10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,  D.C. 20549 
 
FORM 10-Q
 
 
[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2015
or
[   ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
For transition period from               to 
Commission File Number
 
001-35791
 
NORTHFIELD BANCORP, INC.
(Exact name of registrant as specified in its charter) 
 
Delaware
 
80-0882592
(State or other jurisdiction of incorporation)
 
(I.R.S. Employer Identification No.)
581 Main Street, Woodbridge, New Jersey
 
07095
(Address of principal executive offices)
 
(Zip Code)
 
Registrant’s telephone number, including area code: (732) 499-7200
 
Not Applicable
(Former name, former address, and former fiscal year, if changed since last report)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ý    No o.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for shorter period that the registrant was required and post such files).  Yes ý    No o.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):
Large accelerated filer  o 
Accelerated filer  ý
Non-accelerated filer  o  (Do not check if smaller reporting company)
Smaller reporting company  o
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o No ý.
Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.
45,565,594 shares of Common Stock, par value $0.01 per share, were issued and outstanding as of October 30, 2015.



NORTHFIELD BANCORP, INC.
Form 10-Q Quarterly Report
Table of Contents
 
 
Page
Item 1.
Item 2.
Item 3.
Item 4.
 
 
 
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
 



Table of Contents

PART I
ITEM 1. FINANCIAL STATEMENTS
NORTHFIELD BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
 
September 30, 2015 (Unaudited)
 
December 31, 2014
ASSETS:
 
 
 
Cash and due from banks
$
14,647

 
$
14,967

Interest-bearing deposits in other financial institutions
71,341

 
61,742

Total cash and cash equivalents
85,988

 
76,709

Trading securities
6,362

 
6,422

Securities available-for-sale, at estimated fair value
 
 
 
(encumbered $101,186 at September 30, 2015 and $216,262 at December 31, 2014)
579,658

 
771,239

Securities held-to-maturity, at amortized cost
 
 
 
(estimated fair value of $8,747 at September 30, 2015, and $3,691 at December 31, 2014) (encumbered of $435 at September 30, 2015, and $2,114 at December 31, 2014)
8,613

 
3,609

Originated loans held-for-investment, net
1,888,643

 
1,632,494

Loans acquired
368,520

 
265,685

Purchased credit-impaired (PCI) loans held-for-investment
33,135

 
44,816

Loans held-for-investment, net
2,290,298

 
1,942,995

Allowance for loan losses
(25,655
)
 
(26,292
)
Net loans held-for-investment
2,264,643

 
1,916,703

Accrued interest receivable
7,737

 
8,015

Bank owned life insurance
131,844

 
129,015

Federal Home Loan Bank of New York stock, at cost
22,203

 
29,219

Premises and equipment, net
24,387

 
26,226

Goodwill
16,159

 
16,159

Other real estate owned
261

 
752

Other assets
33,579

 
36,801

Total assets
$
3,181,434

 
$
3,020,869

 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY:
 
 
 
LIABILITIES:
 

 
 

Deposits
$
2,083,547

 
$
1,620,665

Securities sold under agreements to repurchase
94,000

 
203,200

Federal Home Loan Bank advances and other borrowings
414,623

 
575,458

Advance payments by borrowers for taxes and insurance
10,965

 
7,792

Accrued expenses and other liabilities
20,201

 
19,826

Total liabilities
2,623,336

 
2,426,941

 
 
 
 
STOCKHOLDERS’ EQUITY:
 

 
 

Preferred stock, $0.01 par value; 25,000,000 shares authorized, none issued or outstanding

 

Common stock, $0.01 par value: 150,000,000 shares authorized, 58,226,326 shares issued
 

 
 

at September 30, 2015, and December 31, 2014, 45,568,708 and 48,402,083 outstanding at September 30, 2015, and December 31, 2014, respectively
582

 
582

Additional paid-in-capital
499,206

 
499,606

Unallocated common stock held by employee stock ownership plan
(24,994
)
 
(25,782
)
Retained earnings
253,587

 
248,908

Accumulated other comprehensive income (loss)
518

 
(765
)
Treasury stock at cost; 12,657,618 and 9,824,243 shares at September 30, 2015, and December 31, 2014, respectively
(170,801
)
 
(128,621
)
Total stockholders’ equity
558,098

 
593,928

Total liabilities and stockholders’ equity
$
3,181,434

 
$
3,020,869


See accompanying notes to consolidated financial statements.

3

Table of Contents

NORTHFIELD BANCORP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 
(Unaudited) (In thousands, except per share data) 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Interest income:
 
 
 
 
 
 
 
Loans
$
22,077

 
$
18,263

 
$
64,034

 
$
53,525

Mortgage-backed securities
3,134

 
4,097

 
10,036

 
13,029

Other securities
64

 
146

 
292

 
460

Federal Home Loan Bank of New York dividends
265

 
189

 
905

 
571

Deposits in other financial institutions
30

 
12

 
93

 
37

Total interest income
25,570

 
22,707

 
75,360

 
67,622

Interest expense:
 

 
 

 
 

 
 

Deposits
2,841

 
1,365

 
7,373

 
3,857

Borrowings
2,156

 
2,372

 
7,145

 
7,160

Total interest expense
4,997

 
3,737

 
14,518

 
11,017

Net interest income
20,573

 
18,970

 
60,842

 
56,605

Provision for loan losses
200

 
317

 
472

 
588

Net interest income after provision for loan losses
20,373

 
18,653

 
60,370

 
56,017

Non-interest income:
 

 
 

 
 

 
 

Fees and service charges for customer services
1,047

 
983

 
2,948

 
3,042

Income on bank owned life insurance
947

 
971

 
2,829

 
2,939

(Losses)/gains on securities transactions, net
(388
)
 
(233
)
 
(334
)
 
210

Other
60

 
119

 
333

 
208

Total non-interest income
1,666

 
1,840

 
5,776

 
6,399

Non-interest expense:
 

 
 

 
 

 
 

Compensation and employee benefits
7,265

 
6,796

 
22,506

 
18,569

Occupancy
2,524

 
2,361

 
7,605

 
7,263

Furniture and equipment
349

 
404

 
1,098

 
1,240

Data processing
881

 
894

 
2,839

 
2,861

Professional fees
953

 
551

 
2,246

 
1,757

FDIC insurance
366

 
323

 
1,152

 
943

Other
2,509

 
1,939

 
6,215

 
5,396

Total non-interest expense
14,847

 
13,268

 
43,661

 
38,029

Income before income tax expense
7,192

 
7,225

 
22,485

 
24,387

Income tax expense
2,515

 
2,496

 
8,511

 
8,999

Net income
$
4,677

 
$
4,729

 
$
13,974

 
$
15,388

Net income per common share:
 
 
 
 
 
 
 
Basic
$
0.11

 
$
0.10

 
$
0.33

 
$
0.31

Diluted
$
0.11

 
$
0.10

 
$
0.32

 
$
0.30

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
See accompanying notes to consolidated financial statements.
 

4

Table of Contents

NORTHFIELD BANCORP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - (Continued)
(Unaudited) (In thousands) 
 
 
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Net Income
$
4,677

 
$
4,729

 
$
13,974

 
$
15,388

Other comprehensive income (loss):
 
 
 
 
 
 
 
Unrealized gains (losses) on securities:
 
 
 
 
 
 
 
Net unrealized holding gains (losses) on securities
3,463

 
(4,586
)
 
2,188

 
1,513

Less: reclassification adjustment for net gains included in net income (included in (losses) gains on securities transactions, net)
(13
)
 
(30
)
 
(56
)
 
(229
)
Net unrealized gains (losses)
3,450

 
(4,616
)
 
2,132

 
1,284

Post retirement benefit adjustment

 

 

 
(1,141
)
Other comprehensive income (loss), before tax
3,450

 
(4,616
)
 
2,132

 
143

Income tax (expense) benefit related to net unrealized holding gains (losses) on securities
(1,385
)
 
1,837

 
(872
)
 
(602
)
Income tax expense related to reclassification adjustment for gains included in net income
6

 
12

 
23

 
92

Income tax expense related to post retirement benefit adjustment

 

 

 
458

Other comprehensive income (loss), net of tax
2,071

 
(2,767
)
 
1,283

 
91

Comprehensive income
$
6,748

 
$
1,962

 
$
15,257

 
$
15,479







































See accompanying notes to consolidated financial statements.

5

Table of Contents

NORTHFIELD BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
Nine Months Ended September 30, 2015 and 2014
(Unaudited) (In thousands, except share data) 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common Stock
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares Outstanding
 
 Par Value
 
Additional Paid-in Capital
 
Unallocated Common Stock Held by the Employee Stock Ownership Plan
 
Retained Earnings
 
Accumulated Other Comprehensive Income (loss) Net of tax
 
Treasury Stock
 
Total Stockholders' Equity
Balance at December 31, 2013
57,926,233

 
$
582

 
$
508,609

 
$
(26,985
)
 
$
242,180

 
$
(4,650
)
 
$
(3,628
)
 
$
716,108

Net income
 

 
 

 
 

 
 

 
15,388

 
 

 
 

 
15,388

Other comprehensive income, net of tax
 

 
 

 
 

 
 

 
 

 
91

 
 

 
91

ESOP shares allocated or committed to be released
 

 
 

 
456

 
788

 
 

 
 

 
 

 
1,244

Stock compensation expense
 

 
 

 
1,621

 
 

 
 

 
 

 
 

 
1,621

Additional tax benefit on equity awards
 

 
 

 
390

 
 

 
 

 
 

 
 

 
390

Issuance of restricted stock
998,200

 
 
 
(12,717
)
 
 
 
 
 
 
 
12,717

 

Exercise of stock options
117,177

 
 

 
 
 
 

 
(621
)
 
 

 
896

 
275

Cash dividends declared ($0.12 per common share)
 

 
 

 
 

 
 

 
(9,682
)
 
 

 
 

 
(9,682
)
Treasury stock (average cost of $12.80 per share)
(8,392,838
)
 
 

 
 

 
 

 
 

 
 

 
(107,594
)
 
$
(107,594
)
Balance at September 30, 2014
50,648,772

 
$
582

 
$
498,359

 
$
(26,197
)
 
$
247,265

 
$
(4,559
)
 
$
(97,609
)
 
$
617,841

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2014
48,402,083

 
$
582

 
$
499,606

 
$
(25,782
)
 
$
248,908

 
$
(765
)
 
$
(128,621
)
 
$
593,928

Net income
 

 
 

 
 

 
 

 
13,974

 
 

 
 

 
13,974

Other comprehensive income, net of tax
 

 
 

 
 

 
 

 
 

 
1,283

 
 

 
1,283

ESOP shares allocated or committed to be released
 

 
 

 
637

 
788

 
 

 
 

 
 

 
1,425

Stock compensation expense
 

 
 

 
4,664

 
 

 
 

 
 

 
 

 
4,664

Additional tax benefit on equity awards
 

 
 

 
119

 
 

 
 

 
 

 
 

 
119

Net issuance of restricted stock
388,720

 
 

 
(5,074
)
 
 

 
 

 
 

 
5,074

 

Exercise of stock options
71,325

 
 

 
(746
)
 
 

 
(85
)
 
 

 
712

 
(119
)
Cash dividends declared ($0.21 per common share)
 

 
 

 
 

 
 

 
(9,210
)
 
 

 
 

 
(9,210
)
Treasury stock (average cost of $14.62 per share)
(3,293,420
)
 
 

 
 

 
 

 
 

 
 

 
(47,966
)
 
(47,966
)
Balance at September 30, 2015
45,568,708

 
$
582

 
$
499,206

 
$
(24,994
)
 
$
253,587

 
$
518

 
$
(170,801
)
 
$
558,098





See accompanying notes to consolidated financial statements.

6

Table of Contents

NORTHFIELD BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (In thousands)

 
Nine Months Ended September 30,
 
2015
 
2014
Cash flows from operating activities:
 
 
 
Net income
$
13,974

 
$
15,388

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Provision for loan losses
472

 
588

ESOP and stock compensation expense
6,089

 
2,865

Depreciation
2,572

 
1,853

Amortization of premiums, and deferred loan costs, net of (accretion) of discounts, and deferred loan fees
1,390

 
1,397

Amortization intangible assets
186

 
315

Income on bank owned life insurance
(2,829
)
 
(2,939
)
Net gain on sale of loans held-for-sale
(9
)
 
(79
)
Proceeds from sale of loans held-for-sale
2,126

 
1,693

Origination of loans held-for-sale
(2,123
)
 
(1,143
)
Losses (gains) on securities transactions, net
334

 
(210
)
(Gain) loss on sale of other real estate owned, net
(128
)
 
19

Net purchases of trading securities
(330
)
 
(254
)
Decrease (increase) in accrued interest receivable
278

 
(944
)
Decrease (increase) in other assets
2,251

 
(4,750
)
Increase in accrued expenses and other liabilities
375

 
3,483

Net cash provided by operating activities
24,628

 
17,282

Cash flows from investing activities:
 
 
 
Net increase in loans receivable
(213,098
)
 
(146,479
)
Purchase of loans
(135,938
)
 
(186,475
)
Redemptions (purchases) of Federal Home Loan Bank of New York stock, net
7,016

 
(9,123
)
Purchases of securities available-for-sale

 
(436
)
Principal payments and maturities on securities available-for-sale
141,909

 
125,292

Principal payments and maturities on securities held-to-maturity
831

 
180

Purchases of securities held-to-maturity
(5,882
)
 
(4,066
)
Proceeds from sale of securities available-for-sale
51,148

 
9,149

Proceeds from sale of other real estate owned
554

 
418

Purchases and improvements of premises and equipment
(733
)
 
(317
)
Net cash used in investing activities
(154,193
)
 
(211,857
)
Cash flows from financing activities:
 
 
 
Net increase in deposits
462,882

 
17,838

Dividends paid
(9,210
)
 
(9,682
)
Exercise of stock options
(119
)
 
275

Purchase of treasury stock
(47,966
)
 
(107,594
)
Additional tax benefit on equity awards
119

 
390

Increase in advance payments by borrowers for taxes and insurance
3,173

 
1,312

Repayments under capital lease obligations
(132
)
 
(137
)
Proceeds from securities sold under agreements to repurchase and other borrowings
129,761

 
524,800

Repayments related to securities sold under agreements to repurchase and other borrowings
(399,664
)
 
(227,000
)
Net cash provided by financing activities
138,844

 
200,202

Net increase in cash and cash equivalents
9,279

 
5,627

Cash and cash equivalents at beginning of period
76,709

 
61,239

Cash and cash equivalents at end of period
$
85,988

 
$
66,866


7

Table of Contents

NORTHFIELD BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued)
(Unaudited) (In thousands)
 
Nine Months Ended September 30,
 
2015
 
2014
Supplemental cash flow information:
 
 
 
Cash paid during the period for:
 
 
 
Interest
$
14,571

 
$
11,128

Income taxes
6,698

 
15,730

Non-cash transactions:
 
 
 
Loans charged-off, net
1,109

 
348

Other real estate owned write-downs
71

 
305

Transfers of loans to other real estate owned

 
599












































See accompanying notes to consolidated financial statements.


8

Table of Contents

NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements
Note 1 – Basis of Presentation
The consolidated financial statements are comprised of the accounts of Northfield Bancorp, Inc. (the “Company”) and its wholly owned subsidiaries, Northfield Investments, Inc. and Northfield Bank (the “Bank”), and the Bank’s wholly-owned significant subsidiaries, NSB Services Corp. and NSB Realty Trust. All significant intercompany accounts and transactions have been eliminated in consolidation.
 
In the opinion of management, all adjustments (consisting solely of normal and recurring adjustments) necessary for the fair presentation of the consolidated financial condition and the consolidated results of operations for the unaudited periods presented have been included.  The results of operations and other data presented for the three and nine months ended September 30, 2015, are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2015.  Whenever necessary, certain prior periods' amounts are reclassified to conform to the current periods' presentation.
In preparing the unaudited consolidated financial statements in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”), management has made estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated statements of financial condition and results of operations for the periods indicated.  Material estimates that are particularly susceptible to change are: the allowance for loan losses, the evaluation of goodwill and other intangible assets, impairment on investment securities, fair value measurements of assets and liabilities, and income taxes.  Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the consolidated financial statements in the period they are deemed necessary. While management uses its best judgment, actual amounts or results could differ significantly from those estimates.
 
Certain information and note disclosures usually included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for the preparation of interim financial statements.  The consolidated financial statements presented should be read in conjunction with the audited consolidated financial statements and notes to consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2014, of Northfield Bancorp, Inc. as filed with the SEC. 

Note 2 – Securities Available-for-Sale
The following is a comparative summary of mortgage-backed securities and other securities available-for-sale at September 30, 2015, and December 31, 2014 (in thousands).
 
