AGM 2021

May 20, 2021

Good morning. I am Noel Collins, Chairman of the Board of Directors of Columbia Financial Inc. It is my pleasure on behalf of the directors and officers of Columbia Financial and Columbia Bank to welcome you and to also express our appreciation to you for virtually attending this meeting. Each of you has already been supplied with a copy of our proxy statement and 2020 annual report. Copies of these documents along with an agenda and the rules of conduct for this meeting are available on the web hosting site for this meeting for any shareholder who does not have them. At this time, I would like now to introduce Tom Kemmidd, the President and Chief Executive Officer of Columbia Financial, who will preside over the remainder of this meeting. Tom? Thank you, Noel. The principal business of this annual meeting is to 1, elect directors 2, ratify the appointment of our independent auditors for fiscal 2021 and 3, vote on an advisory proposal regarding executive compensation matters. Shareholders will have an opportunity to submit electronic questions regarding these items of business to be considered before the vote is taken later in the meeting. Before we move on to the official business, I would like introduce some of the senior officers and members of our Board of Directors and other representatives of the company who are virtually present here today. Our Chairman of the Board, who you've already heard from. We have Frank Cerwinski, a Director we have James Kukin, a Director Michael Masood Jr, a Director Elizabeth Randall, a Director Lucy Sorrentini, a Director Robert Van Dyke, a Director and Paul Man Austin Bridge, a Director. In addition, Dan Crowley, a Director of Columbia Bank, is in attendance as well. From the executive team, we have Thomas Allen, Senior Vice President and Executive Vice President and Chief Operating Officer Dhamun Naram Basham, Executive Vice President, Chief Information and Digital Officer Dennis Gibney, Executive Vice President, Chief Financial Officer Jerry Kelly, Executive Vice President, Chief Human Resource Officer John Klimovich, Executive Vice President, Chief Risk Officer Mark Krucar, Executive Vice President and Chief Credit Officer Oliver Lewis, Executive Vice President, Head of Commercial Banking Brian Murphy, Executive Vice President's Operations Officer Alison Schlessinger, Executive Vice President, Head of Consumer Banking In addition, we have Eugene Schwartz, Senior Vice President, Legal Counsel and Myra Rinaldi, Senior Vice President of Corporate Governance. Now we will move on to the principal business of the meeting. And at this time, I would like to introduce the corporate secretary of the company and the bank, Meyer Rinaldi. And I would also like to introduce Tom Tai, who has been appointed the Inspector of Elections. Ms. Rinaldi, has notice of this meeting been sent to all shareholders entitled to vote at this meeting? Yes, Mr. Kemley. I have here an affidavit sworn to by myself and duly signed stating that a notice has been mailed to each shareholder as required under the company's bylaws. In addition, resolutions were adopted by the company's Board of Directors fixing March 30, 2021 as the record date for determining shareholders entitled to notice of and to vote at this annual meeting. Finally, an alphabetical list of the shareholders of record as of March 30, 2021, who are entitled to vote showing their respective addresses and the number of shares held by each has been posted to the web hosting site for this meeting for inspection by shareholders. Thank you. Inspector, will you please report on the attendance at this meeting so that we can determine whether a quorum exists? There were 109, 151, 017 shares of Columbia Financial Inc. Entitled to vote as of the March 30, 21 equity date, including 67, 339, 203 shares held by Columbia Bank's MHC, there are 100, 551, 000 747 shares represented in person or by proxy. Thank you. On the basis of these reports, I find that proper notice has been given and that a quorum is present. Accordingly, this meeting has been properly convened. The polls for voting on all matters are hereby opened at this time. The proxies solicited by the Board of Directors and the votes that shareholders seek to cast electronically today can be tallied at 1 time even though they contain 3 matters for consideration. Ms. Rinaldi, were there any shareholder nominations or proposals for business for this meeting properly filed with you as Corporate Secretary? No, there were not. Since no shareholder nominations or proposals were properly filed with the Corporate Secretary in advance of this meeting as provided by the bylaws, the business of this meeting is limited to the 3 matters stated in the agenda. We shall now proceed to take the vote on, 1, 1, compensation matters. I will now read and respond to questions submitted electronically regarding all other proposals to be voted on today. Questions related to relevant matters other than the proposals will be addressed once the polls are closed. I do not believe there are any questions. Is that correct? No questions. All right. Will the shareholders who desire to cast their vote at this meeting please vote electronically now for all 3 proposals following the instructions on the web hosting site for the meeting if you have not done so yet. If you have already classed your proxy and do not wish to change your vote, this there's no need to vote electronically at this time. While the polls are closing and the inspector is counting the votes, I would like to report to you about the affairs of the company. The polls for voting on the matter will be closed at the conclusion of my report. Well, again, good morning and welcome to this, which is our 3rd annual meeting of our stockholders. 