-level assets or liabilities that were included in the determination of the carrying amount and fair value of the reporting unit in Step 1. Under this guidance, if a reporting unit’s carrying amount exceeds its fair value, an entity will record an impairment charge based on that difference. The impairment charge will be limited to the amount of goodwill allocated to that reporting unit. This guidance eliminates the requirement to calculate a goodwill impairment charge using Step 2. This guidance does not change the guidance on completing Step 1 of the goodwill impairment test. Under this guidance, an entity will still be able to perform the current optional qualitative goodwill impairment assessment before determining whether to proceed to Step 1. The guidance will be applied prospectively and is effective for annual and interim impairment tests performed in periods beginning after December 15, 2019. Early adoption is permitted for annual and interim goodwill impairment testing dates after January 1, 2017. The Company is currently evaluating the impact of the new guidance on the Company’s consolidated financial statements.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

In August 2016, the FASB issued ASU No. 2016-15, "Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments," a new standard which addresses diversity in practice related to eight specific cash flow issues: debt prepayment or extinguishment costs, settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies (including bank-owned life insurance policies), distributions received from equity method investees, beneficial interests in securitization transactions and separately identifiable cash flows and application of the predominance principle. This guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Entities will apply the standard’s provisions using a retrospective transition method to each period presented. If it is impracticable to apply the amendments retrospectively for some of the issues, the amendments for those issues would be applied prospectively as of the earliest date practicable. The Company is currently evaluating the impact of the new guidance on the Company’s consolidated financial statements and does not anticipate the new guidance to have a material impact.

In June 2016, the FASB issued ASU No. 2016-13, “Measurement of Credit Losses on Financial Instruments”. This guidance provides financial statement users with more decision-useful information about expected credit losses on financial instruments by a reporting entity at each reporting date. The amendments of this guidance require financial assets measured at amortized cost to be presented at the net amount expected to be collected. The allowance for credit losses would represent a valuation account that would be deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. The income statement would reflect the measurement of credit losses that have taken place during the period. The measurement of expected credit losses would be based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. An entity would be required to use judgment in determining the relevant information and estimation methods that are appropriate in its circumstances. The guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within that reporting period, early adoption is permitted. The Company is currently evaluating its existing systems and data to support the new standard as well as assessing the impact that the guidance will have on the Company's consolidated financial statements. The Company has formed a working group under the direction of the Chief Accounting Officer that is primarily comprised of individuals from finance, credit, risk management, and operations. The Company has been developing an implementation plan as well as considering the use of consultants to aid in the implementation.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”. This guidance requires all lessees to recognize a lease liability and a right-of-use asset, measured at the present value of future minimum lease payments, at the lease commencement date. Lessor accounting remains largely unchanged under the new guidance. The guidance is effective for fiscal years beginning after December 15, 2018, including interim reporting periods within that reporting period, early adoption is permitted. A modified retrospective approach must be applied for leases existing at, or entered into after, the beginning of the earliest comparative period present in the financial statements. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements by reviewing its existing lease contracts and service contracts.

In January 2016, the FASB issued ASU No. 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities”. This guidance requires an entity to: i) measure equity investments at fair value through net income, with certain exceptions; (ii) present in other comprehensive income the changes in instrument-specific credit risk for financial liabilities measured using the fair value option; (iii) present financial assets and financial liabilities by measurement category and form of financial asset; (iv) calculate the fair value of financial instruments for disclosure purposes based on an exit price and; (v) assess a valuation allowance on deferred tax assets related to unrealized losses on available-for-sale debt securities in combination with other deferred tax assets. This guidance provides an election to subsequently measure certain nonmarketable equity investments at cost less any impairment and adjusted for certain observable price changes. The guidance also requires a qualitative impairment assessment of such equity investments and amends certain fair value disclosure requirements. The guidance is effective for annual periods beginning after December 15, 2017. The Company is currently evaluating the impact of the new guidance on the Company’s consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers." The objective of this amendment is to clarify the principles for recognizing revenue and to develop a common revenue standard for U.S. GAAP and IFRS. This update affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are in the scope of other standards. The guidance is effective for public business entities for financial statements issued for fiscal years beginning after December 15, 2017, and early adoption is permitted. Subsequently, the FASB issued the following standards related to ASU No. 2014-09: ASU No. 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations;” ASU No. 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing;” ASU No. 2016-11, “Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because of ASU No. 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting;” and ASU No. 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients”. These amendments are intended to improve and clarify the implementation guidance of ASU No. 2014-09 and have the

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

same effective date as the original guidance. The Company's revenue is primarily comprised of net interest income on interest earning assets and liabilities and non-interest income. The scope of guidance explicitly excludes net interest income as well as other revenues associated with financial assets and liabilities, including loans, leases, securities and derivatives. The Company is currently evaluating the impact of the new guidance on the Company’s consolidated financial statements and does not anticipate the new guidance to have a material impact.

4.Investment Securities

Securities Available-for-Sale

The following tables present the amortized cost, gross unrealized gains, gross unrealized losses and the fair value for securities available-for-sale at June 30, 2018 and December 31, 2017:



	June 30, 2018
	Amortized cost		Gross unrealized gains	Gross unrealized (losses)		Fair value
			(In thousands)

U.S. government and agency obligations	$	54,805	—	(1,243	)	$	53,562
Mortgage-backed securities and collateralized mortgage obligations	840,040		344	(24,852	)	815,532
Municipal obligations	1,586		—	—		1,586
Corporate debt securities	54,491		99	(1,023	)	53,567
Trust preferred securities	5,000		—	(370	)	4,630
Equity securities	2,331		862	—		3,193
	$	958,253	1,305	(27,488	)	$	932,070



	December 31, 2017
	Amortized cost		Gross unrealized gains	Gross unrealized (losses)		Fair value
			(In thousands)

U.S. government and agency obligations	$	39,909	17	(282	)	$	39,644
Mortgage-backed securities and collateralized mortgage obligations	615,924		383	(9,695	)	606,612
Municipal obligations	1,957		—	—		1,957
Corporate debt securities	54,489		536	(511	)	54,514
Trust preferred securities	5,000		—	(344	)	4,656
Equity securities	2,328		859	—		3,187
	$	719,607	1,795	(10,832	)	$	710,570

The table below presents the amortized cost and fair value of debt securities available-for-sale at June 30, 2018 by contractual maturity excluding equity securities. Expected maturities may differ from contractual maturities due to prepayment or early call privileges of the issuer.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements



	June 30, 2018
	Amortized cost		Fair value
	(In thousands)

One year or less	$	1,396	$	1,396
More than one year to five years	45,125		44,184
More than five years to ten years	64,361		63,388
More than ten years	5,000		4,377
	$	115,882	$	113,345
Mortgage-backed securities and collateralized mortgage obligations	840,040		815,532
	$	955,922	$	928,877

Mortgage-backed securities and collateralized mortgage obligations totaling $840.0 million at amortized cost and $815.5 million at fair value are excluded from the aggregated maturity balances above as their expected lives are likely to be shorter than the contractual maturity date due to principal prepayments.

There were no sales of securities from the available for sale investment portfolio for the three months ended June 30, 2018. For the six months ended June 30, 2018, proceeds from called securities in the available-for-sale portfolio totaled $10.0 million, resulting in $116 thousand of gross gains and zero gross losses.

There were no sales of securities from the available-for-sale investment portfolio for the three and six months ended June 30, 2017.

Securities available-for-sale with a fair value of $138.4 million and $204.3 million at June 30, 2018 and December 31, 2017 were sold under agreements to repurchase or were pledged as security for deposits of public funds as required and permitted by law.

The following tables summarize the fair value and gross unrealized losses of those securities that reported an unrealized loss at June 30, 2018 and December 31, 2017 and if the unrealized loss position was continuous for the twelve months prior to June 30, 2018 and December 31, 2017:



	June 30, 2018
	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	$	48,812	(1,012	)	4,750	(231	)	53,562	$	(1,243	)
Mortgage-backed securities and collateralized mortgage obligations	580,116		(14,943	)	170,350	(9,909	)	750,466	(24,852		)
Corporate debt securities	19,764		(229	)	9,206	(794	)	28,970	(1,023		)
Trust preferred securities	—		—		4,630	(370	)	4,630	(370		)
	$	648,692	(16,184	)	188,936	(11,304	)	837,628	$	(27,488	)

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements



	December 31, 2017
	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	$	29,654	(282	)	—	—		29,654	$	(282	)
Mortgage-backed securities and collateralized mortgage obligations	514,283		(8,037	)	48,788	(1,658	)	563,071	(9,695		)
Corporate debt securities	4,866		(135	)	4,624	(376	)	9,490	(511		)
Trust preferred securities	—		—		4,656	(344	)	4,656	(344		)
	$	548,803	(8,454	)	58,068	(2,378	)	606,871	$	(10,832	)

The Company evaluates securities for other-than-temporary impairment at each reporting period and more frequently when economic or market conditions warrant such evaluation. The temporary loss position associated with securities available-for-sale was the result of changes in market interest rates relative to the coupon of the individual security. The Company does not have the intent to sell securities in a temporary loss position at June 30, 2018, nor is it more likely than not that the Company will be required to sell the securities before their prices recover which may be maturity.

