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Northfield Bancorp, Inc. - Quarter Report: 2018 June (Form 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 June 30, 2018
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 or organization)
 
(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 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, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
 
 
Large accelerated filer  ý
Accelerated filer  o
Non-accelerated filer  o  (Do not check if smaller reporting company)
Smaller reporting company  o
 
Emerging growth company  o
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 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.
49,492,931 shares of Common Stock, par value $0.01 per share, were issued and outstanding as of July 31, 2018.



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.
 

2

Table of Contents

PART I
ITEM 1.        FINANCIAL STATEMENTS

NORTHFIELD BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited) (In thousands, except share amounts)
 
June 30, 2018
 
December 31, 2017
ASSETS:
 
 
 
Cash and due from banks
$
13,538

 
$
17,446

Interest-bearing deposits in other financial institutions
45,195

 
40,393

Total cash and cash equivalents
58,733

 
57,839

Trading securities
10,167

 
9,597

Debt securities available-for-sale, at estimated fair value
625,279

 
513,782

Debt securities held-to-maturity, at amortized cost
9,819

 
9,931

(estimated fair value of $9,529 at June 30, 2018, and $9,892 at December 31, 2017)
 
 
 
Equity securities
1,301

 
1,339

Originated loans held-for-investment, net
2,547,920

 
2,425,275

Loans acquired
650,875

 
692,803

Purchased credit-impaired (“PCI”) loans held-for-investment
21,331

 
22,741

Loans held-for-investment, net
3,220,126

 
3,140,819

Allowance for loan losses
(26,882
)
 
(26,160
)
Net loans held-for-investment
3,193,244

 
3,114,659

Accrued interest receivable
11,413

 
10,713

Bank owned life insurance
152,298

 
150,604

Federal Home Loan Bank of New York stock, at cost
27,718

 
25,046

Premises and equipment, net
25,058

 
25,746

Goodwill
38,411

 
38,411

Other real estate owned
850

 
850

Other assets
33,867

 
32,900

Total assets
$
4,188,158

 
$
3,991,417

 

 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY:
 
 
 
LIABILITIES:
 

 
 

Deposits
$
2,967,281

 
$
2,836,979

Borrowed funds
524,335

 
471,549

Advance payments by borrowers for taxes and insurance
18,009

 
14,798

Accrued expenses and other liabilities
28,878

 
29,214

Total liabilities
3,538,503

 
3,352,540

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, 60,933,707 shares issued at
 

 
 

June 30, 2018 and December 31, 2017, 49,481,589 and 48,803,885 outstanding at June 30, 2018, and December 31, 2017, respectively
609

 
609

Additional paid-in-capital
544,404

 
548,864

Unallocated common stock held by employee stock ownership plan
(21,737
)
 
(22,244
)
Retained earnings
292,900

 
281,138

Accumulated other comprehensive loss
(11,648
)
 
(5,451
)
Treasury stock at cost; 11,452,118 and 12,129,822 shares at June 30, 2018, and December 31, 2017, respectively
(154,873
)
 
(164,039
)
Total stockholders’ equity
649,655

 
638,877

Total liabilities and stockholders’ equity
$
4,188,158

 
$
3,991,417


See accompanying notes to unaudited 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 June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
Interest income:
 
 
 
 
 
 
 
Loans
$
31,456

 
$
29,653

 
$
62,243

 
$
58,661

Mortgage-backed securities
3,068

 
2,260

 
5,794

 
4,616

Other securities
821

 
283

 
1,323

 
535

Federal Home Loan Bank of New York dividends
398

 
325

 
812

 
696

Deposits in other financial institutions
192

 
139

 
445

 
221

Total interest income
35,935

 
32,660

 
70,617

 
64,729

Interest expense:
 
 
 
 
 

 
 

Deposits
6,050

 
3,899

 
11,261

 
7,519

Borrowings
2,115

 
1,852

 
4,042

 
3,624

Total interest expense
8,165

 
5,751

 
15,303

 
11,143

Net interest income
27,770

 
26,909

 
55,314

 
53,586

Provision for loan losses
670

 
511

 
704

 
883

Net interest income after provision for loan losses
27,100

 
26,398

 
54,610

 
52,703

Non-interest income:
 
 
 
 
 

 
 

Fees and service charges for customer services
1,147

 
1,107

 
2,361

 
2,325

Income on bank owned life insurance
914

 
1,010

 
1,868

 
3,468

Gains on securities transactions, net
313

 
256

 
473

 
664

Other
71

 
64

 
147

 
127

Total non-interest income
2,445

 
2,437

 
4,849

 
6,584

Non-interest expense:
 
 
 
 
 

 
 

Compensation and employee benefits
9,121

 
9,774

 
18,238

 
19,746

Occupancy
2,950

 
2,696

 
6,046

 
5,653

Furniture and equipment
252

 
287

 
508

 
592

Data processing
1,150

 
1,120

 
2,374

 
2,281

Professional fees
909

 
595

 
1,672

 
1,465

FDIC insurance
274

 
258

 
571

 
516

Other
2,384

 
1,888

 
4,757

 
3,909

Total non-interest expense
17,040

 
16,618

 
34,166

 
34,162

Income before income tax expense
12,505

 
12,217

 
25,293

 
25,125

Income tax expense
1,893

 
3,807

 
4,237

 
6,767

Net income
$
10,612

 
$
8,410

 
$
21,056

 
$
18,358

Net income per common share:
 
 
 
 
 
 
 
Basic
$
0.23

 
$
0.19

 
$
0.46

 
$
0.41

Diluted
$
0.23

 
$
0.18

 
$
0.45

 
$
0.39

 
 
 
 
 
 
 
 
 
 
 
 
 
 
See accompanying notes to unaudited consolidated financial statements.
 

4

Table of Contents

NORTHFIELD BANCORP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - (Continued)
(Unaudited) (In thousands) 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
Net Income
$
10,612

 
$
8,410

 
$
21,056

 
$
18,358

Other comprehensive (loss) income:
 
 
 
 
 
 
 
Unrealized (losses) gains on securities:
 
 
 
 
 
 
 
Net unrealized holding (losses) gains on securities
(2,290
)
 
2,107

 
(8,443
)
 
3,086

Less: reclassification adjustment for net (gains) losses included in net income (included in gains on securities transactions, net)
(116
)
 
4

 
(171
)
 
4

Net unrealized (losses) gains
(2,406
)
 
2,111

 
(8,614
)
 
3,090

Amortization related to post retirement benefit obligation

 
27

 

 
54

Other comprehensive (loss) income, before tax
(2,406
)
 
2,138

 
(8,614
)
 
3,144

Income tax benefit (expense) related to net unrealized holding (losses) gains on securities
640

 
(844
)
 
2,369

 
(1,235
)
Income tax benefit (expense) related to reclassification adjustment for (losses) gains included in net income
33

 
(2
)
 
48

 
(2
)
Income tax expense related to post retirement benefit adjustment

 
(11
)
 

 
(22
)
Other comprehensive (loss) income, net of tax
(1,733
)
 
1,281

 
(6,197
)
 
1,885

Comprehensive income
$
8,879

 
$
9,691

 
$
14,859

 
$
20,243



































See accompanying notes to unaudited consolidated financial statements.

5

Table of Contents

NORTHFIELD BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
Six Months Ended June 30, 2018 and 2017
(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, 2016
48,526,658

 
$
609

 
$
547,910

 
$
(23,466
)
 
$
268,226

 
$
(4,332
)
 
$
(167,751
)
 
$
621,196

Net income
 

 
 

 
 

 
 

 
18,358

 
 

 
 

 
18,358

Other comprehensive income, net of tax
 

 
 

 
 

 
 

 
 

 
1,885

 
 

 
1,885

Cumulative effect of change in accounting principle - adoption of ASU No. 2016-09
 
 
 
 
(2,898
)
 
 
 
2,898

 
 
 
 
 

ESOP shares allocated or committed to be released
 

 
 

 
608

 
511

 
 

 
 

 
 

 
1,119

Stock compensation expense
 

 
 

 
3,217

 
 

 
 

 
 

 
 

 
3,217

Forfeitures of restricted stock
(3,600
)
 
 
 
47

 
 
 
 
 
 
 
(47
)
 

Exercise of stock options, net
333,738

 
 

 
(4,422
)
 
 

 
 
 
 

 
4,514

 
92

Cash dividends declared and paid ($0.16 per common share)
 

 
 

 
 

 
 

 
(7,348
)
 
 

 
 

 
(7,348
)
Balance at June 30, 2017
48,856,796

 
$
609

 
$
544,462

 
$
(22,955
)
 
$
282,134

 
$
(2,447
)
 
$
(163,284
)
 
$
638,519

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2017
48,803,885

 
$
609

 
$
548,864

 
$
(22,244
)
 
$
281,138

 
$
(5,451
)
 
$
(164,039
)
 
$
638,877

Net income
 

 
 

 
 

 
 

 
21,056

 
 

 
 

 
21,056

Other comprehensive loss, net of tax
 

 
 

 
 

 
 

 
 

 
(6,197
)
 
 

 
(6,197
)
ESOP shares allocated or committed to be released
 

 
 

 
498

 
507

 
 

 
 

 
 

 
1,005

Stock compensation expense
 

 
 

 
2,717

 
 

 
 

 
 

 
 
 
2,717

Forfeitures of restricted stock
(1,760
)
 
 

 
23

 
 

 
 

 
 

 
(23
)
 

Exercise of stock options, net
679,464

 
 

 
(7,698
)
 
 

 
 
 
 

 
9,189

 
1,491

Cash dividends declared and paid ($0.20 per common share)
 

 
 

 
 

 
 

 
(9,294
)
 
 

 
 

 
(9,294
)
Balance at June 30, 2018
49,481,589

 
$
609

 
$
544,404

 
$
(21,737
)
 
$
292,900

 
$
(11,648
)
 
$
(154,873
)
 
$
649,655





See accompanying notes to unaudited consolidated financial statements.

6

Table of Contents

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

 
Six Months Ended June 30,
 
2018
 
2017
Cash flows from operating activities:
 
 
 
Net income
$
21,056

 
$
18,358

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Provision for loan losses
704

 
883

ESOP and stock compensation expense
3,722

 
4,336

Depreciation
1,529

 
1,661

Amortization of premiums, and deferred loan costs, net of (accretion) of discounts, and deferred loan fees
1,223

 
994

Amortization of intangible assets
166

 
196

Income on bank owned life insurance
(1,868
)
 
(3,468
)
Gains on securities transactions, net
(473
)
 
(664
)
Net purchases of trading securities
(268
)
 
(283
)
Increase in accrued interest receivable
(700
)
 
(52
)
Decrease in other assets
1,283

 
1,247

Decrease in accrued expenses and other liabilities
(336
)
 
(3,113
)
Net cash provided by operating activities
26,038

 
20,095

Cash flows from investing activities:
 
 
 
Net increase in loans receivable
(42,409
)
 
(82,339
)
Purchase of loans
(37,593
)
 

Purchases of Federal Home Loan Bank of New York stock
(14,045
)
 
(10,170
)
Redemptions of Federal Home Loan Bank of New York stock
11,373

 
8,438

Purchases of debt securities available-for-sale
(206,709
)
 
(17,746
)
Principal payments and maturities on debt securities available-for-sale
56,699

 
45,390

Principal payments and maturities on debt securities held-to-maturity
103

 
101

Proceeds from sale of debt securities available-for-sale
29,608

 
967

Proceeds from bank owned life insurance
174

 
2,043

Purchases and improvements of premises and equipment
(841
)
 
(641
)
Net cash used in investing activities
(203,640
)
 
(53,957
)
Cash flows from financing activities:
 
 
 
Net increase in deposits
130,302

 
(35,114
)
Dividends paid
(9,294
)
 
(7,348
)
Exercise of stock options
1,491

 
92

Increase in advance payments by borrowers for taxes and insurance
3,211

 
2,962

Repayments under capital lease obligations
(124
)
 
(109
)
Proceeds from securities sold under agreements to repurchase and other borrowings
415,545

 
179,725

Repayments related to securities sold under agreements to repurchase and other borrowings
(362,635
)
 
(152,132
)
Net cash provided by (used in) financing activities
178,496

 
(11,924
)
Net increase (decrease) in cash and cash equivalents
894

 
(45,786
)
Cash and cash equivalents at beginning of period
57,839

 
96,085

Cash and cash equivalents at end of period
$
58,733

 
$
50,299

 
 
 
 
 
 
 
 
 
 
 
 
See accompanying notes to unaudited consolidated financial statements.

7

Table of Contents


See accompanying notes to unaudited consolidated financial statements.

NORTHFIELD BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued)
(Unaudited) (In thousands)
 
Six Months Ended June 30,
 
2018
 
2017
Supplemental cash flow information:
 
 
 
Cash paid during the period for:
 
 
 
Interest
$
15,222

 
$
10,927

Income taxes
4,747

 
4,500

Non-cash transactions:
 
 
 
Loans recoveries, net
(18
)
 
(127
)
Transfer of originated loans held-for-investment to loans held-for-sale at fair value

 
2,009







































See accompanying notes to unaudited consolidated financial statements.

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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 six months ended June 30, 2018, are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2018 or for any other period. Whenever necessary, certain prior year amounts are reclassified to conform to the current year 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, 2017, of the Company as filed with the SEC. 

Note 2 – Debt Securities Available-for-Sale
The following is a comparative summary of mortgage-backed and other debt securities available-for-sale at June 30, 2018, and December 31, 2017 (in thousands):
 
June 30, 2018
 
 
 
Gross
 
Gross
 
Estimated
 
Amortized
 
unrealized
 
unrealized
 
fair
 
cost
 
gains
 
losses
 
value
Mortgage-backed securities:
 
 
 
 
 
 
 
Pass-through certificates:
 

 
 

 
 

 
 

Government sponsored enterprises (GSE)
$
247,743

 
$
581

 
$
5,238

 
$
243,086

Real estate mortgage investment conduits (REMICs):
 

 
 

 
 

 
 

GSE
283,386

 
95

 
10,760

 
272,721

Non-GSE
76

 

 
1

 
75

 
531,205

 
676

 
15,999

 
515,882

Other debt securities:
 
 
 
 
 
 
 
Municipal bonds
276

 
3

 

 
279

Corporate bonds
109,801

 
215

 
898

 
109,118

 
110,077

 
218

 
898

 
109,397

Total debt securities available-for-sale
$
641,282

 
$
894

 
$
16,897

 
$
625,279



9

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

 
December 31, 2017
 
 
 
Gross
 
Gross
 
Estimated
 
Amortized
 
unrealized
 
unrealized
 
fair
 
cost
 
gains
 
losses
 
value
Mortgage-backed securities:
 

 
 

 
 

 
 

Pass-through certificates:
 

 
 

 
 

 
 

GSE
$
179,320

 
$
1,429

 
$
2,454

 
$
178,295

REMICs:
 

 
 

 
 

 
 

GSE
273,501

 
287

 
6,859

 
266,929

Non-GSE
80

 

 
1

 
79

 
452,901

 
1,716

 
9,314

 
445,303

Other debt securities:
 
 
 
 
 
 
 
Municipal bonds
343

 
6

 

 
349

Corporate bonds
67,927

 
401

 
198

 
68,130

 
68,270

 
407

 
198

 
68,479

Total debt securities available-for-sale
$
521,171

 
$
2,123

 
$
9,512

 
$
513,782


The following is a summary of the expected maturity distribution of debt securities available-for-sale, other than mortgage-backed securities, at June 30, 2018 (in thousands):
Available-for-sale
Amortized cost
 
Estimated fair value
Due after one year through five years
$
100,189

 
$
99,505

Due after five years through ten years
9,888

 
9,892

 
$
110,077

 
$
109,397

 Contractual maturities for mortgage-backed securities are not included above, 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.