2020 will be forever remembered as a year like no other as the global pandemic and subsequent recession closed down our country, forced people to shelter at home and as terrible outcomes from COVID-nineteen spread throughout our state. I would like at this time to express my sympathy to any of our shareholders that personal disruptions brought upon them by the pandemic are put in the past as we return to normalcy. In this challenging year filled with economic uncertainty due to the COVID-nineteen pandemic, Columbia was able to achieve strong financial results while remaining committed to supporting our customers, communities and our employees. We entered a volatile environment with strong capital and liquidity. And during the year, we grew a strong well positioned balance sheet. We saw asset growth of 7.4 percent to $8, 800, 000, 000 deposit growth of 20 percent to $6, 800, 000, 000 we originated $488, 000, 000 under the SBA Paycheck Protection Program We increased net income to $57, 600, 000 or $0.52 per basic and diluted share. We grew net interest income 28.5 percent to $221, 600, 000 We maintained strong asset quality as non performing assets to total assets was 0.09% at December 31, 2020. We completed the acquisition of Roselle Bank and successfully integrated both Roselle and Stewardship Financial Corporation. We continued our digital transformations with the purchase and implementation of several digital banking and other fintech solutions. And finally, we repurchased 7, 600, 000 shares of our common stock for $108, 200, 000 Of course, as we discussed the results of 2020, the impact of COVID-nineteen dominated our bank and in reviewing the impact of COVID-nineteen and our and Columbia's response as it relates to our customers, we continued to operate full service bank branches throughout the pandemic with enhanced safety protocols to provide safe and secure financial solutions for our deposit customers. We also provided enhanced digital solutions to support customers across customer access to their financial products and services. During the year, we deferred payments on nearly $1, 000, 000, 000 of commercial and consumer loans and we subsequently advised and assisted those same customers back to financial stability. We provided mortgage foreclosure forbearance with no credit reporting impact. We provided fee waivers during the height of the pandemic. And of course, we participated in the Paycheck Protection Program to support our families and businesses disrupted by the rapid deterioration in the economy at the beginning of the pandemic. We remained active in our communities providing support to those in need. We funded an emergency field hospital at the New Jersey Convention and Exposition Center in Edison. And what made that transaction special is that we made that commitment within 1 day and we supplied the fund that hospitals billed within a week. We implemented a special program to support nonprofit organizations affected by COVID, pledging $600, 000 to these organizations. Out of that $600, 000 $200, 000 was donated to local hospitals to support their outstanding efforts for frontline healthcare workers and also provided funding to support the vaccination efforts to a local nursing facility. In 2020, grants and donations from our foundation were $2, 200, 000 and so far year to date in 2021, we've continued to make grants out of that foundation of $1, 100, 000 For coworkers, we developed fully operational work from home capabilities for staff which included enhanced technology support. We enhanced the preventive safety measures throughout our facilities in accordance with CDC guidelines. We worked with numerous employees to adapt their schedules for those who were suddenly providing homeschooling or had other personal challenges as a result of the pandemic. We have just recently returned our workforce back to work, initially using a hybrid strategy and trying to get back to a normal working environment. And I want to thank all their patience and hard work in these very disruptive times. So let's review some financial results. In 2020, we grew percent to $8, 800, 000, 000 with loans remaining relatively flat, while deposits increased over 20%. In fact, deposits have continued to grow in 2021, approaching nearly $7, 000, 000, 000 as of March 31. 0.3 percent to $57, 600, 000 or $0.52 per a basic and diluted share despite an increase to our provision for loan losses of 4 36%. That was $14, 300, 000 more in expense in 2020 than in 2019. Net interest income increased 28.5 percent in 2021 compared to 2020. And for the Q1 of 2020 1, net income increased to $21, 000, 000 or $0.20 per basic and diluted earnings per share from $6, 800, 000 in the same quarter of 20 20. Core return on average assets was 0.72% in 2020 and that has improved to 90.99 percent for the Q1 of 2021. Core return on average equity was 0.17% in 2020, improving to 8.71% in the Q1 of 2021. Our net interest margin improved in 2020 2.72%, a 14 basis point improvement over 2019 and that has further improved to 2.8% in the Q1 of 2021. Our expenses remained well controlled contributing to our efficiency ratio improving to 59.65 percent for the year 2020 and that has further improved to 56 0.57% in the Q1 of 2021. As part of our business plan, the company intends to continue to grow all segments of our loan portfolio and we do expect