The Company did not record an other-than-temporary impairment charge on securities in the available-for-sale portfolio for the three and six months ended June 30, 2018 and 2017.

Securities Held-to-Maturity

The following tables present the amortized cost, gross unrealized gains, gross unrealized losses and the fair value for securities held-to-maturity at June 30, 2018 and December 31, 2017:



	June 30, 2018
	Amortized cost		Gross unrealized gains	Gross unrealized (losses)		Fair value
	(In thousands)

U.S. government and agency obligations	$	13,403	—	(346	)	$	13,057
Mortgage-backed securities and collateralized mortgage obligations	241,398		419	(10,635	)	231,182
	$	254,801	419	(10,981	)	$	244,239



	December 31, 2017
	Amortized cost		Gross unrealized gains	Gross unrealized (losses)		Fair value
	(In thousands)

U.S. government and agency obligations	$	8,402	—	(58	)	$	8,344
Mortgage-backed securities and collateralized mortgage obligations	231,216		—	(3,435	)	227,781
	$	239,618	—	(3,493	)	$	236,125

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The table below presents the amortized cost and fair value of debt securities held-to-maturity at June 30, 2018 by contractual maturity. Expected maturities may differ from contractual maturities due to prepayment or early call privileges of the issuer.



	June 30, 2018
	Amortized cost		Fair value
	(In Thousands)

More than five years to ten years	$	13,403	$	13,057
	13,403		13,057
Mortgage-backed securities and collateralized mortgage obligations	241,398		231,182
	$	254,801	$	244,239

Mortgage-backed securities and collateralized mortgage obligations totaling $241.4 million at amortized cost and $231.2 million at fair value are excluded from the maturity table above as their expected lives are likely to be shorter than the contractual maturity date due to principal prepayments.

Securities held-to-maturity with a fair value of $108.3 million and $78.2 million at June 30, 2018 and December 31, 2017 were sold under agreements to repurchase or were pledged as security for deposits of public funds as required and permitted by law.

There were no sales of securities from the held-to-maturity investment portfolio for the three and six months ended June 30, 2018 and 2017.



	June 30, 2018
	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	$	13,057	(346	)	—	—		13,057	$	(346	)
Mortgage-backed securities and collateralized mortgage obligations	153,014		(5,515	)	67,295	(5,120	)	220,309	(10,635		)
	$	166,071	(5,861	)	67,295	(5,120	)	233,366	$	(10,981	)

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements



	December 31, 2017
	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	$	8,344	(58	)	—	—		8,344	$	(58	)
Mortgage-backed securities and collateralized mortgage obligations	196,049		(2,920	)	30,046	(515	)	226,095	(3,435		)
	$	204,393	(2,978	)	30,046	(515	)	234,439	$	(3,493	)

The Company evaluates securities for other-than-temporary impairment at each reporting period and more frequently when economic or market conditions warrant such evaluation. The temporary loss position associated with securities held-to-maturity was the result of changes in market interest rates relative to the coupon of the individual security. The Company does not have the intent to sell securities in a temporary loss position at June 30, 2018, nor is it more likely than not that the Company will be required to sell the securities before their prices recover which may be maturity.

The Company did not record an other-than-temporary impairment charge on securities in the held-to-maturity portfolio for the three and six months ended June 30, 2018 and 2017.

5. Loans Receivable and Allowance for Loan Losses

Loans receivable at June 30, 2018 and December 31, 2017 are summarized as follows:



	June 30,			December 31,
	2018			2017
	(In thousands)
Real estate loans:
One-to-four family	$	1,763,158		$	1,616,259
Multifamily and commercial	1,971,803			1,871,210
Construction	254,850			233,652
Commercial business loans	292,113			277,970
Consumer loans:
Home equity loans and advances	414,388			448,020
Other consumer loans	956			998
Total loans	4,697,268			4,448,109
Net deferred loan costs	14,310			10,539
Allowance for loan losses	(62,524		)	(58,178		)
Loans receivable, net	$	4,649,054		$	4,400,470

The Company had no loans held for sale at June 30, 2018 and December 31, 2017.

The Company sold $3.7 million of residential loans to third parties during the three and six months ended June 30, 2018. The Company sold $31.2 million of residential loans to third parties during the three and six months ended June 30, 2017.

The Company purchased $2.6 million of residential loans and $2.1 million of commercial real estate loans from third parties during the three and six months ended June 30, 2018. The Company purchased $7.4 million of residential loans from third parties during the three and six months ended June 30, 2017.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

At June 30, 2018 and December 31, 2017, the carrying value of real estate loans serviced by the Company for investors was $456.6 million and $478.8 million, respectively.

The following tables summarize the aging of loans receivable by portfolio segment at June 30, 2018 and December 31, 2017:



	June 30, 2018
	30-59 days		60-89 days	Greater than 90 days	Total past due	Current	Total
	(In Thousands)
Real estate loans:
One to four family	$	5,484	1,923	2,218	9,625	1,753,533	$	1,763,158
Multifamily and commercial	164		—	118	282	1,971,521	1,971,803
Construction	—		—	—	—	254,850	254,850
Commercial business loans	—		154	384	538	291,575	292,113
Consumer loans:
Home equity loans advances	808		892	1,041	2,741	411,647	414,388
Other consumer loans	—		1	—	1	955	956
Total loans	$	6,456	2,970	3,761	13,187	4,684,081	$	4,697,268



	December 31, 2017
	30-59 days		60-89 days	Greater than 90 days	Total past due	Current	Total
	(In thousands)
Real estate loans:
One to four family	$	7,080	1,229	3,360	11,669	1,604,590	$	1,616,259
Multifamily and commercial	138		380	1,329	1,847	1,869,363	1,871,210
Construction	—		—	—	—	233,652	233,652
Commercial business loans	89		730	1,263	2,082	275,888	277,970
Consumer loans:
Home equity loans advances	1,421		26	573	2,020	446,000	448,020
Other consumer loans	—		—	—	—	998	998
Total loans	$	8,728	2,365	6,525	17,618	4,430,491	$	4,448,109

The Company considers a loan to be delinquent when we have not received a payment within 30 days of its contractual due date. A loan is designated as a non-accrual loan when the payment of interest is more than three months in arrears of its contractual due date. The accrual of income on a non-accrual loan is reversed and discontinued until the outstanding payments in arrears have been collected. 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 June 30, 2018 and December 31, 2017, non-accrual loans totaled $3.8 million and $6.5 million, respectively.

At June 30, 2018 and December 31, 2017, there were no loans past due 90 days or more and still accruing interest.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The following table summarizes loans receivable and allowance for loan losses by portfolio segment and impairment method:



	June 30, 2018
	One to four family		Multifamily and commercial	Construction	Commercial Business	Home equity loans and advances	Other consumer	Unallocated	Total
	(In thousands)
Allowance for loan losses:
Individually evaluated for impairment	$	476	—	—	355	11	—	—	$	842
Collectively evaluated for impairment	18,073		22,802	6,728	10,565	2,859	7	648	61,682
Total	$	18,549	22,802	6,728	10,920	2,870	7	648	$	62,524

Total loans:
Individually evaluated for impairment	$	10,605	2,856	—	2,951	3,436	—	—	$	19,848
Collectively evaluated for impairment	1,752,553		1,968,947	254,850	289,162	410,952	956	—	4,677,420
Total	$	1,763,158	1,971,803	254,850	292,113	414,388	956	—	$	4,697,268



	December 31, 2017
	One to four family		Multifamily and commercial	Construction	Commercial Business	Home equity loans and advances	Other consumer	Unallocated	Total
	(In thousands)
Allowance for loan losses:
Individually evaluated for impairment	$	423	28	—	80	15	—	—	$	546
Collectively evaluated for impairment	19,568		19,905	5,217	8,195	4,562	8	177	57,632
Total	$	19,991	19,933	5,217	8,275	4,577	8	177	$	58,178

Total loans:
Individually evaluated for impairment	$	11,644	3,693	—	4,263	2,591	—	—	$	22,191
Collectively evaluated for impairment	1,604,615		1,867,517	233,652	273,707	445,429	998	—	4,425,918
Total	$	1,616,259	1,871,210	233,652	277,970	448,020	998	—	$	4,448,109

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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.

