Exhibit 99.1

PRO FORMA VALUATION REPORT

MUTUAL HOLDING COMPANY

STOCK OFFERNG

Columbia Financial, Inc. │Fair Lawn, New Jersey

HOLDING COMPANY FOR:

Columbia Bank │ Fair Lawn, New Jersey

Dated as of November 8, 2017

1100 North Glebe Road Suite 600

Arlington, Virginia 22201

703.528.1700

rpfinancial.com  

November 8, 2017

Board of Directors

Columbia Bank MHC

Columbia Financial, Inc.
Columbia Bank

19-01 Route 208 North

Fair Lawn, New Jersey 07410

Members of the Board of Directors:

At your request, we have completed and hereby provide an independent appraisal ("Appraisal") of the estimated pro forma market value of the common stock which is to be issued in connection with the stock issuance transaction described below.

This Appraisal is furnished pursuant to the requirements stipulated in the Code of Federal Regulations and has been prepared in accordance with the “Guidelines for Appraisal Reports for the Valuation of Savings and Loan Associations Converting from Mutual to Stock Form of Organization” (the “Valuation Guidelines”) of the Office of Thrift Supervision (“OTS”) and accepted by the Federal Reserve Board (“FRB”), the Office of the Comptroller of the Currency (“OCC”) and the Federal Deposit Insurance Corporation (“FDIC”), and applicable regulatory interpretations thereof.

Description of Plan of Stock Issuance

On September 27, 2017, the Board of Directors of Columbia Bank MHC (the “MHC”), Columbia Financial, Inc. (“Columbia Financial” or the “Company”) and Columbia Bank adopted the plan of stock issuance (the “Plan”). Pursuant to the Plan, Columbia Financial will issue a majority of its common stock to the MHC and sell a minority of its common stock to the public. Concurrent with the completion of the public stock offering, Columbia Bank will receive at least 50% of the net stock proceeds and the balance will be retained by Columbia Financial. The MHC will own a controlling interest in the Company of at least 51% and the Company will be the sole subsidiary of the MHC.

Columbia Financial will offer its common stock in a subscription offering to Eligible Account Holders, Tax-Qualified Employee Benefit Plans including Columbia Bank’s employee stock ownership plan (the “ESOP”), Supplemental Eligible Account Holders and Other Depositors and Eligible Borrowers as such terms are defined for purposes of applicable regulatory guidelines governing stock offerings by mutual institutions. To the extent that shares remain available for purchase after satisfaction of all subscriptions received in the subscription offering, the shares may be offered for sale to members of the general public in a community offering and a syndicated or firm commitment offering. At least 50% of the net proceeds from the stock offering will be invested in Columbia Bank and the balance of the net proceeds will be retained by the Company.

Board of Directors
November 8, 2017
Page 2

At this time, no other activities are contemplated for the Company other than the ownership of Columbia Bank, a loan to the newly-formed ESOP and reinvestment of the proceeds that are retained by the Company. In the future, Columbia Financial may acquire or organize other operating subsidiaries, diversify into other banking-related activities, pay dividends or repurchase its stock, although there are no specific plans to undertake such activities at the present time.

The Plan provides for a contribution to the Columbia Bank Foundation, an existing charitable foundation previously established by Columbia Bank (the “Foundation”). The Foundation contribution will be funded with 3.0% of the number of shares of common stock issued in the stock issuance. The purpose of the Foundation is to provide financial support to charitable organizations in the communities in which Columbia Bank operates and to enable those communities to share in Columbia Bank’s long-term growth. The Foundation is dedicated completely to community activities and the promotion of charitable causes.

RP^® Financial, LC.

RP^® Financial, LC. (“RP Financial”) is a financial consulting firm serving the financial services industry nationwide that, among other things, specializes in financial valuations and analyses of business enterprises and securities, including the pro forma valuation for savings institutions converting from mutual-to-stock form. The background and experience of RP Financial is detailed in Exhibit V-1. We believe that, except for the fee we will receive for the Appraisal, we are independent of the Company, Columbia Bank, the MHC and the other parties engaged by Columbia Bank, the Company or the MHC to assist in the stock conversion process.

Valuation Methodology

In preparing our Appraisal, we have reviewed the regulatory applications of the Company, the Bank and the MHC, including the prospectus as filed with the FRB and the Securities and Exchange Commission (“SEC”). We have conducted a financial analysis of the Company, Columbia Bank and the MHC that has included a review of audited financial information for the fiscal years ended September 30, 2013 through September 30, 2017, a review of various unaudited information and internal financial reports through September 30, 2017, and due diligence related discussions with the Company’s management; KPMG LLP, the Company’s independent auditor; Kilpatrick Townsend and Stockton LLP, the Company’s counsel for the stock issuance and Sandler O’Neill & Partners, L.P., the Company’s marketing advisor in connection with the stock offering. All assumptions and conclusions set forth in the Appraisal were reached independently from such discussions. In addition, where appropriate, we have considered information based on other available published sources that we believe are reliable. While we believe the information and data gathered from all these sources are reliable, we cannot guarantee the accuracy and completeness of such information.

Board of Directors
November 8, 2017
Page 3

We have investigated the competitive environment within which Columbia Financial operates and have assessed Columbia Financial’s relative strengths and weaknesses. We have kept abreast of the changing regulatory and legislative environment for financial institutions and analyzed the potential impact on Columbia Financial and the industry as a whole. We have analyzed the potential effects of the stock offering on Columbia Financial’s operating characteristics and financial performance as they relate to the pro forma market value of Columbia Financial. We have reviewed the economic and demographic characteristics of the Company’s primary market area. We have compared Columbia Financial’s financial performance and condition with selected publicly-traded thrifts in accordance with the Valuation Guidelines, as well as all publicly-traded thrifts and thrift holding companies. We have reviewed the current conditions in the securities markets in general and the market for thrift stocks in particular, including the market for existing thrift issues and initial public offerings by thrifts and thrift holding companies. We have excluded from such analyses thrifts subject to announced or rumored acquisition, and/or institutions that exhibit other unusual characteristics.

The Appraisal is based on Columbia Financial’s representation that the information contained in the regulatory applications and additional information furnished to us by Columbia Financial and its independent auditor, legal counsel and other authorized agents are truthful, accurate and complete. We did not independently verify the financial statements and other information provided by Columbia Financial, or its independent auditor, legal counsel and other authorized agents nor did we independently value the assets or liabilities of Columbia Financial. The valuation considers Columbia Financial only as a going concern and should not be considered as an indication of Columbia Financial’s liquidation value.

Our appraised value is predicated on a continuation of the current operating environment for Columbia Financial and for all thrifts and their holding companies. Changes in the local, state and national economy, the legislative and regulatory environment for financial institutions and mutual holding companies, the stock market, interest rates, and other external forces (such as natural disasters or significant world events) may occur from time to time, often with great unpredictability and may materially impact the value of thrift stocks as a whole or the value of Columbia Financial’s stock alone. It is our understanding that there are no current plans for selling control of Columbia Financial following completion of the stock offering. To the extent that such factors can be foreseen, they have been factored into our analysis.