Certain securities available-for-sale are pledged or encumbered to secure borrowings under Pledge Agreements and Repurchase Agreements and for other purposes required by law.  At June 30, 2018, the fair value of securities available-for-sale that were pledged to secure borrowings and deposits was $441.2 million.

For the three and six months ended June 30, 2018, the Company had gross proceeds of $10.1 million and $29.6 million, respectively, on sales of debt securities available-for-sale, with gross realized gains of $116,000 and $176,000 and gross realized losses of $0 and $5,000. For the three and six months ended June 30, 2017, the Company had gross proceeds of $967,000 on sales of debt securities available-for-sale, with no gross realized gains and gross realized losses of $4,000. The Company recognized net gains of $197,000 and $302,000 on its trading securities portfolio during the three and six months ended June 30, 2018, respectively. The Company recognized net gains of $260,000 and $668,000, on its trading securities portfolio during the three and six months ended June 30, 2017, respectively.

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

Gross unrealized losses on mortgage-backed and other debt securities 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 June 30, 2018, and December 31, 2017, were as follows (in thousands):
 
June 30, 2018
 
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
$
1,538

 
$
104,219

 
$
3,700

 
$
74,599

 
$
5,238

 
$
178,818

REMICs:
 
 
 
 
 
 
 
 
 
 
 
GSE
2,720

 
120,720

 
8,040

 
120,653

 
10,760

 
241,373

Non-GSE

 

 
1

 
75

 
1

 
75

Other debt securities:
 
 
 
 
 
 
 
 
 
 
 
Corporate bonds
514

 
75,010

 
384

 
14,798

 
898

 
89,808

Total
$
4,772

 
$
299,949

 
$
12,125

 
$
210,125

 
$
16,897

 
$
510,074

 
December 31, 2017
 
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
$
439

 
$
48,931

 
$
2,015

 
$
76,113

 
$
2,454

 
$
125,044

REMICs:
 
 
 
 
 
 
 
 
 
 
 
GSE
933

 
103,644

 
5,926

 
139,830

 
6,859

 
243,474

Non-GSE

 

 
1

 
79

 
1

 
79

Other debt securities:
 
 
 
 
 
 
 
 
 
 
 
Corporate bonds
61

 
11,006

 
137

 
15,084

 
198

 
26,090

Total
$
1,433

 
$
163,581

 
$
8,079

 
$
231,106

 
$
9,512

 
$
394,687

 
The Company held 33 pass-through mortgage-backed securities issued or guaranteed by GSEs, 19 REMIC mortgage-backed securities issued or guaranteed by GSEs, one REMIC mortgage-backed security not issued or guaranteed by a GSE, and three corporate bonds that were in a continuous unrealized loss position of twelve months or greater at June 30, 2018. There were 40 pass-through mortgage-backed securities issued or guaranteed by GSEs, 37 REMIC mortgage-backed securities issued or guaranteed by a GSE, and 13 corporate bonds that were in an unrealized loss position of less than twelve months at June 30, 2018. All securities referred to above were rated investment grade at June 30, 2018.  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. The Company did not recognize any other-than-temporary impairment charges during the three and six months ended June 30, 2018, or June 30, 2017
    
    

11

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

Note 3 – Debt Securities Held-to-Maturity
The following is a summary of debt securities held-to-maturity at June 30, 2018, and December 31, 2017 (in thousands): 
 
June 30, 2018
 
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Estimated Fair Value
Mortgage-backed securities:
 

 
 

 
 

 
 

Pass-through certificates:
 

 
 

 
 

 
 

GSEs
$
9,819

 
$

 
$
290

 
$
9,529

Total securities held-to-maturity
$
9,819

 
$

 
$
290

 
$
9,529

 
December 31, 2017
 
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Estimated Fair Value
Mortgage-backed securities:
 

 
 

 
 

 
 

Pass-through certificates:
 

 
 

 
 

 
 

GSEs
$
9,931

 
$
17

 
$
56

 
$
9,892

Total securities held-to-maturity
$
9,931

 
$
17

 
$
56

 
$
9,892

    
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. There were no sales of held-to-maturity securities for the three and six months ended June 30, 2018, or June 30, 2017.

At June 30, 2018, debt securities held-to-maturity with a carrying value of $7.1 million were pledged to secure borrowings and deposits.

Gross unrealized losses on mortgage-backed securities held-to-maturity, 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 June 30, 2018 and December 31, 2017, were as follows (in thousands):
 
June 30, 2018
 
Less than 12 months
 
12 months or more
 
Total
 
Unrealized losses
 
Estimated fair value
 
Unrealized losses
 
Estimated fair value
 
Unrealized losses
 
Estimated fair value
Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
Pass-through certificates:
 
 
 
 
 
 
 
 
 
 
 
GSEs
$
145

 
$
5,930

 
$
145

 
$
3,599

 
$
290

 
$
9,529

Total securities held-to-maturity
$
145

 
$
5,930

 
$
145

 
$
3,599

 
$
290

 
$
9,529

 
December 31, 2017
 
Less than 12 months
 
12 months or more
 
Total
 
Unrealized losses
 
Estimated fair value
 
Unrealized losses
 
Estimated fair value
 
Unrealized losses
 
Estimated fair value
Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
Pass-through certificates:
 
 
 
 
 
 
 
 
 
 
 
GSEs
$
7

 
$
3,922

 
$
49

 
$
3,735

 
$
56

 
$
7,657

Total securities held-to-maturity
$
7

 
$
3,922

 
$
49

 
$
3,735

 
$
56

 
$
7,657





12

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

The Company held two pass-through mortgage-backed securities held-to-maturity, issued or guaranteed by GSEs that were in a continuous unrealized loss position of greater than twelve months at June 30, 2018, and four pass-through mortgage-backed securities held-to-maturity, issued or guaranteed by GSEs that were in a continuous unrealized loss position of less than twelve months at June 30, 2018. Management evaluated these securities and concluded that 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.  As a result, there is a risk that significant other-than-temporary impairments may occur in the future given the current economic environment. The Company did not recognize any other-than-temporary impairment charges in earnings on securities held-to-maturity during the three and six months ended June 30, 2018, or June 30, 2017.
Note 4 – Equity Securities
At both June 30, 2018, and December 31, 2017, equity securities totaled $1.3 million. Equity securities consist of money market mutual funds, recorded at fair value of $272,000 and $323,000, at June 30, 2018, and December 31, 2017, respectively, and an investment in a private Small Business Administration (“SBA”) Loan Fund recorded at net asset value of $1.0 million at both June 30, 2018, and December 31, 2017. As the SBA Loan Fund operates as a private fund, its shares are not publicly traded and therefore have no readily determinable market value. The investment in the fund is recorded at net asset value as a practical expedient for reporting fair market value. Upon adoption of Accounting Standards Update (“ASU”) No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities as of January 1, 2018, the Company reclassified its equity securities out of available-for-sale securities to equity securities on the consolidated balance sheets for all periods presented. For further details on ASU No. 2016-01 see Note 12 - “Recently Issued and Adopted Accounting Pronouncements.”


13

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

Note 5 – Loans
 
Net loans held-for-investment are as follows (in thousands):
 
June 30,
 
December 31,
 
2018
 
2017
Real estate loans:
 
 
 
Multifamily
$
1,800,421

 
$
1,735,712

Commercial mortgage
499,518

 
445,225

One-to-four family residential mortgage
100,257

 
100,942

Home equity and lines of credit
72,728

 
66,254

Construction and land
26,983

 
34,545

Total real estate loans
2,499,907

 
2,382,678

Commercial and industrial loans
39,682

 
34,828

Other loans
1,532

 
1,430

Total commercial and industrial and other loans
41,214

 
36,258

Deferred loan cost, net
6,799

 
6,339

Originated loans held-for-investment, net
2,547,920

 
2,425,275

PCI Loans
21,331

 
22,741

Loans acquired:
 
 
 
One-to-four family residential mortgage
265,709

 
275,053

Multifamily
180,951

 
199,149

Commercial mortgage
155,250

 
163,962

Home equity and lines of credit
19,009

 
20,455

Construction and land
14,999

 
17,201

Total acquired real estate loans
635,918

 
675,820

Commercial and industrial loans
14,939

 
16,946

Other loans
18

 
37

Total loans acquired, net
650,875

 
692,803

Loans held-for-investment, net
3,220,126

 
3,140,819

Allowance for loan losses
(26,882
)
 
(26,160
)
Net loans held-for-investment
$
3,193,244

 
$
3,114,659

    
There were no loans held-for-sale at June 30, 2018, or December 31, 2017.

PCI loans totaled $21.3 million at June 30, 2018, as compared to $22.7 million at December 31, 2017. The majority of the PCI loan balance is attributable to those loans acquired as part of a Federal Deposit Insurance Corporation-assisted transaction. The Company accounts for PCI loans utilizing U.S. GAAP applicable to loans acquired with deteriorated credit quality. At June 30, 2018, PCI loans consist of approximately 27% commercial real estate loans and 50% commercial and industrial loans, with the remaining balance in residential and home equity loans. At December 31, 2017, PCI loans consist of approximately 27% commercial real estate loans and 50% commercial and industrial loans, with the remaining balance in residential and home equity loans.

The following table details the accretion of interest income for PCI loans for the three and six months ended June 30, 2018 and June 30, 2017 (in thousands): 
 
At or for the three months ended June 30,
 
At or for the six months ended June 30,
 
2018
 
2017
 
2018
 
2017
Balance at the beginning of period
$
23,412

 
$
22,763

 
$
24,502

 
$
24,215

Accretion into interest income
(1,026
)
 
(1,321
)
 
(2,116
)
 
(2,773
)
Balance at end of period
$
22,386

 
$
21,442

 
$
22,386

 
$
21,442


14

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 six months ended June 30, 2018, and June 30, 2017 (in thousands):  
 
Three Months Ended June 30, 2018
 
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
$
5,213

 
$
455

 
$
463

 
$
17,412

 
$
225

 
$
1,337

 
$
113

 
$

 
$
25,218

 
$
951

 
$
3

 
$
26,172

Charge-offs

 

 

 

 

 

 

 

 

 

 

 

Recoveries
12

 

 

 
26

 

 

 

 

 
38

 

 
2

 
40

Provisions (credit)
493

 
(71
)
 
(25
)
 
165

 
54

 
65

 
(6
)
 

 
675

 

 
(5
)
 
670

Ending balance
$
5,718

 
$
384

 
$
438

 
$
17,603

 
$
279

 
$
1,402

 
$
107

 
$

 
$
25,931

 
$
951

 
$

 
$
26,882


 
Three Months Ended June 30, 2017
 
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
$
5,231

 
$
649

 
$
165

 
$
16,184

 
$
492

 
$
1,561

 
$
72

 
$

 
$
24,354

 
$
896

 
$
34

 
$
25,284

Charge-offs

 

 

 
(178
)
 
(104
)
 

 

 

 
(282
)
 

 
(8
)
 
(290
)
Recoveries
17

 

 

 

 
64

 
17

 

 

 
98

 

 
2

 
100

Provisions (credit)
(12
)
 
(99
)
 
64

 
630

 
(89
)
 
(46
)
 
25

 

 
473

 

 
38

 
511

Ending balance
$
5,236

 
$
550

 
$
229

 
$
16,636

 
$
363

 
$
1,532

 
$
97

 
$

 
$
24,643

 
$
896

 
$
66

 
$
25,605



15

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

 
Six Months Ended June 30, 2018
 
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
$
5,196

 
$
503

 
$
610

 
$
17,374

 
$
122

 
$
1,273

 
$
94

 
$

 
$
25,172

 
$
951

 
$
37

 
$
26,160

Charge-offs
(3
)
 

 

 

 
(60
)
 

 

 

 
(63
)
 

 
(1
)
 
(64
)
Recoveries
28

 

 

 
26

 

 
20

 

 

 
74

 

 
8

 
82

Provisions/(credit)
497

 
(119
)
 
(172
)
 
203

 
217

 
109

 
13

 

 
748

 

 
(44
)
 
704

Ending balance
$
5,718

 
$
384

 
$
438

 
$
17,603

 
$
279

 
$
1,402

 
$
107

 
$

 
$
25,931

 
$
951

 
$

 
$
26,882

 
Six Months Ended June 30, 2017
 
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
$
5,432

 
$
664

 
$
172

 
$
14,952

 
$
588

 
$
1,720

 
$
96

 
$

 
$
23,624

 
$
896

 
$
75

 
$
24,595

Charge-offs
(4
)
 

 

 
(178
)
 
(104
)
 

 

 

 
(286
)
 

 
(31
)
 
(317
)
Recoveries
34

 

 

 
278

 
64

 
64

 

 

 
440

 

 
4

 
444

Provisions/(credit)
(226
)
 
(114
)
 
57

 
1,584

 
(185
)
 
(252
)
 
1

 

 
865

 

 
18

 
883

Ending balance
$
5,236

 
$
550

 
$
229

 
$
16,636

 
$
363

 
$
1,532

 
$
97

 
$

 
$
24,643

 
$
896

 
$
66

 
$
25,605



    

16

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 June 30, 2018, and December 31, 2017 (in thousands):
 
June 30, 2018
 
Real Estate
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
One-to-Four Family
 
Construction and Land
 
Multifamily
 
Home Equity and Lines of Credit
 
Commercial and Industrial
 
Other
 
Originated Loans Total
 
Purchased Credit-Impaired
 
Acquired Loans
 
Total
Allowance for loan losses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending balance: individually evaluated for impairment
$
13

 
$
18

 
$

 
$

 
$
10

 
$
2

 
$

 
$
43

 
$

 
$

 
$
43

Ending balance: collectively evaluated for impairment
$
5,705

 
$
366

 
$
438

 
$
17,603

 
$
269

 
$
1,400

 
$
107

 
$
25,888

 
$
951

 
$

 
$
26,839

Loans, net:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending balance
$
500,051

 
$
101,354

 
$
27,048

 
$
1,803,834

 
$
74,324

 
$
39,776

 
$
1,533

 
$
2,547,920

 
$
21,331

 
$
650,875

 
$
3,220,126

Ending balance: individually evaluated for impairment
$
15,707

 
$
1,947

 
$

 
$
1,275

 
$
65

 
$
152

 
$

 
$
19,146

 
$

 
$
944

 
$
20,090

Ending balance: collectively evaluated for impairment
$
484,344

 
$
99,407

 
$
27,048

 
$
1,802,559

 
$
74,259

 
$
39,624

 
$
1,533

 
$
2,528,774

 
$
21,331

 
$
649,931

 
$
3,200,036


 
December 31, 2017
 
Real Estate
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
One-to-Four Family
 
Construction and Land
 
Multifamily
 
Home Equity and Lines of Credit
 
Commercial and Industrial
 
Other
 
Originated Loans Total
 
Purchased Credit-Impaired
 
Acquired Loans
 
Total
Allowance for loan losses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending balance: individually evaluated for impairment
$

 
$
38

 
$

 
$

 
$
4

 
$
3

 
$

 
$
45

 
$

 
$
37

 
$
82

Ending balance: collectively evaluated for impairment
$
5,196

 
$
465

 
$
610

 
$
17,374

 
$
118

 
$
1,270

 
$
94

 
$
25,127

 
$
951

 
$

 
$
26,078

Loans, net:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending balance
$
445,781

 
$
101,650

 
$
34,620

 
$
1,739,220

 
$
67,679

 
$
34,893

 
$
1,432

 
$
2,425,275

 
$
22,741

 
$
692,803

 
$
3,140,819

Ending balance: individually evaluated for impairment
$
16,008

 
$
1,996

 
$

 
$
1,310

 
$
69

 
$
159

 
$

 
$
19,542

 
$

 
$
1,543

 
$
21,085

Ending balance: collectively evaluated for impairment
$
429,773

 
$
99,654

 
$
34,620

 
$
1,737,910

 
$
67,610

 
$
34,734

 
$
1,432

 
$
2,405,733

 
$
22,741

 
$
691,260

 
$
3,119,734


17

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 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. Loan-to-value (“LTV”) ratios used by management in monitoring credit quality are based on current period 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 loan-to-value ratios, as described above, of less than 35%, and one-to-four family loans having loan-to-value 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.