September 30, 2015
 
 
 
Gross
 
Gross
 
Estimated
 
Amortized
 
unrealized
 
unrealized
 
fair
 
cost
 
gains
 
losses
 
value
Mortgage-backed securities:
 

 
 

 
 

 
 

Pass-through certificates:
 

 
 

 
 

 
 

Government sponsored enterprises (GSE)
$
242,634

 
$
6,826

 
$
770

 
$
248,690

Real estate mortgage investment conduits (REMICs):
 

 
 

 
 

 
 

GSE
323,530

 
1,253

 
5,878

 
318,905

Non-GSE
712

 

 
22

 
690

 
566,876

 
8,079

 
6,670

 
568,285

Other securities:
 
 
 
 
 
 
 
Equity investments-mutual funds
289

 

 

 
289

Corporate bonds
11,057

 
27

 

 
11,084

 
11,346

 
27

 

 
11,373

Total securities available-for-sale
$
578,222

 
$
8,106

 
$
6,670

 
$
579,658



9

Table of Contents
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)


 
December 31, 2014
 
 
 
Gross
 
Gross
 
Estimated
 
Amortized
 
unrealized
 
unrealized
 
fair
 
cost
 
gains
 
losses
 
value
Mortgage-backed securities:
 

 
 

 
 

 
 

Pass-through certificates:
 

 
 

 
 

 
 

GSE
$
292,162

 
$
8,309

 
$
1,131

 
$
299,340

REMICs:
 

 
 

 
 

 
 

GSE
408,328

 
1,314

 
9,192

 
400,450

Non-GSE
1,060

 

 
34

 
1,026

 
701,550

 
9,623

 
10,357

 
700,816

Other securities:
 
 
 
 
 
 
 
Equity investments-mutual funds
410

 

 

 
410

Corporate bonds
69,975

 
40

 
2

 
70,013

 
70,385

 
40

 
2

 
70,423

Total securities available-for-sale
$
771,935

 
$
9,663

 
$
10,359

 
$
771,239

 
The following is a summary of the expected maturity distribution of debt securities available-for-sale, other than mortgage-backed securities, at September 30, 2015 (in thousands).
Available-for-sale
Amortized cost
 
Estimated fair value
Due in one year or less
$
11,057

 
$
11,084

Due after one year through five years

 

 
$
11,057

 
$
11,084

 
Contractual maturities for mortgage-backed securities are not included above, as expected maturities may differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without penalties.

For the three and nine months ended September 30, 2015, the Company had gross proceeds of $11.9 million and $51.1 million, respectively, on sales of securities available-for-sale, with gross realized gains of approximately $13,000 and $59,000, respectively, and grossed realized losses of $0 and $3,000, for the three and nine months ended September 30, 2015, respectively. For the three and nine months ended September 30, 2014, the Company had gross proceeds of $1.9 million and $9.1 million, respectively, on sales of securities available-for-sale, with gross realized gains of approximately $30,000 and $229,000, respectively, and no gross realized losses for both the three and nine months ended September 30, 2014.  The Company recognized net losses of $401,000 and $390,000, on its trading securities portfolio during the three and nine months ended September 30, 2015, respectively. The Company recognized net losses of $262,000 and $17,000, on its trading securities portfolio during the three and nine months ended September 30, 2014, respectively.  The Company did not recognize any other-than-temporary impairment charges during the three and nine months ended September 30, 2015, or September 30, 2014


10

Table of Contents
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)


Gross unrealized losses on mortgage-backed securities and corporate bonds available-for-sale, and the estimated fair value of the related securities, aggregated by security category and length of time that individual securities have been in a continuous unrealized loss position, at September 30, 2015, and December 31, 2014, were as follows (in thousands).
 
September 30, 2015
 
Less than 12 months
 
12 months or more
 
Total
 
Unrealized
 
Estimated
 
Unrealized
 
Estimated
 
Unrealized
 
Estimated
 
losses
 
fair value
 
losses
 
fair value
 
losses
 
fair value
Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
Pass-through certificates:
 
 
 
 
 
 
 
 
 
 
 
GSE
$

 
$
110

 
$
770

 
$
55,076

 
$
770

 
$
55,186

REMICs:
 
 
 
 
 
 
 
 
 
 
 
GSE
73

 
15,820

 
5,805

 
175,033

 
5,878

 
190,853

Non-GSE

 

 
22

 
691

 
22

 
691

Total
$
73

 
$
15,930

 
$
6,597

 
$
230,800

 
$
6,670

 
$
246,730

 
 
December 31, 2014
 
Less than 12 months
 
12 months or more
 
Total
 
Unrealized
 
Estimated
 
Unrealized
 
Estimated
 
Unrealized
 
Estimated
 
losses
 
fair value
 
losses
 
fair value
 
losses
 
fair value
Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
Pass-through certificates:
 
 
 
 
 
 
 
 
 
 
 
GSE
$
1

 
$
181

 
$
1,130

 
$
61,526

 
$
1,131

 
$
61,707

REMICs:
 
 
 
 
 
 
 
 
 
 
 
GSE
30

 
3,179

 
9,162

 
229,896

 
9,192

 
233,075

Non-GSE

 

 
34

 
1,026

 
34

 
1,026

Other Securities:
 
 
 
 
 
 
 
 
 
 
 
  Corporate Bonds
2

 
9,996

 

 

 
2

 
9,996

Total
$
33

 
$
13,356

 
$
10,326

 
$
292,448

 
$
10,359

 
$
305,804

 
The Company held 11 pass-through mortgage-backed securities issued or guaranteed by GSEs, 11 REMIC mortgage-backed securities issued or guaranteed by GSEs, and two REMIC mortgage-backed securities not issued or guaranteed by GSEs that were in a continuous unrealized loss position of greater than twelve months at September 30, 2015.  There were four pass-through mortgage-backed securities issued or guaranteed by GSEs, one REMIC mortgage-backed security issued or guaranteed by a GSE, and no corporate bonds that were in an unrealized loss position of less than twelve months at September 30, 2015. All securities referred to above were rated investment grade at September 30, 2015.  The declines in value relate to the general interest rate environment and are considered temporary.  The securities cannot be prepaid in a manner that would result in the Company not receiving substantially all of its amortized cost.  The Company neither has an intent to sell, nor is it more likely than not that the Company will be required to sell, the securities before the recovery of their amortized cost basis or, if necessary, maturity.
 
The fair values of our investment securities could decline in the future if the underlying performance of the collateral for the collateralized mortgage obligations or other securities deteriorates and our credit enhancement levels do not provide sufficient protections to our contractual principal and interest, which may result in other-than-temporary impairment in the future. 

 

11

Table of Contents
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)



Note 3 – Securities Held-to-Maturity
The following is a summary of mortgage-backed securities held-to-maturity at September 30, 2015, and December 31, 2014 (in thousands). 
 
September 30, 2015
 
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Estimated Fair Value
Mortgage-backed securities:
 

 
 

 
 

 
 

Pass-through certificates:
 

 
 

 
 

 
 

GSEs
$
8,613

 
$
134

 
$

 
$
8,747

Total securities held-to-maturity
$
8,613

 
$
134

 
$

 
$
8,747

 
December 31, 2014
 
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Estimated Fair Value
Mortgage-backed securities:
 

 
 

 
 

 
 

Pass-through certificates:
 

 
 

 
 

 
 

GSEs
$
3,609

 
$
82

 
$

 
$
3,691

Total securities held-to-maturity
$
3,609

 
$
82

 
$

 
$
3,691

    
Contractual maturities for mortgage-backed securities are not presented, as expected maturities on mortgage‑backed securities may differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without penalties. The Company had no held-to-maturity securities at September 30, 2015, or December 31, 2014, that were in an unrealized loss position.

The fair values of our investment securities could decline in the future if the underlying performance of the collateral for the collateralized mortgage obligations or other securities deteriorates and our credit enhancement levels do not provide sufficient protections to our contractual principal and interest.  As a result, there is a risk that significant other-than-temporary impairments may occur in the future given the current economic environment.

 

12

Table of Contents
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)


Note 4 – Loans
 
Net loans held-for-investment are as follows (in thousands).
 
September 30,
 
December 31,
 
2015
 
2014
Real estate loans:
 
Multifamily
$
1,275,335

 
$
1,072,193

Commercial mortgage
407,453

 
390,288

One-to-four family residential mortgage
91,825

 
74,401

Home equity and lines of credit
61,195

 
54,533

Construction and land
17,913

 
21,412

Total real estate loans
1,853,721

 
1,612,827

Commercial and industrial loans
28,995

 
12,945

Other loans
1,217

 
2,157

Total commercial and industrial and other loans
30,212

 
15,102

Deferred loan cost, net
4,710

 
4,565

Originated loans held-for-investment, net
1,888,643

 
1,632,494

PCI Loans
33,135

 
44,816

Loans acquired:
 
 
 
One-to-four family residential mortgage
339,924

 
234,478

Multifamily
17,298

 
18,844

Commercial mortgage
11,298

 
11,999

Construction and land

 
364

Total loans acquired, net
368,520

 
265,685

Loans held-for-investment, net
2,290,298

 
1,942,995

Allowance for loan losses
(25,655
)
 
(26,292
)
Net loans held-for-investment
$
2,264,643

 
$
1,916,703


There were no loans held-for-sale at September 30, 2015 or December 31, 2014.

PCI loans, primarily acquired as part of a Federal Deposit Insurance Corporation-assisted transaction, totaled $33.1 million at September 30, 2015, as compared to $44.8 million at December 31, 2014.   The Company accounts for PCI loans utilizing U.S. GAAP applicable to loans acquired with deteriorated credit quality.  At September 30, 2015, PCI loans consist of approximately 28.2% commercial real estate loans and 51.9% commercial and industrial loans, with the remaining balance in residential and home equity loans. 

The following details the accretion of interest income for the periods indicated (in thousands). 
 
At or for the nine months ended September 30,
 
2015
 
2014
Balance at the beginning of period
$
27,943

 
$
32,464

Accretion into interest income
(3,268
)
 
(3,724
)
Net reclassification (to) from non-accretable difference
(697
)
 
374

Balance at end of period
$
23,978

 
$
29,114

 



13

Table of Contents
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)


The following tables set forth activity in our allowance for loan losses, by loan type, as of and for the three and nine months ended September 30, 2015, and September 30, 2014 (in thousands).  
 
Three Months Ended September 30, 2015
 
Real Estate
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
One-to-Four Family
 
Construction and Land
 
Multifamily
 
Home Equity and Lines of Credit
 
Commercial and Industrial
 
Other
 
Unallocated
 
Originated Loans Total
 
Purchased Credit-Impaired
 
Acquired Loans
 
Total
Allowance for loan losses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
$
7,341

 
$
1,107

 
$
185

 
$
13,208

 
$
941

 
$
1,011

 
$
129

 
$
1,135

 
$
25,057

 
$
400

 
$
59

 
$
25,516

Charge-offs
(6
)
 
(1
)
 

 

 
(115
)
 

 
(1
)
 

 
(123
)
 

 

 
(123
)
Recoveries
2

 

 

 
25

 

 
34

 
1

 

 
62

 

 

 
62

Provisions/(credit)
(710
)
 
(355
)
 
278

 
(245
)
 
322

 
706

 
(56
)
 
(50
)
 
(110
)
 
298

 
12

 
200

Ending balance
$
6,627

 
$
751

 
$
463

 
$
12,988

 
$
1,148

 
$
1,751

 
$
73

 
$
1,085

 
$
24,886

 
$
698

 
$
71

 
$
25,655


 
Three Months Ended September 30, 2014
 
Real Estate
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
One-to-Four Family
 
Construction and Land
 
Multifamily
 
Home Equity and Lines of Credit
 
Commercial and Industrial
 
Other
 
Unallocated
 
Originated Loans Total
 
Purchased Credit-Impaired
 
Acquired Loans
 
Total
Allowance for loan losses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
$
11,882

 
$
1,012

 
$
156

 
$
9,880

 
$
993

 
$
531

 
$
65

 
$
1,308

 
$
25,827

 
$
400

 
$
40

 
$
26,267

Charge-offs
(103
)
 
(36
)
 

 
(8
)
 
(195
)
 
(12
)
 

 

 
(354
)
 

 

 
(354
)
Recoveries

 

 

 
33

 

 

 
14

 

 
47

 

 

 
47

Provisions/(credit)
(439
)
 
(40
)
 
22

 
244

 
461

 
122

 
(2
)
 
(46
)
 
322

 

 
(5
)
 
317

Ending balance
$
11,340

 
$
936

 
$
178

 
$
10,149

 
$
1,259

 
$
641

 
$
77

 
$
1,262

 
$
25,842

 
$
400

 
$
35

 
$
26,277




14

Table of Contents
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)


 
Nine Months Ended September 30, 2015
 
Real Estate
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
One-to-Four Family
 
Construction and Land
 
Multifamily
 
Home Equity and Lines of Credit
 
Commercial and Industrial
 
Other
 
Unallocated
 
Originated Loans Total
 
Purchased Credit-Impaired
 
Acquired Loans
 
Total
Allowance for loan losses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
$
9,309

 
$
951

 
$
266

 
$
12,219

 
$
901

 
$
841

 
$
134

 
$
1,209

 
$
25,830

 
$
400

 
$
62

 
$
26,292

Charge-offs
(836
)
 
(127
)
 

 
(113
)
 
(115
)
 
(32
)
 
(1
)
 

 
(1,224
)
 

 

 
(1,224
)
Recoveries
2

 

 

 
25

 
42

 
34

 
12

 

 
115

 

 

 
115

Provisions/(credit)
(1,848
)
 
(73
)
 
197

 
857

 
320

 
908

 
(72
)
 
(124
)
 
165

 
298

 
9

 
472

Ending balance
$
6,627

 
$
751

 
$
463

 
$
12,988

 
$
1,148

 
$
1,751

 
$
73

 
$
1,085

 
$
24,886

 
$
698

 
$
71

 
$
25,655



 
Nine Months Ended September 30, 2014
 
Real Estate
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
One-to-Four Family
 
Construction and Land
 
Multifamily
 
Home Equity and Lines of Credit
 
Commercial and Industrial
 
Other
 
Unallocated
 
Originated Loans Total
 
Purchased Credit-Impaired
 
Acquired Loans
 
Total
Allowance for loan losses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
$
12,619

 
$
875

 
$
205

 
$
9,374

 
$
860

 
$
425

 
$
67

 
$
1,024

 
$
25,449

 
$
588

 
$

 
$
26,037

Charge-offs
(103
)
 
(58
)
 

 
(8
)
 
(489
)
 
(13
)
 

 

 
(671
)
 

 

 
(671
)
Recoveries

 

 
246

 
33

 

 

 
44

 

 
323

 

 

 
323

Provisions/(credit)
(1,176
)
 
119

 
(273
)
 
750

 
888

 
229

 
(34
)
 
238

 
741

 
(188
)
 
35

 
588

Ending balance
$
11,340

 
$
936

 
$
178

 
$
10,149

 
$
1,259

 
$
641

 
$
77

 
$
1,262

 
$
25,842

 
$
400

 
$
35

 
$
26,277

















15

Table of Contents
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)


The following tables detail the amount of loans receivable held-for-investment, net of deferred loan fees and costs, that are evaluated individually, and collectively, for impairment, and the related portion of the allowance for loan losses that is allocated to each loan portfolio segment, at September 30, 2015, and December 31, 2014 (in thousands).
 
September 30, 2015
 
Real Estate
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
One-to-Four Family
 
Construction and Land
 
Multifamily
 
Home Equity and Lines of Credit
 
Commercial and Industrial
 
Other
 
Unallocated
 
Originated Loans Total
 
Purchased Credit-Impaired
 
Acquired Loans
 
Total
Allowance for loan losses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending balance: individually evaluated for impairment
$
907

 
$
68

 
$

 
$
172

 
$
61

 
$
7

 
$

 
$

 
$
1,215

 
$

 
$
71

 
$
1,286

Ending balance: collectively evaluated for impairment
5,720

 
683

 
463

 
12,816

 
1,087

 
1,744

 
73

 
1,085

 
23,671

 
698

 

 
24,369

Loans, net:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending balance
408,063

 
92,462

 
17,942

 
1,277,556

 
62,359

 
29,044

 
1,217

 

 
1,888,643

 
33,135

 
368,520

 
2,290,298

Ending balance: individually evaluated for impairment
25,894

 
1,600

 

 
2,479

 
358

 
120

 

 

 
30,451

 

 
2,835

 
33,286

Ending balance: collectively evaluated for impairment
382,169

 
90,862

 
17,942

 
1,275,077

 
62,001

 
28,924

 
1,217

 

 
1,858,192

 
33,135

 
365,685

 
2,257,012


 
 December 31, 2014
 
Real Estate
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
One-to-Four Family
 
Construction and Land
 
Multifamily
 
Home Equity and Lines of Credit
 
Commercial and Industrial
 
Other
 
Unallocated
 
Originated Loans Total
 
Purchased Credit-Impaired
 
Acquired Loans
 
Total
Allowance for loan losses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending balance: individually evaluated for impairment
$
2,361

 
$
57

 
$

 
$
215

 
$
13

 
$
109

 
$

 
$

 
$
2,755

 
$

 
$
62

 
$
2,817

Ending balance: collectively evaluated for impairment
6,948

 
894

 
266

 
12,004

 
888

 
732

 
134

 
1,209

 
23,075

 
400

 

 
23,475

Loans, net:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending balance
390,885

 
74,990

 
21,445

 
1,074,539

 
55,486

 
12,992

 
2,157

 

 
1,632,494

 
44,816

 
265,685

 
1,942,995

Ending balance: individually evaluated for impairment
29,224

 
1,072

 

 
1,990

 
327

 
806

 

 

 
33,419

 

 
855

 
34,274

Ending balance: collectively evaluated for impairment
361,661

 
73,918

 
21,445

 
1,072,549

 
55,159

 
12,186

 
2,157

 

 
1,599,075

 
44,816

 
264,830

 
1,908,721


16

Table of Contents
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)


The Company monitors the credit quality of its loan portfolio on a regular basis.  Credit quality is monitored by reviewing certain credit quality indicators.  Management has determined that loan-to-value (LTV) ratios at period end and internally assigned credit risk ratings by loan type are the key credit quality indicators that best measure the credit quality of the Company’s loan receivables. LTV ratios used by management in monitoring credit quality are based on current period end loan balances and original appraised values at time of origination (unless a current appraisal has been obtained as a result of the loan being deemed impaired).  In calculating the provision for loan losses, based on past loan loss experience, management has determined that commercial real estate loans and multifamily loans having LTV ratios, as described above, of less than 35%, and one-to-four family loans having LTV ratios, as described above, of less than 60%, require less of a loss factor than those with higher loan to value ratios.
 