The estimated pro forma market value is defined as the price at which Columbia Financial’s common stock, immediately upon completion of the stock offering, would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of relevant facts.

Board of Directors
November 8, 2017
Page 4

Valuation Conclusion

Based on the foregoing, it is our opinion that, as of November 8, 2017, the estimated aggregate pro forma market value of the shares to be issued immediately following the conversion, both shares issued publicly as well as to the MHC, equaled $876,288,660 at the midpoint, equal to 87,628,866 shares offered at a per share value of $10.00. Pursuant to conversion guidelines, the 15% offering range indicates a minimum value of $744,845,360 and a maximum value of $1,007,731,960. Based on the $10.00 per share offering price determined by the Board, this valuation range equates to total shares outstanding of 74,484,536 at the minimum and 100,773,196 at the maximum. In the event the appraised value is subject to an increase, the aggregate pro forma market value may be increased up to a super maximum value of $1,158,891,750 without a resolicitation. Based on the $10.00 per share offering price, the super maximum value would result in total shares outstanding of 115,889,175. The Board of Directors has established a public offering range such that the public ownership of the Company will constitute a 43.0% ownership interest prior to the issuance of shares to the Foundation. Accordingly, the offering to the public of the minority stock will equal $320,283,500 at the minimum, $376,804,120 at the midpoint, $433,324,740 at the maximum and $498,323,450 at the super maximum of the valuation range. Based on the public offering range and inclusive of the shares issued to the Foundation, equal to 3.0% of the shares issued in the stock issuance, the public ownership of shares will represent 46.0% of the shares issued throughout the valuation range.

Limiting Factors and Considerations

The valuation is not intended, and must not be construed, as a recommendation of any kind as to the advisability of purchasing shares of the common stock. Moreover, because such valuation is determined in accordance with applicable regulatory guidelines and is necessarily based upon estimates and projections of a number of matters, all of which are subject to change from time to time, no assurance can be given that persons who purchase shares of common stock in the stock offering will thereafter be able to buy or sell such shares at prices related to the foregoing valuation of the estimated pro forma market value thereof. The appraisal reflects only a valuation range as of this date for the pro forma market value of Columbia Financial immediately upon issuance of the stock and does not take into account any trading activity with respect to the purchase and sale of common stock in the secondary market on the date of issuance of such securities or at anytime thereafter following the completion of the stock offering.

RP Financial’s valuation was based on the financial condition and operations of Columbia Financial as of September 30, 2017, the date of the financial data included in the prospectus.

RP Financial is not a seller of securities within the meaning of any federal and state securities laws and any report prepared by RP Financial shall not be used as an offer or solicitation with respect to the purchase or sale of any securities. RP Financial maintains a policy which prohibits RP Financial, its principals or employees from purchasing stock of its client institutions.

This valuation will be updated as provided for in the conversion regulations and guidelines. These updates will consider, among other things, any developments or changes in the financial performance and condition of Columbia Financial, management policies, and current conditions in the equity markets for thrift shares, both existing issues and new issues. These updates may also consider changes in other external factors which impact value including, but not limited to: various changes in the legislative and regulatory environment for financial institutions, the stock market and the market for thrift stocks, and interest rates. Should any such new developments or changes be material, in our opinion, to the valuation of the shares, appropriate adjustments to the estimated pro forma market value will be made.

Board of Directors
November 8, 2017
Page 5

The reasons for any such adjustments will be explained in the update at the date of the release of the update. The valuation will also be updated at the completion of Columbia Financial’s stock offering.

	Respectfully submitted,
	RP® FINANCIAL, LC.
	Ronald S. Riggins
	Managing Director
	Gregory E. Dunn
	Director

TABLE OF CONTENTS
COLUMBIA FINANCIAL, INC.

COLUMBIA BANK
Fair Lawn, New Jersey

TABLE OF CONTENTS

COLUMBIA FINANCIAL, INC.
COLUMBIA BANK
Fair Lawn, New Jersey

(continued)

LIST OF TABLES
COLUMBIA FINANCIAL, INC.
COLUMBIA BANK
Fair Lawn, New Jersey

I. Overview and Financial Analysis

Introduction

Columbia Bank, established in 1927, is a federally-chartered stock savings bank headquartered in Fair Lawn, New Jersey. In 1997, Columbia Bank reorganized into the mutual holding company structure. In a series of steps, Columbia Bank formed Columbia Financial, Inc., a Delaware corporation (“Columbia Financial” or the Company), and formed the Columbia Bank MHC, a federally-charted mutual holding company (the “MHC”). The MHC owns 100% of the stock of the Company and Columbia Bank is the wholly-owned subsidiary of the Company. The Bank serves the state of New Jersey and the suburbs surrounding the New York City and Philadelphia metropolitan areas through its headquarters office and 48 full service branch offices, all of which are located in the state of New Jersey. A map of Columbia Bank’s office locations is provided in Exhibit I-1. Columbia Bank is a member of the Federal Home Loan Bank (“FHLB”) system and its deposits are insured up to the maximum allowable amount by the Federal Deposit Insurance Corporation (“FDIC”). As of September 30, 2017, Columbia Financial had total assets of $5.429 billion, total deposits of $4.123 billion and total equity of $475.9 million equal to 8.77% of total assets. The Company’s audited financial statements are included by reference as Exhibit I-2.

Plan of Stock Issuance

On September 27, 2017, the Board of Directors of the MHC, Columbia Financial and Columbia Bank adopted the plan of stock issuance (the “Plan”). Pursuant to the Plan, Columbia Financial will issue a majority of its common stock to the MHC and sell a minority of its common stock to the public. Concurrent with the completion of the public stock offering, Columbia Bank will receive at least 50% of the net stock proceeds and the balance will be retained by Columbia Financial. The MHC will own a controlling interest in the Company of at least 51% and the Company will be the sole subsidiary of the MHC.

Columbia Financial will offer its common stock in a subscription offering to Eligible Account Holders, Tax-Qualified Employee Benefit Plans including Columbia Bank’s employee stock ownership plan (the “ESOP”), Supplemental Eligible Account Holders and Other Depositors and Eligible Borrowers as such terms are defined for purposes of applicable regulatory guidelines governing stock offerings by mutual institutions. To the extent that shares remain available for purchase after satisfaction of all subscriptions received in the subscription offering, the shares may be offered for sale to members of the general public in a community offering and a syndicated or firm commitment offering. At least 50% of the net proceeds from the stock offering will be invested in Columbia Bank and the balance of the net proceeds will be retained by the Company.

At this time, no other activities are contemplated for the Company other than the ownership of the Bank, funding a loan to the newly-formed ESOP and reinvestment of the proceeds that are retained by the Company. In the future, Columbia Financial may acquire or organize other operating subsidiaries, diversify into other banking-related activities, pay dividends or repurchase its stock, although there are no specific plans to undertake such activities at the present time.