The following tables present the number of loans modified as TDRs during the three and six months ended June 30, 2018 and 2017, 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 Three Months Ended
	June 30, 2018					June 30, 2017
	No. of Loans	Pre-modification recorded investment		Post-modification recorded investment		No. of Loans	Pre-modification recorded investment		Post-modification recorded investment
		(In thousands)					(In thousands)
Troubled Debt Restructurings
Real estate loans:
One to four family	3	$	378	$	380	2	$	461	$	461
Consumer loans:
Home equity loans and advances	—	—		—		1	39		39
Total loans	3	$	378	$	380	3	$	500	$	500



	For the Six Months Ended
	June 30, 2018					June 30, 2017
	No. of Loans	Pre-modification recorded investment		Post-modification recorded investment		No. of Loans	Pre-modification recorded investment		Post-modification recorded investment
		(In thousands)					(In thousands)
Troubled Debt Restructurings
Real estate loans:
One to four family	4	$	462	$	462	3	$	543	$	543
Consumer loans:
Home equity loans and advances	1	588		588		1	39		39
Total loans	5	$	1,050	$	1,050	4	$	582	$	582

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The activity in the allowance for loan losses by portfolio segment for the three and six months ended June 30, 2018 and 2017 was as follows:



	For the Three Months Ended June 30,
	One to four family			Multifamily and commercial		Construction	Commercial Business		Home equity loans and advances		Other consumer		Unallocated		Total
	(In Thousands)
2018
Balance at beginning of period	$	18,828		19,097		6,574	10,800		3,924		7		722		$	59,952
Provision charged (credited)	(324		)	3,705		154	87		(1,153	)	5		(74	)	2,400
Recoveries	51			—		—	36		99		3		—		189
Charge-offs	(6		)	—		—	(3	)	—		(8	)	—		(17		)
Balance at end of period	$	18,549		22,802		6,728	10,920		2,870		7		648		$	62,524

2017
Balance at beginning of period	$	18,818		17,638		4,253	7,014		4,129		10		46		$	51,908
Provision charged (credited)	48			485		345	(376	)	(170	)	4		39		375
Recoveries	93			—		—	73		6		—		—		172
Charge-offs	(197		)	(38	)	—	(148	)	—		(6	)	—		(389		)
Balance at end of period	$	18,762		18,085		4,598	6,563		3,965		8		85		$	52,066

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements



	For the Six Months Ended June 30,
	One to four family			Multifamily and commercial		Construction	Commercial Business		Home equity loans and advances		Other consumer		Unallocated		Total
2018
Balance at beginning of period	$	19,991		19,933		5,217	8,275		4,577		8		177		$	58,178
Provision charged (credited)	(1,552		)	2,998		1,508	2,783		(1,810	)	2		471		4,400
Recoveries	171			—		3	87		103		5		—		369
Charge-offs	(61		)	(129	)	—	(225	)	—		(8	)	—		(423		)
Balance at end of period	$	18,549		22,802		6,728	10,920		2,870		7		648		$	62,524

2017
Balance at beginning of period	$	18,599		17,616		4,598	6,358		4,231		11		436		$	51,849
Provision charged (credited)	428			674		—	204		(209	)	5		(351	)	751
Recoveries	115			—		—	149		13		—		—		277
Charge-offs	(380		)	(205	)	—	(148	)	(70	)	(8	)	—		(811		)
Balance at end of period	$	18,762		18,085		4,598	6,563		3,965		8		85		$	52,066

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The following table presents loans individually evaluated for impairment by loan segment:



	June 30, 2018
	Recorded investment		Unpaid principal balance		Specific allowance
	(In thousands)
With no allowance recorded:
Real estate loans:
One to four family	$	7,707	$	8,890	$	—
Multifamily and commercial	2,856		4,204		—
Commercial business loans	16		22		—
Consumer loans:
Home equity loans and advances	3,090		3,445		—
	13,669		16,561		—
With a specific allowance recorded:
Real estate loans:
One to four family	2,898		2,945		476
Commercial business loans	2,935		2,727		355
Consumer loans:
Home equity loans and advances	346		346		11
	6,179		6,018		842
Total:
Real estate loans:
One to four family	10,605		11,835		476
Multifamily and commercial	2,856		4,204		—
Commercial business loans	2,951		2,749		355
Consumer loans:
Home equity loans and advances	3,436		3,791		11
Total loans	$	19,848	$	22,579	$	842

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements



	December 31, 2017
	Recorded investment		Unpaid principal balance		Specific allowance
	(In thousands)
With no allowance recorded:
Real estate loans:
One to four family	$	8,870	$	9,704	$	—
Multifamily and commercial	2,058		2,933		—
Commercial business loans	1,522		2,015		—
Consumer loans:
Home equity loans and advances	2,161		2,601		—
	14,611		17,253		—
With a specific allowance recorded:
Real estate loans:
One to four family	2,774		2,788		423
Multifamily and commercial	1,635		2,208		28
Commercial business loans	2,741		2,741		80
Consumer loans:
Home equity loans and advances
	430		430		15
Total:	7,580		8,167		546
Real estate loans:
One to four family	11,644		12,492		423
Multifamily and commercial	3,693		5,141		28
Commercial business loans	4,263		4,756		80
Consumer loans:
Home equity loans and advances	2,591		3,031		15
Total loans	$	22,191	$	25,420	$	546

Specific allocations of the allowance for loan losses attributable to impaired loans totaled $842 thousand and $546 thousand at June 30, 2018 and December 31, 2017, respectively. At June 30, 2018 and December 31, 2017, impaired loans for which there was no related allowance for loan losses totaled $13.7 million and $14.6 million, respectively.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The following table presents interest income recognized for loans individually evaluated for impairment by loan segment for the three and six months ended June 30, 2018 and 2017:



	For the Three Months Ended
	June 30, 2018				June 30, 2017
	Average recorded Investment		Interest Income Recognized		Average recorded Investment		Interest Income Recognized
	(In thousands)				(In thousands)
Real estate loans:
One to four family	$	10,715	$	103	$	15,202	$	169
Multifamily and commercial	2,718		30		3,295		41
Commercial business loans	3,180		25		3,237		28
Consumer loans:
Home equity loans and advances	3,260		39		4,221		60
Total loans	$	19,873	$	197	$	25,955	$	298



	For the Six Months Ended
	June 30, 2018				June 30, 2017
	Average recorded Investment		Interest Income Recognized		Average recorded Investment		Interest Income Recognized
	(In thousands)				(In thousands)
Real estate loans:
One to four family	$	11,025	$	103	$	16,175	$	156
Multifamily and commercial	3,043		28		5,311		27
Construction	—		—		168		—
Commercial business loans	3,541		25		3,662		27
Consumer loans:
Home equity loans and advances	3,037		38		3,963		48
Total loans	$	20,646	$	194	$	29,279	$	258

The Company utilizes an internal 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 internal loan review department. Results from examinations are presented to the Audit Committee of the Board of Directors.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The following table presents loans receivable by credit quality risk indicator and by loan segment:



	June 30, 2018
	Real Estate
	One to four family		Multifamily and commercial	Construction	Commercial Business	Home equity loans and advances	Other consumer	Total
	(In thousands)
Pass	$	1,754,543	1,955,847	254,850	283,807	412,434	956	$	4,662,437
Special mention	—		2,402	—	3,472	—	—	5,874
Substandard	8,615		13,554	—	4,834	1,954	—	28,957
Doubtful	—		—	—	—	—	—	—
Total	$	1,763,158	1,971,803	254,850	292,113	414,388	956	$	4,697,268



	December 31, 2017
	Real Estate
	One to four family		Multifamily and commercial	Construction	Commercial Business	Home equity loans and advances	Other consumer	Total
	(In thousands)

Pass	$	1,606,672	1,851,772	233,652	268,355	446,364	998	$	4,407,813
Special mention	—		4,782	—	3,678	—	—	8,460
Substandard	9,587		14,656	—	5,937	1,656	—	31,836
Doubtful	—		—	—	—	—	—	—
Total	$	1,616,259	1,871,210	233,652	277,970	448,020	998	$	4,448,109

6. Deposits

Deposits at June 30, 2018 and December 31, 2017 are summarized as follows:



	June 30,		December 31,
	2018		2017
	(In Thousands)

Non-interest bearing transaction	$	710,853	$	681,869
Interest bearing transaction	1,296,928		1,370,403
Money market deposit accounts	277,475		262,396
Savings, including club deposits	537,052		544,765
Certificates of deposit	1,472,524		1,403,882
Total deposits	$	4,294,832	$	4,263,315

The aggregate amount of certificates of deposit that meet or exceed $100,000 is approximately $698.0 million and $641.1 million as of June 30, 2018 and December 31, 2017, respectively.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

A summary of certificate accounts by maturity at June 30, 2018 and December 31, 2017 are summarized as follows:



	June 30,		December 31,
	2018		2017
	(In Thousands)
Less than one year	$	743,577	$	669,610
More than one years to two years	488,016		474,475
More than two years to three years	184,860		169,069
More than three years to four years	40,999		68,184
More than four years	15,072		22,544
	$	1,472,524	$	1,403,882

7.Components of Periodic Benefit Costs

The Bank has a defined benefit pension plan (the "Pension Plan") covering its full-time employees who satisfy the eligibility requirements. The benefits are based on years of service and the employee's compensation during the last five years of employment. Costs of the Pension Plan, based on the actuarial computations of the current future benefits for employees, are recognized to expense and are funded in part based on the maximum amount that can be deducted for federal income tax purposes. The Pension Plan’s assets are primarily invested in fixed debt and equity securities.

In addition to the Pension Plan, certain health care and life insurance benefits are made available to retirement employees (the "Post-retirement Plan").

The Bank has a retirement income maintenance plan (the "RIM Plan"). The RIM Plan is a non-qualified defined benefit plan which provides benefits to all employees of the Bank if their benefits under the Pension Plan are limited by the Internal Revenue Code Sections 415 and 401(a)(17).