The Company maintains a credit risk rating system as part of the risk assessment of its loan portfolio.  The Company’s lending officers are required to assign a credit risk rating to each loan in their portfolio at origination.  This risk rating is reviewed periodically and adjusted if necessary.  Monthly, management presents monitored assets to the loan committee.  In addition, the Company engages a third-party independent loan reviewer that performs semi-annual reviews of a sample of loans, validating the credit risk ratings assigned to such loans.  The credit risk ratings play an important role in the establishment of the loan loss provision and the allowance for loan losses for originated loans held-for-investment.  After determining the general reserve loss factor for each originated portfolio segment held-for-investment, the originated portfolio segment held-for-investment balance collectively evaluated for impairment is multiplied by the general reserve loss factor for the respective portfolio segment in order to determine the general reserve.  

When assigning a risk rating to a loan, management utilizes the Bank’s internal nine-point credit risk rating system. 

1.
Strong
2.
Good
3.
Acceptable
4.
Adequate
5.
Watch
6.
Special Mention
7.
Substandard
8.
Doubtful
9.
Loss
 
Loans rated 1 to 5 are considered pass ratings.  An asset is classified substandard if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any.  Substandard assets have well defined weaknesses based on objective evidence, and are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.  Assets classified as doubtful have all of the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses present make collection or liquidation in full highly questionable and improbable based on current circumstances.  Assets classified as loss are those considered uncollectible and of such little value that their continuance as assets is not warranted.  Assets which do not currently expose the Company to sufficient risk to warrant classification in one of the aforementioned categories, but possess weaknesses, are required to be designated special mention.


17

Table of Contents
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)


The following tables detail the recorded investment of originated loans held-for-investment, net of deferred fees and costs, by loan type and credit quality indicator at September 30, 2015, and December 31, 2014 (in thousands). 
 
September 30, 2015
 
Real Estate
 
 
 
 
 
 
 
Multifamily
 
Commercial
 
One-to-Four Family
 
Construction and Land
 
Home Equity and Lines of Credit
 
Commercial and Industrial
 
Other
 
Total
 
< 35% LTV
 
=> 35% LTV
 
< 35% LTV
 
=> 35% LTV
 
< 60% LTV
 
=> 60% LTV
 
 
 
 
 
 
 
 
 
 
Internal Risk Rating
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pass
$
85,027

 
$
1,185,108

 
$
49,619

 
$
321,411

 
$
43,172

 
$
45,258

 
$
17,942

 
$
61,823

 
$
28,248

 
$
1,217

 
$
1,838,825

Special Mention
263

 
3,883

 
1,021

 
2,993

 
538

 

 

 
77

 
355

 

 
9,130

Substandard

 
3,275

 
1,245

 
31,774

 
1,784

 
1,710

 

 
459

 
441

 

 
40,688

Originated loans held-for-investment, net
$
85,290

 
$
1,192,266

 
$
51,885

 
$
356,178

 
$
45,494

 
$
46,968

 
$
17,942

 
$
62,359

 
$
29,044

 
$
1,217

 
$
1,888,643


 
December 31, 2014
 
Real Estate
 
 
 
 
 
 
 
Multifamily
 
Commercial
 
One-to-Four Family
 
Construction and Land
 
Home Equity and Lines of Credit
 
Commercial and Industrial
 
Other
 
Total
 
< 35% LTV
 
=> 35% LTV
 
< 35% LTV
 
=> 35% LTV
 
< 60% LTV
 
=> 60% LTV
 
 
 
 
 
 
 
 
 
 
Internal Risk Rating
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pass
$
64,692

 
$
999,708

 
$
47,534

 
$
289,794

 
$
29,629

 
$
40,527

 
$
21,445

 
$
54,935

 
$
11,421

 
$
2,157

 
$
1,561,842

Special Mention
283

 
4,342

 
2,436

 
9,792

 
1,143

 

 

 
360

 
652

 

 
19,008

Substandard
801

 
4,713

 

 
41,329

 
2,303

 
1,388

 

 
191

 
919

 

 
51,644

Originated loans held-for-investment, net
$
65,776

 
$
1,008,763

 
$
49,970

 
$
340,915

 
$
33,075

 
$
41,915

 
$
21,445

 
$
55,486

 
$
12,992

 
$
2,157

 
$
1,632,494



18

Table of Contents
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)


Included in originated and acquired loans receivable (including held-for-sale) are loans for which the accrual of interest income has been discontinued due to deterioration in the financial condition of the borrowers.  The recorded investment of these non-accrual loans was $14.1 million and $13.9 million at September 30, 2015, and December 31, 2014, respectively. Generally, loans are placed on non-accruing status when they become 90 days or more delinquent, or sooner if considered appropriate by management, and remain on non-accrual status until they are brought current, have six consecutive months of performance under the loan terms, and factors indicating reasonable doubt about the timely collection of payments no longer exist.  Therefore, loans may be current in accordance with their loan terms, or may be less than 90 days delinquent and still be on a non-accruing status.    

These non-accrual amounts included loans deemed to be impaired of $10.8 million and $10.1 million at September 30, 2015, and December 31, 2014, respectively.  Loans on non-accrual status with principal balances less than $500,000, and therefore not meeting the Company’s definition of an impaired loan, amounted to $3.3 million and $3.8 million at September 30, 2015, and December 31, 2014, respectively. There were no loans held-for-sale at September 30, 2015 or December 31, 2014. Loans past due 90 days or more and still accruing interest were $143,000 and $708,000 at September 30, 2015, and December 31, 2014, respectively, and consisted of loans that are considered well secured and in the process of collection.  

19

Table of Contents
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)


The following tables set forth the detail, and delinquency status, of non-performing loans (non-accrual loans and loans past due 90 days or more and still accruing), net of deferred fees and costs, at September 30, 2015, and December 31, 2014, excluding loans held-for-sale and PCI loans which have been segregated into pools.
 
September 30, 2015
 
Total Non-Performing Loans
 
Non-Accruing Loans
 
 
 
 
 
0-29 Days Past Due
 
30-89 Days Past Due
 
90 Days or More Past Due
 
Total
 
90 Days or More Past Due and Accruing
 
Total Non-Performing Loans
Loans held-for-investment:
 
 
 
 
 
 
 
 
 
 
 
Real estate loans:
 
 
 
 
 
 
 
 
 
 
 
Commercial
 

 
 

 
 

 
 

 
 

 
 

LTV => 35%
 

 
 

 
 

 
 

 
 

 
 

Substandard
$
6,390

 
$
916

 
$
3,255

 
$
10,561

 
$

 
$
10,561

Total commercial
6,390

 
916

 
3,255

 
10,561

 

 
10,561

One-to-four family residential
 

 
 

 
 

 
 

 
 

 
 

LTV < 60%
 

 
 

 
 

 
 

 
 

 
 

Substandard

 
183

 
930

 
1,113

 

 
1,113

Total

 
183

 
930

 
1,113

 

 
1,113

LTV => 60%
 

 
 

 
 

 
 

 
 

 
 

Substandard
511

 
137

 
366

 
1,014

 

 
1,014

Total
511

 
137

 
366

 
1,014

 

 
1,014

Total one-to-four family residential
511

 
320

 
1,296

 
2,127

 

 
2,127

Construction and land
 

 
 

 
 

 
 

 
 

 
 

Pass

 

 

 

 
112

 
112

Total construction and land

 

 

 

 
112

 
112

Multifamily
 

 
 

 
 

 
 

 
 

 
 

LTV => 35%
 

 
 

 
 

 
 

 
 

 
 

Substandard

 

 
559

 
559

 

 
559

Total multifamily

 

 
559

 
559

 

 
559

Home equity and lines of credit
 

 
 

 
 

 
 

 
 

 
 

Substandard

 

 
97

 
97

 
16

 
113

Total home equity and lines of credit

 

 
97

 
97

 
16

 
113

Commercial and industrial loans
 

 
 

 
 

 
 

 
 

 
 

Pass

 

 

 

 
15

 
15

Total commercial and industrial loans

 

 

 

 
15

 
15

Total non-performing loans held-for-investment
6,901

 
1,236

 
5,207

 
13,344

 
143

 
13,487

Loans acquired:
 

 
 

 
 

 
 

 
 

 
 

One-to-four family residential
 

 
 

 
 

 
 

 
 

 
 

LTV < 60%
 

 
 

 
 

 
 

 
 

 
 

Substandard

 

 
788

 
788

 

 
788

Total one-to-four family residential

 

 
788

 
788

 

 
788

Total non-performing loans acquired

 

 
788

 
788

 

 
788

Total non-performing loans
$
6,901

 
$
1,236

 
$
5,995

 
$
14,132

 
$
143

 
$
14,275


20

Table of Contents
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)


 
December 31, 2014
 
Total Non-Performing Loans
 
Non-Accruing Loans
 
 
 
 
 
0-29 Days Past Due
 
30-89 Days Past Due
 
90 Days or More Past Due
 
Total
 
90 Days or More Past Due and Accruing
 
Total Non-Performing Loans
Loans held-for-investment:
 
 
 
 
 
 
 
 
 
 
 
Real estate loans:
 
 
 
 
 
 
 
 
 
 
 
Commercial
 

 
 

 
 

 
 

 
 

 
 

LTV => 35%
 

 
 

 
 

 
 

 
 

 
 

Substandard
$

 
$
395

 
$
10,769

 
$
11,164

 
$

 
$
11,164

Total commercial

 
395

 
10,769

 
11,164

 

 
11,164

One-to-four family residential
 

 
 

 
 

 
 

 
 

 
 

LTV < 60%
 

 
 

 
 

 
 

 
 

 
 

Substandard

 
190

 
674

 
864

 
286

 
1,150

Total

 
190

 
674

 
864

 
286

 
1,150

LTV => 60%
 

 
 

 
 

 
 

 
 

 
 

Substandard

 

 
1,028

 
1,028

 

 
1,028

Total

 

 
1,028

 
1,028

 

 
1,028

Total one-to-four family residential

 
190

 
1,702

 
1,892

 
286

 
2,178

Home equity and lines of credit
 

 
 

 
 

 
 

 
 

 
 

Substandard

 
98

 

 
98

 

 
98

Total home equity and lines of credit

 
98

 

 
98

 

 
98

Commercial and industrial loans
 

 
 

 
 

 
 

 
 

 
 

Substandard

 

 
408

 
408

 

 
408

Total commercial and industrial loans

 

 
408

 
408

 

 
408

Total non-performing loans held-for-investment

 
683

 
12,879

 
13,562

 
286

 
13,848

Loans acquired:
 

 
 

 
 

 
 

 
 

 
 

One-to-four family residential
 

 
 

 
 

 
 

 
 

 
 

LTV < 60%
 

 
 

 
 

 
 

 
 

 
 

Pass

 

 

 

 
422

 
422

Substandard

 

 
313

 
313

 

 
313

Total one-to-four family residential

 


313


313


422


735

Total non-performing loans acquired:

 

 
313

 
313

 
422

 
735

Total non-performing loans
$

 
$
683

 
$
13,192

 
$
13,875

 
$
708

 
$
14,583


21

Table of Contents
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)


The following tables set forth the detail and delinquency status of originated and acquired loans held-for-investment, net of deferred fees and costs, by performing and non-performing loans at September 30, 2015, and December 31, 2014 (in thousands).
 
September 30, 2015
 
Performing (Accruing) Loans
 
 
 
 
 
0-29 Days Past Due
 
30-89 Days Past Due
 
Total
 
Non-Performing Loans
 
Total Loans Receivable, net
Loans held-for-investment:
 
 
 
 
 
 
 
 
 
Real estate loans:
 
 
 
 
 
 
 
 
 
Commercial
 

 
 

 
 

 
 
 
 
LTV < 35%
 

 
 

 
 

 
 
 
 
Pass
$
49,619

 
$

 
$
49,619

 
$

 
$
49,619

Special Mention
1,021

 

 
1,021

 

 
1,021

Substandard
1,245

 

 
1,245

 

 
1,245

Total
51,885

 

 
51,885

 

 
51,885

LTV => 35%
 

 
 

 
 

 
 

 
 

Pass
321,411

 

 
321,411

 

 
321,411

Special Mention
2,993

 

 
2,993

 

 
2,993

Substandard
13,889

 
7,324

 
21,213

 
10,561

 
31,774

Total
338,293

 
7,324

 
345,617

 
10,561

 
356,178

Total commercial
390,178

 
7,324

 
397,502

 
10,561

 
408,063

One-to-four family residential
 

 
 

 
 

 
 

 
 

LTV < 60%
 

 
 

 
 

 
 

 
 

Pass
40,640

 
2,532

 
43,172

 

 
43,172

Special Mention
166

 
372

 
538

 

 
538

Substandard
654

 
17

 
671

 
1,113

 
1,784

Total
41,460

 
2,921

 
44,381

 
1,113

 
45,494

LTV => 60%
 

 
 

 
 

 
 

 
 

Pass
44,998

 
260

 
45,258

 

 
45,258

Substandard
293

 
403

 
696

 
1,014

 
1,710

Total
45,291

 
663

 
45,954

 
1,014

 
46,968

Total one-to-four family residential
86,751

 
3,584

 
90,335

 
2,127

 
92,462

Construction and land
 

 
 

 
 

 
 

 
 

Pass
16,445

 
1,385

 
17,830

 
112

 
17,942

Total construction and land
16,445

 
1,385

 
17,830

 
112

 
17,942

Multifamily
 

 
 

 
 

 
 

 
 

LTV < 35%
 

 
 

 
 

 
 

 
 

Pass
84,882

 
145

 
85,027

 

 
85,027

Special Mention
55

 
208

 
263

 

 
263

Substandard

 

 

 

 

Total
84,937

 
353

 
85,290

 

 
85,290

LTV => 35%
 

 
 

 
 

 
 

 
 

Pass
1,183,518

 
1,590

 
1,185,108

 

 
1,185,108

Special Mention
2,731

 
1,152

 
3,883

 

 
3,883

Substandard
2,716

 

 
2,716

 
559

 
3,275

Total
1,188,965

 
2,742

 
1,191,707

 
559

 
1,192,266

Total multifamily
1,273,902

 
3,095

 
1,276,997

 
559

 
1,277,556

Home equity and lines of credit
 

 
 

 
 

 
 

 
 

Pass
61,456

 
367

 
61,823

 

 
61,823

Special Mention
77

 

 
77

 

 
77

Substandard
258

 
88

 
346

 
113

 
459

Total home equity and lines of credit
61,791

 
455

 
62,246

 
113

 
62,359

Commercial and industrial loans
 

 
 

 
 

 
 

 
 

Pass
28,234

 

 
28,234

 
15

 
28,249

Special Mention
355

 

 
355

 

 
355

Substandard
387

 
53

 
440

 

 
440

Total commercial and industrial loans
28,976

 
53

 
29,029

 
15

 
29,044


22

Table of Contents
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)


 
September 30, 2015
 
Performing (Accruing) Loans
 
 
 
 
 
0-29 Days Past Due
 
30-89 Days Past Due
 
Total
 
Non-Performing Loans
 
Total Loans Receivable, net
Other loans
 

 
 

 
 

 
 

 
 

Pass
1,206

 
11

 
1,217

 


 
1,217

Total other loans
1,206

 
11

 
1,217

 

 
1,217

Total originated loans held-for-investment
$
1,859,249

 
$
15,907

 
$
1,875,156

 
$
13,487

 
$
1,888,643

Acquired loans:
 
 
 
 
 
 
 
 
 
One-to-four family residential
 
 
 
 
 
 
 
 
 
LTV < 60%
 
 
 
 
 
 
 
 
 
Pass
323,316

 
286

 
323,602

 

 
323,602

Special Mention
563

 

 
563

 

 
563

Substandard
724

 
198

 
922

 
788

 
1,710

Total
324,603

 
484

 
325,087

 
788

 
325,875

LTV => 60%
 

 
 

 
 

 
 

 
 

Pass
13,763

 

 
13,763

 

 
13,763

Substandard
286

 

 
286

 

 
286

Total
14,049

 

 
14,049

 

 
14,049

Total one-to-four family residential
338,652

 
484

 
339,136

 
788

 
339,924

Commercial
 

 
 

 
 

 
 
 
 
LTV < 35%
 

 
 

 
 

 
 
 
 
Pass
2,250

 

 
2,250

 

 
2,250

Special Mention

 

 

 

 

Substandard

 
735

 
735

 

 
735

Total
2,250

 
735

 
2,985

 

 
2,985

LTV => 35%
 
 
 
 
 
 
 
 
 
Pass
5,571

 

 
5,571

 

 
5,571

Special Mention
891

 

 
891

 

 
891

Substandard
1,851

 

 
1,851

 

 
1,851

Total
8,313

 

 
8,313

 

 
8,313

Total commercial
10,563

 
735

 
11,298

 

 
11,298

Multifamily
 

 
 

 
 

 
 

 
 

LTV < 35%
 

 
 

 
 

 
 
 
 
Pass
4,736

 

 
4,736

 

 
4,736

Special Mention
142

 

 
142

 

 
142

Total
4,878

 

 
4,878

 

 
4,878

LTV => 35%
 

 
 

 
 

 
 

 
 

Pass
12,091

 

 
12,091

 

 
12,091

Special Mention
329

 

