10-QT 1 a10-qtransitional.htm 10-Q TRANSITION Document
 


UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-QT

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

For the quarterly period ended December 31, 2017

or
ý
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 o 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.
ý Yes ¨ No

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
¨ Yes ý No

Ten shares of the Registrant's common stock, par value of $0.01 per share, were issued and outstanding as of December 31, 2017.
 



COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Index to Form 10-QT
Item Number
Page Number
 
 
 
PART I.
Financial Information
 
 
 
 
Item 1.
Financial Statements
 
 
Consolidated Balance Sheets as of December 31, 2017 (unaudited) and September 30, 2017
 
Consolidated Statements of Income for the three months ended December 31, 2017 and 2016 (unaudited)
 
Consolidated Statements of Comprehensive Income (Loss) for the three months ended December 31, 2017 and 2016 (unaudited)
 
Consolidated Statements of Changes in Stockholder's Equity for the three months ended December 31, 2017 and 2016 (unaudited)
 
Consolidated Statements of Cash Flows for the three months ended December 31, 2017 and December 31, 2016 (unaudited)
 
 
 
 
Item 2.
Item 3.
Item 4.
 
 
 
PART II.
 
 
 
 
 
 
 
 
     Item 6. Exhibit
 
 
 
 
 
 
 
 




COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Consolidated Balance Sheets


(Unaudited)

(Audited)

December 31,

September 30,

2017

2017

(In thousands)
Assets



Cash and cash equivalents
$
65,334


$
100,914

Short-term investments
164


61

Total cash and cash equivalents
65,498


100,975





Securities available-for-sale, at fair value
710,570


557,176

Securities held-to-maturity, at amortized cost (fair value of $236,125 and $131,822 at December 31, 2017 and September 30, 2017, respectively)
239,618


132,939

Federal Home Loan Bank stock
44,664


35,844

Loans receivable, net
4,400,470


4,307,623

Accrued interest receivable
15,915


14,687

Real estate owned
959


393

Office properties and equipment, net
42,620


40,835

Bank-owned life insurance
150,521


149,432

Goodwill and intangible assets
5,997


6,019

Other assets
89,668


83,405

Total assets
$
5,766,500


$
5,429,328





Liabilities and Stockholder's Equity



Liabilities:



Deposits
$
4,263,315


$
4,123,428

Borrowings
929,057


733,043

Advance payments by borrowers for taxes and insurance
25,563


27,118

Accrued expenses and other liabilities
76,495


69,825

Total liabilities
5,294,430


4,953,414





Stockholder's equity:



Retained earnings
537,480


522,094

Accumulated other comprehensive loss, net of tax
(65,410
)

(46,180
)
Total stockholder's equity
472,070


475,914

Total liabilities and stockholder's equity
$
5,766,500


$
5,429,328





See accompanying notes to unaudited consolidated financial statements.



2



COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Consolidated Statements of Income (Unaudited)

 
Three Months Ended
December 31,
 
2017
 
2016
 
(In thousands)
 
 
 
 
Interest and dividend income:



Loans receivable
$
43,043


$
39,374

Securities available-for-sale
5,074


4,307

Securities held-to-maturity
381



Federal funds and interest earning deposits
103


34

Federal Home Loan Bank stock dividends
567


413

Total interest and dividend income
49,168


44,128

Interest expense:



Deposits
7,632


6,216

Borrowings
4,609


4,508

Total interest expense
12,241


10,724





Net interest income
36,927


33,404





Provision for loan losses
3,400







Net interest income after provision for loan losses
33,527


33,404





Non-interest income:



Demand deposit account fees
960


851

Bank-owned life insurance
1,089


1,087

Title insurance fees
1,018


1,337

Loan fees and service charges
542


452

(Loss) gain on securities transactions, net
(60
)

411

Gain on sale of loans receivable, net


409

Other non-interest income
1,125


960

Total non-interest income
4,674


5,507





Non-interest expense:



Compensation and employee benefits expense
15,621


15,010

Occupancy expense
3,386


3,222

Federal insurance premiums expense
414


412

Advertising expense
1,408


711

Professional fees expense
398


219

Data processing expense
595


531

Charitable contributions
60


120

Other non-interest expense
3,659


3,827

Total non-interest expense
25,541


24,052





Income before income tax expense
12,660


14,859





Income tax expense
8,982


4,866





Net income
$
3,678


$
9,993





See accompanying notes to unaudited consolidated financial statements.