Net periodic benefit cost (income) for pension benefits and other benefits for the three and six months ended June 30, 2018 and 2017 includes the following components:



	For the Three Months Ended June 30,
	Pension						RIM				Post-retirement
	2018			2017			2018		2017		2018			2017
	(In thousands)
Service cost	$	1,780		$	1,547		$	61	$	35	$	93		$	112
Interest cost	2,129			2,024			111		96		205			214
Expected return on plan assets	(4,815		)	(5,677		)	—		—		—			—
Amortization:
Prior service cost	—			—			—		—		(34		)	(34		)
Net loss	707			2,123			103		71		69			85
Net periodic cost (income)	$	(199	)	$	17		$	275	$	202	$	333		$	377

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements



	For the Six Months Ended June 30,
	Pension						RIM				Post-retirement
	2018			2017			2018		2017		2018			2017
	(In thousands)
Service cost	$	3,560		$	3,094		$	122	$	70	$	186		$	224
Interest cost	4,258			4,048			222		192		410			428
Expected return on plan assets	(9,630		)	(11,354		)	—		—		—			—
Amortization:
Prior service cost	—			—			—		—		(68		)	(68		)
Net loss	1,414			4,246			206		142		138			170
Net periodic cost (income)	$	(398	)	$	34		$	550	$	404	$	666		$	754

The net periodic benefit cost (income) for pension benefits and other benefits at June 30, 2018 were calculated using the December 31, 2017 third party actuarial valuation reports. For June 30, 2017, the September 30, 2016 third party actuarial valuation reports were utilized as a proxy to estimate the net periodic benefit cost for pension benefits.

8. 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 an estimate of the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. However, in many instances, fair value estimates may not be substantiated by comparison to independent markets and may not be realized in an immediate sale of the financial instrument.

U.S. GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of fair value hierarchy are as follows:

Level 1: Unadjusted quoted market prices in active markets that are accessible at the measurement date for identical,

unrestricted assets or liabilities;

Level 2: Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly for

substantially the full term of the asset or liability; and

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and

unobservable (i.e., supported by minimal or no market activity).

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.

The valuations exclude any accrued interest or dividends at the measurement date. Interest income and expense and dividend income are recorded within the consolidated statements of income depending on the nature of the instrument using the effective interest method based on the discount or premium.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The valuation techniques described below were used to measure fair value of financial instruments in the tables below on a recurring basis as of June 30, 2018 and December 31, 2017.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Securities Available-for-Sale

For securities available-for-sale, 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 comparable securities. The Company evaluates the quality of Level 2 matrix pricing through comparison to similar assets with greater liquidity and evaluation of projected cash flows. As the Company is responsible for the determination of fair value, it performs quarterly analysis on the prices received from the pricing service to determine whether the prices are reasonable estimates of fair value. Specifically, the Company compares the prices received from the pricing service to a secondary pricing source. Additionally, the Company compares changes in the reported market values and returns to relevant market indices to assess the reasonableness of the reported prices. The Company’s internal price verification procedures and review of fair value methodology documentation provided by independent pricing services has not historically resulted in an adjustment in the prices obtained from the pricing service. The Company also holds equity securities and 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.

Derivatives

The Company records all derivatives on the consolidated balance sheets 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.

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

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 June 30, 2018 and December 31, 2017.

Collateral Dependent Impaired Loans

For 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%. The Company classifies these loans as Level 3 within the fair value hierarchy.

Foreclosed Assets

Assets acquired through foreclosure or deed in lieu of foreclosure are carried at fair value, less estimated selling costs which is estimated to be 6%. Fair value is generally based on independent appraisals that rely upon quoted market prices for similar assets in active markets. These appraisals include adjustments, on an individual case basis, to comparable assets based on the appraiser's market knowledge and experience, and are classified as Level 3. When an asset is acquired, the excess of the loan balance over fair value less estimated selling costs is charged to the allowance for loan losses. Operating results from real estate owned, including rental income, operating expenses, and gains and losses realized from the sales of real estate owned, are recorded as incurred.

There were no changes to the valuation techniques for fair value measurements as of June 30, 2018 and December 31, 2017.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The following tables present the assets and liabilities reported on the consolidated balance sheets at their fair values as of June 30, 2018 and December 31, 2017, by level within the fair value hierarchy:



	June 30, 2018
			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)
Measured on a recurring basis:
Securities available-for-sale:
U.S. government and agency obligations	$	53,562	53,562	—	$	—
Mortgage-backed securities and collateralized mortgage obligations	815,532		—	815,532	—
Municipal obligations	1,586		—	1,586	—
Corporate debt securities	53,567		—	53,567	—
Trust preferred securities	4,630		—	4,630	—
Equity securities	3,193		3,193	—	—
Total securities available-for-sale	$	932,070	56,755	875,315	$	—
Derivative assets	965		—	965	—
	$	933,035	56,755	876,280	$	—



	December 31, 2017
			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)
Measured on a recurring basis:
Securities available-for-sale:
U.S. government and agency obligations	$	39,644	39,644	—	$	—
Mortgage-backed securities and collateralized mortgage obligations	606,612		—	606,612	—
Municipal obligations	1,957		—	1,957	—
Corporate debt securities	54,514		—	54,514	—
Trust preferred securities	4,656		—	4,656	—
Equity securities	3,187		3,187	—	—
Total securities available-for-sale	710,570		42,831	667,739	—
Derivative assets	490		—	490	—
	$	711,060	42,831	668,229	$	—

Derivative liabilities	$	203	—	203	$	—

There were no transfers between Level 1, Level 2 and Level 3 during the three and six months ended June 30, 2018 and during the year ended December 31, 2017.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements



	June 30, 2018
			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)
Measured on a non-recurring basis:
Real estate owned	$	660	—	—	$	660
Loans measured for impairment based on the fair value of the underlying collateral	9,629		—	—	9,629
	$	10,289	—	—	$	10,289



	December 31, 2017
			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)
Measured on a non-recurring basis:
Real estate owned	$	959	—	—	$	959
Loans measured for impairment based on the fair value of the underlying collateral	10,251				10,251
	$	11,210	—	—	$	11,210

The following table presents qualitative information for Level 3 assets measured at fair value on a non-recurring basis as of June 30, 2018 and September 30, 2017:



	June 30, 2018
	Fair value		Valuation methodology	Unobservable inputs	Range of inputs
	(In Thousands)
Real estate owned	$	660	Appraised Value	Discount for cost to sell	6.0%
Loans measured for impairment based on the fair value of the underlying collateral	$	9,629	Appraised Value	Discount for cost to sell	6.0% - 8.0%



	December 31, 2017
	Fair value		Valuation methodology	Unobservable inputs	Range of inputs
	(In Thousands)
Real estate owned	$	959	Appraised Value	Discount for cost to sell	6.0%
Loans measured for impairment based on the fair value of the underlying collateral	$	10,251	Appraised Value	Discount for cost to sell	6.0% - 8.0%

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.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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.

Investment Securities Held-to-Maturity

For 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.

Federal Home Loan Bank Stock ("FHLB")

The carrying value of FHLB stock is its cost. The fair value of FHLB stock is based on redemption at par 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, etc. Each applicable 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 is 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 fair value estimated does not incorporate an exit value. The Company classifies the estimated fair value of its loan portfolio as Level 3.

The fair value for 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 non-interest bearing demand deposits and savings deposits, was equal to the amount payable on demand 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.

Borrowed Funds

The fair value of borrowed funds 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

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 in comparison to their carrying value.

The following tables present the Company's financial instruments at their carrying and fair values as of June 30, 2018 and December 31, 2017. Fair values are presented by level within the fair value hierarchy:



	June 30, 2018
			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	$	67,183	67,183	67,183	—	$	—
Securities available-for-sale	932,070		932,070	56,755	875,315	—
Securities held-to-maturity	254,801		244,239	—	244,239	—
Federal Home Loan Bank stock	45,009		45,009	—	45,009	—
Loans receivable, net	4,649,054		4,538,326	—	—	4,538,326
Derivative assets	965		965	—	965	—

Financial liabilities:			—
Total deposits	$	4,294,832	4,282,179	—	4,282,179	$	—
Borrowings	930,618		923,606	—	923,606	—



	December 31, 2017
			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	$	65,498	65,498	65,498	—	$	—
Securities available-for-sale	710,570		710,570	42,831	667,739	—
Securities held-to-maturity	239,618		236,125	—	236,125	—
Federal Home Loan Bank Stock	44,664		44,664	—	44,664	—
Loans receivable, net	4,400,470		4,367,945	—	—	4,367,945
Derivative assets	490		490	—	490	—

Financial liabilities:			—
Total deposits	$	4,263,315	3,959,460	—	3,959,460	$	—
Borrowings	929,057		925,032	—	925,032	—
Derivative liabilities	203		203	—	203	—

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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 no market exists 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 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. Significant assets and liabilities that are not considered financial assets or liabilities include goodwill and other intangibles, deferred tax assets and premises and equipment. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.