18

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 June 30, 2018, and December 31, 2017 (in thousands):
 
June 30, 2018
 
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
$
139,016

 
$
1,662,881

 
$
71,628

 
$
416,297

 
$
59,099

 
$
39,571

 
$
27,048

 
$
74,079

 
$
39,064

 
$
1,533

 
$
2,530,216

Special Mention

 
626

 
402

 
1,158

 
672

 

 

 
27

 
538

 

 
3,423

Substandard

 
1,311

 

 
10,566

 
1,434

 
578

 

 
218

 
174

 

 
14,281

Originated loans held-for-investment, net
$
139,016

 
$
1,664,818

 
$
72,030

 
$
428,021

 
$
61,205

 
$
40,149

 
$
27,048

 
$
74,324

 
$
39,776

 
$
1,533

 
$
2,547,920


 
December 31, 2017
 
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
$
131,792

 
$
1,603,947

 
$
84,620

 
$
346,857

 
$
60,400

 
$
38,504

 
$
34,620

 
$
67,426

 
$
34,141

 
$
1,432

 
$
2,403,739

Special Mention

 
1,897

 
410

 
2,170

 
683

 

 

 
28

 
571

 

 
5,759

Substandard

 
1,584

 

 
11,724

 
1,470

 
593

 

 
225

 
181

 

 
15,777

Originated loans held-for-investment, net
$
131,792

 
$
1,607,428

 
$
85,030

 
$
360,751

 
$
62,553

 
$
39,097

 
$
34,620

 
$
67,679

 
$
34,893

 
$
1,432

 
$
2,425,275


19

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

Included in loans receivable (including loans 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 $6.4 million and $5.5 million at June 30, 2018, and December 31, 2017, respectively. Generally, loans are placed on non-accrual 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 $3.3 million and $3.1 million at June 30, 2018, and December 31, 2017, 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 $3.1 million and $2.4 million at June 30, 2018, and December 31, 2017, respectively. There were no non-accrual loans held-for-sale at June 30, 2018 and December 31, 2017. There were no loans past due 90 days or more and still accruing interest at June 30, 2018. Loans past due 90 days or more and still accruing interest were $28,000 at December 31, 2017, and consisted of loans that are considered well-secured and in the process of collection.

20

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 June 30, 2018, and December 31, 2017, excluding loans held-for-sale and PCI loans which have been segregated into pools. For PCI loans, each loan pool is accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows (in thousands):
 
June 30, 2018
 
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
$

 
$
719

 
$
2,304

 
$
3,023

 
$

 
$
3,023

Total commercial

 
719

 
2,304

 
3,023

 

 
3,023

One-to-four family residential
 

 
 

 
 

 
 

 
 

 
 

LTV < 60%
 

 
 

 
 

 
 

 
 

 
 

Substandard

 
442

 
77

 
519

 

 
519

Total


442


77

 
519

 

 
519

LTV => 60%
 

 
 

 
 

 
 

 
 

 
 

Substandard

 

 
36

 
36

 

 
36

Total one-to-four family residential

 
442

 
113

 
555

 

 
555

Home equity and lines of credit
 

 
 

 
 

 
 

 
 

 
 

Substandard
77

 

 

 
77

 

 
77

Total home equity and lines of credit
77

 

 

 
77

 

 
77

Commercial and industrial loans
 

 
 

 
 

 
 

 
 

 
 

Substandard

 

 
72

 
72

 

 
72

Total commercial and industrial loans

 

 
72

 
72

 

 
72

Total non-performing loans held-for-investment, originated
77

 
1,161

 
2,489

 
3,727

 

 
3,727

Loans acquired:
 

 
 

 
 

 
 

 
 

 
 

Real estate loans:
 
 
 
 
 
 
 
 
 
 
 
Commercial
 

 
 

 
 

 
 

 
 

 
 

LTV < 35%
 

 
 

 
 

 
 

 
 

 
 

Substandard

 

 
291

 
291

 

 
291

LTV => 35%
 
 
 
 
 
 
 
 
 
 
 
Substandard
519

 
250

 
537

 
1,306

 

 
1,306

Total commercial
519

 
250

 
828

 
1,597

 

 
1,597

One-to-four family residential
 

 
 

 
 

 
 

 
 

 
 

LTV < 60%
 

 
 

 
 

 
 

 
 

 
 

Substandard

 
200

 
85

 
285

 

 
285

LTV => 60%
 

 
 

 
 

 
 

 
 

 
 

Substandard

 

 
124

 
124

 

 
124

Total one-to-four family residential

 
200

 
209

 
409

 

 
409

Multifamily
 
 
 
 
 
 
 
 
 
 
 
LTV < 35%
 
 
 
 
 
 
 
 
 
 
 
Substandard

 

 
152

 
152

 

 
152

LTV => 35%
 
 
 
 
 
 
 
 
 
 
 
Substandard

 
416

 

 
416

 

 
416

Total multifamily

 
416

 
152

 
568

 

 
568

Home equity and lines of credit
 

 
 

 
 

 
 

 
 

 
 

Substandard

 
28

 
49

 
77

 

 
77

Total home equity and lines of credit

 
28

 
49

 
77

 

 
77

Total non-performing loans acquired
519

 
894

 
1,238

 
2,651

 

 
2,651

Total non-performing loans
$
596


$
2,055

 
$
3,727

 
$
6,378

 
$

 
$
6,378


21

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


 
December 31, 2017
 
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
$
432

 
$
314

 
$
2,305

 
$
3,051

 
$

 
$
3,051

Total commercial
432

 
314

 
2,305

 
3,051

 

 
3,051

One-to-four family residential
 

 
 

 
 

 
 

 
 

 
 

LTV < 60%
 

 
 

 
 

 
 

 
 

 
 

Substandard

 
206

 
328

 
534

 

 
534

LTV => 60%
 

 
 

 
 

 
 

 
 

 
 

Substandard

 

 
39

 
39

 

 
39

Total one-to-four family residential

 
206

 
367

 
573

 

 
573

Home equity and lines of credit
 
 
 
 
 
 
 
 
 
 
 
Substandard
79

 

 

 
79

 

 
79

Total home equity and lines of credit
79

 

 

 
79

 

 
79

Commercial and industrial loans
 
 
 
 
 
 
 
 
 
 
 
Substandard

 

 
72

 
72

 

 
72

Total commercial and industrial loans

 

 
72

 
72

 

 
72

Total non-performing loans held-for-investment, originated
511

 
520

 
2,744

 
3,775

 

 
3,775

Loans acquired:
 

 
 

 
 

 
 

 
 

 
 

Real estate loans:
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
 
 
 
 
 
 
 
 
 
 
LTV < 35%
 
 
 
 
 
 
 
 
 
 
 
Substandard

 

 
205

 
205

 

 
205

LTV => 35%
 
 
 
 
 
 
 
 
 
 
 
Substandard

 
773

 
58

 
831

 

 
831

Total commercial

 
773

 
263

 
1,036

 

 
1,036

One-to-four family residential
 
 
 
 
 
 
 
 
 
 
 
LTV < 60%
 

 
 

 
 

 
 

 
 

 
 

Substandard

 
201

 

 
201

 
27

 
228

Total one-to-four family residential

 
201




201


27


228

Multifamily
 

 
 

 
 

 
 

 
 

 
 

LTV => 35%
 

 
 

 
 

 
 

 
 

 
 

Substandard

 
417

 

 
417

 

 
417

Total multifamily

 
417

 

 
417

 

 
417

Home equity and lines of credit
 
 
 
 
 
 
 
 
 
 
 
Substandard

 
28

 
49

 
77

 

 
77

Total home equity and lines of credit

 
28

 
49

 
77

 

 
77

Commercial and industrial loans
 
 
 
 
 
 
 
 
 
 
 
Substandard

 

 
2

 
2

 

 
2

Total commercial and industrial loans

 

 
2

 
2

 

 
2

Other loans - Pass

 

 

 

 
1

 
1

Total non-performing loans acquired

 
1,419

 
314

 
1,733

 
28

 
1,761

Total non-performing loans
$
511

 
$
1,939

 
$
3,058

 
$
5,508

 
$
28

 
$
5,536


22

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 June 30, 2018, and December 31, 2017 (in thousands):
 
June 30, 2018
 
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
$
71,628

 
$

 
$
71,628

 
$

 
$
71,628

Special Mention

 
402

 
402

 

 
402

Total
71,628

 
402

 
72,030

 

 
72,030

LTV => 35%
 

 
 

 
 

 
 

 
 

Pass
414,716

 
1,581

 
416,297

 

 
416,297

Special Mention
1,158

 

 
1,158

 

 
1,158

Substandard
7,543

 

 
7,543

 
3,023

 
10,566

Total
423,417

 
1,581

 
424,998

 
3,023

 
428,021

Total commercial
495,045

 
1,983

 
497,028

 
3,023

 
500,051

One-to-four family residential
 

 
 

 
 

 
 

 
 

LTV < 60%
 

 
 

 
 

 
 

 
 

Pass
56,690

 
2,409

 
59,099

 

 
59,099

Special Mention

 
672

 
672

 

 
672

Substandard
915

 

 
915

 
519

 
1,434

Total
57,605

 
3,081

 
60,686

 
519

 
61,205

LTV => 60%
 

 
 

 
 

 
 

 
 

Pass
39,335

 
236

 
39,571

 

 
39,571

Substandard
319

 
223

 
542

 
36

 
578

Total
39,654

 
459

 
40,113

 
36

 
40,149

Total one-to-four family residential
97,259

 
3,540

 
100,799

 
555

 
101,354

Construction and land
 

 
 

 
 

 
 

 
 

Pass
27,046

 
2

 
27,048

 

 
27,048

Total construction and land
27,046

 
2

 
27,048

 

 
27,048

Multifamily
 

 
 

 
 

 
 

 
 

LTV < 35%
 

 
 

 
 

 
 

 
 

Pass
138,715

 
301

 
139,016

 

 
139,016

Total
138,715

 
301

 
139,016

 

 
139,016

LTV => 35%
 

 
 

 
 

 
 

 
 

Pass
1,662,881

 

 
1,662,881

 

 
1,662,881

Special Mention
626

 

 
626

 

 
626

Substandard
81

 
1,230

 
1,311

 

 
1,311

Total
1,663,588

 
1,230

 
1,664,818

 

 
1,664,818

Total multifamily
1,802,303

 
1,531

 
1,803,834

 

 
1,803,834

Home equity and lines of credit
 

 
 

 
 

 
 

 
 

Pass
73,983

 
96

 
74,079

 

 
74,079

Special Mention
27

 

 
27

 

 
27

Substandard
141

 

 
141

 
77

 
218

Total home equity and lines of credit
74,151

 
96

 
74,247

 
77

 
74,324

Commercial and industrial
 

 
 

 
 

 
 

 
 

Pass
39,057

 
7

 
39,064

 

 
39,064

Special Mention
501

 
37

 
538

 

 
538

Substandard
102

 

 
102

 
72

 
174

Total commercial and industrial
39,660

 
44

 
39,704

 
72

 
39,776

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

23

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

 
June 30, 2018
 
Performing (Accruing) Loans (Continued)
 
 
 
 
 
0-29 Days Past Due
 
30-89 Days Past Due
 
Total
 
Non-Performing Loans
 
Total Loans Receivable, net
Other loans - Pass
1,524

 
9

 
1,533

 

 
1,533

Total originated loans held-for-investment
2,536,988

 
7,205

 
2,544,193

 
3,727

 
2,547,920

Acquired loans:
 
 
 
 
 
 
 
 
 
Real estate loans:
 
 
 
 
 
 
 
 
 
One-to-four family residential
 
 
 
 
 
 
 
 
 
LTV < 60%
 
 
 
 
 
 
 
 
 
Pass
240,125

 
2,069

 
242,194

 

 
242,194

Special Mention
429

 

 
429

 

 
429

Substandard
64

 
13

 
77

 
285

 
362

Total
240,618

 
2,082

 
242,700

 
285

 
242,985

LTV => 60%
 

 
 

 
 

 
 

 
 

Pass
22,068

 
532

 
22,600

 

 
22,600

Substandard

 

 

 
124

 
124

Total
22,068

 
532

 
22,600

 
124

 
22,724

Total one-to-four family residential
262,686

 
2,614

 
265,300

 
409

 
265,709

Commercial
 

 
 

 
 

 
 
 
 
LTV < 35%
 

 
 

 
 

 
 
 
 
Pass
52,486

 

 
52,486

 

 
52,486

Special Mention
88

 
70

 
158

 

 
158

Substandard

 
84

 
84

 
291

 
375

Total
52,574

 
154

 
52,728

 
291

 
53,019

LTV => 35%
 
 
 
 
 
 
 
 
 
Pass
92,790

 
3,945

 
96,735

 

 
96,735

Special Mention

 
131

 
131

 

 
131

Substandard
3,639

 
420

 
4,059

 
1,306

 
5,365

Total
96,429

 
4,496

 
100,925

 
1,306

 
102,231

Total commercial
149,003

 
4,650

 
153,653

 
1,597

 
155,250

Construction and land
 

 
 

 
 

 
 

 
 

Pass
14,999

 

 
14,999

 

 
14,999

Total construction and land
14,999

 

 
14,999

 

 
14,999

Multifamily
 

 
 

 
 

 
 

 
 

LTV < 35%
 

 
 

 
 

 
 
 
 
Pass
172,481

 

 
172,481

 

 
172,481

Special Mention

 
65

 
65

 

 
65

Substandard

 

 

 
152

 
152

Total
172,481

 
65

 
172,546

 
152

 
172,698

LTV => 35%
 

 
 

 
 

 
 

 
 

Pass
7,837

 

 
7,837

 

 
7,837

Substandard

 

 

 
416

 
416

Total
7,837

 

 
7,837

 
416

 
8,253

Total multifamily
180,318

 
65

 
180,383

 
568

 
180,951

Home equity and lines of credit
 
 
 
 
 
 
 
 
 
Pass
18,832

 
18

 
18,850

 

 
18,850

Substandard
82

 

 
82

 
77

 
159

Total home equity and lines of credit
18,914

 
18

 
18,932

 
77

 
19,009

Commercial and industrial
 
 
 
 
 
 
 
 
 
Pass
14,939

 

 
14,939

 

 
14,939

Total commercial and industrial
14,939

 

 
14,939

 

 
14,939

Other loans - Pass
18

 

 
18

 

 
18

Total loans acquired
640,877

 
7,347

 
648,224

 
2,651

 
650,875

 
$
3,177,865

 
$
14,552

 
$
3,192,417

 
$
6,378

 
$
3,198,795


24

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

 
December 31, 2017
 
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
$
84,620

 
$

 
$
84,620

 

 
$
84,620

Special Mention

 
410

 
410

 

 
410

Total
84,620

 
410

 
85,030

 

 
85,030

LTV => 35%
 

 
 

 
 

 
 

 
 

Pass
346,229

 
628

 
346,857

 

 
346,857

Special Mention
832

 
1,338

 
2,170

 

 
2,170

Substandard
7,675

 
998

 
8,673

 
3,051

 
11,724

Total
354,736

 
2,964

 
357,700

 
3,051

 
360,751

Total commercial
439,356

 
3,374

 
442,730

 
3,051

 
445,781

One-to-four family residential
 

 
 

 
 

 
 

 
 

LTV < 60%
 

 
 

 
 

 
 

 
 

Pass
57,907

 
2,493

 
60,400

 

 
60,400

Special Mention

 
683

 
683

 

 
683

Substandard
322

 
614

 
936

 
534

 
1,470

Total
58,229

 
3,790

 
62,019

 
534

 
62,553

LTV => 60%
 

 
 

 
 

 
 

 
 

