2013 ANNUAL REPORT
BANK WHEREVER LIFE TAKES YOU
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“We continue to invest in our people and
infrastructure in order to provide long
term value to our customers, stockholders,
and the community.”
Steven M. Klein
President & Chief Operating Officer
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At December 31, 2013
DEAR FELLOW STOCKHOLDER,
On behalf of the Board of Directors and management, I am pleased
to report that Northfield continued its strong performance in 2013.
The year began with the successful completion
of our second step conversion and transition to
a fully public company. With over 25% capital,
our company remains one of the strongest banks
in the country. From this position, we remain
focused on prudently deploying our capital
through a combination of loan growth, core
deposit generation, dividend payments, stock
repurchases, and opportunistic acquisitions.
Repositioning the asset composition of our
balance sheet, to reflect a greater percentage
of loans, continues to be core to our business
strategy. In addition to the positive effect it
has on our net interest margin, it provides us
greater opportunity to cross-sell Northfield’s
many financial products and services. In 2013,
loans grew over 19% and now represent 55.1%
of total assets, as compared to just over 30%
in December 2007, the year we completed
our initial public offering. Our loan growth in
2013 was focused on multifamily loans, which
increased over 42%. Multifamily loans continue
to perform favorably and our overall loan quality
strengthened further in 2013, as nonperforming
loans continued to decline. As we move into
2014 and beyond, management will continue
to evaluate other lending opportunities.
Technology and demographic changes are
revolutionizing how we interact with our
customers. In addition to the personal service
89%
Total Stock Return
12/31/07 - 12/31/13
NFBK_AR2013.indd 3
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John W. Alexander
Chairman and CEO
provided by our branch network, our customers
can conduct transactions when and where it
is convenient for them. Through our internet
banking and mobile capabilities, customers can
securely access Northfield through their smart
phones, tablets, and computers to deposit
checks, transfer funds, pay businesses or
individuals, apply for loans, and open accounts.
Mid-sized and small business customers also
are core to our strategy. Our experienced teams
of bankers are engaged with the business
community and are focused on delivering state-
of-the-art products, with exceptional customer
service. This combination has resulted in a 16%
increase in business, government, and not-for-
profit deposits, during the year.
$0.35, an over
16% increase
from 2012.
These earnings
more than
supported our
regular dividend
of $0.24 per share,
and coupled with
our strong capital
base, also permitted
a special dividend
of $0.25 per share. In
2014, the Company also
announced the commencement of stock
repurchase programs for up to 10% of our
shares outstanding.
Our focus on developing and enhancing
loan and core deposit relationships has been
important to our financial performance and to
building value for our stockholders. In 2013,
Northfield achieved earnings per share of
We successfully completed the integration
and rebranding of the former Flatbush Federal
Savings and Loan Association branches,
and given the current challenging operating
institutions, we
environment
for financial
EARNINGS PER
SHARE - BASIC
2 | 2013 Annual Report
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believe more acquisition opportunities may be
presented in 2014 and beyond to build longer
term value for our stockholders.
Many of our stockholders also are our customers
and members of the communities where we
live and work. Northfield has a long tradition
of giving back to the communities that have
helped us prosper over the past 127 years. From
feeding the hungry, helping the underprivileged,
improving health care, and assisting wounded
soldiers, our employees give of their time
and talents to make a difference in the lives
of others. The Northfield Bank Foundation
also provides support to the community and
achieved a significant milestone this past year
having made over $3.5 million in community
grants since its creation in 2007.
The loyalty and support of our stockholders and
customers, and the hard work and dedication
of our employees and Board of Directors,
continues to bring us success.
Thank you for your ongoing support and
commitment to Northfield.
Sincerely,
John W. Alexander
Chairman and
Chief Executive Officer
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2013 Annual Report | 3
BOARD OF DIRECTORS
Back Row (L-R): Patrick E. Scura, Jr., Timothy C. Harrison, Gil Chapman, Annette Catino, Steven M. Klein, John P. Connors, Jr., Karen J. Kessler,
Frank P. Patafio. Front Row (L-R): Susan Lamberti, John R. Bowen, John W. Alexander, John J. DePierro.
John W. Alexander
Chairman and CEO
Northfield Bancorp
John R. Bowen
Retired Chairman,
President and CEO
Liberty Bancorp, Inc.
Annette Catino
CEO
QualCare, Inc.
Gil Chapman
Retired
Auto Executive
John P. Connors, Jr.
Managing Partner
Connors & Connors, PC
John J. DePierro
Retired Consultant
Health Care Industry
Timothy C. Harrison
Principal
TCH Realty &
Development Co.
Karen J. Kessler
Principal
Evergreen Partners
Steven M. Klein
President
Northfield Bancorp
Susan Lamberti
Retired Educator
New York City
Board of Education
Frank P. Patafio
Senior Executive VP
RXR Realty
Patrick E. Scura, Jr.
