Overview of Financial Performance

Columbia Financial, Inc. and its subsidiaries (the “Company”) reported a strong financial performance for the quarter ended March 31, 2025. The Company recorded net income of $8.9 million, a significant improvement from the net loss of $1.2 million reported in the same period a year earlier.

The key drivers behind the improved financial results were:

• An $8.1 million increase in net interest income, driven by higher yields on loans and securities as well as lower funding costs.
• A $2.3 million decrease in the provision for credit losses, reflecting improved asset quality.
• A $1.8 million decrease in non-interest expenses, primarily due to lower professional fees and deposit insurance premiums.

These positive factors were partially offset by a $3.2 million increase in income tax expense, reflecting the higher pre-tax income.

Revenue and Profit Trends

Net interest income, which is the difference between interest earned on loans and investments and interest paid on deposits and borrowings, was the primary contributor to the Company’s profitability. Net interest income increased by 19.3% to $50.3 million for the quarter ended March 31, 2025, compared to $42.2 million in the same period a year earlier.

The improvement in net interest income was driven by:

• A 10 basis point increase in the average yield on loans to 4.89%.
• An 80 basis point increase in the average yield on securities to 3.45%, as the Company replaced lower-yielding securities with higher-yielding ones.
• A 54 basis point decrease in the average cost of borrowings to 3.21%.

These factors more than offset a 1 basis point decrease in the average cost of interest-bearing deposits to 2.40%.

The Company’s net interest margin, which measures the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities, increased by 36 basis points to 2.11% for the quarter ended March 31, 2025, compared to 1.75% in the same period a year earlier.

Non-interest income, which includes fees and other revenue sources, increased by 13.7% to $8.5 million for the quarter ended March 31, 2025, primarily due to higher fees related to commercial account treasury services and the absence of a loss on securities transactions recorded in the prior-year period.

Non-interest expense, which includes operating costs such as salaries, occupancy, and other expenses, decreased by 4.0% to $43.8 million for the quarter ended March 31, 2025, mainly due to lower professional fees and deposit insurance premiums.

Strengths and Weaknesses

Strengths:

• Strong net interest income growth, driven by improved asset yields and lower funding costs.
• Reduced provision for credit losses, reflecting improved asset quality.
• Disciplined expense management, leading to a decrease in non-interest expenses.
• Diversified loan portfolio, with a focus on multifamily and commercial real estate lending.
• Ample liquidity, with access to $2.8 billion in immediate funding sources and an additional $2.2 billion in unpledged loan collateral.

Weaknesses:

• Increase in non-performing loans, primarily due to a $5.9 million non-performing construction loan.
• Concentration in multifamily and commercial real estate lending, which could expose the Company to risks in these sectors.
• Potential sensitivity to changes in interest rates, as evidenced by the quantitative analysis provided in the report.

Outlook and Future Considerations

The Company’s financial performance for the quarter ended March 31, 2025 demonstrates its ability to navigate the current economic environment and generate solid profitability. The key factors that will likely influence the Company’s future performance include:

1. Interest rate environment: The Company’s net interest income and margin are sensitive to changes in interest rates. While the Company has implemented strategies to manage its interest rate risk, it will need to continue monitoring and adjusting its asset-liability management to mitigate the impact of potential interest rate fluctuations.

2. Asset quality: The increase in non-performing loans, particularly the $5.9 million construction loan, is a concern that the Company will need to closely monitor. Maintaining strong credit underwriting and proactive loan management will be crucial to preserving asset quality.

3. Loan portfolio composition: The Company’s focus on multifamily and commercial real estate lending exposes it to risks in these sectors. The Company should continue to diversify its loan portfolio to mitigate concentration risks.

4. Expense management: The Company’s ability to control non-interest expenses will be important in maintaining its profitability, especially in a challenging economic environment.

5. Regulatory and compliance environment: The financial services industry is subject to a complex and evolving regulatory landscape. The Company will need to remain vigilant in its compliance efforts to avoid any potential issues.

Overall, the Company’s strong financial performance for the quarter ended March 31, 2025 demonstrates its ability to generate solid profitability. However, the Company will need to continue to navigate the challenges posed by the interest rate environment, asset quality, loan portfolio composition, expense management, and the regulatory landscape to ensure its long-term success.