Pass
38,504

 

 
38,504

 

 
38,504

Substandard
554

 

 
554

 
39

 
593

Total
39,058

 

 
39,058

 
39

 
39,097

Total one-to-four family residential
97,287

 
3,790

 
101,077

 
573

 
101,650

Construction and land
 

 
 

 
 

 
 

 
 

Pass
34,614

 
6

 
34,620

 

 
34,620

Total construction and land
34,614

 
6

 
34,620

 

 
34,620

Multifamily
 

 
 

 
 

 
 

 
 

LTV < 35%
 

 
 

 
 

 
 

 
 

Pass
131,488

 
304

 
131,792

 

 
131,792

Total
131,488

 
304

 
131,792

 

 
131,792

LTV => 35%
 

 
 

 
 

 
 

 
 

Pass
1,603,714

 
233

 
1,603,947

 

 
1,603,947

Special Mention
638

 
1,259

 
1,897

 

 
1,897

Substandard
83

 
1,501

 
1,584

 

 
1,584

Total
1,604,435

 
2,993

 
1,607,428

 

 
1,607,428

Total multifamily
1,735,923

 
3,297

 
1,739,220

 

 
1,739,220

Home equity and lines of credit
 

 
 

 
 

 
 

 
 

Pass
67,426

 

 
67,426

 

 
67,426

Special Mention
28

 

 
28

 

 
28

Substandard
146

 

 
146

 
79

 
225

Total home equity and lines of credit
67,600

 

 
67,600

 
79

 
67,679

Commercial and industrial loans
 

 
 

 
 

 
 

 
 

Pass
34,003

 
138

 
34,141

 

 
34,141

Special Mention
547

 
24

 
571

 

 
571

Substandard
109

 

 
109

 
72

 
181

Total commercial and industrial loans
34,659

 
162

 
34,821

 
72

 
34,893

Other loans - Pass
1,403

 
29

 
1,432

 

 
1,432

Total originated loans held-for-investment
$
2,410,842

 
$
10,658

 
$
2,421,500

 
$
3,775

 
$
2,425,275

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

25

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

 
December 31, 2017
 
Performing (Accruing) Loans
 
 
 
 
 
0-29 Days Past Due
 
30-89 Days Past Due
 
Total
 
Non-Performing Loans
 
Total Loans Receivable, net
Loans Acquired
 
 
 
 
 
 
 
 
 
Real estate loans:
 
 
 
 
 
 
 
 
 
One-to-four family residential
 
 
 
 
 
 
 
 
 
LTV < 60%
 
 
 
 
 
 
 
 
 
Pass
250,149

 
224

 
250,373

 

 
250,373

Special Mention
455

 

 
455

 

 
455

Substandard
417

 
150

 
567

 
228

 
795

Total
251,021

 
374

 
251,395

 
228

 
251,623

LTV => 60%
 
 
 
 
 
 
 
 
 
Pass
23,295

 

 
23,295

 

 
23,295

Substandard
135

 

 
135

 

 
135

Total
23,430

 

 
23,430

 

 
23,430

Total one-to-four family residential
274,451

 
374

 
274,825

 
228

 
275,053

Commercial
 
 
 
 
 
 
 
 
 
LTV < 35%
 
 
 
 
 
 
 
 
 
Pass
50,035

 
70

 
50,105

 

 
50,105

Special Mention
91

 

 
91

 

 
91

Substandard

 
181

 
181

 
205

 
386

Total
50,126

 
251

 
50,377

 
205

 
50,582

LTV => 35%
 
 
 
 
 
 
 
 
 
Pass
108,125

 
158

 
108,283

 

 
108,283

Special Mention

 
133

 
133

 

 
133

Substandard
3,703

 
430

 
4,133

 
831

 
4,964

Total
111,828

 
721

 
112,549

 
831

 
113,380

Total commercial
161,954

 
972

 
162,926

 
1,036

 
163,962

Construction and land
 
 
 
 
 
 
 
 
 
Pass
17,201

 

 
17,201

 

 
17,201

Total construction and land
17,201

 

 
17,201

 

 
17,201

Multifamily
 
 
 
 
 
 
 
 
 
LTV < 35%
 
 
 
 
 
 
 
 
 
Pass
189,551

 

 
189,551

 

 
189,551

Special Mention
78

 

 
78

 

 
78

Substandard
153

 

 
153

 

 
153

Total
189,782

 

 
189,782

 

 
189,782

LTV => 35%
 
 
 
 
 
 
 
 
 
Pass
8,950

 

 
8,950

 

 
8,950

Substandard

 

 

 
417

 
417

Total
8,950

 

 
8,950

 
417

 
9,367

Total multifamily
198,732

 

 
198,732

 
417

 
199,149

Home equity and lines of credit
 
 
 
 
 
 
 
 
 
Pass
20,291

 

 
20,291

 

 
20,291

Substandard
87

 

 
87

 
77

 
164

Total home equity and lines of credit
20,378

 

 
20,378

 
77

 
20,455

Commercial and industrial loans
 
 
 
 
 
 
 
 
 
Pass
16,904

 
40

 
16,944

 

 
16,944

Substandard

 

 

 
2

 
2

Total commercial and industrial loans
16,904

 
40

 
16,944

 
2

 
16,946

Other
36

 

 
36

 
1

 
37

Total loans acquired
689,656

 
1,386

 
691,042

 
1,761

 
692,803

 
$
3,100,498

 
$
12,044

 
$
3,112,542

 
$
5,536

 
$
3,118,078


26

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

The following table summarizes originated and acquired impaired loans as of June 30, 2018, and December 31, 2017 (in thousands):
 
June 30, 2018
 
December 31, 2017
 
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
$

 
$
139

 
$

 
$

 
$
139

 
$

LTV => 35%
 

 
 

 
 

 
 
 
 
 
 
Pass
4,632

 
5,519

 

 
6,263

 
7,150

 

Substandard
9,608

 
10,423

 

 
9,745

 
10,560

 

One-to-four family residential
 

 
 

 
 

 
 
 
 
 
 
LTV < 60%
 

 
 

 
 

 
 
 
 
 
 
Pass
1,571

 
1,640

 

 
1,189

 
1,254

 

Substandard
241

 
241

 

 
251

 
251

 

LTV => 60%
 
 
 
 
 
 
 
 
 
 
 
Pass
132

 
159

 

 
136

 
161

 

Substandard
124

 
276

 

 
135

 
286

 

Multifamily
 

 
 

 
 

 
 
 
 
 
 
LTV < 35%
 
 
 
 
 
 
 
 
 
 
 
Substandard
152

 
152

 

 
153

 
153

 

LTV => 35%
 

 
 

 
 

 
 
 
 
 
 
Pass
45

 
515

 

 
1,309

 
1,780

 

Substandard
1,230

 
1,230

 

 

 

 

Home equity and lines of credit
 
 
 
 
 
 
 
 
 
 
 
Pass
31

 
31

 

 
33

 
33

 

Commercial and industrial loans
 

 
 

 
 

 
 
 
 
 
 
Substandard
129

 
129

 

 
135

 
135

 

With a Related Allowance
Recorded:
 

 
 

 
 

 
 
 
 
 
 
Real estate loans:
 

 
 

 
 

 
 
 
 
 
 
Commercial
 

 
 

 
 

 
 
 
 
 
 
LTV => 35%
 

 
 

 
 

 
 
 
 
 
 
Pass
1,467

 
1,467

 
(13
)
 

 

 

One-to-four family residential
 

 
 

 
 

 
 
 
 
 
 
LTV < 60%
 
 
 
 
 
 
 
 
 
 
 
Pass

 

 

 
411

 
411

 
(7
)
Substandard
671

 
671

 
(18
)
 
997

 
997

 
(49
)
LTV => 60%
 
 
 
 
 
 
 
 
 
 
 
Pass

 

 

 
268

 
268

 
(19
)
Home equity and lines of credit
 

 
 

 
 

 
 
 
 
 
 
Substandard
34

 
34

 
(10
)
 
36

 
36

 
(4
)
Commercial and industrial loans
 

 
 

 
 

 
 
 
 
 
 
Special Mention
23

 
23

 
(2
)
 
24

 
24

 
(3
)
Total:
 

 
 

 
 

 
 
 
 
 
 
Real estate loans
 

 
 

 
 

 
 
 
 
 
 
Commercial
15,707

 
17,548

 
(13
)
 
16,008

 
17,849

 

One-to-four family residential
2,739

 
2,987

 
(18
)
 
3,387

 
3,628

 
(75
)
Multifamily
1,427

 
1,897

 

 
1,462

 
1,933

 

Home equity and lines of credit
65

 
65

 
(10
)
 
69

 
69

 
(4
)
Commercial and industrial loans
152

 
152

 
(2
)
 
159

 
159

 
(3
)
 
$
20,090

 
$
22,649

 
$
(43
)
 
$
21,085

 
$
23,638

 
$
(82
)

27

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

Included in the above table at June 30, 2018, are impaired loans with carrying balances of $13.2 million that were not written down by charge-offs or for which there are no specific reserves in our allowance for loan losses. Included in impaired loans at December 31, 2017, are loans with carrying balances of $14.5 million that were not written down by charge-offs or for which there are no specific reserves in our allowance for loan losses. Loans not written down by charge-offs or specific reserves at June 30, 2018, and December 31, 2017, 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 (excluding PCI loans) and interest recognized on impaired loans as of, and for, the three and six months ended June 30, 2018, and June 30, 2017 (in thousands):
 
Three Months Ended
 
Six Months Ended
 
June 30, 2018
 
June 30, 2017
 
June 30, 2018
 
June 30, 2017
 
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%
 
 
 
 
 
 
 
 
 

 
 

 
 
 
 
Substandard
$

 
$

 
$

 
$
16

 
$

 
$

 
$

 
$
22

LTV => 35%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pass
4,664

 
65

 
5,836

 
68

 
5,197

 
129

 
5,194

 
132

Substandard
9,650

 
75

 
12,557

 
129

 
9,681

 
150

 
13,298

 
256

One-to-four family residential
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LTV < 60%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pass
1,374

 
13

 
622

 
8

 
1,312

 
27

 
626

 
15

Substandard
246

 
4

 
585

 
6

 
248

 
4

 
451

 
12

LTV => 60%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pass
267

 
1

 

 

 
223

 
5

 

 

Substandard
129

 

 
278

 
5

 
131

 
3

 
392

 
10

Multifamily
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LTV < 35%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Substandard
152

 
1

 
154

 
2

 
152

 
2

 
155

 
3

LTV => 35%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pass
46

 
4

 
58

 
4

 
467

 
8

 
60

 
8

Substandard
1,237

 
16

 

 

 
825

 
28

 

 

Home equity and lines of credit
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pass
31

 

 
37

 

 
32

 
1

 
38

 
1

Commercial and industrial loans
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Substandard
131

 

 
143

 

 
132

 

 
120

 

With a Related Allowance Recorded:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Real estate loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LTV => 35%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pass
1,476

 
20

 

 

 
984

 
40

 

 

Substandard

 

 

 

 

 

 
673

 

One-to-four family residential
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LTV < 60%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pass
204

 
2

 

 

 
273

 
3

 

 

Substandard
674

 
4

 
1,398

 
9

 
782

 
8

 
1,439

 
19

LTV => 60%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pass

 

 
272

 
6

 
89

 

 
273

 
10

Substandard

 

 
189

 

 

 

 
253

 

Multifamily
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LTV => 35%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pass

 

 
1,289

 
8

 

 

 
1,296

 
20


28

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

 
Three Months Ended
 
Six Months Ended
 
June 30, 2018
 
June 30, 2017
 
June 30, 2018
 
June 30, 2017
 
Average Recorded Investment
 
Interest Income
 
Average Recorded Investment
 
Interest Income
 
Average Recorded Investment
 
Interest Income
 
Average Recorded Investment
 
Interest Income
Substandard

 

 
450

 

 

 

 
300

 

Home equity and lines of credit
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pass

 

 
254

 
2

 

 

 
255

 
3

Substandard
35

 

 
38

 

 
35

 
1

 
38

 
1

Commercial and industrial loans
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Special Mention
23

 

 
26

 

 
23

 
1

 
26

 

Total:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Real estate loans
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
15,790

 
160

 
18,393

 
213

 
15,862

 
319

 
19,165

 
410

One-to-four family residential
2,894

 
24

 
3,344

 
34

 
3,058

 
50

 
3,434

 
66

Multifamily
1,435

 
21

 
1,951

 
14

 
1,444

 
38

 
1,811

 
31

Home equity and lines of credit
66

 

 
329

 
2

 
67

 
2

 
331

 
5

Commercial and industrial loans
154

 

 
169

 

 
155

 
1

 
146

 

 
$
20,339

 
$
205

 
$
24,186

 
$
263

 
$
20,586

 
$
410

 
$
24,887

 
$
512

    

There were no loans modified as troubled debt restructurings (TDRs) during the three and six months ended June 30, 2018 and 2017.

At June 30, 2018, and December 31, 2017, we had TDRs of $17.3 million and $18.3 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 cost 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 an 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 management firm that specializes in appraisal preparation and review to ascertain the reasonableness of updated appraisals. Projecting the expected cash flows under troubled debt restructurings 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 June 30, 2018, there were no TDR loans that were restructured during the preceding twelve months ended June 30, 2018, that subsequently defaulted.


29

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


Note 6 – Deposits

Deposits account balances are summarized as follows (in thousands):
 
June 30, 2018
 
December 31, 2017
Non-interest-bearing demand
$
411,427

 
$
407,267

Interest-bearing negotiable orders of withdrawal (NOW)
421,167

 
465,140

Savings and money market
1,162,218

 
1,225,643

Certificates of deposit
972,469

 
738,929

Total deposits
$
2,967,281

 
$
2,836,979

 
Interest expense on deposit accounts is summarized for the periods indicated (in thousands):
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2018
 
2017
 
2018
 
2017
Negotiable orders of withdrawal, savings, and money market
$
2,312

 
$
2,079

 
$
4,455

 
$
4,109

Certificates of deposit
3,738

 
1,820

 
6,806

 
3,410

Total interest expense on deposit accounts
$
6,050

 
$
3,899

 
$
11,261

 
$
7,519


Note 7 Equity Incentive Plan

The following table is a summary of the Company’s stock options outstanding as of June 30, 2018, and changes therein during the six months then ended.
 
Number of Stock Options
 
Weighted Average Grant Date Fair Value
 
Weighted Average Exercise Price
 
Weighted Average Contractual Life (years)
Outstanding - December 31, 2017
4,620,687

 
$
3.51

 
$
11.82

 
5.17

Forfeited
(19,378
)
 
2.99

 
9.84

 

Exercised
(1,105,157
)
 
2.48

 
7.69

 

Outstanding - June 30, 2018
3,496,152

 
3.83

 
13.14

 
5.81

Exercisable - June 30, 2018
2,661,611

 
3.77

 
12.77

 
5.52

 
Expected future stock option expense related to the non-vested options outstanding as of June 30, 2018, is $2.7 million over a weighted average period of 1.46 years.
The following is a summary of the status of the Company’s restricted stock awards as of June 30, 2018, and changes therein during the six months then ended.
 
Number of Shares Awarded
 
Weighted Average Grant Date Fair Value
Non-vested at December 31, 2017
585,895

 
$
14.05

Vested
(250,013
)
 
13.73

Forfeited
(1,760
)
 
13.13

Non-vested at June 30, 2018
334,122

 
$
14.29

 
Expected future stock award expense related to the non-vested restricted share awards as of June 30, 2018, is $3.8 million over a weighted average period of 1.48 years.    

During the three months ended June 30, 2018 and 2017, the Company recorded $1.3 million and $1.6 million, respectively, of stock-based compensation related to the above plans. During the six months ended June 30, 2018 and 2017, the Company recorded $2.7 million and $3.2 million, respectively, of stock-based compensation related to the above plans.  