Retired Audit Partner
KPMG LLP
SENIOR MANAGEMENT
John W. Alexander
Chairman and
Chief Executive Officer
Steven M. Klein
President and
Chief Operating Officer
Kenneth J. Doherty
Executive Vice
President
Chief Lending Officer
Michael J. Widmer
Executive Vice
President
Operations
William R. Jacobs
Senior Vice President
Chief Financial Officer
M. Eileen Bergin
Vice President
Director of Corporate
Governance
(L-R): William R. Jacobs, M. Eileen Bergin,
Kenneth J. Doherty, John W. Alexander,
Michael J. Widmer, Steven M. Klein.
4 | 2013 Annual Report
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
⌧
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 2013
OR
�
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from _______________ to _________________
Commission File No. 001-35791
Northfield Bancorp, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
581 Main Street, Woodbridge, New Jersey
(Address of Principal Executive Offices)
80-0882592
(I.R.S. Employer
Identification No.)
07095
Zip Code
(732) 499-7200
(Registrant’s telephone number, including area code)
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, par value $0.01 per share
Name of Each Exchange on Which Registered
The NASDAQ Stock Market, LLC
Securities Registered Pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes � No �
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes � No �
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 � No �
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes � No �
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not
contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. �
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, non-accelerated filer, or a smaller
reporting company. See definition of “accelerated filer”, “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check one):
Large accelerated filer
Non-accelerated filer
�
�
Accelerated filer
Smaller reporting company
�
�
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES � NO �
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant, computed by
reference to price at which the common equity was last sold on June 30, 2013 was $665,555,817.
As of March 14, 2014, there were outstanding 55,638,779 shares of the Registrant’s common stock.
Proxy Statement for the 2014 Annual Meeting of Stockholders of the Registrant (Part III).
DOCUMENTS INCORPORATED BY REFERENCE
NORTHFIELD BANCORP, INC.
ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Part I.
Part II.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures about Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Part III.
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 10.
Item 11.
Item 12
Item 13
Item 14
Item 15
Signatures
Exhibits, Financial Statement Schedules
Part IV.
Page
1
32
40
40
40
40
41
44
46
63
63
124
124
124
125
125
125
125
125
126
128
This Page Intentionally Left Blank
This Page Intentionally Left Blank
ITEM 1. BUSINESS
Forward Looking Statements
PART I
This Annual Report contains certain “forward-looking statements,” which can be identified by the use of such words
as “estimate”, “project,” “believe,” “intend,” “anticipate,” “plan”, “seek”, “expect” and words of similar meaning. These
forward looking statements include, but are not limited to:
(cid:127)
(cid:127)
(cid:127)
(cid:127)
statements of our goals, intentions, and expectations;
statements regarding our business plans, prospects, growth and operating strategies;
statements regarding the quality of our loan and investment portfolios; and
estimates of our risks and future costs and benefits.
These forward-looking statements are based on current beliefs and expectations of our management and are inherently
subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our
control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and
decisions that are subject to change.
The following factors, among others, could cause actual results to differ materially from the anticipated results or other
expectations expressed in the forward-looking statements:
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
general economic conditions, either nationally or in our market areas, that are worse than expected;
competition among depository and other financial institutions;
inflation and changes in the interest rate environment that reduce our margins and yields or reduce the fair value of
financial instruments;
adverse changes in the securities markets;
changes in laws or government regulations or policies affecting financial institutions, including changes in
regulatory fees and capital requirements;
our ability to manage operations in the current economic conditions;
our ability to enter new markets successfully and capitalize on growth opportunities;
our ability to successfully integrate acquired entities;
changes in consumer spending, borrowing and savings habits;
changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial
Accounting Standards Board, the Securities and Exchange Commission or the Public Company Accounting
Oversight Board;
changes in our organization, compensation and benefit plans;
changes in the level of government support for housing finance;
significant increases in our loan losses; and
changes in the financial condition, results of operations or future prospects of issuers of securities that we own.
Because of these and other uncertainties, our actual future results may be materially different from the results
indicated by these forward-looking statements. Except as required by law, we disclaim any intention or obligation to update or
revise any forward-looking statements after the date of this Form 10-K, whether as a result of new information, future events
or otherwise.
1
Northfield Bancorp, Inc., a Delaware Corporation
Northfield Bancorp, Inc., a Delaware Corporation was organized in June 2010. Upon completion of the mutual-to-
stock conversion of Northfield Bancorp, MHC in January 2013, Northfield Bancorp, Inc. became the holding company of
Northfield Bank and succeeded to all of the business and operations of the former Northfield Bancorp, Inc., a Federal
Corporation, (“Northfield-Federal”) and each of Northfield-Federal and Northfield Bancorp, MHC ceased to exist. Northfield
Bancorp, Inc. uses the support staff and offices of Northfield Bank and pays Northfield Bank for these services. If Northfield
Bancorp, Inc. expands or changes its business in the future, it may hire its own employees.
In the future, we may pursue other business activities, including mergers and acquisitions, investment alternatives and
diversification of operations. There are, however, no current understandings or agreements for these activities.