The Plan provides for a contribution to the Columbia Bank Foundation, an existing charitable foundation previously established by Columbia Bank (the “Foundation”). The Foundation contribution will be funded with 3.0% of the number of shares of common stock issued in the stock issuance. The purpose of the Foundation is to provide financial support to charitable organizations in the communities in which Columbia Bank operates and to enable those communities to share in Columbia Bank’s long-term growth. The Foundation is dedicated completely to community activities and the promotion of charitable causes.

Strategic Overview

Columbia Financial maintains a local community banking emphasis, with a primary strategic objective of meeting the borrowing and deposit needs of its local customer base. Columbia Financial’s strategic emphasis has shifted from that of a traditional thrift to that of a full service community bank. The Company is pursuing a strategy of strengthening its community bank franchise dedicated to meeting the banking needs of its business and retail customers in the communities that are served by the Company. In recent years, growth strategies have emphasized increased lending diversification that targets growth of commercial real estate and commercial business loans. In connection with the implementation of a full service community banking strategy, the Company has invested in infrastructure and personnel to manage and facilitate growth strategies. Most notably, in support of implementation of a diversified lending strategy, the Company has been building a team of commercial lenders experienced in developing full service commercial banking relationships in the local market. The Bank’s objective is to fund asset growth primarily through deposit growth, emphasizing growth of lower cost core deposits. Core deposit growth is expected to be in part facilitated by growth of commercial lending relationships, pursuant to which the Company is seeking to establish a full service banking relationship with its commercial loan customers through offering a full range of commercial loan products that can be packaged with lower cost commercial deposit products.

Investments serve as a supplement to the Company’s lending activities and the investment portfolio is considered to be indicative of a low risk investment philosophy. Mortgage-backed securities and collateralized mortgage obligations (“CMOs”) constitute the largest portion of the Company’s investment portfolio, with other investments consisting of U.S. government and agency obligations, corporate debt securities, equity securities, trust preferred securities and municipal bonds.

Deposits have consistently served as the primary funding source for the Company, with supplemental funding provided by utilization of borrowings as an alternative funding source for purposes of managing funding costs and interest rate risk. Core deposits, consisting of transaction and savings account deposits constitute the largest portion of the Company’s deposit base. Borrowings currently held by the Company consist primarily of FHLB advances and also include junior subordinated debt and repurchase agreements.

Columbia Financial’s earnings base is largely dependent upon net interest income and operating expense levels. The Company’s net interest margin has trended higher in recent years, which is somewhat counter to industrywide trends. The improvement in the Company’s net interest margin has been facilitated by loan growth, particularly with respect to growth of higher yielding types of loans which has translated into a slight upward trend in the overall yield earned on interest-assets. Lower funding costs have also contributed to the positive trend in the Company’s net interest margin, which has been largely attributable to a decline in borrowing costs. Operating expense ratios have trended higher in recent years, which has been largely related to adding staff and building out infrastructure in support of growth strategies to build the community banking franchise. Non-interest operating income has been a fairly stable contributor to the Company’s earnings, while the amount of loan loss provisions established has fluctuated in recent periods giving consideration to both improving credit quality trends and growth of the loan portfolio primarily driven by growth of higher risk types of loans.

The post-offering business plan of the Company is expected to continue to focus on implementing strategic initiatives to develop and grow a full service community banking franchise. Accordingly, Columbia Financial will continue to be an independent full service community bank, with a commitment to meeting the retail and commercial banking needs of individuals and businesses in the state of New Jersey and the suburbs surrounding the New York City and Philadelphia metropolitan areas.

The Company’s Board of Directors has elected to complete a public stock offering to sustain growth strategies and facilitate implementation of its strategic plan. The capital realized from the stock offering will increase the Company’s operating flexibility and allow for additional growth of the balance sheet. The additional funds realized from the stock offering will provide an alternative funding source to deposits and borrowings in meeting the Company’s future funding needs, which may facilitate a reduction in Columbia Financial’s funding costs. Additionally, Columbia Financial’s higher equity-to-assets ratio will enable the Company to pursue expansion opportunities. Such expansion would most likely occur through the establishment of additional banking offices to gain a market presence in nearby markets that are complementary to the Company’s existing branch network, including possible expansion into contiguous markets in Pennsylvania and New York. The Company will also be in a better position to pursue growth through acquisition of other financial service providers following the stock offering, given its strengthened capital position. The projected uses of proceeds are highlighted below.

Overall, it is the Company’s objective to pursue controlled growth that will serve to increase returns, while continuing to emphasize management of the overall risk associated with Columbia Financial’s operations.

Balance Sheet Trends

Table 1.1 shows the Company’s historical balance sheet data for the past five fiscal years. From fiscal yearend 2013 through fiscal yearend 2017, Columbia Financial’s assets increased at a 4.80% annual rate. Asset growth was largely driven by loan growth, which was partially funded with redeployment of investments. Asset growth was primarily funded by deposit growth, which funded a slight reduction in borrowings as well. A summary of Columbia Financial’s key operating ratios for the past five fiscal years is presented in Exhibit I-3.

Columbia Financial’s loans receivable portfolio increased at a 6.85% annual rate from fiscal yearend 2013 through fiscal yearend 2017, in which the loans receivable balance trended higher throughout the period. The most significant loan growth was realized during fiscal year 2017, which was primarily attributable to growth of commercial real estate and commercial business loans. The Company’s higher loan growth rate compared to its asset growth rate served to increase the loans-to-assets ratio from 73.44% at fiscal yearend 2013 to 79.34% at fiscal yearend 2017.

Columbia Financial’s emphasis on growing commercial loans is evidenced by recent trends in its loan portfolio composition. Trends in the Company’s loan portfolio composition since fiscal yearend 2013 show that the concentration of 1-4 family mortgage loans comprising total loans decreased from 43.13% of total loans at fiscal yearend 2013 to 36.30% of total loans at fiscal yearend 2017. Comparatively, from fiscal yearend 2013 through fiscal yearend 2017, commercial real estate loans (including multi-family loans) increased from 33.58% of total loans to 41.85% of total loans and commercial business loans increased from 3.49% of total loans to 6.15% of total loans. Over the same time period, the relative concentrations of construction loans increased from 3.81% of total loans to 5.02% of total loans and home equity loans and advances decreased from 15.95% of total loans to 10.68% of total loans. The Company also holds a nominal balance of other consumer loans. Recent trends in the Company’s loan portfolio composition are generally expected to continue.

Table 1.1

Columbia Financial, Inc.

Historical Balance Sheet Data

(1) Ratios are as a percent of ending assets.

Sources: Columbia Financial's prospectus, audited and unaudited financial statements and RP Financial calculations.