3



COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income (Loss) (Unaudited)


Three Months Ended
December 31,

2017

2016

(In thousands)




Net income
$
3,678


$
9,993





Other comprehensive (loss) income, net of tax:



Unrealized loss on securities available-for-sale
(3,039
)

(15,207
)
Accretion of unrealized loss on securities reclassified as held-to-maturity
(58
)


Reclassification adjustment for (loss) gain included in net income
(47
)

264


(3,144
)

(14,943
)




Derivatives, net of tax



      Unrealized gain on swap contracts
164




164







Employee benefit plans, net of tax:



Amortization of prior service cost included in net income
(43
)

(18
)
Reclassification adjustment of actuarial net loss included in net income
(103
)

5

Change in funded status of retirement obligations
(16,104
)

152


(16,250
)

139





Total other comprehensive loss
(19,230
)

(14,804
)




Total comprehensive loss, net of tax
$
(15,552
)

$
(4,811
)




See accompanying notes to unaudited consolidated financial statements.


4



COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholder's Equity (Unaudited)


Retained Earnings

Accumulated other comprehensive loss, net of tax

Total stockholder's equity

(In thousands)






Balance at September 30, 2016
$
491,022


$
(51,358
)

$
439,664

Net income
9,993




9,993

Other comprehensive loss


(14,804
)

(14,804
)
Balance at December 31, 2016
501,015


(66,162
)

434,853







Balance at September 30, 2017
522,094


(46,180
)

475,914

Net income
3,678




3,678

Other comprehensive loss


(7,522
)

(7,522
)
Reclassification of tax effects resulting from the adoption of ASU No. 2018-02
$
11,708


$
(11,708
)

$

Balance at December 31, 2017
$
537,480


$
(65,410
)

$
472,070







See accompanying notes to unaudited consolidated financial statements.


5



COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)

Three Months Ended
December 31,

2017

2016

(In thousands)




Cash flows from operating activities:



Net income
$
3,678


$
9,993

Adjustments to reconcile net income to net cash provided by operating activities:



Amortization of deferred loan origination fees
439


168

Net amortization of premiums and discounts on securities
328


412

Net amortization on mortgage servicing rights
22


29

Amortization of debt issuance costs
14


13

Depreciation and amortization of office properties and equipment
863


862

Provision for loan losses
3,400



Loss (gain) on securities transactions, net
60


(411
)
Gain on sale of loans receivable, net


(409
)
Loss on real estate owned, net


12

Deferred tax expense
3,363


13,608

Increase in accrued interest receivable
(1,228
)

(902
)
Increase in cash surrender value of bank-owned life insurance
(1,089
)

(1,087
)
Increase in other assets
(11,429
)

(13,251
)
Increase in accrued expenses and other liabilities
3,905


839

Net cash provided by operating activities
2,326


9,876





Cash flows from investing activities:



Proceeds from sales of securities available-for-sale
92


58,047

Proceeds from principal pay downs / maturities on securities available-for-sale
7,009


17,228

Proceeds from principal pay downs / maturities on securities held-to-maturity
1,845



Purchases of securities available-for-sale
(163,721
)

(13,282
)
Purchases of securities held-to-maturity
(108,640
)


Proceeds from sales of loans receivable


27,333

Purchases of loans receivables
(56,095
)

(9,414
)
Loan originations, net of principal payments
(41,157
)