30

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


Note 8 – Fair Value Measurements
The following tables present the assets reported on the consolidated balance sheets at their estimated fair value as of June 30, 2018, and December 31, 2017, 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.
The methods of determining the fair value of assets and liabilities presented in this note are consistent with our methodologies disclosed in Note 14 to the Consolidated Financial Statements of the Company’s 2017 Annual Report on Form 10-K, except for the valuation of loans held for investment which was impacted by the adoption of ASU No. 2016-01. In accordance with ASU No. 2016-01, the fair value of loans held for investment is estimated using an “exit price” approach in estimating and disclosing fair value of financial instruments incorporating discounts for credit, liquidity and marketability factors. The fair values shown as of December 31, 2017, use an “entry price” approach. For further details on ASU 2016-01 see Note 12 - Recently Issued and Adopted Accounting Pronouncements.

31

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

 
Fair Value Measurements at June 30, 2018 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:
 
 
 
 
 
 
 
Debt securities available-for-sale:
 
 
 
 
 
 
 
Mortgage-backed securities
 
 
 
 
 
 
 
GSE: Pass-through certificates
$
243,086

 
$

 
$
243,086

 
$

GSE: REMICs
272,721

 

 
272,721

 

Non-GSE
75

 

 
75

 

 
515,882

 

 
515,882

 

Other debt securities
 
 
 
 
 
 
 
Municipal bonds
279

 

 
279

 

Corporate bonds
109,118

 

 
109,118

 

Total debt securities available-for-sale
109,397

 

 
109,397

 

Trading securities
10,167

 
10,167

 

 

Equity securities
272

 
272

 

 

Total
$
635,718

 
$
10,439

 
$
625,279

 
$

Measured on a non-recurring basis:
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
Impaired loans:
 
 
 
 
 
 
 
Real estate loans:
 
 
 
 
 
 
 
Commercial real estate
$
5,943

 
$

 
$

 
$
5,943

One-to-four family residential mortgage
777

 

 

 
777

Multifamily
45

 

 

 
45

Home equity and lines of credit
24

 

 

 
24

Total impaired real estate loans
6,789

 

 

 
6,789

Commercial and industrial loans
20

 

 

 
20

Other real estate owned
850

 

 

 
850

Total
$
7,659

 
$

 
$

 
$
7,659


32

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

 
Fair Value Measurements at December 31, 2017 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:
 
 
 
 
 
 
 
Debt securities available-for-sale:
 
 
 
 
 
 
 
Mortgage-backed securities
 
 
 
 
 
 
 
GSE: Pass-through certificates
$
178,295

 
$

 
$
178,295

 
$

GSE: REMICs
266,929

 

 
266,929

 

Non-GSE
79

 

 
79

 

 
445,303

 

 
445,303

 

Other debt securities
 
 
 
 
 
 
 
Municipal bonds
349

 

 
349

 

Corporate bonds
68,130

 

 
68,130

 

Total debt securities available-for-sale
68,479

 

 
68,479

 

Trading securities
9,597

 
9,597

 

 

Equity securities
323

 
323

 

 

Total
$
523,702

 
$
9,920

 
$
513,782

 
$

Measured on a non-recurring basis:
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
Impaired loans:
 
 
 
 
 
 
 
Real estate loans:
 
 
 
 
 
 
 
Commercial real estate
$
4,645

 
$

 
$

 
$
4,645

One-to-four family residential mortgage
1,735

 

 

 
1,735

Multifamily
51

 

 

 
51

Home equity and lines of credit
31

 

 

 
31

Total impaired real estate loans
6,462

 

 

 
6,462

Commercial and industrial loans
21

 

 

 
21

Other real estate owned
850

 

 

 
850

Total
$
7,333

 
$

 
$

 
$
7,333


The following table presents qualitative information for Level 3 assets measured at fair value on a non-recurring basis at June 30, 2018, and December 31, 2017 (dollars in thousands):
 
Fair Value
 
Valuation Methodology
 
Unobservable Inputs       
 
Range of Inputs
 
June 30, 2018
 
December 31, 2017
 
 
 
 
 
June 30, 2018
 
December 31, 2017
Impaired loans
$
6,809

 
$
6,483

 
Appraisals
 
Discount for costs to sell
 
7.0%
 
7.0%
 
 
 
 
 
 
 
Discount for quick sale
 
10.0%
 
10.0%
 
 
 
 
 
Discounted cash flows
 
Interest rates
 
3.13% to 6.25%
 
3.13% to 6.5%
Other real estate owned
$
850

 
$
850

 
Appraisals
 
Discount for costs to sell
 
7.0%
 
7.0%

33

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

The valuation techniques described below were used to measure fair value of financial instruments in the tables below on a recurring basis and a non-recurring basis as of June 30, 2018, and December 31, 2017.
Debt Securities Available for Sale: The estimated fair values for mortgage-backed securities, corporate, and other debt 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. There were no transfers of securities between Level 1 and Level 2 during the six months ended June 30, 2018.     
Trading Securities: Fair values are derived from quoted market prices in active markets. The assets consist of publicly traded mutual funds.

Equity Securities: Fair values of equity securities consisting of publicly traded mutual funds are derived from quoted market prices in active markets.
 
Impaired Loans: At June 30, 2018, and December 31, 2017, the Company had impaired loans held-for-investment (excluding PCI loans) with outstanding principal balances of $9.2 million and $8.8 million, respectively, which were recorded at their estimated fair value of $6.8 million and $6.5 million, respectively. The Company recorded a net decrease in the specific reserve for impaired loans of $39,000 and $127,000 for the six months ended June 30, 2018 and June 30, 2017, respectively, utilizing level 3 inputs. For purposes of estimating the 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 troubled debt restructurings.
 
Other Real Estate Owned (OREO):  At both June 30, 2018, and December 31, 2017, the Company had assets acquired through foreclosure, or deed in lieu of foreclosure, of $850,000. 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. 

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 and Cash Equivalents
Cash and cash equivalents are short-term in nature with original maturities of three 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 six 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)
Debt 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 analysis. The assumptions used in these models typically include assumptions for interest rates, credit losses, and prepayments, utilizing market observable data where available.
(c)
Investments in Equity Securities at Net Asset Value Per Share

The Company uses net asset value as a practical expedient to record its investment in a private SBA Loan Fund since the shares in the fund are not publicly traded, do not have a readily determinable fair value and the net asset value per share is calculated in a manner consistent with the measurement principles of an investment company.
 
(d)
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.
 
(e)
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 using a discounted cash flow analysis. The discount rates used to determine fair value use interest rate spreads that reflect factors such as liquidity, credit, and nonperformance risk of the loans.
 
(f)
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.
 
(g)
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.
 
(h)
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.

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

 (i)
Borrowed Funds
The fair value of borrowed funds is estimated by discounting future cash flows based on rates currently available for debt with similar terms and remaining maturity.
 
(j)
Advance Payments by Borrowers for Taxes and Insurance
Advance payments by borrowers for taxes and insurance have no stated maturity; the fair value is equal to the amount currently payable.

The estimated fair value of the Company’s financial instruments at June 30, 2018, and December 31, 2017, is presented in the following tables (in thousands):
 
June 30, 2018
 
 
 
Estimated Fair Value
 
Carrying Value
 
Level 1
 
Level 2
 
Level 3
 
Total
Financial assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
58,733

 
$
58,733

 
$

 
$

 
$
58,733

Trading securities
10,167

 
10,167

 

 

 
10,167

Debt securities available-for-sale
625,279

 

 
625,279

 

 
625,279

Debt securities held-to-maturity
9,819

 

 
9,529

 

 
9,529

Equity securities (1)
272

 
272

 

 

 
272

Federal Home Loan Bank of New York stock, at cost
27,718

 

 
27,718

 

 
27,718

Net loans held-for-investment
3,193,244

 

 

 
3,225,464

 
3,225,464

Financial liabilities:
 
 
 
 
 
 
 
 
 
Deposits
$
2,967,281

 
$

 
$
2,969,119

 
$

 
$
2,969,119

Borrowed funds
524,335

 

 
516,297

 

 
516,297

Advance payments by borrowers for taxes and insurance
18,009

 

 
18,009

 

 
18,009


 
December 31, 2017
 
 
 
Estimated Fair Value
 
Carrying Value
 
Level 1
 
Level 2
 
Level 3
 
Total
Financial assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
57,839

 
$
57,839

 
$

 
$

 
$
57,839

Trading securities
9,597

 
9,597

 

 

 
9,597

Debt securities available-for-sale
513,782

 

 
513,782

 

 
513,782

Debt securities held-to-maturity
9,931

 

 
9,892

 

 
9,892

Equity securities (1)
323

 
323

 

 
 
 
323

Federal Home Loan Bank of New York stock, at cost
25,046

 

 
25,046

 

 
25,046

Net loans held-for-investment
3,114,659

 

 

 
3,157,829

 
3,157,829

Financial liabilities:
 
 
 
 
 
 
 
 
 
Deposits
$
2,836,979

 
$

 
$
2,839,666

 
$

 
$
2,839,666

Borrowed funds
471,549

 

 
466,625

 

 
466,625

Advance payments by borrowers for taxes and insurance
14,798

 

 
14,798

 

 
14,798

 (1) Excludes $1.0 million of investments measured at net asset value at June 30, 2018, and December 31, 2017, which have not been classified in the fair value hierarchy.



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

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.

Note 9 – 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 would then be included in the weighted average number of shares outstanding for the period using the treasury stock method. When applying the treasury stock method we added the assumed proceeds from option exercises and the average unamortized compensation costs related to unvested shares of restricted stock and stock options. We then divided 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 June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
Net income available to common stockholders
$
10,612

 
$
8,410

 
$
21,056

 
$
18,358

 
 
 
 
 
 
 
 
Weighted average shares outstanding-basic
46,184,918

 
45,252,136

 
45,983,895

 
45,137,791

Effect of non-vested restricted stock and stock options outstanding
925,059

 
1,579,226

 
1,072,404

 
1,741,467

Weighted average shares outstanding-diluted
47,109,977

 
46,831,362

 
47,056,299

 
46,879,258

Earnings per share-basic
$
0.23

 
$
0.19

 
$
0.46

 
$
0.41

Earnings per share-diluted
$
0.23

 
$
0.18

 
$
0.45

 
$
0.39

Anti-dilutive shares
858,844

 
50,000

 
872,294

 
45,000

Note 10 – Commitments

The Company has obligations related to non-cancelable operating leases and capitalized leases on property used for banking purposes, that were disclosed in its Annual Report on Form 10-K for the year ended December 31, 2017. During the quarter ended March 31, 2018, the Company entered into a new lease agreement for 1,800 square feet of space at a branch facility in Brooklyn, New York, for a minimum term of 15 years through March 31, 2033, with three five-year options to renew. Pursuant to the terms of this lease we estimate our total additional future minimum rent payments to be approximately $5.8 million.

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

Note 11 – Revenue Recognition
    
Effective January 1, 2018, the Company adopted ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606”) and all subsequent ASUs that modified Topic 606. For further details on ASU No. 2014-09 see Note 12 - Recently Issued and Adopted Accounting Pronouncements.The adoption of ASU No. 2014-09 did not have a material impact on the measurement or recognition of revenue as it does not apply to revenue associated with financial instruments, including revenue from loans and investment securities, which is the Company's primary source of revenue. In addition, certain non-interest income streams such as income on bank owned life insurance, gains on securities transactions, and other non-interest income are not in the scope of the guidance. The Company’s revenue streams that are within the scope of Topic 606 include service charges on deposit accounts, ATM and card interchange fees, and investment services fees. However, the revenue recognition of these revenue streams did not change upon adoption of Topic 606 as our customer contracts generally do not have performance obligations and fees are assessed and collected as the transaction occurs.
The following table summarizes non-interest income for the periods indicated (in thousands):
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2018
 
2017
 
2018
 
2017
Fees and service charges for customer services:
 
 
 
 
 
 
 
Service charges
$
771

 
768

 
$
1,612

 
1,640

ATM and card interchange fees
313

 
284

 
580

 
544

Investment fees
63

 
55

 
169

 
141

Total fees and service charges for customer services
1,147

 
1,107

 
2,361

 
2,325

Income on bank owned life insurance
914

 
1,010

 
1,868

 
3,468

Gains on securities transactions, net
313

 
256

 
473

 
664

Other
71

 
64

 
147

 
127

Total non-interest income
$
2,445

 
$
2,437

 
$
4,849

 
$
6,584


The following revenue streams are within the scope of Topic 606:

Fees and service charges for customer services. Fees and service charges for customer services include: (i) service charges on deposit accounts, including account maintenance fees, overdraft fees, insufficient funds fees, wire fees, and other deposit related fees; (ii) ATM and card interchange fees, which include fees generated when a Bank cardholder uses a non-Bank ATM or a non-Bank cardholder uses a Bank ATM, and fees earned whenever the Bank's debit cards are processed through card payment networks such as Visa; and (iii) investment services fees earned through partnering with a third party investment and brokerage service firm to provide insurance and investment products to customers. The Company's performance obligation for fees and service charges is satisfied and related revenue recognized immediately or in the month of performance of services.

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

Note 12 – Recently Issued and Adopted Accounting Pronouncements

Accounting Pronouncements Adopted in 2018

ASU No. 2014-09. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies generally will be required to use more judgment and make more estimates than under current guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. Subsequent to the issuance of ASU No. 2014-09, the FASB issued targeted updates to clarify specific implementation issues including ASU No. 2016-08, “Principal versus Agent Considerations (Reporting Revenue Gross versus Net),” ASU No. 2016-10, “Identifying Performance Obligations and Licensing,” ASU No. 2016-12, “Narrow-Scope Improvements and Practical Expedients,” and ASU No. 2016-20 “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers.” The new standard was effective for the Company on January 1, 2018. The adoption of ASU No. 2014-09 did not have a material impact on the Company’s consolidated financial statements and related disclosures as the Company’s primary sources of revenues are derived from interest income on financial assets that are not within the scope of the guidance. Management conducted an assessment of the revenue streams that were potentially affected by the guidance and reviewed contracts in scope to ensure compliance with the guidance. These contracts included those related to service charges on deposit accounts, ATM and card interchange fees, and investment services fees. The Company’s revenue recognition pattern for these revenue streams did not change from current practice. Additional disclosures required by the standard have been included in Note 11. “Revenue Recognition.”

ASU No. 2016-01. In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The guidance primarily affects the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments including the following: 1) Requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income; 2) Simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; 3) Requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; 4) Requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value and 5) Reduces diversity in current practice by clarifying that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available for sale securities in combination with the entity’s other deferred tax assets. ASU No. 2016-01 is effective for the Company for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. The Company adopted ASU No. 2016-01 effective January 1, 2018, which did not have a material impact on the Company’s consolidated financial statements due to the Company's proportionately small portfolio of equity securities and no liabilities that are measured at fair value. The primary impact of the adoption of ASU No. 2016-01 was the reclassification of equity securities from available-for-sale to equity securities on the consolidated balance sheets and the use of an exit price notion for valuing loans at fair value. See Note 4 - “Equity Securities” and Note 8 - “Fair Value Measurements” for further details.

ASU No. 2016-15. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which provides guidance on how certain cash receipts and cash payments should be classified and presented in the statement of cash flows. ASU No. 2016-15 includes guidance on eight specific cash flow issues with the objective of reducing the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU No. 2016-15 is effective for annual and interim reporting periods beginning after December 15, 2017. The Company adopted ASU No. 2016-15 effective January 1, 2018, which did not have a material impact on the Company's consolidated statements of cash flows.


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

ASU No. 2017-07. In March 2017, the FASB issued ASU No. 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which requires that companies disaggregate the service cost component from other components of net benefit cost. The guidance requires companies that offer postretirement benefits to present the service cost, which is the amount an employer has to set aside each quarter or fiscal year to cover the benefits, in the same line item with other current employee compensation costs. Other components of net benefit cost will be presented in the income statement separately from the service cost component and outside the subtotal of income from operations, if one is presented. The Company adopted ASU No. 2017-07 effective January 1, 2018, which did not have a material impact on the Company’s consolidated financial statements.