 
329

 

 
329

Total
12,420

 

 
12,420

 

 
12,420

Total multifamily
17,298

 

 
17,298

 

 
17,298

Total loans acquired
366,513

 
1,219

 
367,732

 
788

 
368,520

 
$
2,225,762

 
$
17,126

 
$
2,242,888

 
$
14,275

 
$
2,257,163



23

Table of Contents
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)


 
December 31, 2014
 
Performing (Accruing) Loans
 
 
 
 
 
0-29 Days Past Due
 
30-89 Days Past Due
 
Total
 
Non-Performing Loans
 
Total Loans Receivable, net
Loans held-for-investment:
 
 
 
 
 
 
 
 
 
Real estate loans:
 
 
 
 
 
 
 
 
 
Commercial
 

 
 

 
 

 
 
 
 
LTV < 35%
 

 
 

 
 

 
 
 
 
Pass
$
47,534

 
$

 
$
47,534

 

 
$
47,534

Special Mention
2,436

 

 
2,436

 

 
2,436

Total
49,970

 

 
49,970

 

 
49,970

LTV => 35%
 

 
 

 
 

 
 

 
 

Pass
288,915

 
878

 
289,793

 

 
289,793

Special Mention
9,792

 

 
9,792

 

 
9,792

Substandard
25,073

 
5,093

 
30,166

 
11,164

 
41,330

Total
323,780

 
5,971

 
329,751

 
11,164

 
340,915

Total commercial
373,750

 
5,971

 
379,721

 
11,164

 
390,885

One-to-four family residential
 

 
 

 
 

 
 

 
 

LTV < 60%
 

 
 

 
 

 
 

 
 

Pass
29,288

 
341

 
29,629

 

 
29,629

Special Mention
1,143

 

 
1,143

 

 
1,143

Substandard
867

 
286

 
1,153

 
1,150

 
2,303

Total
31,298

 
627

 
31,925

 
1,150

 
33,075

LTV => 60%
 

 
 

 
 

 
 

 
 

Pass
38,062

 
2,465

 
40,527

 

 
40,527

Substandard

 
360

 
360

 
1,028

 
1,388

Total
38,062

 
2,825

 
40,887

 
1,028

 
41,915

Total one-to-four family residential
69,360

 
3,452

 
72,812

 
2,178

 
74,990

Construction and land
 

 
 

 
 

 
 

 
 

Pass
21,445

 

 
21,445

 

 
21,445

Total construction and land
21,445

 

 
21,445

 

 
21,445

Multifamily
 

 
 

 
 

 
 

 
 

LTV < 35%
 

 
 

 
 

 
 

 
 

Pass
64,692

 

 
64,692

 

 
64,692

Special Mention
283

 

 
283

 

 
283

Substandard
801

 

 
801

 

 
801

Total
65,776

 

 
65,776

 

 
65,776

LTV => 35%
 

 
 

 
 

 
 

 
 

Pass
999,469

 
239

 
999,708

 

 
999,708

Special Mention
3,822

 
520

 
4,342

 

 
4,342

Substandard
4,382

 
331

 
4,713

 

 
4,713

Total
1,007,673

 
1,090

 
1,008,763

 

 
1,008,763

Total multifamily
1,073,449

 
1,090

 
1,074,539

 

 
1,074,539

Home equity and lines of credit
 

 
 

 
 

 
 

 
 

Pass
54,800

 
135

 
54,935

 

 
54,935

Special Mention
360

 

 
360

 

 
360

Substandard
93

 

 
93

 
98

 
191

Total home equity and lines of credit
55,253

 
135

 
55,388

 
98

 
55,486

Commercial and industrial loans
 

 
 

 
 

 
 

 
 

Pass
11,331

 
90

 
11,421

 

 
11,421

Special Mention
652

 

 
652

 

 
652

Substandard
479

 
32

 
511

 
408

 
919

Total commercial and industrial loans
12,462

 
122

 
12,584

 
408

 
12,992

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

24

Table of Contents
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)


 
December 31, 2014
 
Performing (Accruing) Loans
 
 
 
 
 
0-29 Days Past Due
 
30-89 Days Past Due
 
Total
 
Non-Performing Loans
 
Total Loans Receivable, net
 
 
 
 
 
 
 
 
 
 
Other loans
 

 
 

 
 

 
 

 
 

Pass
2,097

 
60

 
2,157

 

 
2,157

Total other loans
2,097

 
60

 
2,157

 

 
2,157

Total originated loans held-for-investment
$
1,607,816

 
$
10,830

 
$
1,618,646

 
$
13,848

 
$
1,632,494

Loans Acquired
 
 
 
 
 
 
 
 
 
Real estate loans:
 
 
 
 
 
 
 
 
 
One-to-four family residential
 
 
 
 
 
 
 
 
 
LTV < 60%
 
 
 
 
 
 
 
 
 
Pass
225,741

 
526

 
226,267

 
422

 
226,689

Special Mention
597

 

 
597

 

 
597

Substandard
424

 

 
424

 
313

 
737

Total
226,762

 
526

 
227,288

 
735

 
228,023

LTV => 60%
 
 
 
 
 
 
 
 
 
Pass
5,787

 
375

 
6,162

 

 
6,162

Substandard
294

 

 
294

 

 
294

Total
6,081

 
375

 
6,456

 

 
6,456

Total one-to-four family residential
232,843

 
901

 
233,744

 
735

 
234,479

Commercial
 
 
 
 
 
 
 
 
 
LTV < 35%
 
 
 
 
 
 
 
 
 
Pass
2,477

 

 
2,477

 

 
2,477

Special Mention
187

 
521

 
708

 

 
708

Total
2,664

 
521

 
3,185

 

 
3,185

LTV => 35%
 
 
 
 
 
 
 
 
 
Pass
5,817

 

 
5,817

 

 
5,817

Special Mention
2,997

 

 
2,997

 

 
2,997

Total
8,814

 

 
8,814

 

 
8,814

Total commercial
11,478

 
521

 
11,999

 

 
11,999

Construction and land
 
 
 
 
 
 
 
 
 
Substandard
363

 

 
363

 

 
363

Total construction and land
363

 

 
363

 

 
363

Multifamily
 
 
 
 
 
 
 
 
 
LTV < 35%
 
 
 
 
 
 
 
 
 
Pass
4,857

 

 
4,857

 

 
4,857

Special Mention
164

 

 
164

 

 
164

Total
5,021

 

 
5,021

 

 
5,021

LTV => 35%
 
 
 
 
 
 
 
 
 
Pass
13,457

 

 
13,457

 

 
13,457

Special Mention
366

 

 
366

 

 
366

Total
13,823

 

 
13,823

 

 
13,823

Total multifamily
18,844

 

 
18,844

 

 
18,844

Total loans acquired
263,528

 
1,422

 
264,950

 
735

 
265,685

 
$
1,871,344

 
$
12,252

 
$
1,883,596

 
$
14,583

 
$
1,898,179


The following table summarizes originated and acquired impaired loans as of September 30, 2015, and December 31, 2014 (in thousands).

25

Table of Contents
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)


 
September 30, 2015
 
December 31, 2014
 
Recorded Investment
 
Unpaid Principal Balance
 
Related Allowance
 
Recorded Investment
 
Unpaid Principal Balance
 
Related Allowance
With No Allowance Recorded:
 
 
 
 
 
 
 
 
 
 
 
Real estate loans:
 

 
 

 
 

 
 
 
 
 
 
Commercial
 

 
 

 
 

 
 
 
 
 
 
LTV < 35%
 

 
 

 
 

 
 
 
 
 
 
Substandard
$

 
$
122

 
$

 
$

 
$

 
$

LTV => 35%
 

 
 

 
 

 
 
 
 
 
 
Pass
2,425

 
2,562

 

 
3,311

 
3,448

 

Substandard
13,182

 
14,495

 

 
12,880

 
14,339

 

One-to-four family residential
 

 
 

 
 

 
 
 
 
 
 
LTV < 60%
 

 
 

 
 

 
 
 
 
 
 
Pass
361

 
361

 

 
66

 
66

 

Special Mention

 

 

 
138

 
138

 

Substandard
136

 
136

 

 
262

 
262

 

LTV => 60%
 
 
 
 
 
 
 
 
 
 
 
Substandard
200

 
215

 

 

 

 

Multifamily
 

 
 

 
 

 
 
 
 
 
 
LTV => 35%
 

 
 

 
 

 
 
 
 
 
 
Pass
77

 
548

 

 
86

 
557

 
 
Substandard
1,017

 
1,017

 

 
477

 
477

 

Home equity and lines of credit
 
 
 
 
 
 
 
 
 
 
 
Special Mention

 

 

 
49

 
49

 

Commercial and industrial loans
 

 
 

 
 

 
 
 
 
 
 
Special Mention

 

 

 
267

 
268

 

Substandard
90

 
90

 

 
99

 
99

 

With a Related Allowance Recorded:
 

 
 

 
 

 
 
 
 
 
 
Real estate loans:
 

 
 

 
 

 
 
 
 
 
 
Commercial
 

 
 

 
 

 
 
 
 
 
 
LTV => 35%
 

 
 

 
 

 
 
 
 
 
 
Pass
1,662

 
1,662

 
(14
)
 

 

 

Substandard
10,476

 
11,093

 
(893
)
 
13,033

 
14,365

 
(2,361
)
One-to-four family residential
 

 
 

 
 

 
 
 
 
 
 
LTV < 60%
 
 
 
 
 
 
 
 
 
 
 
Pass
372

 
372

 
(3
)
 

 

 

Special Mention

 

 

 
319

 
319

 
(4
)
Substandard
870

 
870

 
(91
)
 
848

 
848

 
(95
)
LTV => 60%
 
 
 
 
 
 
 
 
 
 
 
Substandard
645

 
688

 
(45
)
 
294

 
294

 
(20
)
Multifamily
 

 
 

 
 

 
 
 
 
 
 
LTV => 35%
 
 
 
 
 
 
 
 
 
 
 
Substandard
1,385

 
1,385

 
(172
)
 
1,427

 
1,427

 
(215
)
Home equity and lines of credit
 

 
 

 
 

 
 
 
 
 
 
Pass
271

 
271

 
(13
)
 

 

 

Special Mention
45

 
45

 
(23
)
 
278

 
278

 
(13
)
Substandard
42

 
42

 
(25
)
 

 

 

Commercial and industrial loans
 

 
 

 
 

 
 
 
 
 
 
Special Mention
30

 
30

 
(7
)
 
32

 
32

 
(1
)
Substandard

 

 

 
408

 
530

 
(108
)
Total:
 

 
 

 
 

 
 
 
 
 
 
Real estate loans
 

 
 

 
 

 
 
 
 
 
 
Commercial
27,745

 
29,934

 
(907
)
 
29,224

 
32,152

 
(2,361
)
One-to-four family residential
2,584

 
2,642

 
(139
)
 
1,927

 
1,927

 
(119
)
Construction and land
 
 
 
 
 
 
 
 
 
 
 
Multifamily
2,479

 
2,950

 
(172
)
 
1,990

 
2,461

 
(215
)
Home equity and lines of credit
358

 
358

 
(61
)
 
327

 
327

 
(13
)
Commercial and industrial loans
120

 
120

 
(7
)
 
806

 
929

 
(109
)
 
$
33,286

 
$
36,004

 
$
(1,286
)
 
$
34,274

 
$
37,796

 
$
(2,817
)

26

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NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)


Included in the above table at September 30, 2015, are loans with carrying balances of $12.8 million that were not written down by either charge-offs or specific reserves in our allowance for loan losses.  Included in the above table at December 31, 2014, are loans with carrying balances of $13.1 million that were not written down by either charge-offs or specific reserves in our allowance for loan losses.  Loans not written down by charge-offs or specific reserves at September 30, 2015, and December 31, 2014, are considered to have sufficient collateral values, less costs to sell, to support the carrying balances of the loans.    

The following table summarizes the average recorded investment in originated and acquired impaired loans and interest recognized on impaired loans as of, and for, the three and nine months ended September 30, 2015, and September 30, 2014 (in thousands).
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2015
 
September 30, 2014
 
September 30, 2015
 
September 30, 2014
 
Average Recorded Investment
 
Interest Income
 
Average Recorded Investment
 
Interest Income
 
Average Recorded Investment
 
Interest Income
 
Average Recorded Investment
 
Interest Income
With No Allowance Recorded:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Real estate loans:
 
 
 
 
 
 
 
 
 

 
 

 
 
 
 
Commercial
 
 
 
 
 
 
 
 
 

 
 

 
 
 
 
LTV < 35%
 
 
 
 
 
 
 
 
 

 
 

 
 
 
 
Pass
$

 
$

 
$

 
$

 
$

 
$

 
$
851

 
$

LTV => 35%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pass
2,434

 
24

 
3,347

 
37

 
2,660

 
71

 
7,441

 
112

Special Mention

 

 

 

 
136

 

 

 

Substandard
13,051

 
147

 
10,549

 
117

 
12,398

 
517

 
8,832

 
355

Construction and land
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Substandard

 

 

 

 

 

 
27

 

One-to-four family residential
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LTV < 60%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pass
363

 
5

 

 
1

 
203

 
14

 

 
2

Special Mention

 

 
140

 
2

 
69

 

 
232

 
5

Substandard
92

 
7

 
265

 
3

 
176

 
7

 
267

 
10

LTV => 60%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Substandard
178

 
3

 

 
2

 
89

 
17

 

 
7

Multifamily
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LTV => 35%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pass
79

 
4

 
91

 
4

 
82

 
13

 
45

 
13

Substandard
739

 
10

 
958

 
10

 
607

 
20

 
774

 
22

Home equity and lines of credit
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Special Mention
24

 

 
25

 
1

 
36

 


 
13

 
2

Substandard

 

 

 

 

 

 
250

 

Commercial and industrial loans
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Special Mention
15

 

 
17

 

 
74

 

 
113

 

Substandard
92

 

 
566

 
6

 
95

 

 
704

 
25

With a Related Allowance Recorded:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Real estate loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LTV => 35%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pass
1,670

 
22

 

 

 
835

 
67

 

 

Special Mention

 

 

 

 

 

 
725

 

Substandard
10,717

 
92

 
16,083

 
112

 
11,724

 
201

 
13,189

 
323

One-to-four family residential
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LTV < 60%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pass
374

 
2

 

 

 
203

 
8

 

 

Special Mention

 

 
324

 
2

 
159

 

 
244

 
6

Substandard
874

 
3

 

 

 
870

 
10

 

 

LTV => 60%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Substandard
649

 
4

 

 

 
471

 
40

 
85

 

Multifamily
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LTV => 35%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Substandard
1,392

 
13

 
1,447

 
13

 
1,406

 
39

 
1,461

 
40


27

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NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2015
 
September 30, 2014
 
September 30, 2015
 
September 30, 2014
 
Average Recorded Investment
 
Interest Income
 
Average Recorded Investment
 
Interest Income
 
Average Recorded Investment
 
Interest Income
 
Average Recorded Investment
 
Interest Income
Home equity and lines of credit
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pass
272

 
2

 

 

 
136

 
6

 

 

Special Mention
23

 
1

 
308

 
1

 
150

 
2

 
324

 
4

Substandard
43

 

 

 

 
21

 
2

 
250

 

Commercial and industrial loans
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Special Mention
15

 
1

 
17

 
1

 
23

 
1

 
8

 
1

Substandard

 

 
408

 

 
102

 

 
416

 
2

Total:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Real estate loans
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
27,872

 
285

 
29,979

 
266

 
27,753

 
856

 
31,038

 
790

One-to-four family residential
2,530

 
24

 
729

 
10

 
2,240

 
96

 
828

 
30

Construction and land

 

 

 

 

 

 
27

 

Multifamily
2,210

 
27

 
2,496

 
27

 
2,095

 
72

 
2,280

 
75

Home equity and lines of credit
362

 
3

 
333

 
2

 
343

 
10

 
837

 
6

Commercial and industrial loans
122

 
1

 
1,008

 
7

 
294

 
1

 
1,241

 
28

 
$
33,096

 
$
340

 
$
34,545

 
$
312

 
$
32,725

 
$
1,035

 
$
36,251

 
$
929

     
The following tables summarize loans that were modified as troubled debt restructurings ("TDRs") during the three and nine months ended September 30, 2015. There were no loans modified as TDRs during the three and nine months ended September 30, 2014.

 
Three Months Ended
 
Nine Months Ended
 
September 30, 2015
 
Number of Relationships
 
Pre-Modification Outstanding Recorded Investment
 
Post-Modification Outstanding Recorded Investement
 
Number of Relationships
 
Pre-Modification Outstanding Recorded Investment
 
Post-Modification Outstanding Recorded Investement
 
 
 
(dollars in thousands)
 
 
 
(dollars in thousands)
TDRs
 
 
 
 
 
 
 
 
 
 
 
Commercial real estate loans
 
 
 
 
 
 
 
 
 
 
 
Substandard
 
$—
 
$—
 
3
 
$8,457
 
$8,457
One-to-four family residential
 
 
 
 
 
 
 
 
 
 
 
Pass
 
 
 
1
 
20
 
20
Substandard
1
 
136
 
136
 
4
 
697
 
697
  Home Equity
 
 
 
1
 
43
 
43
Total TDRs
1
 
$136
 
$136
 
9
 
$9,217
 
$9,217

For the three months ended September 30, 2015, the loan in the table above was restructured to receive reduced interest rates.