The intent of the Company’s investment policy is to provide adequate liquidity and to generate a favorable return within the context of supporting Columbia Financial’s overall credit and interest rate risk objectives. It is anticipated that proceeds retained at the holding company level will be invested into liquid funds held as a deposit at Columbia Bank. Since fiscal yearend 2013, the Company’s level of cash and investment securities (inclusive of FHLB stock) ranged from a low of 15.23% of assets at fiscal yearend 2017 to a high of 21.01% of assets at fiscal yearend 2013. Mortgage-backed securities and CMOs totaling $603.0 million comprised the most significant component of the Company’s investment portfolio at September 30, 2017. Other investments held by the Company at September 30, 2017 consisted of corporate debt securities ($49.5 million), U.S. government and agency obligations ($28.3 million), equity securities ($3.3 million), trust preferred securities ($4.7 million) and municipal bonds ($1.4 million). As of September 30, 2017, investments maintained as held to maturity totaled $132.9 million and investments maintained as available for sale totaled $557.2 million. Investments maintained as available-at September 30, 2017 had a net unrealized loss of $6.0 million. Exhibit I-4 provides historical detail of the Company’s investment portfolio. As of September 30, 2017, the Company also held $101.0 million of cash and cash equivalents and $35.8 million of FHLB stock.

The Company also maintains an investment in bank-owned life insurance (“BOLI”) policies, which cover the lives of the Company’s officers. The purpose of the investment is to provide funding for employee benefit plans. The life insurance policies earn tax-exempt income through cash value accumulation and death proceeds. As of September 30, 2017, the cash surrender value of the Company’s BOLI equaled $149.4 million.

Since fiscal yearend 2013, Columbia Financial’s funding needs have been addressed through a combination of deposits, borrowings and internal cash flows. From fiscal yearend 2013 through fiscal yearend 2017, the Company’s deposits increased at a 5.98% annual rate. Deposits as a percent of assets increased from 72.63% at fiscal yearend 2013 to 75.95% at fiscal yearend 2017. Deposits growth was sustained throughout the period covered in Table 1.1. Deposit growth trends in recent years reflect that deposit growth has primarily consisted of core deposits and, to a lesser extent, growth certificates of deposit (“CDs”). Core deposits comprised 67.05% of total deposits at September 30, 2017, versus 65.58% of total deposits at September 30, 2015.

Borrowings serve as an alternative funding source for the Company to address funding needs for growth and to support management of deposit costs and interest rate risk. Additionally, the Company issued junior subordinated debt, in which most of the funds were down streamed into Columbia Bank to increase regulatory capital. From fiscal yearend 2013 through fiscal yearend, 2017, borrowings decreased from $778.4 million or 17.30% of assets to $733.0 million or 13.50% of assets. Borrowings currently held by the Company consist primarily of FHLB advances and also include FHLB lines of credit, junior subordinated debt and repurchase agreements. The Company intends to use a portion of the net offering proceeds to redeem the outstanding balance of junior subordinated debt.

The Company’s equity increased at a 5.83% annual rate from fiscal yearend 2013 through fiscal yearend 2017, which was largely related to retention of earnings. A slightly stronger rate of equity growth relative to asset growth since fiscal yearend 2013 provided for a slight increase in the Company’s equity-to-assets ratio from 8.43% at fiscal yearend 2013 to 8.77% at fiscal yearend 2017. Similarly, the Company’s tangible equity-to-assets ratio increased from 8.30% at fiscal yearend 2013 to 8.66% at fiscal yearend 2017. Goodwill, which was the result of the 2002 acquisition of First Jersey Title Services, Inc., totaled $5.7 million or 0.11% of assets at September 30, 2017. Columbia Bank maintained capital surpluses relative to all of its regulatory capital requirements at September 30, 2017. The addition of stock proceeds will serve to strengthen the Company’s capital position, as well as support growth opportunities. At the same time, the increase in Columbia Financial’s pro forma capital position will initially depress its ROE.

Income and Expense Trends

Table 1.2 shows the Company’s historical income statements for the past five fiscal years. The Company’s reported earnings ranged from a low of a net loss of $30.5 million or 0.69% of average assets during fiscal year 2013 to a high of net income of $33.0 million or 0.67% of average assets during fiscal year 2016. For fiscal year 2017, the Company reported net income $31.1 million or 0.60% of average assets. Net interest income and operating expenses represent the primary components of the Company’s recurring earnings, while non-operating income has been somewhat of a limited source of earnings for the Company. Loan loss provisions have had a varied impact on the Company’s earnings over the past five fiscal years. Non-operating gains and losses generally have not been a significant factor in the Company’s earnings over the past five fiscal years, with the exception of fiscal year 2013. In fiscal year 2013, the Company recorded a $73.1 million loss on debt extinguishment.

During the period covered in Table 1.2, the Company’s net interest income to average assets ratio ranged from a low of 2.43% during fiscal year 2014 to a high of 2.68% during fiscal year 2017. The upward trend in the Company’s net interest income ratio since fiscal year 2014 has been primarily due to a decrease in the interest expense ratio. Notably, a shift in the Company’s interest-bearing liability composition towards a higher concentration of comparatively lower rate deposits relative to borrowings served to reduce the rate paid on interest-bearing liabilities. Additionally, lower borrowing costs also contributed to the reduction in the Company’s interest expense ratio. At the same time, a shift in the Company’s interest-earning asset composition towards a higher concentration of comparatively higher yielding loans relative to lower yielding investments served to slightly increase the overall yield on interest-earning assets and preserve the interest income ratio, during a period when financial institutions in general have been experiencing declining yields due to the downward repricing of interest sensitive assets as interest rates remained at historically low levels over a prolonged period of time. Overall, during the past five fiscal years, the Company’s interest rate spread increased from a low of 2.28% during fiscal year 2013 to a high of 2.60% during fiscal year 2017. The Company’s net interest rate spreads and yields and costs for the past five fiscal years are set forth in Exhibit I-3 and Exhibit I-5.

Table 1.2

Columbia Financial, Inc.

Historical Income Statements

Sources: Columbia Financial's prospectus, audited & unaudited financial statements and RP Financial calculations.

Non-interest operating income has been somewhat of a limited contributor to the Company’s earnings over the past five fiscal years. Throughout the period shown in Table 1.2, non-interest operating income ranged from a low of $17.1 million or 0.38% of average assets during fiscal year 2014 to a high of $20.2 million or 0.46% of average assets during fiscal year 2013. For fiscal year 2017, non-interest operating income amounted to $18.9 million or 0.36% of average assets. Demand deposit account fees, BOLI income, title insurance fees and loan fees and service charges are the primary contributors to the Company’s non-interest operating revenues.

Operating expenses represent the other major component of the Company’s earnings, which have been maintained at less than 2.00% of average assets over the past five fiscal years. For fiscal year 2017, operating expenses totaled $100.4 million or 1.92% of average assets. While operating expenses have trended higher over the past three fiscal years, the Company has been effective in leveraging the increase in operating expenses through additional growth. The upward trend in operating expenses since fiscal year 2014 reflects additional staffing and infrastructure that has been put into place to facilitate implementation of the Company’s strategic plan. Notwithstanding the upward trend in the Company’s operating expenses, the Company has effectively maintained a low operating expense ratio throughout the period shown in Table 1.2. Notably, the Company maintains a high ratio of assets per employee, which is supported by the relatively low staffing requirements associated with the Company’s lending strategy that has emphasized growth of higher balance commercial real estate loans and limited diversification into other products and services that would provide additional sources of non-interest operating income. As of September 30, 2017, the Company’s ratio of assets per full time equivalent employee equaled $9.017 million, versus $8.135 million for all publicly-traded thrifts.