9. Other Comprehensive Income (Loss)

The following tables present the components of other comprehensive income (loss), both gross and net of tax, for the three and six months ended June 30, 2018 and 2017:



	For the Three Months Ended
	June 30, 2018							June 30, 2017
	Before Tax			Tax Effect		After Tax		Before Tax		Tax Effect		After Tax
	(In thousands)
Components of Other Comprehensive (Loss) Income:
Unrealized gains and losses on securities available-for-sale:
Net (losses) gains arising during the period	$	(5,623	)	2,763		(2,860	)	2,689		(950	)	$	1,739
Accretion of unrealized loss on securities reclassified as held-to-maturity	80			(83	)	(3	)	—		—		—
Reclassification adjustment for gains included in net income	—			—		—		—		—		—
	(5,543		)	2,680		(2,863	)	2,689		(950	)	1,739

Unrealized gain (loss) on swap contract	297			(133	)	164		(57	)	20		(37		)
	297			(133	)	164		(57	)	20		(37		)

Employee benefit plans:
Amortization of prior service cost included in net income	—			—		—		—		—		—
Reclassification adjustment of actuarial net (loss) gain included in net income	—			—		—		—		(2	)	(2		)
Change in funded status of retirement obligations	—			2,323		2,323		—		72		72
	—			2,323		2,323		—		70		70
Total other comprehensive (loss) income	$	(5,246	)	4,870		(376	)	2,632		(860	)	$	1,772

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements



	For the Six Months Ended
	June 30, 2018							June 30, 2017
	Before Tax			Tax Effect		After Tax		Before Tax		Tax Effect		After Tax
	(In thousands)
Components of Other Comprehensive (Loss) Income:
Unrealized gains and losses on securities available-for-sale:
Net (losses) gains arising during the period	$	(17,261	)	4,433		(12,828	)	3,340		(1,206	)	$	2,134
Accretion of unrealized loss on securities reclassified as held-to-maturity	(16		)	14		(2	)	—		—		—
Reclassification adjustment for gains included in net income	116			(29	)	87		—		—		—
	(17,161		)	4,418		(12,743	)	3,340		(1,206	)	2,134

Unrealized gain (loss) on swap contract	678			(172	)	506		(48	)	17		(31		)
	678			(172	)	506		(48	)	17		(31		)

Employee benefit plans:
Amortization of prior service cost included in net income	148			(30	)	118		—		—		—
Reclassification adjustment of actuarial net loss included in net income	673			(146	)	527		—		(5	)	(5		)
Change in funded status of retirement obligations	(819		)	2,085		1,266		—		(74	)	(74		)
	2			1,909		1,911		—		(79	)	(79		)
Total other comprehensive (loss) income	$	(16,481	)	6,155		(10,326	)	3,292		(1,268	)	$	2,024

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The following tables present the changes in the components of accumulated other comprehensive (loss) income, net of tax, for the three and six months ended June 30, 2018 and 2017:



	For the Three Months Ended
	June 30, 2018								June 30, 2017
	Unrealized (Losses) Gains on Securities Available-for- Sale			Unrealized Gains (Losses) on Swaps	Employee Benefit Plans		Accumulated Other Comprehensive Loss		Unrealized (Losses) Gains on Securities Available-for- Sale		Unrealized Gains (Losses) on Swaps		Employee Benefit Plans		Accumulated Other Comprehensive Loss
	(In Thousands)								(In Thousands)
Balance at beginning of year	$	(17,223	)	566	(58,703	)	(75,360	)	(8,885	)	6		(57,031	)	$	(65,910	)
Current period changes in other comprehensive (loss) income	(2,863		)	164	2,323		(376	)	1,739		(37	)	70		1,772
Total other comprehensive (loss) income	$	(20,086	)	730	(56,380	)	(75,736	)	(7,146	)	(31	)	(56,961	)	$	(64,138	)



	For the Six Months Ended
	June 30, 2018								June 30, 2017
	Unrealized (Losses) Gains on Securities Available-for- Sale			Unrealized Gains (Losses) on Swaps	Employee Benefit Plans		Accumulated Other Comprehensive Loss		Unrealized (Losses) Gains on Securities Available-for- Sale		Unrealized Gains (Losses) on Swaps		Employee Benefit Plans		Accumulated Other Comprehensive Loss
	(In Thousands)								(In Thousands)
Balance at beginning of year	$	(7,279	)	224	(58,355	)	(65,410	)	(9,279	)	—		(56,883	)	$	(66,162	)
Current period changes in other comprehensive (loss) income	(12,743		)	506	1,911		(10,326	)	2,134		(31	)	(79	)	2,024
Total other comprehensive (loss) income	$	(20,022	)	730	(56,444	)	(75,736	)	(7,145	)	(31	)	(56,962	)	$	(64,138	)

The following table reflects amounts reclassified from accumulated other comprehensive (loss) income to the consolidated statements of income and the affected line item in the statement where net income is presented for the three and six months ended June 30, 2018 and 2017:

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements



	For the Three Months Ended
	6/30/2018		6/30/2017
	(In Thousands)
Accumulated other Comprehensive (Loss) Income Components						Affected line items in the Consolidated Statements of Income
Reclassification adjustment for gains included in net income	$	—	$	—		Gains on securities transactions, net
Reclassification adjustment of actuarial net gain included in net income	—		—			Compensation and employee benefits expense
Total before tax	—		—
Income tax benefit	—		(2		)
Net of tax	$	—	$	(2	)



	For the Six Months Ended
	6/30/2018			6/30/2017
	(In Thousands)
Accumulated other Comprehensive (Loss) Income Components							Affected line items in the Consolidated Statements of Income
Reclassification adjustment for gains included in net income	$	116		$	—		Gains on securities transactions, net
Reclassification adjustment of actuarial net gain included in net income	673			—			Compensation and employee benefits expense
Total before tax	789			—
Income tax benefit	(175		)	(5		)
Net of tax	$	614		$	(5	)

10. Derivatives and Hedging Activities

The Company offers currency forward contracts and interest rate swap contracts to certain commercial banking customers to manage their risk of exposure and risk management strategies. These contracts are simultaneously hedged by offsetting contracts with a third party, such that the Company would minimize its net risk exposure resulting from these transactions. In addition, the Company executes interest rate swaps with third parties to in order to hedge the interest expense of short-term Federal Home Loan Bank Advances. These contracts are simultaneously hedged with short-term Federal Home Loan Bank Advances.

Currency Forward Contracts. At June 30, 2018, the Company had no currency forward contacts in place with commercial banking customers. At December 31, 2017, the Company had a currency forward contract in place with a commercial banking customer with a notional amount of $1.6 million. An offsetting currency forward contract with a third party was also in place at December 31, 2017. The currency forward contracts associated with this program do not meet hedge accounting requirements. Changes in the fair value of both the customer currency forward contract and the offsetting third party contract are recognized directly in earnings. Derivatives not designated in qualifying hedging relationships are not speculative and result from a service the Company provides to certain qualified commercial banking customers and are not used to manage interest rate risk in the Company's assets or liabilities.

Interest Rate Swaps. At June 30, 2018 and December 31, 2017, the Company did not have any interest rate swaps with commercial banking customers.

The Company had 14 interest rate swaps in place at June 30, 2018 with offsetting Federal Home Loan Bank advances with a notional amount of $190.0 million. At December 31, 2017, the Company had two interest rate swaps in place with offsetting Federal Home Loan Bank Advances with a notional amount of $20.0 million. The interest rate swaps associated with the program meet the hedge accounting requirements. The effective portion of changes in the fair value of the derivatives designated that qualify as cash flow hedges are recorded in accumulated other comprehensive income (loss). The ineffective portion of changes in the fair value of the derivatives designated that qualify as cash flow hedges are recorded in earnings. 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 payment payments over the life of the agreements without the exchange of the underlying notional amount.

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the three and six months ended June 30, 2018 and 2017, the Company did not record any hedge ineffectiveness associated with these contracts.

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the Consolidated Balance Sheets at June 30, 2018 and December 31, 2017:



	June 30, 2018
	Asset Derivative			Liability Derivative
	Consolidated Balance Sheet	Fair value		Consolidated Balance Sheet	Fair Value
		(In thousands)			(In thousands)
Derivatives:
Interest rate swap - cash flow hedge	Other Assets	$	965	Other Liabilities	$	—
Total derivative instruments		$	965

	December 31, 2017
	Asset Derivative			Liability Derivative
	Consolidated Balance Sheet	Fair value		Consolidated Balance Sheet	Fair Value
		(In thousands)			(In thousands)
Derivatives:
Interest rate swap - cash flow hedge	Other Assets	287		Other Liabilities	$	—
Currency forward contract - non-designated hedge	Other Assets	203		Other Liabilities	203
Total derivative instruments		$	490		$	203

For the three and six months ended June 30, 2018 and 2017, no gains or losses were recorded in the consolidated statements of operations.

The Company has agreements with counter-parties 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 June 30, 2018 and December 31, 2017, the fair value of derivatives was in a net asset position. At June 30, 2018 and December 31, 2017, accrued interest was $45 thousand and $7 thousand, respectively.

11. Subsequent Events

The Company has evaluated events subsequent to June 30, 2018 and through the financial statement issuance date of August 14, 2018. The Company has not identified any material subsequent events.

Columbia Financial, Inc.