For the nine months ended September 30, 2015, one of the commercial real estate relationships in the table above, with a pre-modification outstanding recorded investment of $6.3 million, represents five loans to one borrower that were restructured into one loan during the nine months ended September 30, 2015. These loans were restructured to provide partial forgiveness of debt, after the borrower made a $500,000 principal payment. The remaining relationships in the table above were restructured to receive reduced interest rates.
 
At September 30, 2015, and December 31, 2014, there were TDRs of $31.7 million and $33.8 million, respectively.

Management classifies all TDRs as impaired loans.  Impaired loans are individually assessed to determine that the loan’s carrying value is not in excess of the estimated fair value of the collateral less costs to sell, if the loan is collateral dependent, or the present value of the expected future cash flows, if the loan is not collateral dependent. Management performs

28

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NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)


a detailed evaluation of each impaired loan and generally obtains updated appraisals as part of the evaluation.  In addition, management adjusts estimated fair values down to appropriately consider recent market conditions, our willingness to accept a lower sales price to effect a quick sale, and costs to dispose of any supporting collateral.  Determining the estimated fair value of underlying collateral (and related costs to sell) can be difficult in illiquid real estate markets and is subject to significant assumptions and estimates.  Management employs an independent third-party expert in appraisal preparation and review to ascertain the reasonableness of updated appraisals.  Projecting the expected cash flows under TDRs which are not collateral dependent is inherently subjective and requires, among other things, an evaluation of the borrower’s current and projected financial condition. Actual results may be significantly different than our projections and our established allowance for loan losses on these loans, which could have a material effect on our financial results.

At September 30, 2015, no TDR loan that was restructured during the twelve months ended September 30, 2015, had subsequently defaulted.

Note 5 – Deposits

Deposits account balances are summarized as follows (in thousands).
 
September 30,
 
December 31,
 
2015
 
2014
Non-interest-bearing demand
$
265,524

 
$
269,466

Interest-bearing negotiable orders of withdrawal (NOW)
188,082

 
124,961

Savings and money market
1,043,884

 
873,094

Certificates of deposit
586,057

 
353,144

Total deposits
$
2,083,547

 
$
1,620,665

 
Interest expense on deposit accounts is summarized for the periods indicated (in thousands).
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2015
 
2014
 
2015
 
2014
Negotiable orders of withdrawal, savings, and money market
$
1,360

 
$
560

 
$
3,416

 
$
1,549

Certificates of deposit
1,481

 
805

 
3,957

 
2,308

Total interest expense on deposit accounts
$
2,841

 
$
1,365

 
$
7,373

 
$
3,857


Note 6 Equity Incentive Plan
 
In May 2015, the Company granted to directors and employees a total of 419,000 restricted shares, and 1,090,000 stock options to purchase Company stock. These shares and options were issued out of the 2014 Equity Incentive Plan ("the Plan"), which allows the Company to grant common stock or options to purchase common stock at specific prices to directors and employees of the Company. All stock options and restricted stock granted to date vest in equal installments over a five-year period beginning one year from the date of grant. The vesting of options and restricted stock awards may accelerate in accordance with terms of the Plan. Stock options were granted at an exercise price equal to the fair value of the Company’s common stock on the grant date based on quoted market prices and all have an expiration period of ten years. The fair value of stock options granted on May 27, 2015, was estimated utilizing the Black-Scholes option pricing model using the following assumptions: an expected life of 6.5 years, risk-free rate of return of 1.67%, volatility of 32.06% and a dividend yield of 1.90%.

The following table is a summary of the Company’s stock options outstanding as of September 30, 2015, and changes therein during the nine months then ended.

29

Table of Contents
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)


 
Number of Stock Options
 
Weighted Average Grant Date Fair Value
 
Weighted Average Exercise Price
 
Weighted Average Contractual Life (years)
Outstanding - December 31, 2014
5,138,072

 
$
3.08

 
$
10.04

 
7.44

Granted
1,090,000

 
4.07

 
14.76

 
9.66

Forfeited
(66,480
)
 
3.91

 
13.13

 

Exercised
(137,371
)
 
2.30

 
7.09

 

Outstanding - September 30, 2015
6,024,221

 
3.30

 
10.93

 
6.66

Exercisable - September 30, 2015
2,978,203

 
2.57

 
8.08

 
4.23

 
Expected future stock option expense related to the non-vested options outstanding as of September 30, 2015, is $11.1 million over an average period of 4.05 years.
The following is a summary of the status of the Company’s restricted share awards as of September 30, 2015, and changes therein during the nine months then ended.
 
Number of Shares Awarded
 
Weighted Average Grant Date Fair Value
Non-vested at December 31, 2014
1,003,074

 
$
13.11

Granted
419,000

 
14.76

Vested
(195,892
)
 
13.09

Forfeited
(30,280
)
 
13.13

Non-vested at September 30, 2015
1,195,902

 
13.70

 
Expected future stock award expense related to the non-vested restricted share awards as of September 30, 2015, is $15.1 million over an average period of 4.05 years.    

During the nine months ended September 30, 2015 and 2014, the Company recorded $4.7 million and $1.7 million, respectively, of stock-based compensation related to the above plans.  
 
Note 7 – Fair Value Measurements
The following tables present the assets reported on the consolidated balance sheet at their estimated fair value as of September 30, 2015, and December 31, 2014, by level within the fair value hierarchy as required by the Fair Value Measurements and Disclosures Topic of the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC").  Financial assets and liabilities are classified in their entirety based on the level of input that is significant to the fair value measurement.  The fair value hierarchy is as follows:

Level 1 Inputs – Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

Level 2 Inputs – Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly.  These include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (for example, interest rates, volatilities, prepayment speeds, loss severities, credit risks and default rates) or inputs that are derived principally from or corroborated by observable market data by correlations or other means.

Level 3 Inputs – Significant unobservable inputs that reflect the Company’s own assumptions that market participants would use in pricing the assets or liabilities.  


30

Table of Contents
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)


 
Fair Value Measurements at September 30, 2015 Using:
 
Carrying Value
 
Quoted Prices in Active Markets for Identical Assets (Level 1)
 
Significant Other Observable Inputs (Level 2)
 
Significant Unobservable Inputs (Level 3)
 
(in thousands)
Measured on a recurring basis:
 
Assets:
 
 
 
 
 
 
 
Investment securities:
 
 
 
 
 
 
 
Available-for-sale:
 
 
 
 
 
 
 
Mortgage-backed securities:
 
 
 
 
 
 
 
GSE
$
567,595

 
$

 
$
567,595

 
$

Non-GSE
690

 

 
690

 

Other securities:
 
 
 
 
 
 
 
Corporate bonds
11,084

 

 
11,084

 

Equities
289

 
289

 

 

Total available-for-sale
579,658

 
289

 
579,369

 

Trading securities
6,362

 
6,362

 

 

Total
$
586,020

 
$
6,651

 
$
579,369

 
$

Measured on a non-recurring basis:
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
Impaired loans:
 
 
 
 
 
 
 
Real estate loans:
 
 
 
 
 
 
 
Commercial real estate
$
16,770

 
$

 
$

 
$
16,770

One-to-four family residential mortgage
1,888

 

 

 
1,888

Multifamily
1,463

 

 

 
1,463

Home equity and lines of credit
358

 

 

 
358

Total impaired real estate loans
20,479

 

 

 
20,479

Commercial and industrial loans
29

 

 

 
29

Other real estate owned
261

 

 

 
261

Total
$
20,769

 
$

 
$

 
$
20,769


31

Table of Contents
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)


 
Fair Value Measurements at December 31, 2014 Using:
 
Carrying Value
 
Quoted Prices in Active Markets for Identical Assets (Level 1)
 
Significant Other Observable Inputs (Level 2)
 
Significant Unobservable Inputs (Level 3)
 
(in thousands)
Measured on a recurring basis:
 
Assets:
 
 
 
 
 
 
 
Investment securities:
 
 
 
 
 
 
 
Available-for-sale:
 
 
 
 
 
 
 
Mortgage-backed securities:
 
 
 
 
 
 
 
GSE
$
699,790

 
$

 
$
699,790

 
$

Non-GSE
1,026

 

 
1,026

 

Other securities:
 
 
 
 
 
 
 
Corporate bonds
70,013

 

 
70,013

 

Equities
410

 
410

 

 

Total available-for-sale
771,239

 
410

 
770,829

 

Trading securities
6,422

 
6,422

 

 

Total
$
777,661

 
$
6,832

 
$
770,829

 
$

Measured on a non-recurring basis:
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
Impaired loans:
 
 
 
 
 
 
 
Real estate loans:
 
 
 
 
 
 
 
Commercial real estate
$
17,438

 
$

 
$

 
$
17,438

One-to-four family residential mortgage
672

 

 

 
672

Multifamily
1,513

 

 

 
1,513

Home equity and lines of credit
278

 

 

 
278

Total impaired real estate loans
19,901

 

 

 
19,901

Commercial and industrial loans
440

 

 

 
440

Other real estate owned
752

 

 

 
752

Total
$
21,093

 
$

 
$

 
$
21,093


The following table presents qualitative information for Level 3 assets measured at fair value on a non-recurring basis at September 30, 2015 and December 31, 2014 (dollars in thousands).
 
Fair Value
 
Valuation Methodology
 
Unobservable Inputs       
 
Range of Inputs
 
September 30, 2015
 
December 31, 2014
 
 
 
 
 
September 30, 2015
 
December 31, 2014
Impaired loans
$
20,508

 
$
20,341

 
Appraisals
 
Discount for costs to sell
 
7.0%
 
7.0%
 
 
 
 
 
 
 
Discount for quick sale
 
10.0% - 40.0%
 
10.0% - 40.0%
 
 
 
 
 
Discounted cash flows
 
Interest rates
 
4.75% to 7.5%
 
4.6% to 7.5%
Other real estate owned
$
261

 
$
752

 
Appraisals
 
Discount for costs to sell
 
7.0%
 
7.0%

    

32

Table of Contents
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)


Available for Sale Securities: The estimated fair values for mortgage-backed and corporate securities are obtained from an independent nationally recognized third-party pricing service.  The estimated fair values are derived primarily from cash flow models, which include assumptions for interest rates, credit losses, and prepayment speeds.  Broker/dealer quotes are utilized as well, when such quotes are available and deemed representative of the market.  The significant inputs utilized in the cash flow models are based on market data obtained from sources independent of the Company (Observable Inputs), and are therefore classified as Level 2 within the fair value hierarchy.  The estimated fair values of equity securities, classified as Level 1, are derived from quoted market prices in active markets.  Equity securities consist of publicly traded mutual funds.  There were no transfers of securities between Level 1 and Level 2 during the nine months ended September 30, 2015.     
Trading Securities: Fair values are derived from quoted market prices in active markets.  The assets consist of publicly traded mutual funds.
 
Impaired Loans: At September 30, 2015, and December 31, 2014, the Company had impaired originated loans held-for-investment with outstanding principal balances of $23.0 million and $23.7 million, respectively, that were recorded at their estimated fair value of $20.5 million and $20.3 million, respectively.  The Company recorded net impairment recoveries of $887,000 for the nine months ended September 30, 2015 and net impairment charges of $146,000 for the nine months ended September 30, 2014, utilizing Level 3 inputs.  For purposes of estimating fair value of impaired loans, management utilizes independent appraisals, if the loan is collateral dependent, adjusted downward by management, as necessary, for changes in relevant valuation factors subsequent to the appraisal date, or the present value of expected future cash flows for non-collateral dependent loans and TDRs.
 
Other Real Estate Owned (OREO):  At September 30, 2015, and December 31, 2014, the Company had assets acquired through foreclosure, or deed in lieu of foreclosure, of $261,000 and $752,000, respectively.  These assets are recorded at estimated fair value, less estimated selling costs when acquired, establishing a new cost basis.  Estimated fair value is generally based on independent appraisals.  These appraisals include adjustments to comparable assets based on the appraisers’ market knowledge and experience, and are considered Level 3 inputs.  When an asset is acquired, the excess of the loan balance over fair value, less estimated selling costs, is charged to the allowance for loan losses.  If the estimated fair value of the asset declines, a write-down is recorded through non-interest expense.  The valuation of foreclosed assets is subjective in nature and may be adjusted in the future because of changes in economic conditions. 
 
There was a $71,000 subsequent valuation adjustment to one OREO property for the nine months ended September 30, 2015.  Operating costs after acquisition are expensed.    

In addition, the Company may be required, from time to time, to measure the fair value of certain other financial assets on a nonrecurring basis in accordance with U.S. GAAP.  The adjustments to fair value usually result from the application of lower-of-cost-or-market accounting or write downs of individual assets.
 
Fair Value of Financial Instruments
 
The FASB ASC Topic for Financial Instruments requires disclosure of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring or non-recurring basis.  The methodologies for estimating the fair value of financial assets and financial liabilities that are measured at fair value on a recurring or non-recurring basis are discussed above.  The following methods and assumptions were used to estimate the fair value of other financial assets and financial liabilities not already discussed above:
 
(a)
Cash, Cash Equivalents, and Certificates of Deposit
Cash and cash equivalents are short-term in nature with original maturities of nine months or less; the carrying amount approximates fair value.  Certificates of deposit having original terms of six-months or less; the carrying value generally approximates fair value.  Certificates of deposit with an original maturity of nine months or greater; the fair value is derived from discounted cash flows.
 

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NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)


(b)
Securities (Held to Maturity)
The estimated fair values for substantially all of our securities are obtained from an independent nationally recognized pricing service.  The independent pricing service utilizes market prices of same or similar securities whenever such prices are available.  Prices involving distressed sellers are not utilized in determining fair value.  Where necessary, the independent third-party pricing service estimates fair value using models employing techniques such as discounted cash flow analyses.  The assumptions used in these models typically include assumptions for interest rates, credit losses, and prepayments, utilizing market observable data where available.
 
(c)
Federal Home Loan Bank of New York Stock
The fair value for Federal Home Loan Bank of New York (FHLB) stock is its carrying value, since this is the amount for which it could be redeemed and there is no active market for this stock.
 
(d)
Loans (Held-for-Investment)
Fair values are estimated for portfolios of loans with similar financial characteristics.  Loans are segregated by type such as originated and purchased, and further segregated by residential mortgage, construction, land, multifamily, commercial and consumer.  Each loan category is further segmented into amortizing and non-amortizing and fixed and adjustable rate interest terms and by performing and nonperforming categories.  The fair value of loans is estimated by discounting the future cash flows using current prepayment assumptions and current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.  This method of estimating fair value does not fully incorporate the exit price approach to fair value, but instead uses a comparison to current market rates for comparable loans.
 
(e)
Loans (Held-for-Sale)
Held-for-sale loans are carried at the lower of aggregate cost or estimated fair value, less costs to sell, and therefore fair value is equal to carrying value.
 
(f)
Deposits
The fair value of deposits with no stated maturity, such as non-interest bearing demand deposits, savings, NOW and money market accounts, is equal to the amount payable on demand.  The fair value of certificates of deposit is based on the discounted value of contractual cash flows.  The discount rate is estimated using the rates currently offered for deposits of similar remaining maturities.
 
(g)
Commitments to Extend Credit and Standby Letters of Credit
The fair value of commitments to extend credit and standby letters of credit is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties.  For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. 

The fair value of off‑balance sheet commitments is insignificant and therefore not included in the following table.
 
(h)
Borrowings
The fair value of borrowings is estimated by discounting future cash flows based on rates currently available for debt with similar terms and remaining maturity.
 
(i)
Advance Payments by Borrowers
Advance payments by borrowers for taxes and insurance have no stated maturity; the fair value is equal to the amount currently payable.


34

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NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)


The estimated fair value of the Company’s significant financial instruments at September 30, 2015, and December 31, 2014, is presented in the following tables (in thousands).
 
September 30, 2015
 
 
 
Estimated Fair Value
 
Carrying Value
 
Level 1
 
Level 2
 
Level 3
 
Total
Financial assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
85,988

 
$
85,988

 
$

 
$

 
$
85,988

Trading securities
6,362

 
6,362

 

 

 
6,362

Securities available-for-sale
579,658

 
289

 
579,369

 

 
579,658

Securities held-to-maturity
8,613

 

 
8,747

 

 
8,747

Federal Home Loan Bank of New York stock, at cost
22,203

 

 
22,203

 

 
22,203

Net loans held-for-investment
2,264,643

 

 

 
2,270,707

 
2,270,707

Financial liabilities:
 
 
 
 
 
 
 
 
 
Deposits
$
2,083,547

 
$

 
$
2,089,582

 
$

 
$
2,089,582

Repurchase agreements, Federal Home Loan Bank advances and and other borrowings
508,623

 

 
512,344

 

 
512,344

Advance payments by borrowers
10,965

 

 
10,965

 

 
10,965

 
 
December 31, 2014
 
 
 
Estimated Fair Value
 
Carrying Value
 
Level 1
 
Level 2
 
Level 3
 
Total
Financial assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
76,709

 
$
76,709

 
$

 
$

 
$
76,709

Trading securities
6,422

 
6,422

 

 

 
6,422

Securities available-for-sale
771,239

 
410

 
770,829

 

 
771,239

Securities held-to-maturity
3,609

 

 
3,691

 

 
3,691

Federal Home Loan Bank of New York stock, at cost
29,219

 

 
29,219

 

 
29,219

Net loans held-for-investment
1,916,703

 

 

 
1,949,511

 
1,949,511

Financial liabilities:
 
 
 
 
 
 
 
 
 
Deposits
$
1,620,665

 
$

 
$
1,622,536

 
$

 
$
1,622,536

Repurchase agreements, Federal Home Loan Bank advances and and other borrowings
778,658

 

 
781,196

 

 
781,196

Advance payments by borrowers
7,792

 

 
7,792

 

 
7,792

 
Limitations
Fair value estimates are made at a specific point in time based on relevant market information and information about the financial instrument.  These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument.  Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected losses, current economic conditions, risk characteristics of various financial instruments, and other factors.  These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
Fair value estimates are based on existing on- and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments.  In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.
 