Overall, during the past five fiscal years, the Company’s expense coverage ratios (net interest income divided by operating expenses) ranged from a low of 1.24x during fiscal year 2013 to a high of 1.40x during fiscal year 2017. Similarly, the Company’s efficiency ratio (operating expenses as a percent of the sum of net interest income and other operating income) reflected an improving trend in core earnings, based on efficiency ratios of 67.93% and 63.16% during fiscal years 2013 and 2017, respectively.

During the period covered in Table 1.2, the amount of loan loss provisions established ranged from low of $417,000 or 0.01% of average assets during fiscal year 2016 to a high of $23.3 million or 0.53% of average assets during fiscal year 2013. For fiscal year 2017, the Company reported loan loss provisions of $6.4 million or 0.12% of average assets. The reduction in loan loss provisions established since fiscal year 2013 was facilitated by improving credit quality trends, including reductions in non-performing loan balances and the amount of net charge-offs recorded. The increase in loan loss provisions established during fiscal year 2017 compared to the prior fiscal year was largely related to loan growth, as opposed to deterioration in credit quality. As of September 30, 2017 the Company maintained loan loss allowances of $54.6 million, equal to 1.26% of total loans receivable and 854.31% of non-accruing loans. Exhibit I-6 sets forth the Company’s loan loss allowance activity for the past five fiscal years.

Non-operating income and losses generally have not been a significant factor in the Company’s earnings over the past five fiscal years, with the exception of fiscal year 2013. In fiscal year 2013, the Company recorded a net non-operating loss of $66.2 million or 1.49% of average assets, which consisted of a $73.1 million loss on debt extinguishment, a $73,000 net impairment loss on securities and a $7.0 million net gain on sales of securities. For fiscal year 2017, the Company reported a net non-operating loss of $4.7 million or 0.09% of average assets. The non-operating loss reported during fiscal year 2017 consisted of a net loss on sales of securities and a one-time $3.0 million cash contribution to the Foundation, which was recorded in the fourth quarter of fiscal year 2017.

Over the past five fiscal years, the Company’s effective tax rate ranged from 34.00% in fiscal year 2017 to an income tax benefit of 36.81% during fiscal year 2013. As set forth in the Company’s prospectus, the Company’s marginal effective tax rate is 36.0%.

Interest Rate Risk Management

The Company’s balance sheet is slightly liability sensitive in the short-term (less than one year). While financial institutions in general have been experiencing some interest spread compression during recent periods, due to the average yield earned on interest-earning assets declining more relative to the average rate paid on interest-bearing liabilities, the Company has been effective in increasing its interest rate spread through a combination of increasing the overall yield earned on interest-earning assets and lowering the overall rate paid on interest-bearing liabilities. The increase in yield has been primarily realized through increasing the concentration of interest-earning comprised of loans relative to lower yielding cash and investments, while the decrease in funding costs has been primarily realized through increasing the concentration of interest-bearing liabilities comprised of deposits relative to higher costing borrowings. As of September 30, 2017, an analysis of the Company’s net portfolio value (“NPV”) and net interest income indicated that in the event of an instantaneous parallel 200 basis point increase in market interest rates NPV would decrease by 16.9% and net interest income would increase by 1.4% in year one, which were within policy limits (see Exhibit I-7).

The Company pursues a number of strategies to manage interest rate risk, particularly with respect to seeking to limit the repricing mismatch between interest rate sensitive assets and liabilities. The Company manages interest rate risk from the asset side of the balance sheet through investing in investment securities with short-terms or adjustable interest rates, maintaining most of the investment portfolio as available for sale, selling originations of longer term 1-4 family fixed rate loans and diversifying into other types of lending beyond 1-4 family permanent mortgage loans which consist primarily of adjustable rate or shorter term fixed rate loans. The Company also hedges a portion of its fixed rate commercial business loan portfolio with interest rate swap contracts. As of September 30, 2017, of the Company’s total loans due after September 30, 2018, adjustable rate loans comprised 36.10% of total loans receivable (see Exhibit I-8). On the liability side of the balance sheet, management of interest rate risk has been pursued through emphasizing growth of lower costing and less interest rate sensitive transaction and savings account deposits and utilizing fixed rate FHLB advances with terms out to five years. Transaction and savings account deposits comprised 67.05% of the Company’s total deposits at September 30, 2017.

The infusion of stock proceeds will serve to further limit the Company’s interest rate risk exposure, as most of the net proceeds will be redeployed into interest-earning assets and the increase in the Company’s capital position will lessen the proportion of interest rate sensitive liabilities funding assets.

Lending Activities and Strategy

Pursuant to the Company’s strategic plan, the Company is pursuing a diversified lending strategy emphasizing commercial real estate loans and commercial business loans as the primary areas of targeted loan growth. Other areas of lending for the Company include 1-4 family permanent mortgage loans, construction loans, home equity loans and advances and other consumer loans. Exhibit I-9 provides historical detail of Columbia Financial’s loan portfolio composition for the past five fiscal years and Exhibit I-10 provides the contractual maturity of the Company’s loan portfolio by loan type as of September 30, 2017.

Commercial Real Estate and Multi-Family Loans. Commercial real estate and multi-family loans consist largely of loans originated by the Company, which are generally collateralized by properties in the Company’s regional lending area. On a limited basis, the Company supplements originations of commercial real estate and multi-family loans with purchased loan participations from local banks. Loan participations are subject to the same underwriting criteria and loan approvals as applied to loans originated by the Company. Columbia Financial generally originates commercial real estate and multi-family loans up to a loan-to-value (“LTV”) ratio of 80% and generally requires a minimum debt-coverage ratio of 1.2 times. Commercial real estate and multi-family loans are generally originated for terms of up to ten and with amortization schedules of up to 25 years for commercial properties and up to 30 years for multi-family properties. Loan terms offered on commercial real estate and multi-family loans include fixed rate and adjustable rate loans. Interest rates are typically based on either the FHLB of New York borrowing rate or the U.S. Treasury rate. Properties securing the commercial real estate and multi-family loan portfolio include office buildings, industrial/warehouse facilities, retail shopping centers, medical office buildings, hotels, assisted-living facilities and apartment buildings. At September 30, 2017, the Company’s largest commercial real estate loan had an outstanding balance of $24.7 million and was secured by a retail property anchored by a supermarket. At September 30, 2017, this loan was performing in accordance with its original terms. At September 30, 2017, the Company’s largest multi-family loan had an outstanding balance of $20.6 million. At September 30, 2017, this loan was performing in accordance with its original terms. As of September 30, 2017, the Company’s outstanding balance of commercial real estate and multi-family loans totaled $1.822 billion equal to 41.85% of total loans outstanding.