(177,257
)
Proceeds of Federal Home Loan Bank Stock
6,476


7,758

Purchases of Federal Home Loan Bank Stock
(15,296
)

(10,089
)
Additions to office properties and equipment
(2,648
)

(918
)
Proceeds from sales of real estate owned


337

Net cash used in investing activities
(372,135
)

(100,257
)




Cash flows from financing activities:



Net increase in deposits
139,887


48,683

Payments for maturities, calls, and payoffs on long-term borrowings
(90,000
)

(40,000
)
Increase in short-term borrowings
286,000


81,800

Decrease in advance payments by borrowers for taxes and insurance
(1,555
)

(5,235
)
Net cash provided by financing activities
334,332


85,248





Net decrease in cash and cash equivalents
(35,477
)

(5,133
)




Cash and cash equivalents at beginning of year
100,975


45,694

Cash and cash equivalents at end of year
$
65,498


$
40,561

 
 
 
 



6



COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)


Three Months Ended
December 31,

2017

2016

(In thousands)




Cash paid during the period for:



Interest
$
11,484


$
9,952

Income tax payments, net
$
1,393


$
6,297





Noncash investing and financing activities:



Transfer of loans receivable to real estate owned
$
566


$
23





See accompanying notes to unaudited consolidated financial statements.


7

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. Certain reclassifications have been made in the consolidated financial statements to conform with current year classification and presentation.

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. The accompanying unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the years ended September 30, 2017 and 2016 and notes thereto, which are included in the Company’s prospectus dated February 8, 2018.

2.
Plan of Stock Issuance

    On September 27, 2017, the Board of Directors of the Company adopted a plan of stock issuance (the “Plan”), as amended on January 25, 2018 pursuant to which the Company will sell shares of common stock, representing a minority ownership (approximately 43.0% of outstanding shares of common stock) interest in the Company. Shares will be offered to eligible depositors and borrowers and the tax qualified employee benefit plans of the Company in a subscription offering and, if necessary, to the general public in a community and/or syndicated community offering or firm commitment pubic offering. Columbia Bank, MHC, Columbia Financial Inc.'s holding company, will own 54.0% of the outstanding common stock following the offering. In connection with the Plan, subject to the approval of the MHC's members, the Company plans to contribute 3.0% of its then outstanding shares of common stock following the offering to the Columbia Bank Foundation.
    
Subsequent to the completion of the offering, the Board of Directors of the Company will have the authority to declare dividends on shares of common stock, subject to statutory and regulatory requirements and other considerations.
    
The direct costs of the Company’s stock offering will be deferred and deducted from the proceeds of the offering. At December 31, 2017, total deferred costs were $1.1 million. In the event that the offering is not completed, any deferred costs will be charged to operations.






8

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements


3.
Recent Accounting Pronouncements

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 further discussed in Note 11. The purpose of the guidance is to improve the usefulness of the information reported to 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 has completed the analysis of remeasuring our gross deferred tax assets and liabilities utilizing the 21% corporate tax rate. 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.
    
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. As of December 31, 2017, there are no significant differences in the guidance comparability of the financial statements as a result of this extended transition period.

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

9

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

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.

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 the impact of the new guidance on the Company's consolidated financial statements.

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 the Company's consolidated financial statements.

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 and does not anticipate the new guidance to have a material impact.


10

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to 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 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.

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. The amendments require the premium to be amortized to the earliest call date. The Company adopted ASU No. 2017-08 for the period ended December 31, 2017 and the impact was immaterial to the Company's financial statements.