Management’s Discussion and Analysis

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

Forward-Looking Statements

Certain statements contained herein are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements may be identified by reference to a future period or periods, or by the use of forward-looking terminology, such as “may,” “will,” “believe,” “expect,” “estimate,” "project," "intend," “anticipate,” “continue,” or similar terms or variations on those terms, or the negative of those terms. Forward-looking statements are subject to numerous risk factors and uncertainties, including, but not limited to, those set forth in the Company's prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b)(3) on February 8, 2018, and those related to the economic environment, particularly in the market areas in which the Company operates, competitive products and pricing, fiscal and monetary policies of the U.S. Government, changes in government regulations affecting financial institutions, including regulatory fees and capital requirements, changes in prevailing interest rates, acquisitions and the integration of acquired businesses, credit risk management, asset-liability management, the financial and securities markets and the availability of and costs associated with sources of liquidity.

The Company cautions readers not to place undue reliance on any such forward-looking statements which speak only as of the date made. The Company also advises readers that the factors listed above could affect the Company’s financial performance and could cause the Company’s actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements. The Company does not have any obligation to update any forward-looking statements to reflect any subsequent events or circumstances after the date of this statement.

Comparison of Financial Condition at June 30, 2018 and December 31, 2017

Total assets increased approximately $510.9 million, or 8.9%, to $6.3 billion at June 30, 2018 from $5.8 billion at December 31, 2017. The increase in total assets was primarily attributed to the increases in loans receivable, net of $248.6 million and available-for-sale securities of $221.5 million. Growth was funded primarily by $492.4 million of net proceeds from the minority stock offering.

Securities available-for-sale increased $221.5 million to $932.1 million at June 30, 2018 from $710.6 million at December 31, 2017. Securities held-to-maturity increased $15.2 million to $254.8 million at June 30, 2018 from $239.6 million at December 31, 2017.

Loans receivable, net increased $248.6 million to $4.6 billion at June 30, 2018 from $4.4 billion at December 31, 2017. One-to-four family, multifamily and commercial, construction loans and commercial business lending contributed $146.9 million, $100.6 million, $21.2 million and $14.1 million to the growth, respectively. Home equity loans and advances declined $33.6 million between June 30, 2018 and December 31, 2017.

Total liabilities increased $41.7 million, or 0.8%, to $5.3 billion at June 30, 2018 from $5.3 billion at December 31, 2017. The increase is primarily attributable to an increase in total deposits of $31.5 million mainly driven by higher certificate of deposit balances. Overall borrowings remained relatively flat over the six month period.

Total stockholders’ equity increased $469.2 million or 99.4%, to $941.3 million at June 30, 2018 from $472.1 million at December 31, 2017. The net increase is primarily driven by the recording of the common stock and additional-paid-in capital related to the completion of the minority stock offering. Net proceeds from the offering totaled $492.4 million.

Results of Operations for the Three Months Ended June 30, 2018 and June 30, 2017

A net loss of $14.7 million was recorded for the three months ended June 30, 2018, compared to net income of $9.3 million for the three months ended June 30, 2017. The decrease of $24.0 million was primarily attributable to $34.8 million of expense related to the contribution of shares of the Company's common stock to our charitable foundation coupled with a $2.0 million increase in the provision for loan losses. These expenses were partially offset by a $5.4 million increase in net interest income and an $8.9 million decrease in income tax expense.

The Company’s net interest income was $41.0 million for the quarter ended June 30, 2018, an increase of $5.4 million, or 15.1% from $35.6 million for the quarter ended June 30, 2017. The increase in net interest income was attributable to an $8.2 million increase in interest and dividend income which was partially offset by a $2.8 million increase in interest expense.

The increase in interest and dividend income for the three month period was largely due to a $308.6 million increase in average loans, a $500.2 million increase in average investment securities and a $104.7 million increase in other interest earning assets. The increase in other interest earning assets was primarily due to the increase in excess cash reserves during of the month of April related to the subscription funds deposited with Columbia Bank in connection with the minority stock offering.

The yield on total average earning assets decreased two basis points due to the growth in lower yielding excess cash reserves as a percentage of the earning asset mix. The yield on average loans increased seven basis points while the yield on investment securities increased 11 basis points for the quarter ended June 30, 2018 as compared with the quarter ended June 30, 2017.

The $2.8 million increase in interest expense on deposits was largely the result of a $536.0 million increase in the average balance of interest bearing deposits combined with a 19 basis point increase in the cost of deposits. Interest expense related to junior subordinated debt increased as the Company completed all steps required to redeem its outstanding trust preferred securities during the third quarter of 2018 and, therefore, accelerated the amortization of deferred issuance costs.

The Company's net interest margin for the quarter ended June 30, 2018 decreased seven basis points to 2.76% when compared to 2.83% for the quarter ended June 30, 2017. The weighted average yield on interest-earning assets decreased two basis points to 3.70% for the quarter ended June 30, 2018 compared with 3.72% for the quarter ended June 30, 2017. The cost of average total interest bearing liabilities increased 11 basis points to 1.20% for the quarter ended June 30, 2018 as compared to 1.09% for the quarter ended June 30, 2017.

The provision for loan losses was $2.4 million for the quarter ended June 30, 2018, an increase of approximately $2.0 million from $375 thousand for the quarter ended June 30, 2017. The increase was primarily driven by loan growth during the period and changes in certain credit metrics.

Non-interest income was $5.4 million for the quarter ended June 30, 2018, an increase of $642 thousand, or 13.5%, from $4.8 million for the quarter ended June 30, 2017. Income from bank-owned life insurance increased $434 thousand as a result of one-time gains associated with life insurance proceeds during the three months ended June 30, 2018. Title insurance fees were higher by $306 thousand as a result of increased activity during the 2018 quarter.

Non-interest expense was $61.7 million for the quarter ended June 30, 2018, an increase of $36.9 million, or 148.6%, from $24.8 million for the quarter ended June 30, 2017. The increase was driven primarily by the previously noted one-time $34.8 million contribution of common stock of Columbia Financial, Inc. to the Columbia Bank Foundation in connection with our minority stock offering. In addition, compensation and employee benefit expenses increased $1.4 million as a result of the newly created Employee Stock Ownership Plan, several strategic hires and annual merit increases and incentives for employees.

Income tax benefit was $3.0 million for the quarter ended June 30, 2018 as compared to $5.9 million of tax expense for the quarter ended June 30, 2017.

On July 1, 2018, New Jersey Governor Phil Murphy signed a number of bills that implement numerous state tax law changes. The enactment of this legislation includes significant revisions to the existing New Jersey Corporation Business tax laws. A number of the provisions directly impacts the Company. The Company is currently evaluating the impact of the revised tax laws signed into legislation on the consolidated financial statements of the Company.

Results of Operations for the Six Months Ended June 30, 2018 and June 30, 2017

For the six months ended June 30, 2018, earnings decreased $22.5 million to a loss of $3.0 million, compared to income of $19.6 million for the six months ended June 30, 2017. The decrease was primarily attributable to the previously noted one-time contribution of the Company's common stock to our charitable foundation and related tax benefit associated with the contribution and a $3.6 million increase in the provision for loan losses, partially offset by a $9.7 million increase in net interest income.

Net interest income was $80.1 million for the six month period ended June 30, 2018, an increase of $9.7 million, or 13.7% from $70.4 million for the six months ended June 30, 2017. The increase in net interest income was attributable to a $14.5 million increase in interest and dividend income which was partially offset by a $4.9 million increase in interest expense.

The increase in interest and dividend income for the six month period was primarily the result of a $293.8 million increase in average loans, a $418.7 million increase in average investment securities and a $107.5 million increase in other interest earning assets. The increase in other interest earning assets was largely due to the increase in excess cash reserves related to the subscription funds received in connection with the minority stock offering.

The yield on total average earning assets decreased two basis points due to the growth in lower yielding excess cash reserves as a percentage of the earning asset mix. The yield on average loans increased six basis points while the yield on investment securities increased 13 basis points for the six months ended June 30, 2018 as compared with the same period ended June 30, 2017.

For the six months ended June 30, 2018, interest expense on deposits was $17.3 million, an increase of $4.8 million or 38.9% from $12.5 million for the six months ended June 30, 2017, driven by a $530.7 million increase in the average balance of total interest bearing deposits coupled with a 14 basis point increase in the cost of deposits. Total borrowings increased by $62.0 million in average balances while the average cost of borrowings declined by 19 basis points. The reduced cost of average borrowings resulted from the maturity of higher rate borrowings. Interest expense related to the junior subordinated debt increased as the Company completed all steps required to redeem its outstanding trust preferred securities during the third quarter of 2018 and, therefore, accelerated the amortization of deferred issuance costs.

The Company's net interest margin for the six month period ended June 30, 2018 decreased seven basis points to 2.78% compared with 2.85% for the six months ended June 30, 2017. The weighted average yield on interest-earning assets decreased two basis points to 3.71% for the six months ended June 30, 2018 compared with 3.73% for the six months ended June 30, 2017. The cost of average total interest bearing liabilities increased eight basis points to 1.15% for the six months ended June 30, 2018 compared with 1.07% for the six months ended June 30, 2017.

