Columbia Financial (CLBK) Q3 2026 earnings review
Columbia Financial's lending spread widens, but its underlying loans shrink
Columbia Financial, the parent of New Jersey lender Columbia Bank, reshaped its balance sheet through a public stock offering and the purchase of rival Northfield. Net interest income nearly doubled to $114 million, and profit excluding one-offs more than doubled to $41 million as the bank sold low-yielding bonds and paid off costly debt. Reported net income fell to $5 million because of one-time merger charges and losses taken to sell bonds and risky loans.
| Net interest income | $114.4M +99% from a year ago |
|---|---|
| Profit per share, excluding one-offs | $0.16 $0.07 a year ago |
| Net interest margin | 2.96% +0.67 percentage points from a year ago |
| Underlying gross loans (excluding merger) | -$59M change from last quarter by our math |
⚖️ Verdict: 🟢 Bullish
The story got better because the $1.6 billion stock offering and bond restructuring lifted the lending margin by 0.52 percentage points in a single quarter. Chief executive Thomas J. Kemly also sold $302 million of Northfield property loans, cutting New York rent-regulated apartment exposure below 1% of assets. One caution: stripping out $3.2 billion of acquired loans, underlying loan balances shrank by about $59 million from last quarter by our math.
The question now is whether the bank can lend out its $3.2 billion equity pile fast enough to earn a competitive return on stockholder capital. Either new commercial bankers win enough borrowers to replace lower-yielding government bonds with higher-paying loans, or excess capital sits in securities and holds return on tangible equity near 6%. Fourth-quarter loan balances and the first-quarter 2027 computer system conversion will show the pace.
🐂 Bull Case
New Capital and Bond Swaps Lifted Lending Margins
Columbia Financial, the parent of New Jersey lender Columbia Bank, tracks net interest margin (NIM), the profit spread between what it earns on loans and pays on deposits. During the third quarter, chief executive Thomas J. Kemly completed a stock offering raising $1.6 billion and acquired rival lender Northfield Bancorp. Kemly also "executed a series of transactions to improve earnings, reduce interest rate and credit risk on the balance sheet".
- Net interest margin: 2.96%, up 0.67 percentage points from a year ago and 0.52 points from last quarter
- Interest-earning assets to interest-bearing liabilities: 138.8%, up from 126.1% last quarter
- Securities sold and replaced: $254.7 million sold at a $40.8 million loss, reinvested at yields 4.45 percentage points higher
- Borrowings repaid: $353.5 million paid off at an average cost of 3.97%
These moves matter because the $1.6 billion of new cash requires no interest payments, which lowered funding costs while new bond purchases raised asset yields. The bond swap alone will add $9.3 million in interest income over the next year, the company said. Even excluding $6.8 million of accounting gains on acquired loans, NIM reached 2.81% by our math.
What to watch: net interest margin in the fourth quarter, which will be the first full period after the July 20 merger close. A reading near or above 2.96% would show that cheaper funding and higher bond yields are holding up without one-time merger adjustments.
Loan Sales Cut New York Rent-Regulated Exposure
Buying Northfield brought $3.2 billion of held loans onto the balance sheet, including apartment building loans in New York City where local laws cap rent increases. Kemly said the bank acted quickly in "materially reducing our exposure to New York City rent regulated multifamily loans" right after closing the deal.
Columbia agreed to sell $246.2 million of Northfield's New York rent-regulated apartment loans at a $5.9 million loss, picking those "deemed to have the highest credit risk based upon the percentage of units that were rent regulated". The lender also sold $55.6 million of other Northfield commercial property loans at a $1.1 million loss. After the apartment loan sale closed on October 27, remaining New York rent-regulated loans stood at $164.6 million, or less than 1% of total assets.
What to watch: credit loss provisions and loan charge-offs in the fourth quarter. Low charge-offs would confirm that selling those $301.8 million of higher-risk Northfield loans insulated the combined portfolio from New York apartment defaults.
Bigger Scale Lowered Operating Costs as a Share of Income
Banks measure cost control using the efficiency ratio, which shows operating expenses as a percentage of total revenue. Reported non-interest expenses more than doubled from a year ago to $97.5 million because Columbia booked $30.6 million in one-time merger charges and added Northfield's staff and branches.
Excluding one-offs, the efficiency ratio dropped 12.9 percentage points from a year ago to 53.2%. By our math, staff pay and benefits fell by 8.0 percentage points as a share of underlying revenue, to 35.5%, even as amortization of acquired deposit intangibles rose by 2.0 points. In addition, the bank plans "to complete the core system conversion during the first quarter of 2027", which will unify its technology platforms.
What to watch: underlying non-interest expenses in the second quarter of 2027, right after the system conversion finishes. A drop in data processing and staff costs would show that retiring Northfield's separate computer systems delivered further savings.
🐻 Bear Case
Underlying Loan Balances Shrank Outside the Merger
Kemly said Columbia continues to hire commercial bankers to capture market share, adding that "our disciplined focus on capital deployment will drive strong earnings growth and stockholder returns". Headline gross loans rose by $3.14 billion from last quarter to $11.59 billion, which looks like rapid expansion.