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 December 31, 2017 and September 30, 2017:
 
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


11

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

    
 
September 30, 2017
 
Amortized cost

Gross unrealized gains

Gross unrealized (losses)

Fair value
 
 
 
(In thousands)
 
 
 
 
 
 
 
 
 
 
U.S. government and agency obligations
$
24,954


35


(116
)

$
24,873

Mortgage-backed securities and collateralized mortgage obligations
479,927


652


(7,088
)

473,491

Municipal obligations
1,357






1,357

Corporate debt securities
49,489


536


(532
)

49,493

Trust preferred securities
5,000




(292
)

4,708

Equity securities
2,482


826


(54
)

3,254

 
$
563,209


2,049


(8,082
)

$
557,176


The table below presents the amortized cost and fair value of debt securities available-for-sale at December 31, 2017 by contractual maturity. Expected maturities may differ from contractual maturities due to prepayment or early call privileges of the issuer.
    

December 31, 2017

Amortized cost

Fair value

(In thousands)
 
 
 
 
One year or less
$
1,957


$
1,957

More than one year to five years
34,954


34,934

More than five years to ten years
54,444


54,600

More than ten years
10,000


9,280


$
101,355


$
100,771

Mortgage-backed securities and collateralized mortgage obligations
615,924


606,612


$
717,279


$
707,383

    
Mortgage-backed securities and collateralized mortgage obligations totaling $615.9 million at amortized cost and $606.6 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.

For the three months ended December 31, 2017, proceeds from sales of securities available-for-sale totaled $92 thousand, resulting in zero gains and $60 thousand of gross losses. For the three months ended December 31, 2016, proceeds from the sales of securities available-for-sale totaled $58.0 million, resulting in gross gains of $500 thousand and gross losses of $89 thousand.

Securities available-for-sale with a fair value of $282.6 million and $302.9 million at December 31, 2017 and September 30, 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 December 31, 2017 and September 30, 2017 and if the unrealized loss position was continuous for the twelve months prior to December 31, 2017 and September 30, 2017:

12

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
)

 
 
 
 
 
 
 
 
 
 
 

September 30, 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
$
14,831


(116
)





14,831


$
(116
)
Mortgage-backed securities and collateralized mortgage obligations
329,554


(5,346
)

49,695


(1,742
)

379,249


(7,088
)
Corporate debt securities
9,824


(176
)

9,644


(356
)

19,468


(532
)
Trust preferred securities




4,708


(292
)

4,708


(292
)
Equity securities
98


(54
)





98


(54
)

$
354,307


(5,692
)

64,047


(2,390
)

418,354


$
(8,082
)

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 and changes in credit spreads. The Company does not have the intent to sell securities in a temporary loss position at December 31, 2017, nor is it more likely than not that the Company will be required to sell the securities before their prices recover.

The Company did not record an other-than-temporary impairment charge on securities in the available-for-sale portfolio for the three months ended December 31, 2017 and December 31, 2016.

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 December 31, 2017 and September 30, 2017:









13

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements


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










September 30, 2017

Amortized cost

Gross unrealized gains

Gross unrealized (losses)

Fair value

(In thousands)








U.S. government and agency obligations
$
3,407




(7
)

$
3,400

Mortgage-backed securities and collateralized mortgage obligations
129,532




(1,110
)

128,422


$
132,939




(1,117
)

$
131,822


The table below presents the amortized cost and fair value of debt securities held-to-maturity at December 31, 2017 by contractual maturity. Expected maturities may differ from contractual maturities due to prepayment or early call privileges of the issuer.

December 31, 2017

Amortized cost

Fair value

(In Thousands)
 
 
 
 
More than five years to ten years
$
8,402


$
8,344


8,402


8,344

Mortgage-backed securities and collateralized mortgage obligations
231,216


227,781


$
239,618


$
236,125


Mortgage-backed securities and collateralized mortgage obligations totaling $231.2 million at amortized cost and $227.8 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.

There were no sales of securities from the held-to-maturity investment portfolio for the three months ended December 31, 2017 and December 31, 2016.

