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Columbia Financial (CLBK) to Buy Freehold Bank, To Grow Presence

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Columbia Financial, Inc. CLBK, Columbia Bank, MHC (the mutual holding company parent of Columbia Bank), and Columbia Bank have signed a definitive merger deal with Freehold MHC, Freehold Bancorp and Freehold Bank.

The transaction, which has been approved by the boards of directors of all companies, is subject to the satisfaction of customary closing norms, including the receipt of various regulatory approvals. The transaction is anticipated to be closed in fourth-quarter 2021.

Mr. Thomas J. Kemly, Columbia’s president and chief executive officer, said “The transaction will broaden our footprint into Monmouth County. As two community-minded banks, we are proud to strengthen our local impact and support new markets.”

Mr. James H. Wainwright, president and chief executive officer of Freehold, noted “The merger will provide an opportunity for our customers to join a larger banking network, with expanded products and services, while employees will benefit from the opportunity to work for a rapidly growing community bank.”

Transaction Details and Financial Impact

Per the merger agreement, Freehold Bank will likely merge into Columbia Bank two years after the completion of the mergers of Freehold MHC and Freehold Bancorp into Columbia Bank, MHC, and Columbia Financial, respectively.

Effectively, Freehold Bank will become a federal savings bank and operate as a wholly-owned subsidiary of Columbia Financial. With this, its current depositors will become members of the Columbia Bank, MHC.

Immediately prior to the merger, Columbia Financial will issue additional shares of its common stock to Columbia Bank, MHC, amounting to Freehold’s fair value.

The transaction is a strategic fit as it is likely to be accretive to Columbia’s 2022 net income on a pro-forma basis and be around 3% accretive to fully converted tangible book value. However, it will be marginally dilutive to 2022 earnings per share by early 2% due to the additional shares issued to Columbia Bank, MHC.

Over the past year, shares of Columbia Financial have gained 19.4% compared with 3.4% growth recorded by the industry.

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Currently, the company carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Our Take

Markedly, amid heightened costs of regulatory compliance and increased investments in technology, a number of banks have resorted to mergers to remain competitive.

Recently, Old National Bancorp ONB and First Midwest Bancorp, Inc. FMBI entered an all-stock merger of equals worth $6.5 billion, which is expected to close in late 2021 or early 2022, subject to the approval of regulatory bodies and shareholders.

Also, United Bankshares, Inc. UBSI has entered an all-stock merger worth $303.3 million with the parent company of Essex Bank, Community Bankers Trust Corporation.

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