However, Northfield brought in $3.2 billion of held loans at closing. Stripping out those acquired balances, underlying loans shrank by about $59 million during the quarter by our math. Rather than lending out its $1.6 billion of new stock proceeds to borrowers, the bank parked $1.1 billion of that cash in government and mortgage bonds yielding 4.80%.
Buying bonds lifted interest income right away, but securities earn less than loans, which yielded an average of 5.37% this quarter. With total capital now sitting at 25.8% of risk-weighted assets, nearly double last year's level, Columbia cannot earn a high return on stockholders' equity until its bankers turn that cash and bond pile into customer loans.
What to watch: total gross loans in the fourth quarter, when no merger additions will cloud the comparison. A decline or tiny increase would show that underlying loan demand in New Jersey and New York remains weak.
Troubled Loans From the Merger Sit Outside Headline Ratios
Columbia highlighted that non-performing loans — loans where borrowers have stopped making payments — fell to $36.5 million, or 0.31% of total gross loans, down from 0.51% last quarter. Management achieved part of that drop by moving $4.9 million of unpaid residential mortgages into a held-for-sale account and selling a $5.9 million foreclosed construction property.
The headline 0.31% figure also leaves out purchased credit deteriorated (PCD) loans, which are loans acquired in a merger that already show signs of credit trouble. Those PCD balances jumped from $9.8 million in June to $163.0 million in September because of Northfield. Meanwhile, a $10.6 million commercial property loan on a six-story mixed-use building in Philadelphia stopped paying during the year.
What to watch: movements in PCD loan balances and net charge-offs over the next two quarters. Rising charge-offs would indicate that the $86.6 million credit discount taken on Northfield's loan book at closing was not enough to cover borrower defaults.
Higher Share Count and Accounting Boosts Cloud Per-Share Profit
Excluding one-offs, profit more than doubled from a year ago to $40.6 million, or $0.16 per diluted share. While the dollar profit jump is real, two timing and accounting factors flattered the per-share number this quarter.
First, the stock offering and merger closed on July 20, three weeks into the quarter. Because of that timing, the bank calculated per-share profit using a weighted average of 251.7 million diluted shares, whereas actual shares at quarter-end stood 7.1% higher at 269.5 million by our math. Second, net interest income included $6.8 million of loan yield accretion, an accounting boost from marking down Northfield's loans at closing that fades as loans pay off.
What to watch: diluted earnings per share excluding one-offs in the fourth quarter, when all 269.5 million shares count for the full ninety days. That figure will establish the true per-share earnings baseline for the combined bank.
👓 Other Themes
Columbia Initiated a Quarterly Dividend After Full Public Conversion
On July 20, the company completed its second-step conversion, moving from a partially mutual holding structure to a fully public company and raising $1.6 billion in net equity. All historical share counts were multiplied by 2.2 to reflect the conversion exchange ratio. Following the capital raise, the board declared a quarterly cash dividend of $0.05 per share, payable on November 25 to stockholders of record on November 10.
💲 Other KPIs
Deposits rose 32.2% from last quarter, adding $3.06 billion. Northfield contributed $3.8 billion of deposits, while customers pulled $970.1 million out of accounts to buy shares in the stock offering; stripping out both items, underlying deposits grew by about $230 million by our math. Non-interest-bearing accounts jumped 49.6% to $2.33 billion, lowering average interest-bearing deposit costs to 2.60%.
The reserve for unpaid loans rose from $71.1 million last quarter to $118.6 million, or 1.02% of gross loans compared with 0.84% in June. An accounting charge of $47.1 million booked on day one of the Northfield purchase drove the increase. Because headline non-performing loans fell, the reserve now covers 325.1% of non-performing loans, up from 165.3% last quarter.
Tangible book value per share — net worth after stripping out goodwill and deposit intangibles — ended the quarter at $11.04. The lender reported $10.03 at the end of 2025, before applying the 2.2-for-1 share exchange ratio from the July conversion; adjusting December's figure for the split puts it at $4.56 by our math, showing how the $1.6 billion stock offering lifted per-share net worth.
❓ Key Questions
Why did underlying loans shrink outside the Northfield deal?
Total gross loans rose $3.14 billion, but acquired Northfield loans accounted for $3.2 billion, leaving a $59 million drop in the existing book by our math. Investors need to know if deliberate loan payoffs or weak borrower demand caused the contraction.
How quickly will loan yield accretion fade from interest income?
Accounting adjustments on acquired Northfield loans added $6.8 million to third-quarter net interest income, lifting the net interest margin by about 0.15 percentage points by our math. Management has not disclosed the scheduled quarterly run-off for the remaining $150.5 million yield mark.
When will the bank resume share repurchases under the new rules?
Even after initiating a $0.05 quarterly dividend, Tier 1 capital sits at 18.4% of adjusted assets and return on tangible equity excluding one-offs is only 6.2%. Banking rules normally restrict buybacks for one year after a second-step conversion.
What is the workout plan for the $163 million of troubled acquired loans?
Purchased credit deteriorated (PCD) loans rose from $9.8 million to $163.0 million following the merger, and Columbia excludes them from its 0.31% non-performing loan ratio. Management has not said whether it plans to sell more of these loans or work them out internally.