Columbia Financial's $597M Northfield Merger Unlocks Second-Step Conversion, Targets 50% EPS Accretion
February 2, 2026 · by Fintool Agent
Columbia Financial+3.00% (NASDAQ: CLBK) announced Monday it will acquire Northfield Bancorp+2.14% (NASDAQ: NFBK) in a $597 million deal that simultaneously unlocks the Fair Lawn, N.J.-based thrift's long-anticipated second-step conversion to a fully public company. The combined transaction will create New Jersey's third-largest regional bank with $18 billion in assets, while targeting approximately 50% earnings per share accretion in 2027.
Both stocks surged on the news. CLBK jumped 11.2% to $18.09, hitting a new 52-week high of $18.85 intraday. NFBK climbed 11.8% to $13.77, also touching a 52-week high of $13.89. The market reaction signals investor enthusiasm for the dual-catalyst structure that deploys excess capital immediately rather than letting it languish post-conversion.
The Deal: Two Transactions, One Close
The announcement combines two separate but simultaneous transactions: Columbia's second-step conversion from a mutual holding company structure, and its acquisition of Northfield.
Second-Step Conversion: Columbia Bank MHC currently owns 73.1% of Columbia Financial's outstanding shares. Through the conversion, those shares will be cancelled and replaced by a public stock offering at $10.00 per share, expected to raise $1.4 billion to $1.9 billion in gross proceeds. Existing minority shareholders (26.9%) will receive exchange ratios ranging from 1.8729x to 2.5340x, depending on the final appraisal value—translating to implied share values of $18.73 to $25.34 versus the pre-announcement price of $16.27.
Northfield Acquisition: Immediately following the conversion close, Northfield will merge into the new holding company. Northfield shareholders can elect either stock or cash consideration:
| Appraisal Value | Stock Exchange Ratio | Cash Per Share |
|---|---|---|
| Less than $2.3B | 1.425 shares | $14.25 |
| $2.3B - $2.6B | 1.450 shares | $14.50 |
| $2.6B or greater | 1.465 shares | $14.65 |
Cash elections are capped at 30% of outstanding Northfield shares. At the $14.25 midpoint, the transaction represents a 15% premium to NFBK's January 30 close of $12.32 and a 20% premium versus the stock's January average.
Ask Fintool AI AgentWhy Now? Eliminating the Minority Discount
The strategic logic centers on escaping the "minority discount" that has historically weighed on Columbia's valuation as an MHC. With public shareholders owning only 26.9% of the company, Columbia traded at compressed multiples despite solid fundamentals.
CEO Thomas Kemly framed the dual transaction as essential to "achieve a normalized return on equity faster than on a standalone basis." The math supports this: Columbia's standalone ROAA sits at just 0.57%, a byproduct of its overcapitalized balance sheet. The second-step alone would boost this to 0.82%, but pairing it with the Northfield acquisition pushes the metric to 1.06%—nearly doubling profitability.
| Metric | Columbia Standalone | After Second-Step | Pro Forma (Merged) |
|---|---|---|---|
| Return on Avg Assets | 0.57% | 0.82% | 1.06% |
| Net Interest Margin | 2.36% | 2.58% | 2.90% |
| Efficiency Ratio | 68.4% | 56.5% | 48.1% |
| TCE / TA | 6.9% | 10.5% | 16.7% |
The efficiency ratio improvement is particularly striking. Dropping from 68.4% to 48.1% reflects both scale benefits and the fact that Columbia already invested heavily in infrastructure to support $10 billion-plus in assets. That fixed cost base now gets leveraged across a larger revenue pool.
Geographic Expansion: Staten Island and Brooklyn Beachhead
Northfield brings 37 branches spanning Staten Island, Brooklyn, and select New Jersey counties. The 137-year-old institution holds the #1 community bank deposit share in Staten Island, a market with $89.5 billion in total deposits across all institutions.
For Columbia, the deal provides "a median entry into two densely populated and economically diverse New York markets" where median household incomes approach $150,000—well above national averages. Brooklyn alone has 2.6 million residents and 327 competing financial institutions; Northfield ranks 17th by deposits despite having only 8 branches.
The combined entity will operate 108 branches across 14 New Jersey counties plus Brooklyn and Staten Island, with pro forma deposits of approximately $13 billion.
| Market Position | Standalone Columbia | Pro Forma |
|---|---|---|
| NJ-Headquartered Bank Rank | #6 | #3 |
| NYC Metro Community Bank Rank | #6 | #5 |
| Staten Island Community Bank | Not Present | #1 |
Ask Fintool AI AgentThe Rent-Regulated Elephant in the Room
One area receiving significant due diligence attention: Northfield's $419 million portfolio of New York rent-regulated multifamily loans, representing 10.9% of its loan book. This asset class has drawn intense scrutiny across the banking sector, with several institutions taking material write-downs.
Columbia management emphasized the conservative underwriting: weighted average LTV of 49.8%, debt service coverage of 1.60x, and average loan size of just $1.7 million. Over the past decade, Northfield charged off only $414,000 from the entire rent-regulated portfolio—all related to a single credit.