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NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)


Note 8 – Earnings Per Share
 
Basic earnings per share is computed by dividing net income available to common stockholders by the weighted average number of shares outstanding during the period.  For purposes of calculating basic earnings per share, weighted average common shares outstanding excludes unallocated employee stock ownership plan (ESOP) shares that have not been committed for release and unvested restricted stock.

Diluted earnings per share is computed using the same method as basic earnings per share, but reflects the potential dilution that could occur if stock options and unvested shares of restricted stock were exercised and converted into common stock.  These potentially dilutive shares are included in the weighted average number of shares outstanding for the period using the treasury stock method.  When applying the treasury stock method, we add: (1) the assumed proceeds from option exercises; (2) the tax benefit, if any, that would have been credited to additional paid-in capital assuming exercise of non-qualified stock options and vesting of shares of restricted stock; and (3) the average unamortized compensation costs related to unvested shares of restricted stock and stock options.  We then divide this sum by our average stock price for the period to calculate assumed shares repurchased.  The excess of the number of shares issuable over the number of shares assumed to be repurchased is added to basic weighted average common shares to calculate diluted earnings per share.
 
The following is a summary of the Company’s earnings per share calculations and reconciliation of basic to diluted earnings per share for the periods indicated (dollars in thousands, except per share data).
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2015
 
2014
 
2015
 
2014
Net income available to common stockholders
$
4,677

 
$
4,729

 
$
13,974

 
$
15,388

 
 
 
 
 
 
 
 
Weighted average shares outstanding-basic
41,495,862

 
47,598,732

 
42,562,396

 
50,357,982

Effect of non-vested restricted stock and stock options outstanding
1,148,923

 
986,245

 
1,158,949

 
995,545

Weighted average shares outstanding-diluted
42,644,785

 
48,584,977

 
43,721,345

 
51,353,527

 
 
 
 
 
 
 
 
Earnings per share-basic
$
0.11

 
$
0.10

 
$
0.33

 
$
0.31

Earnings per share-diluted
$
0.11

 
$
0.10

 
$
0.32

 
$
0.30

Anti-dilutive shares
3,281,500

 
2,530,800

 
3,223,900

 
1,122,636

 
Note 9 – Recent Accounting Pronouncements

 In January 2014, the FASB issued ASU No. 2014-04, “Receivables - Troubled Debt Restructurings by Creditors (subtopic 310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure.” This ASU clarifies that if an in-substance repossession occurs, a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure, or the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal arrangement. This ASU requires interim and annual disclosure of both the amount of foreclosed residential real estate property held by the creditor and the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction. ASU No. 2014-04 is effective for annual and interim periods beginning after December 15, 2014. The adoption of this pronouncement did not have a material effect on the Company’s consolidated financial statements.



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ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Cautionary Statement Regarding Forward-Looking Statements
This Quarterly Report contains certain “forward-looking statements,” which can be identified by the use of such words as “estimate”, “project,” “believe,” “intend,” “anticipate,” “plan,” “seek,” “expect,” and words of similar meaning.  These forward looking statements include, but are not limited to: 

statements of our goals, intentions, and expectations;
statements regarding our business plans, prospects, growth and operating strategies;
statements regarding the quality of our loan and investment portfolios; and
estimates of our risks and future costs and benefits. 

These forward-looking statements are based on current beliefs and expectations of our management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control.  In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. 
 
The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:

general economic conditions, either nationally or in our market areas, that are worse than expected;
competition among depository and other financial institutions;
inflation and changes in the interest rate environment that reduce our margins and yields or reduce the fair value of financial instruments;
adverse changes in the securities or credit markets;
changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements;
our ability to manage operations in the current economic conditions;
our ability to enter new markets successfully and capitalize on growth opportunities;
our ability to successfully integrate acquired entities;
changes in consumer spending, borrowing and savings habits;
changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, or the Securities and Exchange Commission, or the Public Company Accounting Oversight Board;
cyber attacks, computer viruses and other technological risks that may breach the security of our websites or other systems to obtain unauthorized access to confidential information and destroy data or disable our systems;
changes in our organization, compensation, and benefit plans;
changes in the level of government support for housing finance;
significant increases in our loan losses; and
changes in the financial condition, results of operations, or future prospects of issuers of securities that we own.
our ability to successfully close and integrate the pending merger with Hopewell Valley Community Bank ("Hopewell Valley")
 
Because of these and other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements.  Except as required by law, we disclaim any intention or obligation to update or revise any forward-looking statements after the date of this Form 10-Q, whether as a result of new information, future events or otherwise. 
 

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Critical Accounting Policies
 
Note 1 to the Company’s Audited Consolidated Financial Statements for the year ended December 31, 2014, included in the Company’s Annual Report on Form 10-K, as supplemented by this report, contains a summary of significant accounting policies.  Various elements of these accounting policies, by their nature, are inherently subject to estimation techniques, valuation assumptions and other subjective assessments.  Certain assets are carried in the Consolidated Balance Sheets at estimated fair value or the lower of cost or estimated fair value.  Policies with respect to the methodologies used to determine the allowance for loan losses, estimated cash flows of our PCI loans, and judgments regarding the valuation of intangible assets and securities as well as the valuation allowance against deferred tax assets are the most critical accounting policies because they are important to the presentation of the Company’s financial condition and results of operations, involve a higher degree of complexity, and require management to make difficult and subjective judgments which often require assumptions or estimates about highly uncertain matters. The use of different judgments, assumptions, and estimates could result in material differences in the results of operations or financial condition.  These critical accounting policies and their application are reviewed periodically and, at least annually, with the Audit Committee of the Board of Directors.  For a further discussion of the critical accounting policies of the Company, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.
Overview
This overview highlights selected information and may not contain all the information that is important to you in understanding our performance during the period.  For a more complete understanding of trends, events, commitments, uncertainties, liquidity, capital resources, and critical accounting estimates, you should read this entire document carefully, as well as our Annual Report on Form 10-K for the year ended December 31, 2014.
 
Net income was $14.0 million for the nine months ended September 30, 2015, as compared to $15.4 million for the nine months ended September 30, 2014. Diluted earnings per common share were $0.32 for the nine months ended September 30, 2015, compared to diluted earnings per common share of $0.30 for the nine months ended September 30, 2014. Earnings for the nine months ended September 30, 2015, included a charge of $795,000, or $0.02 per share, related to the write-down of deferred tax assets as a result of New York City tax reforms enacted in April 2015 and a charge of $437,000, or $0.01 per share, attributable to merger expenses associated with the Company's recently announced merger with Hopewell Valley Community Bank (discussed further below). By comparison, earnings for the nine months ended September 30, 2014, included a charge of $570,000, or $0.01 per share, related to the write-down of deferred tax assets as a result of New York State tax laws enacted in the first quarter of 2014 and a credit of $937,000 ($560,000, after tax), or $0.01 per share, in compensation and benefits, related to the settlement of the former Flatbush Federal Savings & Loan Association pension plan. For the nine months ended September 30, 2015, our return on average assets was 0.60%, as compared to 0.76% for the nine months ended September 30, 2014.  For the nine months ended September 30, 2015, our return on average stockholders’ equity was 3.24% as compared to 3.03% for the nine months ended September 30, 2014.

On August 26, 2015, the Company announced the signing of a definitive agreement under which Hopewell Valley Community Bank ("Hopewell Valley") will merge with and into the Company's subsidiary, Northfield Bank. Consideration will be paid to Hopewell Valley stockholders in a combination of stock and cash valued at approximately $54.9 million, based on Northfield's closing price of $14.87 on August 25, 2015. The merger will double Northfield’s presence in New Jersey and bring total assets to approximately $3.7 billion. The completion of the transaction is subject to Hopewell Valley's stockholder approval and normal and customary regulatory approvals for both companies.

Comparison of Financial Condition at September 30, 2015, and December 31, 2014
Total assets increased $160.6 million, or 5.3%, to $3.18 billion at September 30, 2015, from $3.02 billion at December 31, 2014. The increase was primarily attributable to an increase in loans held-for-investment, net, of $347.3 million, partially offset by a decrease in securities available-for-sale of $191.6 million.
 
The securities available-for-sale portfolio totaled $579.7 million at September 30, 2015, compared to $771.2 million at December 31, 2014.  At September 30, 2015, $567.6 million of the portfolio consisted of residential mortgage-backed securities issued or guaranteed by Fannie Mae, Freddie Mac, or Ginnie Mae. In addition, the Company held $11.1 million in corporate bonds, all of which were rated investment grade at September 30, 2015, and also held $289,000 of equity investments in money market mutual funds. The effective duration of the securities portfolio at September 30, 2015 was 3.9 years.
 
 Total loans held-for-investment, net, increased $347.3 million to $2.29 billion at September 30, 2015, as compared to $1.94 billion at December 31, 2014. The increase was primarily attributable to increases in originated loans held-for-

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investment, net, and loans acquired, partially offset by a decrease in purchased credit-impaired (“PCI”) loans held-for-investment.

Originated loans held-for-investment, net, totaled $1.89 billion at September 30, 2015, as compared to $1.63 billion at December 31, 2014.  The increase was primarily due to an increase in multifamily real estate loans of $203.1 million, or 18.9%, to $1.28 billion at September 30, 2015, from $1.07 billion at December 31, 2014. The following table details our multifamily real estate loan originations for the nine months ended September 30, 2015 (dollars in thousands).

Originations
 
Weighted Average Interest Rate
 
Weighted Average Loan-to-Value Ratio
 
Weighted Average Months to Next Rate Change or Maturity for Fixed Rate Loans
 
(F)ixed or (V)ariable
 
Amortization Term
$
315,059

 
3.37%
 
65%
 
76
 
V
 
15 - 30 Years
2,829

 
4.14%
 
24%
 
180
 
F
 
15 Years
$
317,888

 
3.38%
 
64%
 
 
 
 
 
 
    
Acquired loans increased by $102.8 million to $368.5 million at September 30, 2015, from $265.7 million at December 31, 2014, primarily due to the purchase of $135.9 million of one-to-four family residential real estate loans, partially offset by paydowns during the period.
    
PCI loans, primarily acquired as part of a transaction with the Federal Deposit Insurance Corporation, decreased to $33.1 million at September 30, 2015, as compared to $44.8 million at December 31, 2014, due to paydowns and sales.  The Company accreted interest income of $3.3 million for the nine months ended September 30, 2015, compared to $3.7 million for the nine months ended September 30, 2014.    
    
Total liabilities increased $196.4 million, or 8.1%, to $2.62 billion at September 30, 2015, from $2.43 billion at December 31, 2014.  The increase was primarily attributable to an increase in deposits of $462.9 million, partially offset by decreases in securities sold under agreements to repurchase of $109.2 million and Federal Home Loan Bank advances and other borrowings of $160.8 million.
    
Deposits increased $462.9 million, or 28.6%, to $2.08 billion at September 30, 2015, from $1.62 billion at December 31, 2014. The increase was attributable to increases of $232.9 million in certificate of deposit accounts ($203.8 million of which were brokered deposits), $80.8 million in savings accounts, $90.0 million in money market accounts, and $59.2 million in transaction accounts.
 
Borrowings and securities sold under agreements to repurchase decreased by $270.0 million, or 34.7%, to $508.6 million at September 30, 2015, from $778.7 million at December 31, 2014.  Management utilizes borrowings to mitigate interest rate risk, for short-term liquidity, and to a lesser extent as part of leverage strategies.  The following is a table of term borrowing maturities (excluding capitalized leases and overnight borrowings) and the weighted average rate by year (dollars in thousands) at September 30, 2015
 
Year
 
Amount
 
Weighted Average Rate
2015
 
$31,000
 
1.90%
2016
 
108,910
 
2.18%
2017
 
165,003
 
1.22%
2018
 
142,715
 
1.66%
2019
 
33,502
 
1.88%
2020
 
20,000
 
1.58%
 
 
$501,130
 
1.66%
 

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Total stockholders’ equity decreased by $35.8 million to $558.1 million at September 30, 2015, from $593.9 million at December 31, 2014.  This decrease was primarily attributable to stock repurchases of $48.0 million and dividend payments of $9.2 million. These decreases were partially offset by net income of $14.0 million for the nine months ended September 30, 2015, $6.1 million of stock compensation activity, and a $1.3 million increase in accumulated other comprehensive income, attributable to the increase in fair value of our securities available-for-sale portfolio.

Comparison of Operating Results for the Nine Months Ended September 30, 2015 and 2014
 
Net Income. Net income was $14.0 million and $15.4 million for the nine months ended September 30, 2015, and September 30, 2014, respectively. Significant variances from the comparable prior year period are as follows: a $4.2 million increase in net interest income, a $623,000 decrease in non-interest income, a $5.6 million increase in non-interest expense, and a $488,000 decrease in income tax expense.

Interest Income. Interest income increased $7.7 million, or 11.4%, to $75.4 million for the nine months ended September 30, 2015, from $67.6 million for the nine months ended September 30, 2014, primarily due to an increase in average interest-earing assets of $370.3 million, or 14.8%, partially offset by a 10 basis point decline in yields earned on interest-earning assets. Interest income on loans increased by $10.5 million, primarily attributable to an increase in the average loan balances of $533.6 million, which was partially offset by a decrease of 52 basis points in the yield earned. The Company accreted interest income related to its PCI loans of $3.3 million for the nine months ended September 30, 2015, as compared to $3.7 million for the comparable prior year period. Interest income on loans for the nine months ended September 30, 2015, reflected loan prepayment income of $1.7 million compared to $1.0 million for the nine months ended September 30, 2014. The nine months ended September 30, 2014, also included a recovery of $246,000 of interest income that was previously charged-off related to a loan payoff. Interest income on mortgage-backed securities decreased by $3.0 million primarily due to a decrease in the average balances of $174.8 million, or 21.3%, and a four basis point decrease in the yield earned.

Interest Expense. Interest expense increased $3.5 million, or 31.8%, to $14.5 million for the nine months ended September 30, 2015, from $11.0 million for the nine months ended September 30, 2014. The increase was primarily due to an increase in interest expense on deposits, primarily as a result of an increase in the average balance of interest bearing deposits of $333.5 million, or 26.7%, to $1.58 billion for the nine months ended September 30, 2015, from $1.25 billion for the nine months ended September 30, 2014, as well as a 21 basis point increase in the cost of interest bearing deposits to 0.62% from 0.41%, due to higher rates offered on our deposit products to remain competitive.
Net Interest Income. Net interest income for the nine months ended September 30, 2015increased $4.2 million, or 7.5%, primarily due to a $370.3 million, or 14.8%, increase in our average interest-earning assets, partially offset by a 19 basis point decrease in our net interest margin to 2.83%. The increase in average interest-earning assets was primarily attributable to an increase in average loans outstanding of $533.6 million, partially offset by a decrease in average mortgage-backed securities of $174.8 million. Yields earned on interest-earning assets decreased 10 basis points to 3.51% for the nine months ended September 30, 2015, from 3.61% for the comparable prior year period. Net interest income for the nine months ended September 30, 2015, also was affected by an increase in interest expense, driven by a $446.3 million, or 25.2%, increase in our average interest-bearing liabilities. The cost of interest-bearing liabilities increased five basis points to 0.88% for the nine months ended September 30, 2015 as compared to 0.83% for the comparable prior year period, resulting from an increase in the cost of interest-bearing deposits, partially offset by lower rates on borrowed funds.
 
Provision for Loan Losses. The provision for loan losses decreased by $116,000 to $472,000 for the nine months ended September 30, 2015, from $588,000 for the nine months ended September 30, 2014, due to an improvement in asset quality indicators and stable economic and business conditions, partially offset by an increase in the provision from the recasting of cash flows on the Company's PCI portfolio, whereas the prior year period included the reversal of previously recorded impairments in the PCI portfolio. Net charge-offs were $1.1 million for the nine months ended September 30, 2015, compared to net charge-offs of $348,000 for the nine months ended September 30, 2014. The increased level of charge-offs is primarily related to recoveries recorded in 2014 and to five previously impaired loans to one borrower that were restructured and partially charged-off during the first quarter of 2015. These loans had existing specific reserves associated with them that adequately covered the charge-offs, resulting in no material effect on the provision for loan losses for the nine months ended September 30, 2015. At September 30, 2015, the balance of the restructured loan was $6.0 million, with a related specific reserve of $542,000.
 
Non-interest Income. Non-interest income decreased $623,000, or 9.7%, to $5.8 million for the nine months ended September 30, 2015, from $6.4 million for the nine months ended September 30, 2014, due to decreases in fees and service charges for customer services of $94,000, income on bank owned life insurance of $110,000 and gains on securities transactions, net, of $544,000. These decreases were partially offset by an increase in other income of $125,000, primarily

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related to a $129,000 realized gain on the sale of an other real estate owned property during the nine months ended September 30, 2015. Securities losses, net, in the nine months ended September 30, 2015 and September 30, 2014, included losses of $390,000 and $17,000, respectively, related to the Company’s trading portfolio.  The trading portfolio is utilized to fund the Company’s deferred compensation obligation to certain employees and directors of the Company's deferred compensation plan (the Plan). The participants of this Plan, at their election, defer a portion of their compensation. Gains and losses on trading securities have no effect on net income since participants benefit from, and bear the full risk of, changes in the trading securities market values. Therefore, the Company records an equal and offsetting amount in compensation expense, reflecting the change in the Company’s obligations under the Plan.
   