Northfield Bancorp, Inc. is subject to comprehensive regulation and examination by the Federal Reserve Bank of
Philadelphia.
Northfield Bancorp, Inc.’s main office is located at 581 Main Street, Woodbridge, New Jersey 07095, and its telephone
number at this address is (732) 499-7200. Its website address is www.eNorthfield.com. Information on this website is not and
should not be considered to be a part of this annual report.
Northfield Bank
Northfield Bank was organized in 1887 and is a federally chartered savings bank. Northfield Bank conducts business
primarily from its home office located in Staten Island, New York, its operations center located in Woodbridge, New Jersey, its
29 additional branch offices located in New York and New Jersey, and its lending office located in Brooklyn, New York. The
branch offices are located in Staten Island, Brooklyn, and the New Jersey counties of Union and Middlesex.
Northfield Bank’s principal business consists of originating multifamily and other commercial real estate loans,
purchasing investment securities, including mortgage-backed securities and corporate bonds, and to a lesser extent depositing
funds in other financial institutions. Northfield Bank also offers construction and land loans, commercial and industrial loans,
one-to-four family residential mortgage loans, and home equity loans and lines of credit. Northfield Bank offers a variety of
deposit accounts, including certificates of deposit, passbook, statement, and money market savings accounts, transaction
deposit accounts (negotiable orders of withdrawal (NOW) accounts and non-interest bearing demand accounts), individual
retirement accounts, and to a lesser extent when it is deemed cost effective, brokered deposits. Deposits are Northfield Bank’s
primary source of funds for its lending and investing activities. Northfield Bank also borrows funds, principally repurchase
agreements with brokers and Federal Home Loan Bank of New York advances. Northfield Bank owns 100% of NSB Services
Corp., which, in turn, owns 100% of the voting common stock of a real estate investment trust, NSB Realty Trust, that holds
primarily mortgage loans and other real estate related investments. In addition, Northfield Bank refers its customers to an
independent third party that provides non-deposit investment products.
Northfield Bank is subject to comprehensive regulation and examination by the Office of the Comptroller of the
Currency (“OCC”).
Northfield Bank’s main office is located at 1731 Victory Boulevard, Staten Island, New York 10314, and its telephone
number at this address is (718) 448-1000. Its website address is www.eNorthfield.com. Information on this website is not and
should not be considered to be a part of this annual report.
Market Area and Competition
We have been in business for over 125 years, offering a variety of financial products and services to meet the needs of
the communities we serve. Our commercial and retail banking network consists of multiple delivery channels including full-
service banking offices, automated teller machines, and telephone and internet banking capabilities including remote deposit
capture. We consider our competitive products and pricing, branch network, reputation for superior customer service, and
financial strength, as our major strengths in attracting and retaining customers in our market areas.
We face intense competition in our market area both in making loans and attracting deposits. Our market areas have a
high concentration of financial institutions, including large money center and regional banks, community banks, and credit
2
unions. We face additional competition for deposits from money market funds, brokerage firms, mutual funds, and insurance
companies. Some of our competitors offer products and services that we do not offer, such as trust services and private
banking.
Our deposit sources are primarily concentrated in the communities surrounding our banking offices in the New York
counties of Richmond (Staten Island) and Kings (Brooklyn), and Union and Middlesex counties in New Jersey. As of June 30,
2013 (the latest date for which information is publicly available), we ranked fifth in deposit market share in Staten Island with
a 9.33% market share. As of that date, we had a 0.58% deposit market share in Brooklyn, New York, and a combined deposit
market share of 1.07% in Middlesex and Union Counties in New Jersey.
The following table sets forth the unemployment rates for the communities we serve and the national average for the
last five years, as published by the Bureau of Labor Statistics.
Union County, NJ . . . . . . . . . . . . . . . . . . . . . . . . . . .
Middlesex County, NJ . . . . . . . . . . . . . . . . . . . . . . . .
Richmond County, NY . . . . . . . . . . . . . . . . . . . . . . .
Kings County, NY . . . . . . . . . . . . . . . . . . . . . . . . . .
National Average . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unemployment Rate At December 31,
____________________________________________________________________________
2009
2010
2011
2012
2013
_____________
_____________
_____________
_____________
_____________
9.4%
9.2%
8.8%
9.2%
6.9%
8.4
7.9
7.6
7.9
5.9
8.7
8.0
7.9
7.9
6.6
9.5
9.5
9.5
8.2
10.6
9.4%
8.5%
7.8%
6.7%
9.9%
The following table sets forth median household income at December 31, 2013 and 2012, for the communities we
serve, as published by the U.S. Census Bureau.