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


14

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
)

 
 
 
 
 
 
 
 
 
 
 

September 30, 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
$




3,400


(7
)

3,400


$
(7
)
Mortgage-backed securities and collateralized mortgage obligations
29,965


(349
)

96,076


(761
)

126,041


(1,110
)

$
29,965


(349
)

99,476


(768
)

129,441


$
(1,117
)


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 and changes in credit spreads. The Company does not have the intent to sell securities in a temporary loss position at December 31, 2017, nor is it more likely than not that the Company will be required to sell the securities before their prices recover.

The Company did not record an other-than-temporary impairment charge on securities in the held-to-maturity portfolio for the three months ended December 31, 2017 and December 31, 2016.

5.
Loans Receivable and Allowance for Loan Losses

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


15

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

 
December 31,
 
September 30,
 
2017
 
2017
 
(In thousands)
Real estate loans:
 
 
 
One to four family
$
1,616,259


$
1,578,835

Multifamily and commercial
1,871,210


1,821,982

Construction
233,652


218,408

Commercial business loans
277,970


267,664

Consumer loans:



Home equity loans and advances
448,020


464,962

Other consumer loans
998


1,270

Total loans
4,448,109


4,353,121

Net deferred loan costs
10,539


9,135

Allowance for loan losses
(58,178
)

(54,633
)
Loans receivable, net
$
4,400,470


$
4,307,623


The Company had no loans held for sale at December 31, 2017 and September 30, 2017. The Company purchased commercial real estate and multifamily loans with a carrying value of $49.8 million and residential loans with a carrying value of $6.2 million from third parties during the three months ended December 31, 2017. The Company purchased $9.4 million of residential loans from third parties for the three months ended December 31, 2016.

At December 31, 2017 and September 30, 2017, the carrying value of real estate loans serviced by the Company for investors was $478.8 million and $493.2 million, respectively.
    
The following tables summarize the aging of loans receivable by portfolio segment at December 31, 2017 and September 30, 2017:
 
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



16

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

 
September 30, 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
$
3,924


932


3,496


8,352


1,570,483


$
1,578,835

Multifamily and commercial


123


1,510


1,633


1,820,349


1,821,982

Construction








218,408


218,408

Commercial business loans


388


1,038


1,426


266,238


267,664

Consumer loans:











Home equity loans advances
1,437


187


351


1,975


462,987


464,962

Other consumer loans
1






1


1,269


1,270

Total loans
$
5,362


1,630


6,395


13,387


4,339,734


$
4,353,121


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 December 31, 2017 and September 30, 2017, there were no loans past due 90 days or more and still accruing interest.
 
The following table summarizes loans receivable and allowance for loan losses by portfolio segment and impairment method:
 
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


4,561


8


178


57,632

Total
$
19,991


19,933


5,217


8,275


4,576


8


178


$
58,178

Total loans:















Ending balance:















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



17

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

 
September 30, 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
407


35




84


14






540

Collectively evaluated for impairment
18,126


17,994


5,299


8,396


4,176


8


94


54,093

Total
18,533


18,029


5,299


8,480


4,190


8


94


54,633

Total loans:















Ending balance:















Individually evaluated for impairment
$
12,247


6,343




4,327


2,998






$
25,915

Collectively evaluated for impairment
1,566,588


1,815,639


218,408


263,337


461,964


1,270




4,327,206

Total
$
1,578,835


1,821,982


218,408


267,664


464,962


1,270




$
4,353,121


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 months ended December 31, 2017 and December 31, 2016, along with their balances immediately prior to the modification date and post-modification as of December 31, 2017 and December 31, 2016.
 