Non-interest Expense. Non-interest expense increased $5.6 million, or 14.8%, to $43.7 million for the nine months ended September 30, 2015, from $38.0 million for the nine months ended September 30, 2014. This was primarily due to a $3.9 million increase in compensation and employee benefits, primarily attributable to increased salary expense, health benefit costs, and stock compensation expense, related to stock awards issued in June 2014 and May 2015, a $342,000 increase in occupancy costs, a $489,000 increase in professional fees, primarily attributable to merger expenses associated with the pending merger with Hopewell Valley, and an $819,000 increase in other expenses, largely due to an increase in Directors' stock awards. By comparison, non-interest expense for the nine months ended September 30, 2014, was favorably affected by a pre-tax gain of $937,000 related to the settlement of the former Flatbush Federal Savings & Loan Association pension plan.

Income Tax Expense. The Company recorded income tax expense of $8.5 million for the nine months ended September 30, 2015, compared to $9.0 million for the nine months ended September 30, 2014.  The effective tax rate for the nine months ended September 30, 2015, was 37.9% compared to 36.9% for the nine months ended September 30, 2014. Income tax expense for the nine months ended September 30, 2015, included a deferred tax asset write-down of $795,000 related to New York City tax reforms enacted in April 2015, whereas the comparable prior year period included a deferred tax asset write-down of $570,000 related to New York State tax reforms enacted in March 2014. The nine months ended September 30, 2015, also included $437,000 in non-deductible merger related expenses.
  

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ANALYSIS OF NET INTEREST INCOME
(Dollars in thousands)
 
For the Nine Months Ended
 
September 30, 2015
 
September 30, 2014
 
Average Outstanding Balance
 
Interest
 
Average Yield/ Rate (1)
 
Average Outstanding Balance
 
Interest
 
Average Yield/ Rate (1)
Interest-earning assets:
 
 
 
 
 
 
 
 
 
 
 
Loans (2)
$
2,077,241

 
$
64,034

 
4.12
%
 
$
1,543,615

 
$
53,525

 
4.64
%
Mortgage-backed securities (3)
645,543

 
10,036

 
2.08

 
820,349

 
13,029

 
2.12

Other securities (3)
52,026

 
292

 
0.75

 
81,122

 
460

 
0.76

Federal Home Loan Bank of New York stock
26,521

 
905

 
4.56

 
18,569

 
571

 
4.11

Interest-earning deposits in financial institutions
71,479

 
93

 
0.17

 
38,863

 
37

 
0.13

Total interest-earning assets
2,872,810

 
75,360

 
3.51

 
2,502,518

 
67,622

 
3.61

Non-interest-earning assets
219,555

 
 
 
 
 
205,777

 
 
 
 
Total assets
$
3,092,365

 
 
 
 
 
$
2,708,295

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing liabilities:
 
 
 
 
 
 
 
 
 
 
 
Savings, NOW, and money market accounts
$
1,097,582

 
$
3,416

 
0.42
%
 
$
948,374

 
$
1,549

 
0.22
%
Certificates of deposit
485,647

 
3,957

 
1.09

 
301,331

 
2,308

 
1.02

Total interest-bearing deposits
1,583,229

 
7,373

 
0.62

 
1,249,705

 
3,857

 
0.41

Borrowed funds
631,245

 
7,145

 
1.51

 
518,499

 
7,160

 
1.85

Total interest-bearing liabilities
2,214,474

 
14,518

 
0.88

 
1,768,204

 
11,017

 
0.83

Non-interest bearing deposit accounts
262,804

 
 
 
 
 
228,182

 
 
 
 
Accrued expenses and other liabilities
39,309

 
 
 
 
 
33,361

 
 
 
 
Total liabilities
2,516,587

 
 
 
 
 
2,029,747

 
 
 
 
Stockholders' equity
575,778

 
 
 
 
 
678,548

 
 
 
 
Total liabilities and stockholders' equity
$
3,092,365

 
 
 
 
 
$
2,708,295

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest income
 
 
$
60,842

 
 
 
 
 
$
56,605

 
 
Net interest rate spread (4)
 
 
 
 
2.63
%
 
 
 
 
 
2.78
%
Net interest-earning assets (5)
$
658,336

 
 
 
 
 
$
734,314

 
 
 
 
Net interest margin (6)
 
 
 
 
2.83
%
 
 
 
 
 
3.02
%
Average interest-earning assets to interest-bearing liabilities
 
 
 
 
129.73
%
 
 
 
 
 
141.53
%
 
 
 
(1)
Average yields and rates are annualized.
(2)
Includes non-accruing loans.
(3)
Securities available-for-sale are reported at amortized cost.
(4)
Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.
(5)
Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.
(6)
Net interest margin represents net interest income divided by average total interest-earning assets.

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Comparison of Operating Results for the Three Months Ended September 30, 2015 and 2014
 
Net Income.    Net income was $4.7 million for each of the quarters ended September 30, 2015 and 2014.  Significant variances from the comparable prior year period are as follows: a $1.6 million increase in net interest income and a $1.6 million increase in non-interest expense.

Interest Income.  Interest income increased $2.9 million, or 12.6%, to $25.6 million for the quarter ended September 30, 2015, from $22.7 million for the quarter ended September 30, 2014, primarily due to an increase in average interest-earing assets of $412.4 million, or 16.4%, partially offset by a 12 basis point decline in yields earned on interest-earning assets. Interest income on loans increased by $3.8 million, primarily attributable to an increase in the average loan balances of $568.6 million, which was partially offset by a decrease of 48 basis points in the yield earned. The Company accreted interest income related to its PCI loans of $1.0 million for the quarter ended September 30, 2015, as compared to $1.2 million for the quarter ended September 30, 2014. Interest income on loans for the quarter ended September 30, 2015 reflected loan prepayment income of $489,000 compared to $295,000 for the quarter ended September 30, 2014. Interest income on mortgage-backed securities decreased by $1.0 million primarily due to a decrease in the average balances of $155.7 million, or 20.3%, and a nine basis point decrease in the yield.
 
Interest Expense.   Interest expense increased $1.3 million, or 33.7%, to $5.0 million for the quarter ended September 30, 2015, from $3.7 million for the quarter ended September 30, 2014. The increase consisted of a $1.5 million increase in interest expense on deposits, partially offset by a $216,000 decrease in interest expense on borrowings. The increase in interest expense on deposits was due to an increase in the average balance of interest bearing deposits of $466.0 million, or 37.4%, to $1.71 billion for the quarter ended September 30, 2015, from $1.25 billion for the quarter ended September 30, 2014, and a 23 basis point increase in the cost of interest bearing deposits to 0.66% from 0.43%, due to higher rates offered on our deposit products to remain competitive. The decrease in interest expense on borrowings was attributed to a 12 basis point decrease in the cost of borrowings to 1.51%, from 1.63% for the quarter ended September 30, 2014 and a decrease in the average balances of borrowings of $11.0 million, or 1.9%, to $564.9 million for the quarter ended September 30, 2015, from $575.9 million for the quarter ended September 30, 2014.
Net Interest Income.   Net interest income for the quarter ended September 30, 2015, increased $1.6 million, or 8.5%, primarily due to an increase in average interest-earning assets of $412.4 million, or 16.4%, partially offset by a 21 basis point decrease in our net interest margin to 2.79%. The increase in average interest-earning assets was primarily attributable to an increase in average loans outstanding of $568.6 million, partially offset by a decrease in average mortgage-backed securities of $155.7 million. Yields earned on interest-earning assets decreased 12 basis points to 3.47% for the quarter ended September 30, 2015, from 3.59% for the comparable prior year quarter. Net interest income for the quarter ended September 30, 2015, also was affected by an increase in interest expense, driven by a $455.0 million, or 25.0%, increase in our average interest-bearing liabilities. The cost of interest-bearing liabilities increased six basis points to 0.87% for the quarter ended September 30, 2015 as compared to 0.81% for the quarter ended September 30, 2014, driven by an increase in the cost of interest-bearing deposits, partially offset by lower rates on borrowed funds.

Provision for Loan Losses.    The provision for loan losses decreased $117,000 to $200,000 for the quarter ended September 30, 2015, from $317,000 for the quarter ended September 30, 2014, due to an improvement in asset quality indicators and stable economic and business conditions, partially offset by an increase in the provision from the recasting of cash flows on the Company's PCI portfolio. Net charge-offs were $61,000 for the quarter ended September 30, 2015, compared to net charge-offs of $307,000 for the quarter ended September 30, 2014.

Non-interest Income. Non-interest income decreased $174,000, or 9.5%, to $1.7 million for the quarter ended September 30, 2015, from $1.8 million for the quarter ended September 30, 2014.  This decrease was primarily a result of a $155,000 decrease in gains on securities transactions, net. Securities losses, net, in the third quarter of 2015 included losses of $401,000 related to the Company's trading portfolio described above, while the third quarter of 2014 included losses of $262,000. 

       Non-interest Expense. Non-interest expense increased $1.6 million, or 11.9%, to $14.8 million for the quarter ended September 30, 2015, from $13.3 million for the quarter ended September 30, 2014. This increase was primarily due to a $469,000 increase in compensation and employee benefits, primarily attributable to increased stock compensation expense, related to stock awards issued in May 2015, a $163,000 increase in occupancy costs, a $402,000 increase in professional fees, primarily attributable to the Hopewell Valley merger, and a $570,000 increase in other expenses, largely due to an increase in Directors' stock awards.


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Table of Contents

Income Tax Expense The Company recorded income tax expense of $2.5 million for both quarters ended September 30, 2015 and September 30, 2014. The effective tax rate for the quarter ended September 30, 2015, was 35.0% as compared to 34.5% for the quarter ended September 30, 2014. The quarter ended September 30, 2015 included $437,000 in non-deductible merger related expenses.
  

ANALYSIS OF NET INTEREST INCOME
(Dollars in thousands)

 
For the Three Months Ended
 
September 30, 2015
 
September 30, 2014
 
Average Outstanding Balance
 
Interest
 
Average Yield/ Rate (1)
 
Average Outstanding Balance
 
Interest
 
Average Yield/ Rate (1)
Interest-earning assets:
 
 
 
 
 
 
 
 
 
 
 
Loans (2)
$
2,175,407

 
$
22,077

 
4.03
%
 
$
1,606,774

 
$
18,263

 
4.51
%
Mortgage-backed securities (3)
612,301

 
3,134

 
2.03

 
768,007

 
4,097

 
2.12

Other securities (3)
38,100

 
64

 
0.67

 
77,297

 
146

 
0.75

Federal Home Loan Bank of New York stock
24,285

 
265

 
4.33

 
19,690

 
189

 
3.81

Interest-earning deposits in financial institutions
75,148

 
30

 
0.16

 
41,026

 
12

 
0.12

Total interest-earning assets
2,925,241

 
25,570

 
3.47

 
2,512,794

 
22,707

 
3.59

Non-interest-earning assets
220,794

 
 
 
 
 
207,780

 
 
 
 
Total assets
$
3,146,035

 
 
 
 
 
$
2,720,574

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing liabilities:
 
 
 
 
 
 
 
 
 
 
 
Savings, NOW, and money market accounts
$
1,164,887

 
$
1,360

 
0.46
%
 
$
949,355

 
$
560

 
0.23
%
Certificates of deposit
548,488

 
1,481

 
1.07

 
297,992

 
805

 
1.07

Total interest-bearing deposits
1,713,375

 
2,841

 
0.66

 
1,247,347

 
1,365

 
0.43

Borrowed funds
564,898

 
2,156

 
1.51

 
575,916

 
2,372

 
1.63

Total interest-bearing liabilities
2,278,273

 
4,997

 
0.87

 
1,823,263

 
3,737

 
0.81

Non-interest bearing deposit accounts
258,476

 
 
 
 
 
237,824

 
 
 
 
Accrued expenses and other liabilities
44,840

 
 
 
 
 
26,274

 
 
 
 
Total liabilities
2,581,589

 
 
 
 
 
2,087,361

 
 
 
 
Stockholders' equity
564,446

 
 
 
 
 
633,213

 
 
 
 
Total liabilities and stockholders' equity
$
3,146,035

 
 
 
 
 
$
2,720,574

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest income
 
 
$
20,573

 
 
 
 
 
$
18,970

 
 
Net interest rate spread (4)
 
 
 
 
2.60
%
 
 
 
 
 
2.77
%
Net interest-earning assets (5)
$
646,968

 
 
 
 
 
$
689,531

 
 
 
 
Net interest margin (6)
 
 
 
 
2.79
%
 
 
 
 
 
3.00
%
Average interest-earning assets to interest-bearing liabilities
 
 
 
 
128.40
%
 
 
 
 
 
137.82
%
 
 
 
(1)
Average yields and rates are annualized.
(2)
Includes non-accruing loans.
(3)
Securities available-for-sale are reported at amortized cost.
(4)
Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.
(5)
Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.
(6)
Net interest margin represents net interest income divided by average total interest-earning assets.

    
    


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Table of Contents

Asset Quality
 
PCI Loans
 
At September 30, 2015, based on contractual principal, 4.6% of PCI loans were past due 30 to 89 days, and 21.6% were past due 90 days or more, as compared to 7.8% and 24.1%, respectively, at December 31, 2014.  
 
Originated and Acquired Loans
 
The discussion that follows includes originated and acquired loans (excluding PCI), both held-for-investment and held-for-sale.
 
The following table shows total non-performing assets for the current and previous four quarters, and also shows, for the same dates, non-performing originated loans to total loans, troubled debt restructurings ("TDRs") on which interest is accruing, and accruing loans delinquent 30 to 89 days (dollars in thousands). 
 
September 30, 2015
 
June 30, 2015
 
March 31, 2015
 
December 31, 2014
 
September 30, 2014
Non-accruing loans:
 
 
 
 
 
 
 
 
 
Held-for-investment
$
4,918

 
$
4,118

 
$
5,233

 
$
4,332

 
$
4,350

Held-for-sale

 
325

 

 

 

Non-accruing loans subject to restructuring agreements:
 
 
 
 
 
 
 
 
 
Held-for-investment
9,214

 
9,329

 
8,567

 
9,543

 
9,608

Total non-accruing loans
14,132

 
13,772

 
13,800

 
13,875

 
13,958

Loans 90 days or more past due and still accruing:
 
 
 
 
 

 
 

 
 
Held-for-investment
143

 
967

 
282

 
708

 
418

Total non-performing loans
14,275

 
14,739

 
14,082

 
14,583

 
14,376

Other real estate owned
261

 
423

 
532

 
752

 
491

Total non-performing assets
$
14,536

 
$
15,162

 
$
14,614

 
$
15,335

 
$
14,867

Non-performing loans to total loans
0.62
%
 
0.67
%
 
0.70
%
 
0.75
%
 
0.79
%
Non-performing assets to total assets
0.46
%
 
0.48
%
 
0.48
%
 
0.51
%
 
0.51
%
Loans subject to restructuring agreements and still accruing
$
22,465

 
$
22,516

 
$
20,810

 
$
24,213

 
$
24,643

Accruing loans 30 to 89 days delinquent
$
17,126

 
$
15,394

 
$
15,319

 
$
12,252

 
$
16,202

 
Total Non-accruing Loans
 
The following table details the change in non-accrual loans from December 31, 2014, to September 30, 2015 (dollars in thousands).

 
At or for the nine months ended September 30, 2015
Balance at beginning of period
$
13,875

Additions
2,142

Charge-offs
(691
)
Pay-offs and principal pay-downs
(550
)
Returned to accrual status
(331
)
Sales
(313
)
Balance at end of period
$
14,132



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Table of Contents

Loans Subject to TDR Agreements
 
Included in non-accruing loans are loans subject to TDR agreements totaling $9.2 million and $9.5 million at September 30, 2015, and December 31, 2014, respectively.  At September 30, 2015, $2.3 million, or 25.1%, of the $9.2 million were not performing in accordance with their restructured terms, as compared to the entire $9.5 million at December 31, 2014. Two separate relationships account for the loans not performing in accordance with their restructured terms at September 30, 2015. These loans are primarily collateralized by real estate with an aggregate appraised value of $2.6 million.

The Company also holds loans subject to restructuring agreements that are on accrual status, totaling $22.5 million and $24.2 million at September 30, 2015, and December 31, 2014, respectively.  At September 30, 2015, loans totaling $1.7 million, or 7.7%, of the $22.5 million were not performing in accordance with the restructured terms, as compared to $1.6 million, or 6.6%, of the $24.2 million at December 31, 2014.  These loans were less than 90 days delinquent at September 30, 2015. Generally, the types of concessions that we make to troubled borrowers include reductions to both temporary and permanent interest rates, extensions of payment terms, and to a lesser extent forgiveness of principal and interest.

The following table details the amounts and categories of the loans subject to restructuring agreements by loan type as of September 30, 2015, and December 31, 2014 (dollars in thousands). 
 
September 30, 2015
 
December 31, 2014
 
Non-Accruing
 
Accruing
 
Non-Accruing
 
Accruing
TDRs:
 
 
 
 
 
 
 
Real estate loans:
 
 
 
 
 
 
 
Commercial
$
8,703

 
$
17,994

 
$
9,135

 
$
19,570

One-to-four family residential
511

 
2,072

 

 
1,927

Multifamily

 
1,920

 

 
1,990

Home equity and lines of credit

 
359

 

 
327

Commercial and industrial loans

 
120

 
408

 
399

 
$
9,214

 
$
22,465

 
$
9,543

 
$
24,213

 
Accruing Loans 30 to 89 Days Delinquent
 
Loans 30 to 89 days delinquent and on accrual status at September 30, 2015, and December 31, 2014 totaled $17.1 million and $12.3 million, respectively. The following table sets forth delinquencies for accruing loans by type and by amount at September 30, 2015, and December 31, 2014 (dollars in thousands).   
 