Union County, NJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Middlesex County, NJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Richmond County, NY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Kings County, NY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Median Household Income
At December 31,
_______________________________
2013
2012
_____________
_____________
$ 60,991
$ 63,641
77,407
77,925
72,905
74,860
$ 40,269
$ 42,291
Lending Activities
Our principal lending activity is the origination of multifamily real estate loans and, to a lesser extent, other
commercial real estate loans in New York City, New Jersey, and Eastern Pennsylvania, typically on office, retail, and
industrial properties. We also originate one-to-four family residential real estate loans, construction and land loans,
commercial and industrial loans, and home equity loans and lines of credit. In October 2009, we began to offer loans to
finance premiums on insurance policies, including commercial property and casualty insurance, and professional liability
insurance. At the end of December 2011, we stopped originating loans to finance premiums on insurance policies and in
February 2012 we sold the majority of our insurance premium loans at par value.
Loan Originations, Purchases, Sales, Participations, and Servicing. All loans we originate for our portfolio are
underwritten pursuant to our policies and procedures or are properly approved as exceptions to our policies and procedures. In
addition, we originate both adjustable-rate and fixed-rate residential real estate loans under an origination assistance
agreement with a third-party underwriter that conforms to secondary market underwriting standards, whereby the third-party
underwriter processes and underwrites one-to-four family residential real estate loans that we fund at origination, and we elect
either to portfolio the loans or sell them to the third-party. Prior to entering into the origination assistance agreement with this
third-party underwriter in 2010, Northfield Bank was a participating seller/servicer with Freddie Mac, and generally
underwrote its one-to-four family residential real estate loans to conform to Freddie Mac standards. Our ability to originate
fixed- or adjustable-rate loans is dependent on the relative customer demand for such loans, which is affected by various
factors including current market interest rates as well as anticipated future market interest rates. Our loan origination and sales
activity may be adversely affected by changes in economic conditions that result in decreased loan demand. Our home equity
loans and lines of credit typically are generated through direct mail advertisements, newspaper advertisements, online
applications through our website, and referrals from branch personnel. A significant portion of our multifamily real estate
3
loans and other commercial real estate loans are generated with the use of third-party loan brokers and referrals from
accountants and other professional contacts.
We generally retain in our portfolio all adjustable-rate residential real estate loans we originate, as well as shorter-
term, fixed-rate residential real estate loans (terms of 10 years or less). Loans we sell consist primarily of conforming, longer-
term, fixed-rate residential real estate loans. We sold $4.0 million of one-to-four family residential real estate loans (generally
fixed-rate loans, with terms of 15 years or longer) during the year ended December 31, 2013.
We sell our loans without recourse, except for standard representations and warranties typical in secondary market
transactions. Currently, we do not retain any servicing rights on one-to-four family residential real estate loans originated
under the agreement with the third-party underwriter, including loans we may elect to add to our portfolio. During 2012, we
sold the servicing rights of one-to-four family residential real estate loans owned by others to a third-party bank. Historically,
the origination of loans held-for-sale and related servicing activity has not been material to our operations.
Loans acquired in a transaction with the Federal Deposit Insurance Corporation and the merger of Flatbush Federal
Bancorp, Inc. with deteriorated credit quality herein referred to as purchased credit-impaired loans (“PCI loans”) have a
carrying value of $59.5 million at December 31, 2013. Additionally, we transferred certain loans with deteriorated credit
quality, which we had previously originated and designated as held-for-investment, to held-for-sale in both 2013, 2012, and
2011. The accounting and reporting for both of these groups of loans differs substantially from those loans originated and
classified as held-for-investment.
For purposes of reporting, discussion and analysis, management has classified its loan portfolio into four categories:
(1) PCI loans, which are held-for-investment, and initially valued at estimated fair value on the date of acquisition, with no
initial related allowance for loan losses, (2) loans originated and held-for-sale, which are carried at the lower of aggregate cost
or estimated fair value, less costs to sell, and therefore have no associated allowance for loan losses, (3) originated loans held-
for-investment, which are carried at amortized cost, less net charge-offs and the allowance for loan losses, and (4) acquired
loans with no evidence of credit deterioration, which are held-for-investment, and initially valued at an estimated fair value on
the date of acquisition, with no initial related allowance for loan losses.
Loan Approval Procedures and Authority. Our lending activities follow written, non-discriminatory, underwriting
standards established by our board of directors. The loan approval process is intended to assess the borrower’s ability to repay
the loan and the value of the collateral that will secure the loan, if any. To assess the borrower’s ability to repay, we review the
borrower’s income and credit history, and information on the historical and projected income and expenses of the borrower.
In underwriting a loan secured by real property, we require an appraisal of the property by an independent licensed
appraiser approved by our board of directors. The appraisals of multifamily, mixed-use, and other commercial real estate
properties are also reviewed by an independent third-party we hire but the fee is passed onto the borrower. We review and
inspect properties before disbursement of funds during the term of a construction loan. Generally, management obtains
updated appraisals when a loan is deemed impaired. These appraisals may be more limited than those prepared for the
underwriting of a new loan. In addition, when we acquire other real estate owned, we generally obtain a current appraisal to
substantiate the net carrying value of the asset.