to place greater emphasis on the commercial segments. We have been working hard to add seasoned commercial lenders to help foster this effort, which are actively being recruited from the regional and money centered banks. In 2020, we did originate $489, 000, 000 in PPP loans and so far in 2021, we've originated $236, 000, 000 in PPP 2 that has just started to be completed this last month. During the year, residential lending was very strong as we saw a heightened refi market. However, we were challenged for loan growth with accelerated prepayments and in addition, we took advantage of secondary marketing opportunities during the year. The company will seek to sell a portion of our residential originations in the future as we continue to support the growth of our servicing fee income. A very bright spot for our company has been the performance of our loan portfolios related to asset quality. NPAs to assets remain very low relative to peer data with non performing assets to total assets ending 2020 at 0.07%. In response to the pandemic, we originally had deferrals of our loans of nearly $1, 000, 000, 000 for commercial and consumer loans, as I mentioned, As a result of working with these customers to return to full payment status, loan deferrals declined to $69, 300, 000 or 1.1 percent of loans as of April 22, 2021, and we continue to see improvements as we continue to work with our borrowers. Our allowance for loan losses ended 2020 at 1.25 percent of assets compared to a peer median of 0.78%. An important note is that under the CARES Act and subsequently the Consolidated Appropriations Act, the company elected to delay the implementation of the current expected credit loss model, the CECL model as commonly known in accounting terminology. Management expects that the company's allowance for loan losses and reserves for unfunded commitments would have been 15% to 25% lower under the CECL methodology as of March 31st had we adopted the CECL method. Now while loan activity has been somewhat muted in 2020, deposit flows have been a different story as consumers held liquidity through the pandemic. Deposit growth is retail branch network in conjunction with the efforts of our business development and commercial lending teams. The Company continues to increase checking balances, which currently account for over half of our deposits. And in 2020, the company leveraged our PPP efforts as a means of building and expanding our commercial DDA relationships. Commercial DDA account balances grew 49% during 2020 with an increased focus on treasury services as a means of deepening our relationships. Let's talk about our acquisition of Roselle. We completed that transaction on April 1, 2020. And as a mutual transaction, there was no actual consideration paid to a third party for this same rights to Columbia Bank MHC as Columbia Bank depositors and maintain deposit rights at Columbia Bank as of their account opening date at Roselle Bank. This transaction was accretive to fully converted tangible book value. We added $421, 000, 000 of assets and 4 branches in attractive markets and we have fully achieved expected cost savings by the Q4 of 2020. Through April 30, 2021, CLBK has performed favorably as compared to the NASDAQ Holding Company Index. As we mentioned, our technology initiatives continue and I'd like to talk about that. The bank's emphasis on investing in technology to support our digital transformation continues. And in fact, it actually had to accelerate as a result of the pandemic, which has influenced both our company's need and our consumers' interest in digital banking solutions. Over the last many years, we've made some significant infrastructure improvements designed to put us in a position to enhance our technology, all with the intention of being able to drive growth and profitability to achieve operational excellence to improve our customer experiences, being mindful that security and risk controls need to be at the highest levels and to enhance our employees' experiences. In 2020 2021, our initiatives included a digital mortgage solution implemented with Blend, a small business lending solution using the Ncino platform, business intelligent tools to drive business decisions using PayNet system for small business customers, all with an intention to drive digital adoption and using personal customer experiences using data and analytics. We're also developing artificial intelligence and machine learning for cyber defense. And as response to our pandemic, we had to implement and perfect our remote work place environment and we further developed collaborative suite of tools for our employees to work efficiently. Throughout all this, we reassessed our disaster recovery and continuity plans to ensure that we were prepared for this new remote environment And all in all, our technology spending has increased 24% for the Q1 of 2021 as compared to the same period in 2020 in trying to implement all of the technology advancements necessary to stay competitive. In consumer banking, we continue to focus on expanded products and services to remain competitive. And as I mentioned, in 2020, we've deployed our digital platform to transform our mortgage process with the plan system and this mortgage system, digital mortgage system features a simplified client experience, ease of application entry, automates the data collection process. It is a mobile document uploading system and is positioning us for technological advances further beyond initial deployment. We've made a number of investments in our client experience