September 30, 2015
 
December 31, 2014
Real estate loans:
 
 
 
Commercial
$
8,059

 
$
6,492

One-to-four family residential
4,068

 
4,353

Construction and land
1,385

 

Multifamily
3,095

 
1,090

Home equity and lines of credit
455

 
135

Commercial and industrial loans
53

 
122

Other loans
11

 
60

Total delinquent accruing loans
$
17,126

 
$
12,252



Liquidity and Capital Resources
Liquidity.  The overall objective of our liquidity management is to ensure the availability of sufficient funds to meet financial commitments and to take advantage of lending and investment opportunities.  Northfield Bank manages liquidity in order to meet deposit withdrawals on demand or at contractual maturity, to repay borrowings as they mature, and to fund new loans and investments as opportunities arise.

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Table of Contents

Northfield Bank's primary sources of funds are deposits, principal and interest payments on loans and securities, borrowed funds, the proceeds from maturing securities and short-term investments, and to a lesser extent the proceeds from the sales of loans and securities and wholesale borrowings.  The scheduled amortization of loans and securities, as well as proceeds from borrowed funds, are predictable sources of funds.  Other funding sources, however, such as deposit inflows and loan prepayments are greatly influenced by market interest rates, economic conditions, and competition.  Northfield Bank is a member of the FHLB, which provides an additional source of short-term and long-term funding.  Northfield Bank also has short-term borrowing capabilities with the Federal Reserve Bank.  Northfield Bank’s borrowed funds, excluding capitalized lease obligations and floating rate advances, were $501.1 million at September 30, 2015, and had a weighted average interest rate of 1.66%.  A total of $102.0 million of these borrowings will mature in less than one year.  Borrowed funds, excluding capitalized lease obligations and floating rate advances, were $775.7 million at December 31, 2014.  Northfield Bank has the ability to obtain additional funding from the FHLB and Federal Reserve Bank discount window of approximately $726.7 million utilizing unencumbered securities of $116.1 million and multifamily loans of $610.6 million at September 30, 2015.  Northfield Bank expects to have sufficient funds available to meet current commitments in the normal course of business.
Northfield Bancorp, Inc. (stand alone) is a separate legal entity from Northfield Bank and must provide its own liquidity to pay dividends, repurchase its stock, and for other corporate purposes. Northfield Bancorp, Inc.'s primary source of liquidity is dividend payments from Northfield Bank. At September 30, 2015, Northfield Bancorp, Inc. (stand alone) had liquid assets of approximately $7.1 million.
Capital Resources.  At September 30, 2015, and December 31, 2014, as set forth in the following table, Northfield Bank exceeded all of the regulatory capital requirements to which it was subject at such dates.
 
Actual
 
For Capital Adequacy Purposes
 
For Well Capitalized Under Prompt Corrective Action Provisions
As of September 30, 2015:
 
 
 
 
 
Common equity Tier 1 capital (to risk-weighted assets)
20.97
%
 
4.50
%
 
6.50
%
Tier 1 leverage
16.22
%
 
4.00
%
 
5.00
%
Tier I capital (to risk-weighted assets)
20.97
%
 
6.00
%
 
8.00
%
Total capital (to risk-weighted assets)
22.05
%
 
8.00
%
 
10.00
%
As of December 31, 2014:
 
 
 
 
 
Tangible capital to tangible assets
16.46
%
 
1.50
%
 
NA

Tier I capital (core) (to adjusted total assets)
16.46
%
 
4.00
%
 
5.00
%
Total capital (to risk-weighted assets)
22.95
%
 
8.00
%
 
10.00
%
 
In July, 2013, the federal bank regulatory agencies issued a final rule that revises their leverage and risk-based capital requirements and the method for calculating risk-weighted assets to make them consistent with agreements that were reached by the Basel Committee on Banking Supervision and certain provisions of the Dodd-Frank Act.  Among other things, the new rule establishes a new common equity Tier 1 minimum capital requirement (4.5% of risk-weighted assets), increases the minimum Tier 1 capital to risk-based assets requirement (from 4% to 6% of risk-weighted assets) and assigns a higher risk weight (150%) to exposures that are more than 90 days past due or are on non-accrual status, and to certain commercial real estate facilities that finance the acquisition, development, or construction of real property.  The final rule also requires unrealized gains and losses on certain "available-for-sale" securities holdings to be included for purposes of calculating regulatory capital requirements unless a one-time opt-in or opt-out is exercised.  The rule limits a banking organization's capital distributions and certain discretionary bonus payments if the banking organization does not hold a "capital conservation buffer" consisting of 2.5% of common equity Tier 1 capital to risk-weighted assets in addition to the amount necessary to meet its minimum risk-based capital requirements. 
 
The final rule became effective for Northfield Bank on January 1, 2015.  The capital conservation buffer requirement will be phased in beginning January 1, 2016, and ending January 1, 2019, when the full capital conservation buffer requirement will be effective.  The final rule also implemented consolidated capital requirements for savings and loan holding companies, such as the Company, effective January 1, 2015.

At September 30, 2015, as set forth in the following table, Northfield Bancorp, Inc. exceeded all of the regulatory capital requirements to which it was subject at such dates.

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Table of Contents

 
 
Actual
 
For Capital Adequacy Purposes
 
For Well Capitalized Under Prompt Corrective Action Provisions
Common equity Tier 1 capital (to risk-weighted assets)
22.36
%
 
4.50%
 
6.50%
Tier 1 leverage
17.29
%
 
4.00%
 
5.00%
Tier I capital (to risk-weighted assets)
22.36
%
 
6.00%
 
8.00%
Total capital (to risk-weighted assets)
23.44
%
 
8.00%
 
10.00%

Off-Balance Sheet Arrangements and Contractual Obligations
In the normal course of operations, the Company engages in a variety of financial transactions that, in accordance with U.S. GAAP, are not recorded in the financial statements.  These transactions primarily relate to lending commitments. These arrangements are not expected to have a material impact on the Company's results of operations or financial condition.
The following table shows the contractual obligations of the Company by expected payment period as of September 30, 2015 (dollars in thousands).
Contractual Obligation
 
Total
 
Less than One Year
 
One to less than Three Years
 
Three to less than Five Years
 
Five Years and greater
Debt obligations (excluding capitalized leases)
 
$
501,130

 
$
102,000

 
$
313,548

 
$
85,582

 
$

Commitments to originate loans
 
69,196

 
69,196

 

 

 

Commitments to fund unused lines of credit
 
64,752

 
64,752

 

 

 


Commitments to fund unused lines of credit are agreements to lend additional funds to customers as long as there have been no violations of any of the conditions established in the agreements (original or restructured).  Commitments to originate loans generally have a fixed expiration or other termination clauses, which may or may not require payment of a fee.  Since some of these loan commitments are expected to expire without being drawn upon, total commitments do not necessarily represent future cash requirements.
 
For further information regarding our off-balance sheet arrangements and contractual obligations, see Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

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Table of Contents

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
A majority of our assets and liabilities are monetary in nature.  Consequently, our most significant form of market risk is interest rate risk.  Our assets, consisting primarily of mortgage-related assets and loans, generally have longer maturities than our liabilities, which consist primarily of deposits and wholesale borrowings.  As a result, a principal part of our business strategy involves managing interest rate risk and limiting the exposure of our net interest income to changes in market interest rates.  Accordingly, our board of directors has established a management risk committee, comprised of our Chief Investment Officer, who chairs this committee, our Chief Executive Officer, our President/Chief Operating Officer, our Chief Financial Officer, our Chief Lending Officer, and our Executive Vice President of Operations.  This committee is responsible for, among other things, evaluating the interest rate risk inherent in our assets and liabilities, for recommending to the risk management committee of our board of directors the level of risk that is appropriate given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the guidelines approved by the board of directors.
The management risk committee aims to manage interest rate risk by structuring the balance sheet to maximize net interest income while maintaining an acceptable level of risk exposure to changes in market interest rates.  Liquidity, interest rate risk, and profitability are all considered to reach such a goal.  Various asset/liability strategies are used to manage and control the interest rate sensitivity of our assets and liabilities.  These strategies include pricing of loans and deposit products, adjusting the terms of loans and borrowings, and managing the deployment of our securities and short-term assets to manage mismatches in interest rate re-pricing.
Net Portfolio Value Analysis.  We compute amounts by which the net present value of our assets and liabilities (net portfolio value or “NPV”) would change in the event market interest rates change over an assumed range of rates.  Our simulation model uses a discounted cash flow analysis to measure the interest rate sensitivity of NPV.  Depending on current market interest rates, we estimate the economic value of these assets and liabilities under the assumption that interest rates experience an instantaneous and sustained increase of 100, 200, 300, or 400 basis points, or a decrease of 100 and 200 basis points, which is based on the current interest rate environment.  A basis point equals one-hundredth of one percent, and 100 basis points equals one percent.  An increase in interest rates from 3% to 4% would mean, for example, a 100 basis point increase in the “Change in Interest Rates” column below. 
 
Net Interest Income Analysis.  In addition to NPV calculations, we analyze our sensitivity to changes in interest rates through our net interest income model.  Net interest income is the difference between the interest income we earn on our interest-earning assets, such as loans and securities, and the interest we pay on our interest-bearing liabilities, such as deposits and borrowings.  In our model, we estimate what our net interest income would be for a twelve-month period.  Depending on current market interest rates we then calculate what the net interest income would be for the same period under the assumption that interest rates experience an instantaneous and sustained increase of 100, 200, 300, or 400 basis points, or a decrease of 100 or 200 basis points, which is based on the current interest rate environment.   
The tables below set forth, as of September 30, 2015 and December 31, 2014, our calculation of the estimated changes in our NPV, NPV ratio, and percent change in net interest income that would result from the designated instantaneous and sustained changes in interest rates.  Computations of prospective effects of hypothetical interest rate changes are based on numerous assumptions, including relative levels of market interest rates, loan prepayments and deposit decay, and should not be relied on as indicative of actual results (dollars in thousands).
 
 
NPV at September 30, 2015
 
 
Change in Interest Rates (basis points)
 
Estimated Present Value of Assets
 
Estimated Present Value of Liabilities
 
Estimated NPV
 
Estimated Change in NPV
 
Estimated Change in NPV %
 
Estimated NPV/Present Value of Assets Ratio
 
Net Interest Income Percent Change
+400
 
$
2,790,400

 
$
2,429,160

 
$
361,240

 
$
(235,835
)
 
(39.50
)%
 
12.95
%
 
(18.99
)%
+300
 
2,875,998

 
2,467,533

 
408,465

 
(188,610
)
 
(31.59
)
 
14.20

 
(14.13
)
+200
 
2,972,718

 
2,507,172

 
465,546

 
(131,529
)
 
(22.03
)
 
15.66

 
(9.19
)
+100
 
3,074,106

 
2,548,135

 
525,971

 
(71,104
)
 
(11.91
)
 
17.11

 
(4.51
)
 
3,187,559

 
2,590,484

 
597,075

 

 

 
18.73

 

(100)
 
3,329,203

 
2,635,495

 
693,708

 
96,633

 
16.18

 
20.84

 
0.65

(200)
 
3,505,457

 
2,655,302

 
850,155

 
253,080

 
42.39

 
24.25

 
(1.12
)
 
    

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Table of Contents

    
 
 
NPV at December 31, 2014
 
 
Change in Interest Rates (basis points)
 
Estimated Present Value of Assets
 
Estimated Present Value of Liabilities
 
Estimated NPV
 
Estimated Change In NPV
 
Estimated Change in NPV %
 
Estimated NPV/Present Value of Assets Ratio
 
Net Interest Income Percent Change
+400
 
$
2,666,893

 
$
2,236,062

 
$
430,831

 
$
(233,202
)
 
(35.12
)%
 
16.15
%
 
(16.56
)%
+300
 
2,750,724

 
2,272,781

 
477,943

 
(186,090
)
 
(28.02
)
 
17.38

 
(12.29
)
+200
 
2,844,970

 
2,310,727

 
534,243

 
(129,790
)
 
(19.55
)
 
18.78

 
(7.96
)
+100
 
2,943,080

 
2,349,959

 
593,121

 
(70,912
)
 
(10.68
)
 
20.15

 
(3.88
)
 
3,054,570

 
2,390,537

 
664,033

 

 

 
21.74

 

(100)
 
3,180,875

 
2,431,040

 
749,835

 
85,802

 
12.92

 
23.57

 
0.18

(200)
 
3,325,206

 
2,456,489

 
868,717

 
204,684

 
30.82

 
26.13

 
(1.83
)

The first table above indicates that at September 30, 2015, in the event of a 200 basis point decrease in interest rates, we would experience a 42.39% increase in estimated net portfolio value and a 1.12% decrease in net interest income. In the event of a 400 basis point increase in interest rates, we would experience a 39.50% decrease in estimated net portfolio value and a 18.99% decrease in net interest income. Our policies provide that, in the event of a 300 basis point increase/decrease or less in interest rates, our net present value ratio should decrease by no more than 800 basis points and in the event of a 200 basis point increase, our projected net interest income should decrease by no more than 21%, and in the event of a 200 basis point decrease, our projected net interest income should decrease by no more than 15%.  Additionally, our policy states that our net portfolio value should be between 8% and 10% of total assets before and after such shock. However, when the federal funds rate is low and negative rate shocks do not produce meaningful results, management may temporarily suspend use of guidelines for negative rate shocks. At September 30, 2015, we were in compliance with all board approved policies with respect to interest rate risk management. 

The duration of a financial instrument changes as market interest rates change. Potential movements in the duration of our investment portfolio, as well as the duration of the loan portfolio may have a positive or negative effect on our net interest income.
 
Certain shortcomings are inherent in the methodologies used in determining interest rate risk through changes in NPV and net interest income.  Modeling requires making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates.  In this regard, the NPV and net interest income information presented assume that the composition of our interest-sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured, and also assume that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities.  Accordingly, although interest rate risk calculations provide an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on our net interest income and will differ from actual results.

ITEM 4.    CONTROLS AND PROCEDURES 
An evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) promulgated under the Securities and Exchange Act of 1934, as amended) as of September 30, 2015.  Based on that evaluation, the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective.
 
During the three months ended September 30, 2015, there were no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II

ITEM 1.     LEGAL PROCEEDINGS
The Company and subsidiaries are subject to various legal actions arising in the normal course of business.  In the opinion of management, the resolution of these legal actions is not expected to have a material adverse effect on the Company’s consolidated financial condition or results of operations.

ITEM 1A.  RISK FACTORS
During the nine months ended September 30, 2015, there have been no material changes to the risk factors as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2014, as filed with the SEC.
 
ITEM 2.     UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
(a)
Unregistered Sale of Equity Securities.  There were no sales of unregistered securities during the period covered by this report.
(b)
Use of Proceeds.  Not applicable.
(c)
Repurchases of Our Equity Securities.  
The following table shows the Company’s repurchase of its common stock for the three months ended September 30, 2015.
Period
 
(a) Total Number of Shares Purchased
 
(b) Average Price Paid per Share
 
(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)
 
(d) Maximum Number of Shares that May Yet Be Purchased Under Plans or Programs (1)
July 1, 2015 through July 31, 2015
 
187,245

 
$
15.01

 
174,800

 
210,716

August 1, 2015 through August 31, 2015
 
58,186

 
$
14.97

 
58,186

 
153,791

September 1, 2015 through September 30, 2015
 
141,000

 
$
14.97

 
141,000

 
12,600

Total
 
386,431

 
$
14.99

 
373,986

 
 
 (1) The repurchase program permits shares to be repurchased in open market or private transactions, through block trades, and pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities and Exchange Commission. The number of shares remaining to be purchased at September 30, 2015, is calculated utilizing the remaining approved repurchase amount of $192,000 divided by the closing price of the stock on that day.
ITEM 3.     DEFAULTS UPON SENIOR SECURITIES
None.

ITEM  4.     MINE SAFETY DISCLOSURES
Not applicable.

ITEM 5.     OTHER INFORMATION
None.

ITEM 6.      EXHIBITS
The exhibits required by Item 601 of Regulation S-K are included with this Form 10-Q and are listed on the “Index to Exhibits” immediately following the Signatures.

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
NORTHFIELD BANCORP, INC.
(Registrant)
 
 
Date: November 9, 2015
/s/   John W. Alexander
John W. Alexander
Chairman and Chief Executive Officer
 
/s/   William R. Jacobs
William R. Jacobs
Chief Financial Officer
(Principal Financial and Accounting Officer)

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INDEX TO EXHIBITS
  
Exhibit
 
 
Number
 
Description
 
31.1

 
Certification of John W. Alexander, Chairman and Chief Executive Officer, Pursuant to Rule 13a-14(a) and Rule 15d-14(a)
 
 
 
31.2

 
Certification of William R. Jacobs, Chief Financial Officer, Pursuant to Rule 13a-14(a) and Rule 15d-14(a)
 
 
 
32

 
Certification of John W. Alexander, Chairman and Chief Executive Officer, and William R. Jacobs, Chief Financial Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 
 
101

 
The following materials from the Company’s Report on Form 10-Q for the quarter ended September 30, 2015, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Comprehensive Income, (iii) the Consolidated Statements of Changes in Stockholders’ Equity, (iv) the Consolidated Statements of Cash Flows and (v) the Notes to Consolidated Financial Statements
 


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