Accounting Pronouncements Not Yet Adopted

ASU 2018-07. In June 2018, the FASB issued ASU No. 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which is intended to align the accounting for share-based payment awards issued to employees and nonemployees. ASU 2018-07 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company's share-based payment awards to nonemployees consist only of grants made to the Company's Directors as compensation solely related to the individual's role as a Director. As such, the ASU is not expected to have an impact on the Company's consolidated financial statements, as share-based payment awards to nonemployee Directors are accounted for in the same manner as share-based payment awards for employees.

ASU No. 2018-03. In February 2018, the FASB issued ASU No. 2018-03, Technical Corrections and Improvements to Financial Instruments-Overall (Subtopic 825-10), which clarifies certain aspects of the guidance issued in ASU No. 2016-01 including: the ability to irrevocably elect to change the measurement approach for equity securities measured using the practical expedient (at cost plus or minus observable transactions less impairment) to a fair value method in accordance with Topic 820, Fair Value Measurement; clarification that if an observable transaction occurs for such securities, the adjustment is as of the observable transaction date; clarification that the prospective transition approach for equity securities without a readily determinable fair value is meant only for instances in which the practical expedient is elected; and various other clarifications. ASU No. 2018-03 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years beginning after June 15, 2018. Adoption is not expected to have a material impact on the Company's consolidated financial statements.

ASU No. 2017-08. In March 2017, the FASB issued ASU No. 2017-08, Receivables-Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. The amendments in this update require the premium on callable debt securities to be amortized to the earliest call date rather than the maturity date; however, securities held at a discount continue to be amortized to maturity. The amendments apply only to debt securities purchased at a premium that are callable at fixed prices and on preset dates. The amendments more closely align interest income recorded on debt securities held at a premium or discount with the economics of the underlying instrument. ASU No. 2017-08 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted, and is to be applied using the modified retrospective method. ASU No. 2017-08 is not expected to have a significant effect on the Company's consolidated financial statements.

ASU No 2017-04. In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The ASU simplifies the subsequent measurement of goodwill impairment by eliminating the requirement to calculate the implied fair value of goodwill (i.e., the current Step 2 of the goodwill impairment test) to measure a goodwill impairment charge. As amended, the goodwill impairment test will consist of one step comparing the fair value of a reporting unit with its carrying amount. A goodwill impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value. The ASU is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim and annual goodwill impairment testing dates after January 1, 2017. The adoption of this pronouncement is not expected to have an effect on the Company's consolidated financial statements.

ASU No. 2016-13. In June 2016, the FASB issued No. ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires credit losses on most financial assets measured at amortized cost and certain other instruments to be measured using an expected credit loss model (referred to as the current expected credit loss (“CECL”) model. Under this model, entities will estimate credit losses over the entire contractual term of the instrument from the date of initial recognition of that instrument. Current US GAAP is based on an incurred loss model that delays recognition of credit losses until it is probable the loss has been incurred. Accordingly, it is anticipated that

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

credit losses will be recognized earlier under the CECL model than under the incurred loss model. ASU No. 2016-13 is effective for interim and annual reporting periods beginning after December 15, 2019; early adoption is permitted for interim and annual reporting periods beginning after December 15, 2018. The Company continues to evaluate the potential effect of adoption of this pronouncement on its consolidated financial statements by identifying key interpretive issues, assessing its processes, portfolio segmentation, model development, and identifying the data and system requirements against the guidance to determine what modifications may be required. As part of the evaluation process, the Company has also established a CECL working group that includes individuals from various functional areas to assess processes and has selected a third-party vendor to assist in the application of the ASU No. 2016-13. The adoption of ASU No. 2016-13 may result in an increase in the allowance for loan losses as a result of changing from an incurred loss model, which encompasses allowances for current known and inherent losses within the portfolio, to an expected losses model, which encompasses allowances for losses expected to be incurred over the life of the portfolio. The extent of the effect is indeterminable at this time as it will depend upon the nature and characteristics of the Company's loan portfolio at the adoption date, as well as economic conditions and forecasts at that date.

ASU No. 2016-02. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which is intended to increase transparency and comparability of accounting for lease transactions. The ASU will require all leases to be recognized on the balance sheet as lease assets and lease liabilities and will require both quantitative and qualitative disclosures regarding key information about leasing arrangements. Lessor accounting is largely unchanged. The guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within that reporting period. The Company is currently evaluating the potential effect of adoption of this pronouncement on its consolidated financial statements. The Company has several lease agreements, such as branch locations, which are currently considered operating leases, and therefore, not recognized on the Company’s consolidated statements of condition. The guidance will require these lease agreements to be recognized on the consolidated balance sheets as a right-of-use asset and a corresponding lease liability. Therefore, the Company’s preliminary evaluation indicates the provisions of ASU No. 2016-02 are expected to impact the Company’s consolidated balance sheets; the extent of such impact is under evaluation. The Company does not expect the guidance to have a material impact on its results of operations. The Company is nearing completion of identifying a complete inventory of arrangements containing a lease and accumulating the data necessary to apply the amended guidance. The Company has contracted with a third-party software vendor to aid in the transition to the new leasing guidance implementation.
    
    
    


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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,” “annualized,” “could,” “may,” “should,” “will,” 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 the 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, including employment prospects, real estate values and conditions, 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, credit markets or real estate values;
changes in laws, tax policies, 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 demand, 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;
technological changes that may be more difficult or expensive than expected;
changes in our organization, compensation, and benefit plans;
changes in the level of government support for housing finance;
changes in monetary or fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board (“FRB”)
the ability of third-party providers to perform their obligations to us;
the ability of the U.S. Government to manage federal debt limits;
significant increases in our loan losses, including increases that may result from the new authoritative accounting guidance known as the current expected credit loss (“CECL”) model which may increase the required level of our allowance for loan losses after adoption effective January 1, 2020;
changes in our income tax expense resulting from the impact of recently enacted state and federal corporate tax reform; and
changes in the financial condition, results of operations, or future prospects of issuers of securities that we own.


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Because of these and other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements. Accordingly, you should not place undue reliance on such 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 Quarterly Report on Form 10-Q, whether as a result of new information, future events or otherwise.

Critical Accounting Policies
 
Note 1 to the Company’s Audited Consolidated Financial Statements for the year ended December 31, 2017, 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 purchased credit-impaired (“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, 2017.
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, 2017.
 
Net income was $21.1 million for the six months ended June 30, 2018, as compared to $18.4 million for the six months ended June 30, 2017. Basic and diluted earnings per common share were $0.46 and $0.45, respectively, for the six months ended June 30, 2018, compared to basic and diluted earnings per common share of $0.41 and $0.39, respectively, for the six months ended June 30, 2017. Earnings for the six months ended June 30, 2018 benefited from a lower effective tax rate due to the enactment of the Tax Cuts and Jobs Act in the fourth quarter of 2017 (the “Tax Reform Act”), which reduced the federal statutory corporate tax rate to 21% from 35%. Earnings for the six months ended June 30, 2018, also benefited from excess tax benefits of $2.1 million, or $0.05 per diluted share, related to the exercise or vesting of equity awards. Earnings for the six months ended June 30, 2017, benefited from excess tax benefits of $2.3 million, or $0.05 per diluted share, related to the exercise or vesting of equity awards, as well as $1.5 million, or $0.03, per diluted share of tax-exempt income from bank-owned life insurance proceeds in excess of the cash surrender value of the policies. For the six months ended June 30, 2018, our return on average assets was 1.04%, as compared to 0.95% for the six months ended June 30, 2017. For the six months ended June 30, 2018, our return on average stockholders’ equity was 6.59% as compared to 5.86% for the six months ended June 30, 2017.

On July 1, 2018, the State of New Jersey enacted new legislation that created a temporary surtax effective for tax years 2018 through 2021 and will require certain companies to file combined tax returns beginning in 2019. Management is currently evaluating the effect of this new legislation on our net deferred tax asset and future tax expense.  We anticipate that we will realize a tax benefit during the third quarter of 2018 due to the write up of our net deferred tax asset and, prospectively, our state tax expense will increase.


Comparison of Financial Condition at June 30, 2018, and December 31, 2017
Total assets increased $196.7 million, or 4.9%, to $4.19 billion at June 30, 2018, from $3.99 billion at December 31, 2017. The increase was primarily due to an increase in our available-for sale debt securities portfolio of $111.5 million and an increase in loans held-for-investment, net, of $79.3 million.
 
The Company’s debt securities available-for-sale portfolio increased by $111.5 million, or 21.7%, to $625.3 million at June 30, 2018, from $513.8 million at December 31, 2017. The increase was primarily attributable to purchases of mortgage-

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backed and corporate securities, partially offset by paydowns and sales. At June 30, 2018, $272.7 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 $109.1 million in corporate bonds, all of which were considered investment grade at June 30, 2018, and $279,000 in municipal bonds. The effective duration of the securities portfolio at June 30, 2018 was 3.36 years.

 As of June 30, 2018, our commercial real estate concentration (as defined by regulatory guidance issued in 2006) to total risk-based capital was 411%. Management believes that Northfield Bank (the "Bank") has implemented appropriate risk management practices including risk assessments, board approved underwriting policies and related procedures, which include monitoring bank portfolio performance, performing market analysis (economic and real estate), and stressing of the Bank’s commercial real estate portfolio under severe adverse economic conditions. Although management believes the Bank has implemented appropriate policies and procedures to manage our commercial real estate concentration risk, the Bank’s regulators could require us to implement additional policies and procedures or could require us to maintain higher levels of regulatory capital, which might adversely affect our loan originations, ability to pay dividends, and profitability.

Loans held-for-investment, net, increased $79.3 million to $3.22 billion at June 30, 2018, from $3.14 billion at December 31, 2017. Originated loans held-for-investment, net, totaled $2.55 billion at June 30, 2018, as compared to $2.43 billion at December 31, 2017. The increase was primarily due to an increase in multifamily real estate loans of $64.7 million, or 3.7%, to $1.80 billion at June 30, 2018, from $1.74 billion at December 31, 2017, and an increase in commercial real estate loans of $54.3 million, or 12.2%, to $499.5 million at June 30, 2018, from $445.2 million at December 31, 2017, partially offset by decreases in acquired loans and purchased credit-impaired (PCI) loans.

The following tables detail our multifamily real estate originations for the six months ended June 30, 2018 and 2017 (dollars in thousands):
For the Six Months Ended June 30, 2018
Multifamily 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
$
159,649

 
3.77%
 
69%
 
77
 
V
 
25 to 30 Years
6,615

 
4.07%
 
38%
 
180
 
F
 
15 Years
$
166,264

 
3.78%
 
68%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Six Months Ended June 30, 2017
Multifamily 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
$
192,407

 
3.55%
 
60%
 
80
 
V
 
15 to 30 Years
750

 
5.00%
 
48%
 
1
 
V
 
Line of Credit (2-Year Term)
7,640

 
3.89%
 
27%
 
180
 
F
 
15 Years
$
200,797

 
3.57%
 
59%
 
 
 
 
 
 
Acquired loans, which include loans purchased with no evidence of credit deterioration, decreased by $41.9 million to $650.9 million at June 30, 2018, from $692.8 million at December 31, 2017, primarily due to paydowns, partially offset by purchases of one-to-four family residential mortgage loan pools during the first quarter of 2018, totaling $37.5 million.
The following table provides the details of the loan pools purchased during the six months ended June 30, 2018 (dollars in thousands):
Principal Amounts Purchased
 
Loan Type
 
Weighted Average Interest Rate(1)
 
Weighted Average Loan-to-Value Ratio
 
Weighted Average Months to Next Rate Change or Maturity for Fixed Rate Loans
 
(F)ixed or (V)ariable
 
Original Amortization Term
$
29,963

 
Residential
 
2.30%
 
55%
 
1
 
V
 
30 Years
4,368

 
Residential
 
3.67%
 
58%
 
346
 
F
 
15 - 30 Years
3,178

 
Residential
 
3.68%
 
60%
 
330
 
F
 
15 - 30 Years
$
37,509

 
 
 
2.58%
 
56%
 
 
 
 
 
 

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(1) Net of servicing fee retained by the originating bank    

The geographic locations of the properties collateralizing the loans purchased are as follows: 32.7% in New York, 29.9% in California, and 27.1% in Massachusetts, with the majority of the remaining balance in New Jersey. There were no loan pool purchases during the six months ended June 30, 2017.

PCI loans totaled $21.3 million at June 30, 2018, as compared to $22.7 million at December 31, 2017. The majority of the PCI loan balance consists of loans acquired as part of a Federal Deposit Insurance Corporation-assisted transaction. The Company accreted interest income of $1.0 million and $2.1 million attributable to PCI loans for the three and six months ended June 30, 2018, respectively, as compared to $1.3 million and $2.8 million for the three and six months ended June 30, 2017, respectively.

Total liabilities increased $186.0 million, or 5.5%, to $3.54 billion at June 30, 2018, from $3.35 billion at December 31, 2017. The increase was primarily attributable to an increase in deposits of $130.3 million, an increase in other borrowings of $54.8 million, and an increase in advance payments by borrowers for taxes and insurance of $3.2 million, partially offset by a decrease in securities sold under agreements to repurchase of $2.0 million.
 
Deposits increased $130.3 million, or 4.6%, to $2.97 billion at June 30, 2018, as compared to $2.84 billion at December 31, 2017. The increase was attributable to increases of $213.3 million in certificates of deposit, and $20.2 million in brokered deposits, partially offset by decreases of $39.8 million in transaction accounts, $56.3 million in money market accounts, and $7.1 million in savings accounts.

Borrowings and securities sold under agreements to repurchase increased by $52.8 million, or 11.2%, to $524.3 million at June 30, 2018, from $471.5 million at December 31, 2017. 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 at June 30, 2018 (dollars in thousands):
Year
 
Amount
 
Weighted Average Rate
2018
 
$97,080
 
1.75%
2019
 
123,502
 
1.48%
2020
 
90,000
 
1.65%
2021
 
70,000
 
1.80%
2022
 
20,000
 
1.97%
Thereafter
 
75,000
 
2.85%
 
 
$475,582
 
1.85%

Total stockholders’ equity increased by $10.8 million to $649.7 million at June 30, 2018, from $638.9 million at December 31, 2017. The increase was primarily attributable to net income of $21.1 million for the six months ended June 30, 2018, and to a lesser extent a $5.2 million increase related to ESOP and equity award activity. These increases were partially offset by dividend payments of $9.3 million and a $6.2 million increase in unrealized losses on our securities available-for-sale portfolio as a result of the increased interest rate environment.
 
Comparison of Operating Results for the Six Months Ended June 30, 2018 and 2017
 
Net Income. Net income was $21.1 million and $18.4 million for the six months ended June 30, 2018, and June 30, 2017, respectively. Significant variances from the comparable prior year period are as follows: a $1.7 million increase in net interest income, a $1.7 million decrease in non-interest income, and a $2.5 million decrease in income tax expense.

Interest Income. Interest income increased $5.9 million, or 9.1%, to $70.6 million for the six months ended June 30, 2018, from $64.7 million for the six months ended June 30, 2017, due to an increase in the average balance of interest-earning assets of $266.1 million, or 7.4%, and a six basis point increase in the yields earned on average interest-earning assets. Interest income on loans increased by $3.6 million, primarily attributable to an increase in the average loan balances of $144.7 million and a five basis point increase in the average yield on loans as a result of the recent increases in market interest rates. The Company accreted interest income related to its PCI loans of $2.1 million for the six months ended June 30, 2018, as compared to $2.8 million for the six months ended June 30, 2017. Interest income on loans for the six months ended June 30, 2018, reflected loan prepayment income of $1.1 million compared to $520,000 for the six months ended June 30, 2017.

