Columbia Financial buying RSI to expand in affluent New Jersey counties

Columbia Financial in Fair Lawn, New Jersey, is acquiring RSI Bancorp in a deal that expands its footprint in the Garden State’s affluent Union and Middlesex counties.

Both the $9.6 billion-asset Columbia and the $620 million-asset RSI, the holding company for the 170-year-old RSI Bank in Rahway, are depositor-owned mutual institutions, though Columbia sold a minority stake to investors in April 2018.

Columbia announced its deal with RSI on Wednesday, the same day it closed its acquisition of another New Jersey mutual company, the $311 million-asset Freehold Bancorp in Freehold.

Since both Columbia and RSI are mutuals, no money will be paid to third parties as a result of their merger. Instead, Columbia plans to issue 7.07 million shares of stock, worth about $129 million, to its mutual holding company. Columbia issued 2.6 million shares to its mutual holding company as part of its acquisition of Freehold.

Acquiring RSI would push Columbia’s asset size past $10 billion, making it subject to the provisions of the Durbin Amendment, which limits the fees banks with $10 billion or more of assets can charge for debit card transactions. Analyst Laurie Havener Hunsicker, who covers Columbia for Compass Point, estimated this limitation would cost Columbia $2.1 million in interchange revenue in 2023, but that loss would be more than offset by cost savings, which Columbia said would total 30% of RSI’s noninterest expense base.

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RSI reported noninterest expenses totaling $9.9 million through the first nine months of 2021, according to the Federal Deposit Insurance Corp.

Columbia is also expecting to benefit from a bigger presence in Union and Middlesex Counties, both of which boast median household incomes in excess of $90,000. The national average is $67,500 according to the Census Bureau. The combined company would have 17 branches and $1.9 billion of deposits in Union and Middlesex, making it the region’s tenth-largest bank, with a 2.3% share of the $82.4 billion deposit market.

Hunsicker called Columbia’s deal for RSI “a very attractive acquisition.” In a research report Wednesday, Hunsicker estimated that it would boost Columbia’s fully converted tangible book value — its projected valuation as a 100% stock-traded company — to $20.47 per share, a nearly 6% increase from the current level of $19.34.

Hunsicker expects Columbia to announce a second-step conversion and sell the remaining shares held by its mutual holding company to investors “in the next two or three years.”

RSI is the fourth deal Columbia has announced since completing its April 2018 first-step conversion. Along with Freehold, Columbia acquired Roselle Bank in Roselle, New Jersey, in April 2020, and Stewardship Financial Corp. in Midland Park, New Jersey, in November 2019.

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