enhancements, adding to our new adding to a new website, which has enhanced navigation and mobile responsiveness. We've implemented unauthenticated chat, excuse me, where customers or prospects can chat with a live agent via columbiabank.com. We now have an appointment scheduler which gives our customers the ability schedule in person or virtual appointments with bankers and we've enhanced the ability for customers to use external loan payment sources to make their payments in real time loans, all meant to enhance our client experience and continue to give the customer more digital capability. On the product front, we did introduce a commercial credit card later this year. We don't really intend for the consumer card to capture a large market share. However, it does give us opportunity to capture more wallet share and provide a more full service banking experience to our client base. On the business front, we have had a considerable request and add from our business clients, so we've been able to support that request. Under capital management, the company continues to have a strong regulatory capital position. And during 2020, we repurchased 7, 600, 000 shares and continued to repurchase activity during the Q1 of 2020 with an additional 2, 000, 000 shares repurchased. Our tangible common equity to tangible assets ended 2020 at 10.2%, which is down considerably from pro form a IPO super maximum of 15.6%. As I've mentioned in the past, I just want to give you a reminder about dividends. CLBK is not a grandfathered mutual holding company as defined in the Dodd Frank Act, which means that based upon the Federal Reserve current policy, cash dividends cannot be waived by Columbia Bank MHC. And for this reason, we do not expect to pay cash dividends to shareholders. So where do we go from here? Our strategic focus is really centered on some basic ideas that we feel pretty good about economic growth for the future. We feel pretty good about the economic prospects for the country and the region. We are returning, 1st of all, to a normal business environment with a as I mentioned, we've brought our workers back to our headquarters facilities and back office facilities in a hybrid working environment for employees. And we are initiating initiatives to reengage our client base, our COIs, our prospects and this is all in the spirit of being a local community bank. We do expect to resume our growth strategy with a target of 8% to 10% of organic growth. We will continue to evaluate acquisitions opportunistically as they potentially could come along. We will continue to emphasize our commercial lines of business to migrate toward a commercial bank balance sheet. We're building team in order to achieve increase our emphasis on our digital strategy to continue to address customer preferences and to gain operating efficiencies throughout the bank. In this past year, we elevated our focus on ESG programming and our diversity initiatives, and we expect to continue to work hard to show improvements in all those areas. We should be selectively adding de novo branches in target markets as we continue to expand out our community banking focus. We anticipate repurchase shares on a disciplined basis, and we do want to manage our level of operating expense to continue to improve our customers to maintain our low level of problem assets and to continue to reduce the deferred loans that are lingering on the balance sheet. So in conclusion, I want to thank our shareholders for their support and I want to thank our management team and staff and the Board of Directors of Columbia Financial for their efforts and achievements in 2020 and for the tremendous efforts that have already gone on in 2021. 2020 was 1 of the most challenging environments I can recall in my career and I'm very proud of Columbia Financial's results in the face of these considerable challenges presented by the pandemic and that resulting recession. We continue to remain positive about our economic future as we continue to focus toward achieving the goal of becoming the preeminent bank in New Jersey. I want to thank you for taking the time to listen to my comments. Mr. Kemley, Okay. There were no questions submitted electronically. You asked that you answered that before I got to ask it, Myron, but that's fine. Okay. So hearing that no questions, I see the vote tally is complete. And let's see, given that we're running out of time for questions, we will respond to any appropriate questions that have not yet been answered. There are no questions. Okay. So, Inspector, would you now present your report on the vote? A vote was taken at this meeting for the election of directors and Noel R. Holland, Robert Van Dyke and Lucy Cerantini have been through 3 year terms as Directors. In addition, a vote was taken on 1 ratification of the independent registered public accounting firm for the year ending December 31, 2021 and 2, the advisory vote on the compensation of the company's named executive officers as disclosed in the proxy statement. And each proposal received the affirmative vote of a majority of the shares passed at the moment. Okay. The inspector of elections report is accepted and approved, and a copy of the written report will be attached to the minutes of the annual meeting. Miss Rinaldi, please safeguard proxies and the oath and certificate and report of the Inspector of Election and maintain them among the records of the company. I want to thank you all for virtually attending today's meeting and again thank you for all your support. This meeting is now closed.