For the six months ended June 30, 2018 the provision for loan losses was $4.4 million, an increase of $3.6 million from $751 thousand for the six months ended June 30, 2017. The increase was primarily driven by loan growth during the period and changes in certain credit metrics.

Non-interest income was $9.9 million for the six month period ended June 30, 2018, a decrease of $615 thousand, or 5.8%, from $10.5 million for the six months ended June 30, 2017. Income from bank-owned life insurance decreased approximately $201 thousand as a result of higher gains associated with life insurance proceeds recognized during the six months ended June 30, 2017.

For the six months ended June 30, 2018 non-interest expense was $87.7 million, an increase of $38.0 million, or 76.5%, from $49.7 million for the six months ended June 30, 2017. The increase was driven primarily by the above noted $34.8 million contribution of common stock of Columbia Financial, Inc. to the Columbia Bank Foundation. In addition, compensation and employee benefit expenses increased $2.0 million as a result of newly created Employee Stock Ownership Plan, several strategic hires and annual merit increases and incentives for employees.

Income tax expense was $844 thousand for the six months ended June 30, 2018 as compared to $10.9 million of tax expense for the same period ended June 30, 2017.

Critical Accounting Policies

The Company considers certain accounting policies to be critically important to the fair presentation of its consolidated balance sheets and statements of income. These policies require management to make judgments on matters which by their nature have elements of uncertainty. The sensitivity of the Company’s consolidated financial statements to these critical accounting policies, and the assumptions and estimates applied, could have a significant impact on its consolidated balance sheets and statements of income. Assumptions, estimates and judgments made by management can be influenced by a number of factors, including the general economic environment. The Company has identified the following as critical accounting policies:

▪Adequacy of the allowance for loan losses

▪Valuation of securities and impairment analysis

▪Valuation of post-retirement benefits

▪Valuation of deferred tax assets

The calculation of the allowance for loan losses is a critical accounting policy of the Company. The allowance for loan losses is a valuation account that reflects management’s evaluation of the probable losses in the loan portfolio. Determining the amount of the allowance for loan losses involves a high degree of judgment. Estimates required to establish the allowance include: the overall economic environment, value of collateral, strength of guarantors, loss exposure in the event of default, the amount and timing of future cash flows on impaired loans, and determination of loss factors applied to the portfolio segments. These estimates are susceptible to significant change. Management regularly reviews loss experience within the portfolio, monitors current economic conditions and other factors related to the collectability of the loan portfolio. The Company maintains the allowance for loan losses through provisions for loan losses which are charged to income. Charge-offs against the allowance for loan losses are taken on loans where management determines that the collection of loan principal is unlikely. Recoveries made on loans that have been charged-off are credited to the allowance for loan losses.

As part of the evaluation of the adequacy of the allowance for loan losses, each quarter management prepares an analysis that categorizes the entire loan portfolio by certain risk characteristics such as loan type (residential mortgage, commercial mortgage, construction, commercial, etc.) and loan risk rating.

When assigning a risk rating to a loan, management utilizes an eight-point internal risk rating system. Loans deemed to be “acceptable quality” are rated 1 through 4, with a rating of 1 established for loans with minimal risk. Loans 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 internal loan review department. The Company requires an annual review be performed above certain dollar thresholds, depending on loan type, to help determine the appropriate risk rating.

Management estimates the amount of loan losses for groups of loans by applying quantitative loss factors to the loan segments at the risk rating level and applying qualitative adjustments to each loan segment at the risk rating level. Quantitative loss factors give consideration to historical loss experience and migration experience by loan type based upon an appropriate look-back period, adjusted for a loss emergence period. Quantitative loss factors are evaluated periodically. Qualitative adjustments give consideration to other qualitative or environmental factors such as trends and levels of delinquencies, impaired loans, charge-offs, recoveries and loan volumes, as well as national and local economic trends and conditions. Qualitative adjustments reflect risks in the loan portfolio not captured by the quantitative loss factors and, as such, are evaluated from a risk level perspective relative to the risk levels present over the look-back period. The reserves resulting from the application of both the quantitative experience and qualitative factors are combined to arrive at the allowance for loan losses.

Management believes the primary risks inherent in the portfolio are a general decline in the economy, a decline in real estate market values, rising unemployment, elevated unemployment, increasing vacancy rates, and increases in interest rates in the absence of economic improvement. Any one or a combination of these events may adversely affect a borrowers’ ability to repay their loan, resulting in increased delinquencies and loan losses. Accordingly, the Company has recorded loan losses at a level which is estimated to represent the current risk in its loan portfolio. Management considers it important to maintain the ratio of the allowance for loan losses to total loans at an acceptable level considering the current composition of the loan portfolio.

Although management believes that the Company has established and maintained the allowance for loan losses at appropriate levels, additional reserves may be necessary if future economic and other conditions differ substantially from the current operating environment. 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. In addition, regulatory agencies periodically review the adequacy of the Company’s allowance for loan losses as an integral part of their examination process. Such agencies may require the Company to recognize additions to the allowance or additional write-downs based on their judgments about information available to them at the time of their examination. Although management uses the best information available, the level of the allowance for loan losses remains an estimate that is subject to significant judgment.

The Company’s available-for-sale securities portfolio is carried at fair value, with unrealized gains or losses, net of taxes, reported in accumulated other comprehensive income or loss. Fair values are based on third party market quotations. Securities which the Company has the intent and ability to hold to maturity are classified as held-to-maturity and carried at amortized cost. Management conducts a periodic review and evaluation of the securities portfolio to determine if any declines in the fair values of securities are other-than-temporary. In this evaluation, if such a decline 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 accumulated other comprehensive income (loss). 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 decline, the fair value of fixed-rate securities increases. The Company determines if it has the intent to sell these securities or if it is more likely than not that the Company would be required to sell the securities before the anticipated recovery. If either exists, the entire decline in value is considered other-than-temporary and would be recognized as an expense in the current period.

The Company provides certain health care and life insurance benefits to eligible retired employees. The cost of retiree health care and other benefits during the employees' period of active service are accrued monthly. The accounting guidance requires the following: a) recognizing in the statement of financial position the over funded or underfunded status of a defined benefit post-retirement plan measured as the difference between the fair value of plan assets and the benefit obligations; b) measuring a plan's assets and its obligations that determine its funded status as of the end of the Company's fiscal year (with limited exceptions); and c) recognizing as a component of other comprehensive income (loss), net of tax, the actuarial gain and losses and the prior service costs and credits that arise during the period.

The determination of whether deferred tax assets will be realizable is predicated on the reversal of existing deferred tax liabilities, utilization against carry-back years and estimates of future taxable income. Such estimates are subject to management’s judgment. A valuation allowance is established when management is unable to conclude that it is more likely than not that it will realize deferred tax assets based on the nature and timing of these items. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income tax expense in the period enacted.

Asset Quality:

The following table sets forth information regarding the Company’s non-performing assets as of June 30, 2018 and December 31, 2017:



	June 30, 2018		December 31, 2017
	(In Thousands)
Mortgage loans:
One to four family	$	2,218	$	3,360
Multifamily and commercial	118		1,329
Total mortgage loans	2,336		4,689
Commercial business loans	384		1,263
Consumer loans	1,041		573
Total non-performing loans	3,761		6,525
Foreclosed assets	660		959
Total non-performing assets	$	4,421	$	7,484

The following table sets forth information regarding the Company's 60-89 day delinquent loans as of June 30, 2018 and December 31, 2017:



	June 30, 2018		December 31, 2017
	(In Thousands)
Mortgage loans:
One to four family	$	1,923	$	1,229
Multifamily and commercial	—		380
Total mortgage loans	1,923		1,609
Commercial business loans	154		730
Consumer loans	893		26
Total 60-89 day delinquent loans	$	2,970	$	2,365

At June 30, 2018, the allowance for loan losses totaled $62.5 million, or 1.33% of total loans, compared with $58.2 million, or 1.31% of total loans at December 31, 2017. Total non-performing loans were $3.8 million, or 0.08% of total loans at June 30, 2018, compared to $6.5 million, or 0.15% of total loans at December 31, 2017.

At June 30, 2018 and December 31, 2017, the Company held $660 thousand and $959 thousand of foreclosed assets, respectively. During the six months ended June 30, 2018, there were no additions to foreclosed assets and one property sold with a carrying value of $299 thousand.

Non-performing assets totaled $4.4 million, or 0.07% of total assets at June 30, 2018 compared to $7.5 million or 0.13% of total assets at December 31, 2017.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Net Interest Income:

Qualitative Analysis. Interest rate risk is the exposure of a Company's current and future earnings and capital arising from adverse movements in interest rates. The guidelines of the Company’s interest rate risk policy seek to limit the exposure to changes in interest rates that affect the underlying economic value of assets, liabilities, earnings and capital.

The Asset/Liability Committee meets regularly to review the impact of interest rate changes on net interest income, net interest margin, net income and the economic value of equity. The Asset/Liability Committee reviews a variety of strategies that project changes in asset or liability mix and the impact of those changes on projected net interest income and net income.