The board of directors maintains a loan committee consisting of bank directors to: periodically review and recommend
for approval our policies related to lending (collectively, the “loan policies”) as prepared by management; approve or reject
loan applicants meeting certain criteria; and monitor loan quality including concentrations and certain other aspects of our
lending functions, as applicable. Certain Northfield Bank officers, at levels beginning with senior vice president, have
individual lending authority that is approved by the board of directors.
4
Loan Portfolio Composition. The following table sets forth the composition of our loan portfolio, by type of loan, at
the dates indicated, excluding loans held for sale of $471,000, $5.4 million, $3.9 million, $1.2 million, and $0, at December
31, 2013, 2012, 2011, 2010, and 2009, respectively.
At December 31,
_________________________________________________________________________________________________________
2009
2013
2011
_______________________
_______________________
______________________
Percent
Amount
Percent
Amount
Percent
Amount
_____________
_________
_____________
_________
_________
_____________
(Dollars in thousands)
2012
______________________
Percent
Amount
_________
_____________
2010
_______________________
Percent
Amount
_________
_____________
Real estate loans:
Multifamily . . . . . . . . . $ 870,951
Commercial . . . . . . . . .
340,174
One-to-four family
residential . . . . . . . .
64,753
Home equity and
lines of credit . . . . . .
46,231
Construction and
land . . . . . . . . . . . . .
14,152
Commercial and
industrial loans . . . . . .
10,162
Insurance premium
finance . . . . . . . . . . . . .
Other loans . . . . . . . . . . .
Purchase credit-
—
2,310
58.61% $ 610,129
315,450
22.89
49.18% $ 458,370
327,074
25.43
42.72% $ 283,588
339,321
30.48
34.30% $178,401
327,802
41.04
24.48%
44.99
4.36
3.11
0.95
0.68
—
0.16
64,733
33,573
23,243
14,786
26
1,804
5.22
2.71
1.87
1.19
—
0.15
72,592
29,666
23,460
12,710
59,096
1,496
6.77
2.76
2.19
1.18
5.51
0.14
78,032
28,125
35,054
17,020
44,517
1,062
9.44
3.40
4.24
2.06
5.39
0.13
90,898
12.48
26,118
44,548
19,252
40,382
1,299
3.58
6.11
2.64
5.54
0.18
impaired (PCI) loans . .
Loans acquired . . . . . . . .
59,468
77,817
_____________
Total loans . . . . . . . . . . $1,486,018
75,349
101,433
_____________
100.00% $1,240,526
4.00
5.24
_________
_________
_________
88,522
—
_____________
100.00% $1,072,986
6.07
8.18
_________
_________
_________
—
—
_____________
100.00% $ 826,719
8.25
—
_________
_________
_________
—
—
_____________
100.00% $728,700
—
—
_________
_________
_________
—
—
_________
100.00%
_________
_________
Other items:
Deferred loan costs
(fees), net . . . . . . . .
3,458
_____________
2,456
_____________
1,481
872
569
Allowance for loan
losses . . . . . . . . . . . .
(26,037)
_____________
(26,424)
_____________
(26,836)
_____________
Net loans held-for-
investment . . . . . . . . $1,463,439
_____________
_____________
$1,216,558
_____________
_____________
$1,047,631
_____________
_____________
(21,819)
_____________
$ 805,772
_____________
_____________
(15,414)
_____________
$713,855
_____________
_____________
At December 31, 2013, loans acquired consisted of approximately 78% one-to four family residential loans, 17%
commercial real estate loans, with the remaining balance in multifamily loans. At December 31, 2012, loans acquired
consisted of approximately 79% one-to four family residential loans, 15% commercial real estate loans, with the remaining
balance in multifamily loans.
At December 31, 2013, PCI loans consisted of approximately 37% commercial real estate, 47% commercial and
industrial loans, with the remaining balance in residential and home equity loans. At December 31, 2012, these loans
consisted of approximately 39% commercial real estate, 52% commercial and industrial loans with the remaining balance in
residential and home equity loans. At December 31, 2011, these loans consisted of approximately 39% commercial real estate,
53% commercial and industrial loans, with the remaining balance in residential and home equity loans.
Loan Portfolio Maturities. The following table summarizes the scheduled repayments of our loan portfolio at
December 31, 2013. Demand loans (loans having no stated repayment schedule or maturity) and overdraft loans are reported
as being due in the year ending December 31, 2013. Maturities are based on the final contractual payment date and do not
reflect the effect of prepayments, repricing and scheduled principal amortization.
5
Multifamily
_________________________
Weighted
Average
_______
Rate
________
Amount
Due during the years
ending December 31,
Commercial
Real Estate
_________________________
Weighted
Average
________
_______
Amount
Rate
(Dollars in thousands)
One-to-Four-Family
Residential
_________________________
Weighted
Average
_______
Rate
________
Amount
Home Equity and
Lines of Credit
_________________________
Weighted
Average
_______
Rate
________
Amount
1,000
2014 . . . . . . . . . . . . . . . . . . $
494
2015 . . . . . . . . . . . . . . . . . .