1-4 Family Residential Loans. Columbia Financial offers both fixed rate and adjustable rate 1-4 family permanent mortgage loans with terms of up to 30 years. Loans are generally underwritten to secondary market guidelines, so as to allow for the sale of such loans if such a strategy is warranted for purposes of interest rate risk management. The Company’s current practice is to generally sell conforming 30-year fixed rate loans, with servicing retained by the Company. ARM loans offered by the Company have initial repricing terms of up to ten years and then reprice annually for the balance of the loan term. ARM loans are indexed to U.S. Treasury Security Index. As of September 30, 2017, the Company’s outstanding balance of 1-4 family loans totaled $1.579 billion equal to 36.27% of total loans outstanding.

Home Equity Loans and Advances. The Company’s 1-4 family lending activities include home equity loans and advances. Home equity loans are offered as fixed rate loans with terms of up to 30 years. Home equity advances are indexed to the prime rate as published in The Wall Street Journal and can have repayment schedules of both principal and interest or interest only paid monthly The Company will generally originate home equity loans and advances up to a maximum LTV ratio of 80%, inclusive of other liens on the property. As of September 30, 2017, the Company’s outstanding balance of home equity loans and advances totaled $465.0 million equal to 10.68% of total loans outstanding.

Construction Loans. Construction loans originated by the Company consist of loans to finance the construction of 1-4 family residences, commercial real estate properties and multi-family properties. The Company also originates construction loans on unimproved land. Construction loans are interest only loans during the construction period, which is usually six to 36 months, and are generally offered up to a maximum LTV ratio of 75% of as completed appraised value for multi-family and commercial properties, up to 65% for the lower of the appraised value or the cost of land for unimproved land and up to 80% for 1-4 family residences. Commercial real estate construction loans are typically based upon the prime rate as published in The Wall Street Journal or LIBOR. As of September 30, 2017, the Company’s outstanding balance of construction loans totaled $218.4 million equal to 5.02% of total loans outstanding.

Commercial Business Loans. The commercial business loan portfolio is generated through extending loans to businesses operating in the local market area. Expansion of commercial business lending activities is a desired area of loan growth for the Company, pursuant to which the Company is seeking to become a full service community bank to its commercial loan customers through offering a full range of commercial loan products that can be packaged with lower cost commercial deposit products. The Company offers a variety of secured and unsecured commercial business loans that include term loans for equipment financing and business acquisitions, working capital loans, inventory financing and revolving lines of credit. Fixed rate loans are generally offered for terms of up to ten years and are fully amortizing. Revolving lines of credit are generally extended as floating rate loans indexed to The Wall Street Journal prime rate for periods of up to 24 months. As of September 30, 2017, the Company’s outstanding balance of commercial business loans totaled $267.7 million equal to 6.15% of total loans outstanding.

Consumer Loans. Consumer lending other than home equity loans and advances has been a limited area of lending diversification for the Company, with such loans consisting of installment loans, personal loans and unsecured lines of credit. As of September 30, 2017, the Company held $1.3 million of consumer loans equal to 0.03% of total loans outstanding.

Exhibit I-11 provides a summary of the Company’s lending activities over the past three fiscal years. Total loans originated ranged from a low of $1.062 billion during fiscal year 2016 to a high of $1.308 billion during fiscal year 2017. The increase in loans originated during fiscal year 2017 was driven by increased originations of commercial real estate and multi-family loans and commercial business loans. The Company’s organic loan production was supplemented with a limited amount of loan purchases, ranging from a low of $10.0 million during fiscal year 2015 to a high of $21.1 million during fiscal year 2016. Total loans sold or securitized ranged from a low of $105.1 million during fiscal year 2017 to a high of $187.4 million during fiscal year 2015. Total principal repayments ranged from a low of $812.3 million during fiscal year 2016 to a high of $847.0 million during fiscal year 2017. Loan growth was recorded during each of the past three fiscal years. Overall, total loans receivable increased from $3.816 billion at fiscal yearend 2015 to $4.353 billion at fiscal yearend 2017.

Asset Quality

Historically, the Company’s lending emphasis on lending in local and familiar markets generally supported maintenance of relatively favorable credit quality measures. However, with the onset of the national recession and resulting financial crisis, the Company experienced some deterioration in credit quality. In recent years, the Company has taken proactive measures to address credit quality deterioration and significantly reduce the balance of non-performing balance assets from peak levels. Over the past five fiscal years, Columbia Financial’s balance of non-performing assets ranged from a high of $75.6 million or 1.68% of assets at fiscal yearend 2013 to a low of $6.8 million or 0.13% of assets at September 30, 2017. As shown in Exhibit I-11, non-performing assets at September 30, 2017 consisted of $6.4 million of non-accruing loans and $393,000 of other real estate owned. Most of the reduction in the balance of non-performing loans since fiscal yearend 2013 was realized through a decline in non-accruing 1-4 family loans, which declined from a peak balance of $39.5 million at fiscal yearend 2013 to $3.5 million at fiscal yearend 2017.

To track the Company’s asset quality and the adequacy of valuation allowances, the Company has established detailed asset classification policies and procedures which are consistent with regulatory guidelines. Classified assets are reviewed quarterly by senior management and the Board. Pursuant to these procedures, when needed, the Company establishes additional valuation allowances to cover anticipated losses in classified or non-classified assets. As of September 30, 2017, the Company maintained loan loss allowances of $54.6 million, equal to 1.26% of total loans receivable and 854.31% of non-performing loans.

Funding Composition and Strategy

Deposits have consistently served as the Company’s primary funding source and at September 30, 2017 deposits accounted for 84.91% of Columbia Financial’s combined balance of deposits and borrowings. Exhibit I-12 sets forth the Company’s deposit composition for the past three fiscal years. Transaction and savings account deposits constituted 67.05% of total deposits at September 30, 2017, as compared to 65.58% of total deposits at September 30, 2015. The increase in the concentration of core deposits comprising total deposits since fiscal yearend 2015 was realized through comparatively stronger growth of core deposits relative to growth of CDs. Since fiscal yearend 2015, transaction account deposits (both interest bearing and non-interest bearing) have been the largest source of core deposit growth for the Company and transaction account deposits comprise the largest concentration of the Company’s core deposits. As of September 30, 2017, transaction account deposits totaled $1.945 billion or 70.35% of core deposits.

The balance of the Company’s deposits consists of CDs, which equaled 32.95% of total deposits at September 30, 2017 compared to 34.42% of total deposits at September 30, 2015. Columbia Financial’s current CD composition reflects a slightly higher concentration of long-term CDs (maturities of more than year). The CD portfolio totaled $1.358 billion at September 30, 2017 and $700.7 million or 51.58% of the CDs were scheduled to mature in more than one year. Exhibit I-13 sets forth the maturity schedule of the Company’s CDs as of September 30, 2017. As of September 30, 2017, jumbo CDs (CD accounts with balances of $100,000 or more) amounted to $599.7 million or 44.14% of total CDs.