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Interest Expense. Interest expense increased $4.2 million, or 37.3%, to $15.3 million for the six months ended June 30, 2018, as compared to $11.1 million for six months ended June 30, 2017, due to a $3.7 million increase in interest expense on deposits and a $418,000 increase in interest expense on borrowings. The increase in interest expense on deposits was attributed to a 24 basis point increase in the cost of interest-bearing deposits to 0.90% for the six months ended June 30, 2018, as compared to 0.66% for the comparable prior year period and an increase in the average balance of interest-bearing deposit accounts of $232.7 million, or 10.1%, to $2.53 billion for the six months ended June 30, 2018, from $2.30 billion for the six months ended June 30, 2017.
Net Interest Income. Net interest income for the six months ended June 30, 2018increased $1.7 million, or 3.2%, to $55.3 million, from $53.6 million for the six months ended June 30, 2017, primarily due to a $266.1 million, or 7.4%, increase in our average interest-earning assets, partially offset by a 12 basis point decrease in our net interest margin to 2.89% from 3.01% for the six months ended June 30, 2017. The increase in average interest-earning assets was due to increases in average loans outstanding of $144.7 million, average mortgage-backed securities of $64.0 million, average other securities of $49.4 million, and average interest-earning deposits in financial institutions of $9.3 million, partially offset by a decrease in average Federal Home Loan Bank of New York (“FHLBNY”) stock of $1.3 million. The increase in average loans was primarily due to strong originated loan growth as well as loan pool purchases during the first quarter of 2018. Yields earned on interest-earning assets increased six basis points to 3.69% for the six months ended June 30, 2018, from 3.63% for the six months ended June 30, 2017, driven by higher yields on all asset classes. The cost of interest-bearing liabilities increased 23 basis points to 1.03% for the current period as compared to 0.80% for the comparable prior year period, due to higher rates on interest-bearing deposits and borrowed funds, attributable to the rising rate environment.
 
Provision for Loan Losses. The provision for loan losses decreased by $179,000 to $704,000 for the six months ended June 30, 2018, from $883,000 for the six months ended June 30, 2017, primarily due to improving asset quality trends, including a decrease in criticized loans, and an improvement in historical loss rates. Net recoveries for the six months ended June 30, 2018, were $18,000, as compared to net recoveries of $127,000 for the six months ended June 30, 2017.

Non-interest Income. Non-interest income decreased $1.7 million, or 26.4%, to $4.8 million for the six months ended June 30, 2018, from $6.6 million for the six months ended June 30, 2017, primarily due to a decrease of $1.6 million in income on bank owned life insurance, attributable to insurance proceeds in excess of the related cash surrender value of the policies, received in the first quarter of 2017, and a decrease of $191,000 in gains on securities transactions, net. Securities gains, net, during the six months ended June 30, 2018, included gains of $302,000 related to the Company’s trading portfolio, compared to gains of $668,000 in the comparative prior year period. 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 the 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 remained level at $34.2 million for both six-month periods ended June 30, 2018 and June 30, 2017.

Income Tax Expense. The Company recorded income tax expense of $4.2 million for the six months ended June 30, 2018, compared to $6.8 million for the six months ended June 30, 2017. The effective tax rate for the six months ended June 30, 2018, was 16.8% compared to 26.9% for the six months ended June 30, 2017, reflecting the reduction of the federal statutory corporate tax rate to 21% from 35% by the Tax Reform Act, partially offset by lower excess tax benefits. Excess tax benefits were $2.1 million for the current period as compared to $2.3 million for the prior year period. Excess tax benefits will fluctuate throughout the year based on the Company's stock price and timing of employee stock option exercises and vesting of other share-based awards. The Company has approximately 335,000 options outstanding at June 30, 2018, from its 2009 grants which expire on January 30, 2019, at a weighted average price of $7.09 per share and a weighted average grant date fair value of $2.30 per share. To the extent these options are exercised during the remainder of 2018, this will result in additional tax benefits which will have a positive effect on our effective tax rate. The effective tax rate for the six months ended June 30, 2017, benefited from $1.5 million of tax-exempt income from bank owned life insurance proceeds in excess of the cash surrender value of the policies.

On July 1, 2018, the State of New Jersey enacted new legislation that created a temporary surtax effective for tax years 2018 through 2021 and will require certain companies to file combined tax returns beginning in 2019. Management is currently evaluating the effect of this new legislation on our net deferred tax asset and future tax expense.  We anticipate that we will

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realize a tax benefit during the third quarter of 2018 due to the write up of our net deferred tax asset and, prospectively, our state tax expense will increase.

The following table sets forth average balances, average yields and costs, and certain other information for the periods indicated.                
 
ANALYSIS OF NET INTEREST INCOME
(Dollars in thousands)

 
For the Six Months Ended
 
June 30, 2018
 
June 30, 2017
 
Average Outstanding Balance
 
Interest
 
Average Yield/ Rate (1)
 
Average Outstanding Balance
 
Interest
 
Average Yield/ Rate (1)
Interest-earning assets:
 
 
 
 
 
 
 
 
 
 
 
Loans (2)
$
3,153,089

 
$
62,243

 
3.98
%
 
$
3,008,361

 
$
58,661

 
3.93
%
Mortgage-backed securities (3)
504,126

 
5,794

 
2.32

 
440,111

 
4,616

 
2.12

Other securities (3)
109,144

 
1,323

 
2.44

 
59,723

 
535

 
1.81

Federal Home Loan Bank of New York stock
25,155

 
812

 
6.51

 
26,476

 
696

 
5.30

Interest-earning deposits in financial institutions
69,631

 
445

 
1.29

 
60,381

 
221

 
0.74

Total interest-earning assets
3,861,145

 
70,617

 
3.69

 
3,595,052

 
64,729

 
3.63

Non-interest-earning assets
240,627

 
 
 
 
 
283,165

 
 
 
 
Total assets
$
4,101,772

 
 
 
 
 
$
3,878,217

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing liabilities:
 
 
 
 
 
 
 
 
 
 
 
Savings, NOW, and money market accounts
$
1,669,009

 
$
4,455

 
0.54
%
 
$
1,733,794

 
$
4,109

 
0.48
%
Certificates of deposit
861,366

 
6,806

 
1.59

 
563,902

 
3,410

 
1.22

Total interest-bearing deposits
2,530,375

 
11,261

 
0.90

 
2,297,696

 
7,519

 
0.66

Borrowed funds
469,937

 
4,042

 
1.73

 
496,301

 
3,624

 
1.47

Total interest-bearing liabilities
3,000,312

 
15,303

 
1.03

 
2,793,997

 
11,143

 
0.80

Non-interest bearing deposits
409,918

 
 
 
 
 
382,689

 
 
 
 
Accrued expenses and other liabilities
47,615

 
 
 
 
 
70,237

 
 
 
 
Total liabilities
3,457,845

 
 
 
 
 
3,246,923

 
 
 
 
Stockholders' equity
643,927

 
 
 
 
 
631,294

 
 
 
 
Total liabilities and stockholders' equity
$
4,101,772

 
 
 
 
 
$
3,878,217

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest income
 
 
$
55,314

 
 
 
 
 
$
53,586

 
 
Net interest rate spread (4)
 
 
 
 
2.66
%
 
 
 
 
 
2.83
%
Net interest-earning assets (5)
$
860,833

 
 
 
 
 
$
801,055

 
 
 
 
Net interest margin (6)
 
 
 
 
2.89
%
 
 
 
 
 
3.01
%
Average interest-earning assets to interest-bearing liabilities
 
 
 
 
128.69
%
 
 
 
 
 
128.67
%
 
 
 
(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 June 30, 2018 and 2017
 
Net Income. Net income was $10.6 million and $8.4 million for the quarters ended June 30, 2018, and June 30, 2017, respectively. Significant variances from the comparable prior year quarter are as follows: an $861,000 increase in net interest income, a $159,000 increase in the provision for loan losses, a $422,000 increase in non-interest expense, and a $1.9 million decrease in income tax expense.
 
Interest Income. Interest income increased $3.3 million, or 10.0%, to $35.9 million for the quarter ended June 30, 2018, from $32.7 million for the quarter June 30, 2017, due to an increase in the average balance of interest-earning assets of $276.9 million, or 7.6%, and an eight basis point increase in the yields earned on interest-earning assets. Interest income on loans increased by $1.8 million, primarily attributable to an increase in the average loan balances of $132.0 million, and a seven basis point increase in the average yield on loans as a result of the recent increases in market interest rates. The increase in average loans was primarily due to strong originated loan growth. The Company accreted interest income related to its PCI loans of $1.0 million for the quarter ended June 30, 2018, as compared to $1.3 million for the quarter ended June 30, 2017. Interest income on loans for the quarter ended June 30, 2018, included loan prepayment income of $479,000, as compared to $193,000 for the quarter ended June 30, 2017.

Interest Expense. Interest expense increased $2.4 million, or 42.0%, to $8.2 million for the quarter ended June 30, 2018, from $5.8 million for the quarter ended June 30, 2017. The increase was primarily due to an increase of $2.2 million in interest expense on deposits. The increase in interest expense on deposits was attributed to an increase in the average balance of interest-bearing deposits of $231.3 million, or 9.9%, to $2.56 billion for the quarter ended June 30, 2018, from $2.32 billion for the quarter ended June 30, 2017, and a 28 basis point increase in the cost of interest-bearing deposits.
Net Interest Income. Net interest income for the quarter ended June 30, 2018increased $861,000, or 3.2%, primarily due to a $276.9 million, or 7.6%, increase in our average interest-earning assets, partially offset by a 12 basis point decrease in our net interest margin to 2.85% from 2.97% for the quarter ended June 30, 2017. The increase in average interest-earning assets was due to increases in average loans outstanding of $132.0 million, average mortgage-backed securities of $93.3 million, and average other securities of $65.6 million, partially offset by decreases of $12.9 million in average interest-earning deposits in financial institutions and $1.1 million in average FHLBNY stock. The increase in average loans was primarily due to originated loan growth. Yields earned on interest-earning assets increased eight basis points to 3.69% for the quarter ended June 30, 2018, from 3.61% for the quarter ended June 30, 2017, driven by higher yields on all asset classes. The cost of interest-bearing liabilities increased 26 basis points to 1.08% for the current quarter as compared to 0.82% for the comparable prior year quarter due to higher rates across all interest-bearing deposits and borrowed funds attributable to the rising rate environment.
   
Provision for Loan Losses. The provision for loan losses increased by $159,000 to $670,000 for the quarter ended June 30, 2018, from $511,000 for the quarter ended June 30, 2017, primarily due to originated loan growth, partially offset by improving asset quality trends, including a decrease in criticized loans, and an improvement in historical loss rates. Net recoveries were $40,000 for the quarter ended June 30, 2018, compared to net charge-offs of $190,000 for the quarter ended June 30, 2017.

Non-interest Income. Non-interest income remained level at $2.4 million for both quarters ended June 30, 2018 and June 30, 2017.
   
Non-interest Expense. Non-interest expense increased $422,000, or 2.5%, to $17.0 million for the quarter ended June 30, 2018, from $16.6 million for the quarter ended June 30, 2017. The increase was due primarily to increases of $496,000 in other expense, primarily due to higher advertising expense and higher directors' fees and equity award expense; $314,000 in professional fees; and $254,000 in occupancy costs, primarily due to higher rent expense attributable to a new branch office and expanded space in our corporate offices. Partially offsetting these increases was a decrease of $653,000 in employee compensation and benefits.
 
Income Tax Expense. The Company recorded income tax expense of $1.9 million for the quarter ended June 30, 2018, compared to $3.8 million for the quarter ended June 30, 2017. The effective tax rate for the quarter ended June 30, 2018, was 15.1% compared to 31.2% for the quarter ended June 30, 2017, reflecting the reduction of the federal statutory corporate tax rate to 21% from 35%, and higher excess tax benefits of $1.3 million for the current quarter as compared to $593,000 for the comparable prior year quarter.


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The following table sets forth average balances, average yields and costs, and certain other information for the periods indicated.
                    
 
ANALYSIS OF NET INTEREST INCOME
(Dollars in thousands)

 
For the Three Months Ended
 
June 30, 2018
 
June 30, 2017
 
Average Outstanding Balance
 
Interest
 
Average Yield/ Rate (1)
 
Average Outstanding Balance
 
Interest
 
Average Yield/ Rate (1)
Interest-earning assets:
 
 
 
 
 
 
 
 
 
 
 
Loans (2)
$
3,173,787

 
$
31,456

 
3.98
%
 
$
3,041,774

 
$
29,653

 
3.91
%
Mortgage-backed securities (3)
522,009

 
3,068

 
2.36

 
428,757

 
2,260

 
2.11

Other securities (3)
126,823

 
821

 
2.60

 
61,202

 
283

 
1.85

Federal Home Loan Bank of New York stock
25,487

 
398

 
6.26

 
26,600

 
325

 
4.90

Interest-earning deposits in financial institutions
57,061

 
192

 
1.35

 
69,928

 
139

 
0.80

Total interest-earning assets
3,905,167

 
35,935

 
3.69

 
3,628,261

 
32,660

 
3.61

Non-interest-earning assets
238,225

 
 
 
 
 
282,492

 
 
 
 
Total assets
$
4,143,392

 
 
 
 
 
$
3,910,753

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing liabilities:
 
 
 
 
 
 
 
 
 
 
 
Savings, NOW, and money market accounts
$
1,655,819

 
$
2,312

 
0.56
%
 
$
1,731,451

 
$
2,079

 
0.48
%
Certificates of deposit
900,437

 
3,738

 
1.67

 
593,492

 
1,820

 
1.23

Total interest-bearing deposits
2,556,256

 
6,050

 
0.95

 
2,324,943

 
3,899

 
0.67

Borrowed funds
475,067

 
2,115

 
1.79

 
495,656

 
1,852

 
1.50

Total interest-bearing liabilities
3,031,323

 
8,165

 
1.08

 
2,820,599

 
5,751

 
0.82

Non-interest bearing deposits
414,792

 
 
 
 
 
382,353

 
 
 
 
Accrued expenses and other liabilities
50,589

 
 
 
 
 
71,853

 
 
 
 
Total liabilities
3,496,704

 
 
 
 
 
3,274,805

 
 
 
 
Stockholders' equity
646,688

 
 
 
 
 
635,948

 
 
 
 
Total liabilities and stockholders' equity
$
4,143,392

 
 
 
 
 
$
3,910,753

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest income
 
 
$
27,770

 
 
 
 
 
$
26,909

 
 
Net interest rate spread (4)
 
 
 
 
2.61
%
 
 
 
 
 
2.79
%
Net interest-earning assets (5)
$
873,844

 
 
 
 
 
$
807,662

 
 
 
 
Net interest margin (6)
 
 
 
 
2.85
%
 
 
 
 
 
2.97
%
Average interest-earning assets to interest-bearing liabilities
 
 
 
 
128.83
%
 
 
 
 
 
128.63
%
 
 
 
(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
 
Purchased Credit Impaired Loans
    
PCI loans are recorded at estimated fair value using discounted expected future cash flows deemed to be collectible on the date acquired. Based on its detailed review of PCI loans and experience in loan workouts, management believes it has a reasonable expectation about the amount and timing of future cash flows and accordingly has classified PCI loans ($21.3 million at June 30, 2018 and $22.7 million at December 31, 2017) as accruing, even though they may be contractually past due. At June 30, 2018, 7.1% of PCI loans were past due 30 to 89 days, and 24.1% were past due 90 days or more, as compared to 10.8% and 17.1%, respectively, at December 31, 2017.
 