The Company’s strategy for liabilities has been to maintain a stable funding base by focusing on core deposit accounts. The Company’s ability to retain maturing time deposit accounts is the result of its strategy to remain competitively priced within its marketplace. The Company’s pricing strategy may vary depending upon current funding needs and the ability of the Company to fund operations through alternative sources.

Quantitative Analysis. Current and future sensitivity to changes in interest rates are measured through the use of balance sheet and income simulation models. The analysis captures changes in net interest income using flat rates as a base and rising and declining interest rate forecasts. Changes in net interest income and net income for the forecast period, generally twelve to twenty-four months, is measured and compared to policy limits for acceptable changes. The Company periodically reviews historical deposit re-pricing activity and makes modifications to certain assumptions used in its balance sheet and income simulation models regarding the interest rate sensitivity of deposits. These modifications are made to more closely reflect the most likely results under the various interest rate change scenarios. Since it is inherently difficult to predict the sensitivity of interest bearing deposits to changes in interest rates, the changes in net interest income due to changes in interest rates cannot be precisely predicted. There are a variety of reasons that may cause actual results to vary considerably from the predictions presented below which include, but are not limited to, the timing, magnitude, and frequency of changes in interest rates, interest rate spreads, prepayments, and actions taken in response to such changes.

Assumptions used in the simulation model include but are not limited to:

•Investment pricing from third parties;

•Loan pricing indications from third parties;

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

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

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

The following table sets forth the results of the estimated impact of interest rate changes on our estimated annual net interest income as of June 30, 2018:



	June 30,
	2018
Change in Interest Rates (Basis Points)	Change in Net Interest Income
-100	(2.7	)%
Base	-
100	1.5	%
200	2.4	%

Another measure of interest rate sensitivity is to model changes in economic value of equity ("EVE") through the use of immediate and sustained interest rate shocks. The following table illustrates the result of the economic value of equity model as of June 30, 2018:



	June 30, 2018
			Estimated Increase (Decrease) in EVE					EVE as a Percentage of Economic Value of Assets
Change in Interest Rates (Basis Points)	Estimated EVE		Amount			Percent		EVE Ratio		Change in Basis Points
-100	$	1,050,370	$	36,855		3.6	%	16.64	%	9
Base	1,013,515		-			-		16.55	%	-
100	938,103		(75,412		)	(7.4	)%	15.84	%	(71	)
200	852,318		(161,197		)	(15.9	)%	14.90	%	(165	)

The preceding table indicates that as of June 30, 2018, in the event of an immediate and sustained 200 basis point increase in interest rates, the EVE is projected to decrease 15.9%, or $161.2 million. If rates were to decrease 100 basis points, the model forecasts a 3.6%, or $36.9 million increase in the EVE. Certain shortcomings are inherent in the methodologies used in the above interest rate risk measurements. Modeling changes in net interest income requires the use of certain assumptions regarding prepayment and deposit repricing, which may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. While management believes such assumptions are reasonable, there can be no assurance that assumed prepayment rates and repricing rates will approximate actual future loan prepayment and deposit repricing activity. Moreover, net interest income assumes that the composition of interest sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and also assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration to maturity or repricing of specific assets and liabilities. Accordingly, although the table provides an indication of the Company’s interest rate risk exposure at a particular point in time, such measurement is not intended to and does not provide a precise forecast of the effect of changes in market interest rates on the Company’s net interest income and will differ from actual.

Liquidity Management and Capital Resources:

Liquidity Management. Liquidity is the ability to meet current and future financial obligations of a short-term and long-term nature. Our primary source of funds consists of deposit inflows, loan repayments and maturities, sales of securities and borrowings. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows, calls of investment securities and borrowed funds and prepayments of loans are influenced by economic conditions, competition and interest rate movements.

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

Capital Resources. The Company is subject to regulatory capital requirements administered by the federal banking agencies. 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 capital conservation buffer requirement was phased in beginning January 1, 2016, at 0.625% of risk-weighted assets and increases each year until fully implemented at 2.5% on January 1, 2019.

The regulations establish 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%, a tier 1 capital to risk-weighted assets ratio of at least 8%, 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 June 30, 2018 the Company exceeded all capital adequacy requirements to which it is subject.

The following table presents the Company's actual capital amounts and ratios as of June 30, 2018 compared to the Federal Reserve Bank minimum capital adequacy requirements and the Federal Reserve Bank requirements for classification as a well - capitalized institution:



	June 30, 2018
	Actual				For capital adequacy purposes				To be well capitalized under prompt corrective action provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
	(in Thousands)
Company:
Total capital to risk-weighted assets	$	1,115,343	25.37	%	$	351,739	8.0	%	$	439,674	10.0	%
Tier 1 capital to risk-weighted assets	1,060,076		24.11		263,805		6.0		351,739		8.0
Common equity tier 1 capital to risk-weighted assets	1,008,529		22.94		197,853		4.5		285,788		6.5
Tier 1 capital to adjusted total assets	1,060,076		16.88		251,236		4.0		314,045		5.0

	December 31, 2017
	Actual				For capital adequacy purposes				To be well capitalized under prompt corrective action provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
	(in Thousands)
Company:
Total capital to risk-weighted assets	$	631,952	15.01	%	$	336,730	8.0	%	$	420,912	10.0	%
Tier 1 capital to risk-weighted assets	579,080		13.76		252,547		6.0		336,730		8.0
Common equity tier 1 capital to risk-weighted assets	528,080		12.55		189,410		4.5		273,593		6.5
Tier 1 capital to adjusted total assets	579,080		10.54		219,833		4.0		210,456		5.0

	June 30, 2018
	Actual				For capital adequacy purposes				To be well capitalized under prompt corrective action provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
	(in Thousands)
Columbia Bank:
Total capital to risk-weighted assets	$	856,664	19.53	%	$	350,891	8.0	%	$	438,613	10.0	%
Tier 1 capital to risk-weighted assets	801,528		18.27	%	263,168		6.0		350,891		8.0
Common equity tier 1 capital to risk-weighted assets	801,528		18.27	%	197,376		4.5		285,099		6.5
Tier 1 capital to adjusted total assets	801,528		12.85	%	249,495		4.0		311,869		5.0



	December 31, 2017
	Actual				For capital adequacy purposes				To be well capitalized under prompt corrective action provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
	(in Thousands)
Columbia Bank:
Total capital to risk-weighted assets	$	625,336	14.90	%	$	335,736	8.0	%	$	419,671	10.0	%
Tier 1 capital to risk-weighted assets	572,617		13.64		251,802		6.0		335,736		8.0
Common equity tier 1 capital to risk-weighted assets	572,617		13.64		188,852		4.5		272,786		6.5
Tier 1 capital to adjusted total assets	572,617		10.44		221,257		4.0		276,571		5.0

Item 4. CONTROLS AND PROCEDURES

An evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended) as of June 30, 2018. In designing and evaluating the Company’s disclosure controls and procedures, the Company and its management recognize that any controls and procedures, no matter how well-designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating and implementing possible controls and procedures. Based on that evaluation, the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

During the quarter ended June 30, 2018, there were no changes in the Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

The Company is involved in various legal actions and claims arising in the normal course of business. In the opinion of management, these legal actions and claims are not expected to have a material adverse impact on the Company’s financial condition.

Item 1A. Risk Factors

For information regarding the Company’s risk factors, refer to the “Risk Factors” in the Company’s prospectus, filed with the Securities and Exchange Commission pursuant to Rule 424(b)(3) on February 20, 2018. As of June 30, 2018 the risk factors of the Company have not changed materially from those disclosed in the prospectus.

Item 2. Unregistered Sales of Equity Securities

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

None.

Item 6. Exhibits

The exhibits listed in the Exhibit Index (following the signatures section of this report) are included in, or incorporated by reference into, this Quarterly Report on Form 10-Q.

Exhibit Index



3.1		Certificate of Incorporation of Columbia Financial, Inc.

3.2		Amended and Restated Bylaws of Columbia Financial, Inc.

4		Form of Common Stock Certificate of Columbia Financial, Inc.

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

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

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

101.		The following materials from the Company’s Quarterly Report to Stockholders on Form 10-Q for the quarter ended. June 30, 2018, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Financial Condition, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Changes in Stockholder’s Equity, (v) the Consolidated Statements of Cash Flows and (vi) the Notes to Consolidated Financial Statements.

101.		INS XBRL Instance Document

101.		SCH XBRL Taxonomy Extension Schema Document

101.		CAL XBRL Taxonomy Extension Calculation Linkbase Document

101.		DEF XBRL Taxonomy Extension Definition Linkbase Document

101.		LAB XBRL Taxonomy Extension Labels Linkbase Document

101.		PRE XBRL Taxonomy Extension Presentation Linkbase Document

SIGNATURES



		Columbia Financial, Inc

Date:	August 14, 2018	/s/Thomas J. Kemly
		Thomas J. Kemly
		President and Chief Executive Officer
		(Principal Executive Officer)

Date:	August 14, 2018	/s/Dennis E. Gibney
		Dennis E. Gibney
		Executive Vice President and Chief Financial Officer
		(Principal Financial and Accounting Officer)

Columbia Financial - 10-Q quarterly report FY2018 Q2

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