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Executives from Columbia Financial NASDAQ: CLBK and Northfield Bancorp detailed plans for a merger valued at approximately $597 million alongside Columbia’s proposed “second step” conversion to a fully public stockholding company structure during a company call.
Merger terms and timeline
Columbia Bank President and CEO Thomas Kemly said Columbia and Northfield have entered into a merger agreement in which Northfield Bank will merge into Columbia Bank, with Columbia Bank surviving. The companies expect the second step conversion and the merger to close early in the third quarter of 2026, subject to regulatory and shareholder approvals and other customary closing conditions.
Kemly said the deal is valued at about $597 million, or 0.86x Northfield’s tangible book value. Consideration will be paid in stock or cash, with cash available for up to 30% of outstanding Northfield shares. The per-share merger consideration will be based on Columbia’s final valuation appraisal, as required in a second step conversion; on a pro forma basis, management said the consideration would range from $14.25 to $14.65 depending on the final appraised value.
Strategic rationale and pro forma footprint
Kemly said the combined organization would become the third-largest regional bank headquartered in New Jersey, with pro forma total assets of about $18 billion and more than 100 branches across 14 New Jersey counties, plus Brooklyn and Staten Island. He also said the company expects to hold the No. 1 deposit share for community banks in the Brooklyn and Staten Island market.
Management positioned the merger as a way to build a larger New Jersey/New York metro competitor while using proceeds from the conversion to reach a “normalized return on equity faster than on a standalone basis.” Kemly said the second step conversion would eliminate what he described as the minority discount embedded in Columbia’s stock as a mutual holding company and improve the company’s positioning for future growth.
Executives highlighted deposit and market expansion as key benefits, including adding $1.8 billion in deposits in New Jersey and entering Staten Island and Brooklyn, which they described as densely populated and economically diverse markets. Kemly said the combination reduces Columbia’s reliance on long-term, fixed-rate residential mortgages, improving balance sheet flexibility.
Leadership and governance
Following the transaction, Kemly said he would continue as President and CEO of the combined organization. Dennis Gibney, recently promoted, will serve as Senior Executive Vice President and Chief Banking Officer. Kemly also said Steve Klein would join Columbia as Senior Executive Vice President and Chief Operating Officer.
The post-merger board is expected to have 13 directors—nine from Columbia and four from Northfield, including Klein.
Financial outlook and conversion details
Based on a preliminary evaluation by an independent appraiser related to the conversion stock offering, Kemly said Columbia anticipates approximately 50% earnings accretion in 2027, tangible book value dilution of 4.4%, and a tangible book value earnback period of about 1.8 years.
Gibney said Columbia retained RP Financial to perform the independent appraisal for the second step conversion. He noted RP will update the appraisal immediately prior to filing Columbia’s S-1 in late February or early March and again before the company goes to market in early May. Gibney said the final appraisal may change and is subject to Federal Reserve non-objection as part of the conversion review process.
Based on RP’s preliminary valuation range, Gibney said the exchange ratio for existing minority shareholders would range from 1.8729 to 2.5340, while new shareholders would be “buying in at a discount to our peers on a pro forma price-to-tangible book basis.” He said management expects improved operating performance, citing a pro forma 2027 return on average assets of 1.06% and an efficiency ratio of about 48%.
Management described intended uses for conversion proceeds, including:
- Funding future organic growth
- Stock repurchases one year after conversion
- Cash dividends
- Potentially restructuring securities held available for sale
Gibney also said bank M&A would be “de-emphasized for the next 18 months” as management focuses on integration and performance optimization.
Credit profile and due diligence highlights
Executives repeatedly characterized the deal as low risk, citing both banks’ conservative credit cultures and historically low levels of non-performing assets. Kemly said that, pro forma, commercial real estate exposure would be well under 300% of capital.
Gibney provided detail on Northfield’s New York rent-regulated multifamily exposure, which he said totals $419 million. He described the portfolio as diverse with an average loan size of $1.7 million, a weighted average loan-to-value ratio under 50%, and a debt service coverage ratio of 1.6x. He said aggregate charge-offs from the portfolio over the last 10 years were $414,000, and that Northfield currently has one rent-regulated loan on non-accrual status with a $2 million balance; he said the non-accrual status relates to inability to document the source of repayment while the loan continues to pay as agreed.
Gibney said more than 70 individuals participated in due diligence over more than 30 days. Columbia reviewed 624 commercial loan files (slightly more than 50% of the portfolio), and SRA Consulting reviewed 583 commercial loan files (52% of the portfolio). He said both Columbia and SRA reviewed 100% of the New York City rent-regulated loans, non-performing loans, and classified loans. He also said stress testing and appraisals resulted in 11 loans with a collateral shortfall totaling $2.7 million.
Gibney said the credit mark on Northfield’s portfolio is $81 million, representing 2.1% of loans and more than two times Northfield’s current reserves. He added that the aggregate mark on the rent-regulated portfolio is 14%, composed of 7% for a credit mark and 7% for an interest rate mark.
During Q&A, Kemly said the combined company intends to continue transitioning away from a thrift model and emphasized growth in commercial and industrial (C&I) lending, while noting there is still room to grow in commercial real estate given lower CRE-to-capital levels. He also said the company may consider selling a portion of the rent-regulated multifamily loans and had spoken with market participants, adding that any sale pricing “should be well within the mark that we have on the portfolio.”
About Columbia Financial NASDAQ: CLBK
Columbia Financial, Inc is the bank holding company for Columbia Bank, a commercial bank headquartered in Fair Lawn, New Jersey. Through its principal subsidiary, Columbia Bank, the company offers a comprehensive suite of retail and commercial banking products and services. These offerings include deposit accounts, consumer and mortgage lending, commercial real estate financing, and business banking solutions tailored to small- and medium-sized enterprises.
On the consumer side, Columbia Bank provides checking and savings accounts, certificates of deposit, home equity lines of credit, and residential mortgage loans.
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