Borrowings serve as an alternative funding source for the Company to facilitate management of funding costs and interest rate risk Additionally, the Company issued junior subordinated debt, in which most of the funds were down streamed into Columbia Bank to increase regulatory capital. Borrowings totaled $733.0 million at September 30, 2017 and consisted of $642.2 million of FHLB advances, $50.6 million of junior subordinated debt and $40.0 million of repurchase agreements. At September 30, 2017, the FHLB advances had a weighted average interest rate of 2.10%, the repurchase agreements had a weighted average rate of 3.88% and the rate on the junior subordinated debt equaled 8.00%. The Company intends to use a portion of the offering proceeds to redeem the outstanding balance of junior subordinated debt. Exhibit I-14 provides further detail of the Company’s borrowings activities during the past three fiscal years.

Subsidiary Activities

Columbia Bank is a wholly owned subsidiary of Columbia Financial. Columba Financial also owns all of the common stock of a Delaware statutory business trust, Columbia Capital Trust I. The capital trust is unconsolidated and its only material asset is a $50 million trust preferred security related to the junior subordinated debentures.

Columbia Bank’s active subsidiaries are as follows:

First Jersey Title Services, Inc., a title insurance agency that Columbia Bank acquired in 2002. At September 30, 2017, total assets were approximately $16.5 million. For the year ended September 30, 2017, First Jersey Title Services, Inc. had net income of approximately $237,000.

1901 Commercial Management Co. LLC, which was established in 2009 to hold commercial other real estate owned, and 1901 Residential Management Co. LLC, which was established in 2009 to hold residential other real estate owned. At September 30, 2017, these subsidiaries held $11.7 million and $10.1 million in total assets, respectively.

2500 Broadway Corp., a passive investment company that holds an investment in CSB Realty Corp. was contributed to 2500 Broadway Corp. At September 30, 2017, total assets were approximately $1.9 billion.

CSB Realty Corp., which is a majority owned subsidiary of 2500 Broadway Corp. CSB Realty Corp. is a real estate investment trust which holds commercial real estate, mortgage and home equity loans for investments. At September 30, 2017, total assets were approximately $1.5 billion.

Columbia Bank also currently maintains three inactive subsidiaries: (i) Columbia Investment Services, Inc., (ii) Real Estate Management Corp, LLC and (iii) Plaza Financial Services, Inc.

Legal Proceedings

The Company is not currently party to any pending legal proceedings that the Company’s management believes would have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

II. MARKET AREA

Introduction

Headquartered in Fair Lawn, New Jersey, Columbia Financial serves the state of New Jersey and the suburbs surrounding the New York City and Philadelphia metropolitan areas through its headquarters office and 48 full service branch offices. The Company’s branch network covers a ten-county market area in the state of New Jersey: Bergen County (16 branches and headquarters), Middlesex County (8 branches), Passaic County (6 branches), Monmouth County (3 branches), Union County (2 branches), Morris County (2 branches), Burlington County (3 branches), Gloucester County (3 branches), Camden County (2 branches) and Essex County (3 branches). Exhibit II-1 provides information on the Company’s office facilities.

With operations in major metropolitan areas, the Company’s competitive environment includes a significant number of commercial banks, thrifts and other financial services companies, some of which have a regional or national presence. These institutions also have greater resources at their disposal than the Company. The New York City and Philadelphia metropolitan areas have highly developed economies, with a relatively high concentration of highly skilled workers who are employed in a number of different industry clusters including financial services, healthcare and technology.

Future growth opportunities for Columbia Financial depend on the future growth and stability of the local and regional economy, demographic growth trends, and the nature and intensity of the competitive environment. These factors have been briefly examined to help determine the growth potential that exists for the Company, the relative economic health of the Company’s market area, and the resultant impact on value.

National Economic Factors

The future success of the Company’s operations is partially dependent upon various national and local economic trends. In assessing national economic trends over the past few quarters, manufacturing activity eased in April 2017 with an index reading of 54.8. Comparatively, April service sector activity accelerated with an index reading of 57.5. The U.S. economy added 211,000 jobs in April and the unemployment rate for April fell to 4.4%, which was the lowest unemployment rate since May 2007. Housing starts declined 2.6% in April. Likewise, new and existing home sales for April showed respective decreases of 11.4% and 2.3%. Manufacturing activity for May inched up to a reading of 54.9, while service sector activity for May expanded at a slightly lower rate with a reading of 56.9. The U.S. economy added 138,000 jobs in May and the May unemployment rate fell to a 16-yeare low of 4.3%. Housing starts for May declined for a third month in a row, decreasing 5.5% compared to April. However, existing and new home sales rebounded in May, increasing 1.1% and 2.9%, respectively. May durable-goods orders fell 1.1% from April. Manufacturing activity for June rose to a reading of 57.8 and June service sector activity expanded to a reading of 57.4. The U.S. economy added 222,000 jobs in June, which was more than expected. However, the June unemployment rate edged up to 4.4%, as the labor participation rate rose slightly. Housing starts rose 8.3% in June and new home sales for June also showed an increase of 0.8%. Comparatively, June existing home sales declined 1.8%. Second quarter GDP expanded at an annual rate of 2.6% (subsequently revised up to 3.1%), which was the strongest pace of growth in more than two years.

Manufacturing and service sector activity decelerated in July 2017, based on readings of 56.3 and 53.9, respectively. The U.S. economy added 209,000 jobs in July and the July unemployment rate fell to 4.3%. Housing starts for July declined 4.8%, while new and existing home sales also fell in July decreasing by 9.4% and 1.3%, respectively. Durable-goods orders declined 6.8% in July, which was driven by a drop in aircraft orders. Excluding aircraft orders, July durable-goods orders were up 0.5%. Economic activity in the manufacturing and service sectors expanded at faster rates in August, based on respective readings of 58.8 and 55.3. The U.S. economy added 156,000 jobs in August and the August unemployment rate ticked up to 4.4%. Housing data for August showed a slight slowdown compared to July, as August housing starts fell 0.8%, existing home sales slipped 1.7% and new home sales decreased 3.4%. Manufacturing activity for September reached a 13-year high, with a reading of 60.8. Similarly, the September service sector activity reading of 59.8 was a 12-year high. The U.S. economy lost 33,000 jobs in September, reflecting the impact of hurricanes Harvey and Irma. The September unemployment rate fell to a post-crisis low of 4.2%. Sales of existing homes edged up 0.7% in September, while new home sales for September surged 18.9%. Indications that the U.S. economy was gaining momentum was provided by a 2.2% increase in September durable-goods orders and GDP increased at a 3.0% annual rate in the third quarter.

Manufacturing activity for October 2017 expanded at a slightly lower rate compared to September, with a reading of 58.7. Comparatively, service sector activity accelerated in October to a reading of 60.1, its highest reading since August 2005. The unemployment rate for October declined to a 17-year low of 4.1%, as U.S. employers added 261,000 jobs in October.