December 31, 2017
 
December 31, 2016
 
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


$


$

 
2


$
257


$
257

Consumer loans:





 





Home equity loans and advances





 
1


108


108

Total loans


$


$

 
3


$
365


$
365


The activity in the allowance for loan losses by portfolio segment at December 31, 2017 and 2016 was as follows:

18

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements


One to four family

Multifamily and commercial

Construction

Commercial Business

Home equity loans and advances

Other consumer

Unallocated

Total
 
(In Thousands)
2017















Balance at beginning of period
$
18,533


$
18,029


5,299


8,480


4,190


8


94


$
54,633

Provision charged (credited)
1,473


1,906


(82
)

(373
)

389


3


84


3,400

Recoveries
9






171


6


2




188

Charge-offs
(24
)

(2
)



(3
)

(9
)

(5
)



(43
)
Balance at end of period
$
19,991


19,933


5,217


8,275


4,576


8


178


$
58,178


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2016















Balance at beginning of period
$
18,638


17,390


5,960


5,721


4,052


11


95


$
51,867

Provision charged (credited)
(27
)

226


(1,362
)

641


177


4


341



Recoveries
3






19


6






28

Charge-offs
(15
)

$




(23
)

(4
)

(4
)



(46
)
Balance at end of period
$
18,599


17,616


4,598


6,358


4,231


11


436


$
51,849


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

19

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


$
7,580


8,167


$
546

Total:





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




20

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements


September 30, 2017

Recorded investment

Unpaid principal balance

Specific allowance

(In thousands)
With no allowance recorded:





Real estate loans:





One to four family
$
9,272


10,156


$

Multifamily and commercial
4,701


5,577



Commercial business loans
1,545


2,038



Consumer loans:





Home equity loans and advances
2,745


3,214




$
18,263


20,985


$

With a specific allowance recorded:





Real estate loans:





One to four family
$
2,975


2,989


$
407

Multifamily and commercial
1,642


2,215


35

Commercial business loans
2,782


2,782


84

Consumer loans:





Home equity loans and advances






253


253


14

Total:
$
7,652


8,239


$
540

Real estate loans:





One to four family
$
12,247


13,145


$
407

Multifamily and commercial
6,343


7,792


35

Commercial business loans
4,327


4,820


84

Consumer loans:





Home equity loans and advances
2,998


3,467


14

Total loans
$
25,915


29,224


$
540


Specific allocations of the allowance for loan losses attributable to impaired loans totaled $546 thousand and $540 thousand at December 31, 2017 and September 30, 2017, respectively. At December 31, 2017 and September 30, 2017, impaired loans for which there was no related allowance for loan losses totaled $14.6 million and $18.3 million, respectively.

The following table presents interest income recognized for loans individually evaluated for impairment by loan segment for the three months ended December 31, 2017 and 2016:

December 31, 2017

December 31, 2016

Average recorded Investment

Interest Income Recognized

Average recorded Investment

Interest Income Recognized

(In thousands)

(In thousands)
Real estate loans:










One to four family
$
14,015


$
110


$
16,419


$
118

Multifamily and commercial
4,087


39


4,879


70

Commercial business loans
3,870


46


3,861


49

Consumer loans:











Home equity loans and advances
3,618


35


3,952


34

Total loans
$
25,590


$
230


$
29,111


$
271


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, with a rating of 1 established for

21

COLUMBIA FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

loans with minimal risk. Loans that are deemed to be of “questionable quality” are rated 5 (Watch) or 6 (Special Mention). Loans with adverse classifications are rated 7 (Doubtful) or 8 (Loss), respectively. 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.

The following table presents loans receivable by credit quality risk indicator and by loan segment:
 
December 31, 2017
 
Real Estate
 
 
 
 
 
 
 
One to four family
 
Multifamily and commercial
 
Construction
 
Home equity loans and advances
 
Commercial business
 
Other consumer
 
Total
 
(In thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pass
$
1,606,672


1,851,772


233,652


446,364


268,355


998


$
4,407,813

Special mention


4,782






3,678




8,460

Substandard
9,587


14,656




1,656


5,937




31,836

Doubtful













Total
$
1,616,259


1,871,210


233,652


448,020


277,970


998


$
4,448,109


 
September 30, 2017
 
Real Estate
 
 
 
 
 
 
 
One to four family

Multifamily and commercial

Construction

Home equity loans and advances

Commercial business

Other consumer