91
2016 . . . . . . . . . . . . . . . . . .
206
2017 to 2018 . . . . . . . . . . .
12,062
2019 to 2023 . . . . . . . . . . .
62,905
2024 to 2028 . . . . . . . . . . .
2029 and beyond . . . . . . . .
794,193
________
Total . . . . . . . . . . . . . . . . . . $870,951
________
________
5,266
5.00% $
44
4.89
732
4.93
1,945
5.13
26,167
4.59
43,921
4.53
4.12
262,099
________
_______
4.16% $ 340,174
_______
________
________
_______
73
6.01% $
179
5.00
328
5.86
4,404
6.85
4,591
4.97
4,837
4.98
5.12
50,341
________
_______
5.11% $ 64,753
_______
________
________
_______
648
5.84% $
58
6.35
296
5.66
3,675
5.19
8,537
5.38
10,010
4.70
4.79
23,007
________
_______
4.85% $ 46,231
_______
________
________
_______
2.67%
4.04
4.55
3.41
4.30
3.99
3.33
_______
3.65%
_______
_______
Construction and
Land
______________________
Weighted
Average
_______
Rate
________
Amount
Commercial and
Industrial
______________________
Weighted
Average
_______
________
Amount
Rate
(Dollars in thousands)
Other
______________________
Weighted
Average
_______
Rate
________
Amount
Due during the years
ending December 31,
5,158
2014 . . . . . . . . . . . . . . . . . . $
3,733
2015 . . . . . . . . . . . . . . . . . .
78
2016 . . . . . . . . . . . . . . . . . .
—
2017 to 2018 . . . . . . . . . . .
—
2019 to 2023 . . . . . . . . . . .
—
2024 to 2028 . . . . . . . . . . .
2029 and beyond . . . . . . . .
5,183
________
Total . . . . . . . . . . . . . . . . . . $ 14,152
________
________
4,274
4.89% $
852
5.45
430
7.74
3,418
—
—
—
1,081
—
4.61
107
________
_______
4.95% $ 10,162
________
_______
________
_______
5.05% $
5.41
6.28
5.08
—
5.16
5.48
_______
5.16% $
_______
_______
1,938
—
4
149
—
—
219
________
2,310
________
________
0.05%
—
12.00
6.31
—
—
4.41
_______
0.89%
_______
_______
Purchase
Credit-Impaired(1)
______________________
Weighted
Average
_______
Rate
________
Amount
Acquired
______________________
Weighted
Average
_______
________
Amount
Rate
(Dollars in thousands)
Total
______________________
Weighted
Average
__________ _______
Rate
Amount
Due during the years
ending December 31,
1,855
2014 . . . . . . . . . . . . . . . . . . $
2,760
2015 . . . . . . . . . . . . . . . . . .
1,106
2016 . . . . . . . . . . . . . . . . . .
3,409
2017 to 2018 . . . . . . . . . . .
15,809
2019 to 2023 . . . . . . . . . . .
2,969
2024 to 2028 . . . . . . . . . . .
2029 and beyond . . . . . . . .
31,560
________
Total . . . . . . . . . . . . . . . . . . $ 59,468
________
________
203
26.06% $
612
14.66
1,255
9.54
4,762
11.23
19,256
9.14
7,450
7.57
7.30
44,279
________
_______
9.00% $ 77,817
_______
________
________
_______
20,415
6.77% $
8,732
$
7.24
4,320
$
6.37
21,968
$
5.20
$
6.06
86,422
$ 133,173
5.39
5.00
$1,210,988
___________ _______
_______
5.36% $1,486,018
___________ _______
_______
___________ _______
_______
6.63%
8.46%
6.91%
5.97%
5.88%
4.76%
4.47%
4.66%
(1) represents estimated accretable yield.
The Company has a total of $1.2 billion in loans due to mature in 2029 and beyond, of which $79.9 million, or 6.58%,
are fixed rate loans.
6
The following table sets forth the scheduled repayments of fixed- and adjustable-rate loans at December 31, 2013, that
are contractually due after December 31, 2014.
Due After December 31, 2014
_________________________________________________
Adjustable
______________
Rate
(In thousands)
______________
Total
_______________
Fixed Rate
Real estate loans:
Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
One-to-four family residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction and land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Home equity and lines of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial and industrial loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase credit-impaired (PCI) loans . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquired loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 39,901
33,987
210
64,481
25,213
2,299
372
9,632
60,436
_______________
$ 236,531
_______________
_______________
$ 295,007
30,693
8,784
805,470
20,370
3,589
—
47,981
17,178
______________
$1,229,072
______________
______________
$ 334,908
64,680
8,994
869,951
45,583
5,888
372
57,613
77,614
______________
$1,465,603
______________
______________
Multifamily Real Estate Loans. We currently focus on originating multifamily real estate loans. Loans secured by
multifamily properties totaled approximately $871.0 million, or 58.61% of our total loan portfolio, at December 31, 2013. We
include in this category mixed-use properties having more than four residential units and a business or businesses where the
majority of space is utilized for residential purposes. At December 31, 2013, we had 740 multifamily real estate loans with an
average loan balance of approximately $1.2 million. At December 31, 2013, our largest multifamily real estate loan had a
principal balance of $12.6 million and was performing in accordance with its original contractual terms. Substantially all of
our multifamily real estate loans are secured by properties located in our primary market areas.