Originated and Acquired loans
 
The following table details total originated and acquired (including held-for-sale, but excluding PCI) non-accruing loans, non-performing loans, non-performing assets, troubled debt restructurings (TDRs) on which interest is accruing, and accruing loans 30 to 89 days delinquent at June 30, 2018, and December 31, 2017 (dollars in thousands):  

 
June 30, 2018
 
December 31, 2017
Non-accrual loans:
 
 
 
Held-for-investment
 
 
 
Real estate loans:
 
 
 
Commercial
$
4,620

 
$
4,087

One-to-four family residential
964

 
774

Multifamily
568

 
417

Home equity and lines of credit
154

 
156

Commercial and industrial
72

 
74

Total non-accrual loans
6,378

 
5,508

Loans delinquent 90 days or more and still accruing:
 
 
 
Held-for-investment
 
 
 
Real estate loans:
 
 
 
One-to-four family residential

 
27

Other

 
1

Total loans delinquent 90 days or more and still accruing

 
28

Total non-performing loans
6,378

 
5,536

Other real estate owned
850

 
850

Total non-performing assets
$
7,228

 
$
6,386

Non-performing loans to total loans
0.20
%
 
0.18
%
Non-performing assets to total assets
0.17
%
 
0.16
%
Loans subject to restructuring agreements and still accruing
$
16,758

 
$
18,003

Accruing loans 30 to 89 days delinquent
$
14,552

 
$
12,044


The increase in non-accrual loans was primarily attributable to three previously acquired loans from Hopewell Valley Community Bank being placed on non-accrual status during the second quarter of 2018. The loans are well-secured and in the process of collection and no impairment reserve was considered necessary at June 30, 2018.

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Table of Contents

Accruing Loans 30 to 89 Days Delinquent
 
Loans 30 to 89 days delinquent and on accrual status totaled $14.6 million and $12.0 million at June 30, 2018, and December 31, 2017, respectively. The following table sets forth delinquencies for accruing loans by type and by amount at June 30, 2018, and December 31, 2017 (dollars in thousands):     
 
June 30, 2018
 
December 31, 2017
Held-for-investment
 
 
 
Real estate loans:
 
 
 
Commercial(1)
$
6,633

 
$
4,347

One-to-four family residential
6,154

 
4,162

Multifamily
1,596

 
3,298

Construction and land
2

 
6

Home equity and lines of credit
114

 

Commercial and industrial loans
44

 
202

Other loans
9

 
29

Total delinquent accruing loans
$
14,552

 
$
12,044

(1) Included in commercial real estate loans 30 to 89 days delinquent at June 30, 2018, is a loan with a balance of $3.8 million which was partially paid off in July 2018 from sales of properties collateralizing the loan, with the remaining balance brought current.

Loans Subject to TDR Agreements
 
Included in non-accruing loans are loans subject to TDR agreements totaling $517,000 and $251,000 at June 30, 2018, and December 31, 2017, respectively. At June 30, 2018, $276,000, or 53.4%, of the non-accruing TDRs were not performing in accordance with their restructured terms, comprised of two separate relationships. The loans are adequately collateralized by real estate with an aggregate appraised value of $825,000. At December 31, 2017, the $251,000 non-accruing TDR was comprised of one loan collateralized by real estate with an appraised value of $629,000.

The Company also holds loans subject to restructuring agreements that are on accrual status totaling $16.8 million and $18.0 million at June 30, 2018, and December 31, 2017, respectively. At June 30, 2018, and December 31, 2017, all of the accruing TDR loans were performing in accordance with their restructured terms. Generally, types of concessions that we make to troubled borrowers include both temporary and permanent reductions to interest rates, extension 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 June 30, 2018, and December 31, 2017 (in thousands): 
 
June 30, 2018
 
December 31, 2017
 
Non-Accruing
 
Accruing
 
Non-Accruing
 
Accruing
TDRs:
 
 
 
 
 
 
 
Real estate loans:
 
 
 
 
 
 
 
Commercial
$

 
$
12,986

 
$

 
$
13,272

One-to-four family residential
365

 
2,374

 
251

 
3,135

Multifamily
152

 
1,253

 

 
1,440

Home equity and lines of credit

 
65

 

 
69

Commercial and industrial loans

 
80

 

 
87

 
$
517

 
$
16,758

 
$
251

 
$
18,003


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Table of Contents

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. The 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.
The 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, 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. The Bank is a member of the FHLBNY, which provides an additional source of short-term and long-term funding. The Bank also has short-term borrowing capabilities with the Federal Reserve Bank of New York. The Bank’s borrowed funds, excluding capitalized lease obligations and floating rate advances, were $475.6 million at June 30, 2018, and had a weighted average interest rate of 1.85%. A total of $135.6 million of these borrowings will mature in less than one year. Borrowed funds, excluding capitalized lease obligations, floating rate advances, and overnight line of credit, were $466.2 million at December 31, 2017. The Bank has the ability to obtain additional funding from the FHLB and Federal Reserve Bank of New York's discount window of approximately $1.04 billion utilizing unencumbered securities of $321.4 million and loans of $722.5 million at June 30, 2018. The Bank expects to have sufficient funds available to meet current commitments in the normal course of business.

Northfield Bancorp, Inc. (standalone) is a separate legal entity from the Bank and must provide for 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 the Bank. At June 30, 2018, Northfield Bancorp, Inc. (standalone) had liquid assets of $15.8 million.

Capital Resources. Federal regulations require federally insured depository institutions to meet several minimum capital standards: a common equity Tier 1 capital to risk-based assets ratio of 4.5%, a Tier 1 capital to risk-based assets ratio of 6.0%, a total capital to risk-based assets of 8.0%, and a 4.0% Tier 1 capital to total assets leverage ratio. These capital requirements were effective January 1, 2015, and are the result of a final rule implementing recommendations of the Basel Committee on Banking Supervision and certain requirements of the Dodd-Frank Act. In addition to establishing the minimum regulatory capital requirements, the regulations limit capital distributions and certain discretionary bonus payments to management if the institution does not hold a “capital conservation buffer” consisting of 2.5% of capital to risk-weighted assets above the amount necessary to meet its minimum risk-based capital requirements. The capital conservation buffer requirement was phased in beginning January 1, 2016, at 0.625% of risk-weighted assets and increases each year until fully implemented at 2.5% on January 1, 2019. For calendar year 2018, the capital conservation buffer is 1.875%.
As a result of the recently enacted Economic Growth, Regulatory Relief, and Consumer Protection Act, the federal banking agencies are required to develop a “Community Bank Leverage Ratio” (the ratio of a bank’s tangible equity capital to average total consolidated assets) for financial institutions with assets of less than $10 billion.  A “qualifying community bank” that exceeds this ratio will be deemed to be in compliance with all other capital and leverage requirements, including the capital requirements to be considered “well capitalized” under Prompt Corrective Action statutes.  The federal banking agencies may consider a financial institution’s risk profile when evaluating whether it qualifies as a community bank for purposes of the capital ratio requirement. The federal banking agencies must set the minimum capital for the new Community Bank Leverage Ratio at not less than 8% and not more than 10%.  A financial institution can elect to be subject to this new definition.


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Table of Contents

At June 30, 2018, and December 31, 2017, as set forth in the following table, both the Bank and Northfield Bancorp, Inc. exceeded all of the regulatory capital requirements to which they were subject at such dates.    
 
Northfield Bank
 
Northfield Bancorp, Inc.
 
For Capital Adequacy Purposes (1)
 
For Well Capitalized Under Prompt Corrective Action Provisions
As of June 30, 2018:
 
 
 
 
 
 
 
Common equity Tier 1 capital (to risk-weighted assets)
16.48%
 
17.62%
 
6.375%
 
6.50%
Tier 1 leverage
14.16%
 
15.15%
 
4.000%
 
5.00%
Tier I capital (to risk-weighted assets)
16.48%
 
17.62%
 
7.875%
 
8.00%
Total capital (to risk-weighted assets)
17.26%
 
18.40%
 
9.875%
 
10.00%
As of December 31, 2017:
 
 
 
 
 
 
 
Common equity Tier 1 capital (to risk-weighted assets)
16.70%
 
18.02%
 
5.750%
 
6.50%
Tier 1 leverage
14.15%
 
15.27%
 
4.000%
 
5.00%
Tier I capital (to risk-weighted assets)
16.70%
 
18.02%
 
7.250%
 
8.00%
Total capital (to risk-weighted assets)
17.49%
 
18.81%
 
9.250%
 
10.00%
 
 
 
 
 
 
 
 
(1) Includes capital conservation buffer at June 30 2018, and December 31, 2017.
 
 
 
 
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 June 30, 2018 (in thousands):
Contractual Obligations
 
Total
 
Less than One Year(1)
 
One to less than Three Years
 
Three to less than Five Years
 
More than Five Years
Debt obligations (excluding capitalized leases)
 
$
524,160

 
$
184,160

 
$
221,725

 
$
105,775

 
$
12,500

Commitments to originate loans
 
97,917

 
97,917

 

 

 

Commitments to fund unused lines of credit
 
103,600

 
103,600

 

 

 

 
 
 
 
 
 
 
 
 
 
 
(1) Includes $5.1 million of floating rate advances and $43.5 million overnight line of credit.
 
 
 
 
 
 

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, 2017.

Recent Accounting Standards

See Note 12 of the Notes to the Unaudited Consolidated Financial Statements for information about recent accounting developments.

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Table of Contents

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Management of Market Risk
General.  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 securities 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 Asset-Liability Committee (“MALCO”), comprised of our SVP & Chief Investment Officer and Treasurer, who chairs this Committee, our President and Chief Executive Officer, our EVP & Chief Administrative Officer, EVP & Chief Financial Officer, EVP & Chief Lending Officer, EVP Operations, EVP & Director of Business Development and SVP & Director of Marketing, and other officers and staff as necessary or appropriate to manage interest rate risk. 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.
 
We seek to manage our interest rate risk in order to minimize the exposure of our earnings and capital to changes in interest rates. As part of our ongoing asset-liability management, we currently use the following strategies to manage our interest rate risk:

originating multifamily loans and commercial real estate loans that generally have shorter maturities than one-to-four family residential real estate loans and have higher interest rates that generally reset from five to ten years;
investing in shorter-term investment grade corporate securities and mortgage-backed securities; and
obtaining general financing through lower-cost core deposits, brokered deposits, and longer-term FHLB advances and repurchase agreements.
Shortening the average term of our interest-earning assets by increasing our investments in shorter-term assets, as well as originating loans with variable interest rates, helps to match the maturities and interest rates of our assets and liabilities better, thereby reducing the exposure of our net interest income to changes in market interest rates.
 
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 changed 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 or decrease 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.

The following tables set forth, as of June 30, 2018, and December 31, 2017, 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 (dollars in thousands).  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 repricing characteristics including decay rates, and correlations to movements in interest rates, and should not be relied on as indicative of actual results.

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Table of Contents

 
 
NPV at June 30, 2018
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
 
Next 12 Months Net Interest Income Percent Change
 
Months 13-24 Net Interest Income Percent Change
+400
 
$
3,816,388

 
$
3,091,386

 
$
725,002

 
$
(151,003
)
 
(17.24
)%
 
19.00
%
 
(11.92
)%
 
(4.93
)%
+300
 
3,910,907

 
3,150,595

 
760,312

 
(115,693
)
 
(13.21
)
 
19.44

 
(8.85
)
 
(3.57
)
+200
 
4,013,791

 
3,212,257

 
801,534

 
(74,471
)
 
(8.50
)
 
19.97

 
(5.57
)
 
(1.68
)
+100
 
4,115,576

 
3,276,519

 
839,057

 
(36,948
)
 
(4.22
)
 
20.39

 
(2.64
)
 
(0.54
)
 
4,219,545

 
3,343,540

 
876,005

 

 

 
20.76

 

 

(100)
 
4,321,425

 
3,417,953

 
903,472

 
27,467

 
3.14

 
20.91

 
1.26

 
(0.01
)
(200)
 
4,420,880

 
3,499,424

 
921,456

 
45,451

 
5.19

 
20.84

 
0.79

 
(0.27
)
     
 
 
NPV at December 31, 2017
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
 
Next 12 Months Net Interest Income Percent Change
 
Months 13-24 Net Interest Income Percent Change
400
 
$
3,637,558

 
$
2,979,633

 
$
657,925

 
$
(171,778
)
 
(20.70
)%
 
18.09
%
 
(10.35
)%
 
(0.70
)%
300
 
3,730,853

 
3,032,696

 
698,157

 
(131,546
)
 
(15.85
)
 
18.71

 
(7.59
)
 
(0.37
)
200
 
3,832,498

 
3,088,081

 
744,417

 
(85,286
)
 
(10.28
)
 
19.42

 
(4.67
)
 
0.46

100
 
3,933,263

 
3,145,932

 
787,331

 
(42,372
)
 
(5.11
)
 
20.02

 
(2.20
)
 
0.47

 
4,036,107

 
3,206,404

 
829,703

 

 

 
20.56

 

 

(100)
 
4,138,762

 
3,275,424

 
863,338

 
33,635

 
4.05

 
20.86

 
1.21

 
0.22

(200)
 
4,244,864

 
3,347,146

 
897,718

 
68,015

 
8.20

 
21.15

 
0.21

 
(0.56
)

At June 30, 2018, in the event of a 200 basis point decrease in interest rates, we would experience a 5.19% increase in estimated net portfolio value and a 0.79% increase in net interest income in year one and a 0.27% decrease in net interest income in year two. In the event of a 400 basis point increase in interest rates, we would experience a 17.24% decrease in estimated net portfolio value and a 11.92% decrease in net interest income in year one and a 4.93% decrease in net interest income in year two. Our policies provide that, in the event of a 200 basis point decrease or less in interest rates, our net present value ratio should decrease by no more than 300 basis points and 10%, and in the event of a 400 basis point increase or less, our net present value should decrease by no more than 475 basis points and 35%. In the event of a 200 basis point decrease or less, our projected net interest income should decrease by no more than 10% in year one, and in the event of a 400 basis point increase or less, our projected net interest income should decrease by no more than 30% in year one and 22% in year two. 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 interest rate shocks. At June 30, 2018, we were in compliance with all board approved policies with respect to interest rate risk management.

Certain shortcomings are inherent in the methodologies used in determining interest rate risk through changes in net portfolio value and net interest income.  Our model requires us to make certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates.  However, we also apply consistent parallel yield curve shifts (in both directions) to determine possible changes in net interest income if the theoretical yield curve shifts occurred gradually.  Net interest income analysis also adjusts the asset and liability repricing analysis based on changes in prepayment rates resulting from the parallel yield curve shifts.  In addition, the net portfolio value 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 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 portfolio value or net interest income and will differ from actual results.


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Table of Contents

ITEM 4.    CONTROLS AND PROCEDURES 
An evaluation was performed under the supervision and with the participation of the Company’s management, including the President and 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 Exchange Act of 1934, as amended) as of June 30, 2018.  Based on that evaluation, the Company’s management, including the President and Chief Executive Officer and the Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective.
 
During the three months ended June 30, 2018, 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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Table of Contents

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 quarter ended June 30, 2018, there have been no material changes to the risk factors as previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017, as filed with the Securities and Exchange Commission.
 
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 Company did not repurchase any of its common stock during the three months ended June 30, 2018. The previously adopted repurchase program permitted $185.0 million shares of common stock 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. There were no shares remaining to be purchased at June 30, 2018.

ITEM 3.     DEFAULTS UPON SENIOR SECURITIES
None

ITEM 4.     MINE SAFETY DISCLOSURES
Not applicable

ITEM 5.     OTHER INFORMATION
None

ITEM 6.      EXHIBITS
The following exhibits required by Item 601 of Regulation S-K are included with this Quarterly Report on Form 10-Q.
Exhibit Number
 
Description
 
 
 
 
 
 
 
 
 
 
 
 
101
 
The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2018, 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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Table of Contents

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: August 9, 2018
/s/   Steven M. Klein
Steven M. Klein
President and Chief Executive Officer
 
/s/   William R. Jacobs
William R. Jacobs
Chief Financial Officer
(Principal Financial and Accounting Officer)

58