The due diligence process involved over 70 professionals reviewing 624 commercial loan files (52% of the portfolio). Columbia also commissioned independent appraisals from NYC-based firms for any loans showing stressed LTV above 90%. The result: only 11 loans with aggregate collateral shortfalls of $2.7 million.
| NY Rent-Regulated Portfolio | Metric |
|---|---|
| Total Balance | $419M |
| % of Northfield Loans | 10.9% |
| Weighted Avg LTV | 49.8% |
| Weighted Avg DSCR | 1.60x |
| Non-Accrual Balance | $2.0M (0.47%) |
| 10-Year Charge-offs | $414K |
| Applied Credit Mark | 7% |
| Applied Rate Mark | 7% |
| Total Mark | 14% |
The aggregate credit mark on Northfield's entire loan portfolio totals $81 million, or 2.1% of loans—over two times Northfield's existing reserves.
Transaction Economics: EPS Accretion vs. TBV Dilution
At the midpoint appraisal, Columbia projects 50% EPS accretion in 2027, with pro forma earnings of approximately $200 million. The accretion comes from several sources:
- Northfield earnings base: $56.6M
- Cost savings (after-tax): $22.1M
- Interest rate mark accretion: $25.7M
- Less: Core deposit intangible amortization: ($7.8M)
- Less: Durbin Amendment impact: ($0.7M)
The flip side is 4.4% tangible book value dilution, but with a swift 1.8-year earnback period. The deal actually generates negative goodwill ($16.4 million bargain purchase) at the midpoint due to Northfield's fair value adjustments.
| Deal Multiple | Value |
|---|---|
| Price / TBV | 0.86x |
| Price / 2027E EPS | 10.6x |
| Premium to NFBK 1/30 Close | 15% |
| TBV Dilution | 4.4% |
| TBV Earnback | 1.8 years |
| 2027E EPS Accretion | 50% |
Capital Deployment: Four Priorities
The second-step conversion will leave Columbia with roughly $1.4 billion in "excess capital" (assuming a 9% TCE/TA floor). Management outlined four planned uses:
- Organic growth – particularly C&I lending, which Kemly called an "accelerated pace" priority
- Share repurchases – permitted one year after conversion close
- Cash dividends – to be initiated post-close
- Securities restructuring – potential repositioning of the AFS portfolio
Bank M&A is explicitly "de-emphasized for the next 18 months" as management focuses on integration and optimization.
Ask Fintool AI AgentCompetitive Context: NJ Bank Consolidation Accelerates
The Columbia-Northfield deal arrives amid a broader wave of New Jersey bank consolidation. Just five weeks ago, Oceanfirst Financial+0.51% announced its $579 million acquisition of Flushing Financial, creating a $23 billion regional bank with enhanced New York presence.
Bank M&A volume surged 45% in 2025, with seven deals exceeding $1 billion in total value. The regulatory environment has turned more favorable, and scale pressures—particularly around technology investment and compliance costs—are pushing sub-$10 billion banks to seek partners.
| Recent NJ/NY Regional Bank Deals | Value | P/TBV | Target |
|---|---|---|---|
| OceanFirst / Flushing | $579M | 0.80x | Flushing Financial |
| Columbia / Northfield | $597M | 0.86x | Northfield Bancorp |
| Fulton / Blue Foundry | $243M | 0.95x | Blue Foundry Bancorp |
The Columbia deal stands out for its simultaneous second-step conversion, a structure that allows immediate capital deployment rather than the typical post-conversion overhang where banks sit on excess capital while seeking acquisition targets.
Leadership and Governance
Post-close, Columbia's leadership team will expand to incorporate Northfield executives:
| Role | Executive |
|---|---|
| President & CEO | Thomas Kemly (Columbia) |
| 1st SVP & Chief Banking Officer | Dennis Gibney (Columbia) |
| SVP & Chief Operating Officer | Steven Klein (Northfield) |
| EVP & CFO | Thomas Splaine (Columbia) |
The combined board will consist of 13 directors: 9 from Columbia and 4 from Northfield, including Klein.
Klein brings nearly 40 years of industry experience and emphasized the cultural alignment: "I have known and respected the Columbia team for nearly 40 years, and I believe this combination will create enormous value and opportunity for our team members, customers, and stockholders."
What to Watch
Regulatory Approvals: The transaction requires Federal Reserve non-objection on the second-step conversion and standard bank regulatory approvals for the merger. The CRE concentration ratio drops to 211% of total risk-based capital pro forma—well under the 300% supervisory threshold that has constrained many regional banks.
Appraisal Finalization: RP Financial will update its independent appraisal in late February/early March before the S-1 filing, with a final update before the May stock offering. Variation in the appraised value affects the exchange ratios for both existing Columbia shareholders and Northfield stockholders.
Stock Offering Reception: Depositors of Columbia Bank with qualifying balances as of December 31, 2024 receive first-priority subscription rights at $10/share. The community offering and any standby underwritten portion will be led by Keefe, Bruyette & Woods.
Expected Timeline: Early Q3 2026 close, pending shareholder approvals from both companies, depositor approval of the conversion, and regulatory sign-off.