Our multifamily real estate loans typically amortize over 20 to 30 years with negotiated interest rates that adjust after
an initial five-, seven or 10-year period, and every five years thereafter. Interest rates adjust at margins generally ranging from
275 basis points to 350 basis points above the average yield on U.S. Treasury securities, adjusted to a constant maturity of
similar term, as published by the Federal Reserve Board for loans originated prior to 2009. Adjustable rate loans originated
subsequent to 2008 generally have been indexed to the five-year London Interbank Offered Rate (LIBOR) swaps rate as
published in the Federal Reserve Statistical Release adjusted for a negotiated margin. We also originate, to a lesser extent, 10-
to 15-year fixed-rate, fully amortizing loans. In general, our multifamily real estate loans have interest rate floors equal to the
interest rate on the date the loan is originated, and have prepayment penalties should the loan be prepaid in the initial five,
seven or ten year term.
In underwriting multifamily real estate loans, we consider a number of factors, including the ratio of the projected net
cash flow to the loan’s debt service requirement (generally requiring a minimum ratio of 120%), the age and condition of the
collateral, the financial resources and income of the borrower, and the borrower’s experience in owning or managing similar
properties. Multifamily real estate loans generally are originated in amounts up to 75% of the appraised value of the property
securing the loan. We require title insurance, fire and extended coverage casualty insurance, and, if appropriate, flood
insurance up to the regulatory required amount of $500,000, in order to protect our security interest in the underlying
property. Although a significant portion of our multifamily real estate loans are originated with the use of third-party brokers,
we underwrite all multifamily real estate loans in accordance with our underwriting standards. Due to competitor
considerations, as is customary in our marketplace, we typically do not obtain personal guarantees from multifamily real
estate borrowers.
Loans secured by multifamily real estate properties generally have less credit risk than other commercial real estate
loans. The repayment of loans secured by multifamily real estate properties typically depends on the successful operation of
the property. If the cash flow from the property is reduced, the borrower’s ability to repay the loan may be impaired.
In a ruling that was contrary to a 1996 advisory opinion from the New York State Division of Housing and
Community Renewal that owners of housing units who benefited from the receipt of “J-51” tax incentives under the Rent
Stabilization Law are eligible to decontrol apartments, the New York State Court of Appeals ruled on October 22, 2009, that
residential housing units located in two major housing complexes in New York City had been illegally decontrolled by the
current and previous property owners. This ruling may subject other property owners that have previously or are currently
benefiting from a J-51 tax incentive to litigation, possibly resulting in a significant reduction to property cash flows. Based on
7
management’s assessment of its multifamily loan portfolio, we believe that only one loan may be affected by the ruling
regarding J-51. The loan has a principal balance of $7.3 million at December 31, 2013, and is performing in accordance with
its original contractual terms.
Commercial Real Estate Loans. Commercial real estate loans (other than multifamily real estate loans) totaled $340.2
million, or 22.89% of our loan portfolio as of December 31, 2013. At December 31, 2013, our commercial real estate loan
portfolio consisted of 384 loans with an average loan balance of approximately $885,870, although there are a large number
of loans with balances substantially greater than this average. At December 31, 2013, our largest commercial real estate loan
had a principal balance of $8.8 million, was secured by a hotel, and was performing in accordance with its original
contractual terms. Substantially all of our commercial real estate loans are secured by properties located in our primary
market areas.
The table below sets forth the property types collateralizing our commercial real estate loans as of December 31, 2013.
Mixed Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Office Building . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Warehousing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accommodations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recreational . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restaurant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Schools/Day Care . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
At December 31, 2013
_______________________
_________
_________
Amount
Percent
(Dollars in thousands)
$ 78,023
69,185
35,805
32,910
31,287
26,723
25,364
16,953
11,125
8,019
4,780
_________
$340,174
_________
_________
22.9%
20.3
10.5
9.7
9.2
7.8
7.5
5.0
3.3
2.4
1.4
_________
100.00%
_________
_________
Our commercial real estate loans typically amortize over 20 to 25 years with negotiated interest rates that adjust after
an initial five-, seven,- or 10-year period, and every five years thereafter. Interest rates adjust at margins generally range from
275 basis points to 350 basis points above the average yield on U.S. Treasury securities, adjusted to a constant maturity of
similar term, as published by the Federal Reserve Board for loans originated prior to 2009. Adjustable rate loans originated
subsequent to 2008 have generally been indexed to the five year LIBOR swaps rate as published in the Federal Reserve
Statistical Release, adjusted for a negotiated margin. We also originate, to a lesser extent, 10- to 15-year fixed-rate, fully
amortizing loans. In general, our commercial real estate loans have interest rate floors equal to the interest rate on the date the
loan is originated, and generally have prepayment penalties if the loan is repaid in the initial five, seven or ten year term.