In terms of interest rates trends over the past few quarters, long-term Treasury yields continued to edge lower during the first half of April 2017 with the 10-year Treasury yield declining to a low of 2.18%. Disappointing job growth reflected in the March employment data and investors moving into safe-haven assets on news of the U.S. dropping a bomb on an Islamic State target in Afghanistan were noted factors contributing to the rally in Treasury bonds. Long-term Treasury yields edged up slightly during the second of half of April and into the first week of May. The Federal Reserve concluded its two-day policy meeting in early-May voting to hold its benchmark rate steady. Long-term Treasury yields edged higher going into mid-May, based on growing expectations that the Federal Reserve would raise rates in June. However, Treasury yields retreated in the second half of May amid investor anxiety about the future prospects of President Trump’s legislative agenda. The 10-year Treasury yield fell to a 2017 low of 2.15% in early-June, as the May employment report showed weaker-than-expected job growth. The Federal Reserve concluded its mid-June policy meeting with a quarter point rate increase and penciled in one more rate increase by the end of 2017. As central banks in various global markets moved toward reducing stimulus measures, long-term Treasury yields moved higher at the end of the second quarter.

The upward trend in long-term Treasury yields continued at the start of the third quarter of 2017, which was followed by a slight decline in long-term Treasury yields in the second half of July. The Federal Reserve elected to hold rates steady at the conclusion of its late-July policy meeting and signaled readiness to start shrinking its bond holdings as soon as September 2017. Following a period of relatively stable interest rates through most of August, long-term Treasury yields trended lower in late-August through the first part of September. Factors contributing to the rally in Treasury bonds included warnings from Federal Reserve officials that persistently low inflation could make it difficult for the Federal Reserve to continue raising rates, as well as a flight to safe-haven investments fueled by escalating tensions between the U.S. and North Korea. Long-term Treasury yields edged higher ahead of the Federal Reserve’s September meeting. The Federal Reserve concluded its September policy meeting leaving interest rates unchanged and indicated that it was on track to raise short-term interest rates later in 2017. The upward trend in long-term Treasury yields continued through the end of the third quarter.

Strong reports for September manufacturing and service sector activity contributed to sustaining the upward trend in long-term Treasury yields at the start of the fourth quarter of 2017. Comparatively, soft inflation data contributed to a rally in Treasury bonds in mid-October. Long-term Treasury yields moved higher during the second half of October, with the 10-year Treasury yield closing above 2.4% for the time in five months. Investors preparing for the Federal Reserve to back away from years of stimulus efforts was a noted factor contributing to the rise in Treasury yields. At the start of November, the Federal Reserve concluded its policy meeting leaving its target rate unchanged as expected. Treasury yields eased lower in early-November, as President Trump’s nomination to be the next Federal Reserve chairman eased some investors’ fears that the President would choose a candidate likely to favor a more aggressive pace of interest rate increases. As of November 8, 2017, the bond equivalent yields for U.S. Treasury bonds with terms of one and ten years equaled 1.53% and 2.32%, respectively, versus comparable year ago yields of 0.71% and 1.88%. Exhibit II-2 provides historical interest rate trends.

Based on the consensus outlook of economists surveyed by The Wall Street Journal in October 2017, GDP growth was projected to increase to 2.4% in 2018. The unemployment rate was forecasted to equal 4.2% in December 2017 and then decline slightly to equal 4.1% in June 2018. An average of 161,000 jobs were projected to be added per month during 2017. On average, the economists forecasted an increase in the federal funds rate to 1.37% in December 2017 and then increase to 1.72% in June 2018. On average, the economists forecasted that the 10-year Treasury yield would increase to 2.46% in December 2017 and then increase to 2.76% in June 2017. The surveyed economists also forecasted home prices would rise 4.8% in 2018 and housing starts would continue to trend slightly higher in 2018.

The September 2017 mortgage finance forecast from the Mortgage Bankers Association (the “MBA”) was for 2017 existing home sales to increase by 2.6% from 2016 sales and new home sales were forecasted to increase by 8.7% in 2017 from sales in 2016. The 2017 median sale prices for new and existing homes were forecasted to increase by 4.4% and 1.2%, respectively. Total mortgage production was forecasted to decline in 2017 to $1.659 trillion, compared to $1.891 trillion in 2016. The forecasted decrease in 2017 originations was based on a 9.9% increase in purchase volume and a 36.6% decrease in refinancing volume. Purchase mortgage originations were forecasted to total $1.088 trillion in 2017, versus refinancing volume totaling $571 billion. Housing starts for 2017 were projected to increase by 2.9% to total 1.211 million.

Market Area Demographics

Demographic and economic growth trends, measured by changes in population, number of households, age distribution and median household income, provide key insight into the health of the market area served by Columbia Financial. Table 2.1 presents information regarding the demographic and economic trends for the Company’s primary market area counties from 2010 to 2018 (estimated) and projected data through 2023. Data for the nation and the state of New Jersey are included for comparative purposes.

The primary market area counties are densely populated markets, ranking among the largest populations in the state of New Jersey. Bergen County has the largest population among the ten primary market area counties and is the largest county in New Jersey, followed by Middlesex County and Essex County as the second and third largest counties in New Jersey. The primary market area counties maintain populations ranging from 293,000 in Gloucester County to 946,000 in Bergen County. Overall, the Company’s primary market area counties in New Jersey make up eight of the top ten highest populated counties in the state encompassing approximately 67% of New Jersey’s total population. While large in their population totals, most of the primary market area counties have experienced relatively slow demographic growth during the 2010 to 2018 period, a characteristic typical of mature densely populated urban markets located throughout the Northeast Corridor. Population and household growth rates were the strongest in the counties of Bergen, Middlesex, Essex and Union, which were the only primary market area counties that exceeded the comparable New Jersey growth rates. Comparatively, Camden County and Monmouth County experienced slight declines in population and no change in households since 2010. Population and household growth rates for all of the primary market area counties were below the comparable U.S. growth rates and are projected to remain below the U.S. growth rates over the next five years.

Age distribution measures reflect that the primary market area counties were generally in-line with the New Jersey and U.S age distribution measures.

The primary market area counties encompass the metropolitan areas of New York City and Philadelphia, which has fostered some relatively affluent markets that are served by the Company’s branch network. U.S. Census Bureau data for 2016 shows that New Jersey ranks third in the United States in terms of median household income. Morris County has the highest household and per capita income measures among the primary market area counties, which can be attributable to its close proximity to New York City. Six Fortune 500 companies maintain their headquarters in Morris County, which ranks the highest among all of the New Jersey counites. The lower income areas of the Company’s primary market area include the northern New Jersey counties of Passaic (lowest per capita income) and Essex (lowest median household income).

Table 2.1

Columbia Financial, Inc.

Summary Demographic Data

Table 2.1

Columbia Financial, Inc.

Summary Demographic Data