In the underwriting of commercial real estate loans, we generally lend up to the lesser of 75% of either the property’s
appraised value or purchase price. Certain single use property types have lower loan to appraised value ratios. We base our
decision to lend primarily on the economic viability of the property and the creditworthiness of the borrower. In evaluating a
proposed commercial real estate loan, we emphasize the ratio of the property’s projected net cash flow to the loan’s debt
service requirement (generally requiring a minimum ratio of 125%), computed after deduction for a vacancy factor, when
applicable, and property expenses we deem appropriate. Personal guarantees of the principals are typically obtained. We
require title insurance, fire and extended coverage casualty insurance, and, if appropriate, flood insurance up to the regulatory
required amount of $500,000, in order to protect our security interest in the underlying property. Although a significant
portion of our commercial real estate loans were originated with the use of third-party brokers, we underwrite all commercial
real estate loans in accordance with our underwriting standards.
Commercial real estate loans generally carry higher interest rates and have shorter terms than one-to-four family
residential real estate loans. Commercial real estate loans also generally have greater credit risk compared to one-to-four
family residential real estate loans, as they typically involve larger loan balances concentrated with single borrowers or groups
of related borrowers. In addition, the payment of loans secured by income-producing properties typically depends on the
successful operation of the property or business. Changes in economic conditions that are not in the control of the borrower or
lender may affect the value of the collateral for the loan or the future cash flow of the property. Additionally, any decline in
real estate values may be more pronounced for commercial real estate than for residential properties.
8
Construction and Land Loans. At December 31, 2013, construction and land loans total $14.2 million, or 0.95% of
total loans receivable. At December 31, 2013, the additional un-advanced portion of these construction loans totaled $2.9
million. At December 31, 2013, we had 13 construction and land loans with an average loan balance of approximately $1.1
million. At December 31, 2013, our largest construction and land loan had a principal balance of $5.0 million and was for the
purpose of financing land. This loan is performing in accordance with its original contractual terms.
Our construction and land loans typically are interest-only loans with interest rates that are tied to the prime rate as
published in The Wall Street Journal. Margins generally range from zero basis points to 200 basis points above the prime rate.
We also originate, to a lesser extent, 10- to 15-year fixed-rate, fully amortizing land loans. In general, our construction and
land loans have interest rate floors equal to the interest rate on the date the loan is originated, and we do not typically charge
prepayment penalties.
We grant construction and land loans to experienced developers for the construction of single-family residences,
including condominiums, and commercial properties. Construction and land loans also are made to individuals for the
construction of their personal residences. Advances on construction loans are made in accordance with a schedule reflecting
the cost of construction, but are generally limited to a loan-to-completed appraised value ratio of 70%. Repayment of
construction loans on residential properties normally is expected from the sale of units to individual purchasers, or in the case
of individuals building their own residences, with a permanent mortgage. In the case of income-producing property,
repayment usually is expected from permanent financing upon completion of construction. We typically offer permanent
mortgage financing on our construction loans on income-producing properties.
Land loans also help finance the purchase of land intended for future development, including single-family housing,
multifamily housing, and commercial property. In some cases, we may make an acquisition loan before the borrower has
received approval to develop the land. In general, the maximum loan-to-value ratio for land acquisition loans is 50% of the
appraised value of the property, and the maximum term of these loans is two years. Generally, if the maturity of the loan
exceeds two years, the loan must be an amortizing loan.
Construction and land loans generally carry higher interest rates and have shorter terms than one-to-four family
residential real estate loans. Construction and land loans have greater credit risk than long-term financing on improved, owner-
occupied real estate. Risk of loss on a construction loan depends largely upon the accuracy of the initial estimate of the real
estate value at completion of construction as compared to the estimated cost (including interest) of construction and other
assumptions. If the estimate of construction costs is inaccurate, we may decide to advance additional funds beyond the amount
originally committed in order to protect our security interest in the underlying property. However, if the estimated value of the
completed project is inaccurate, the borrower may hold the real estate with a value that is insufficient to assure full repayment
of the construction loan upon its sale. In the event we make a land acquisition loan on real estate that is not yet approved for the
planned development, there is a risk that approvals will not be granted or will be delayed. Construction loans also expose us to
a risk that improvements will not be completed on time in accordance with specifications and projected costs. In addition, the
ultimate sale or rental of the real estate may not occur as anticipated and the market value of collateral, when completed, may
be less than the outstanding loans against the real estate and there may be no permanent financing available upon completion.
Substantially all of our construction and land loans are secured by real estate located in our primary market areas.
Commercial and Industrial Loans. At December 31, 2013, commercial and industrial loans totaled $10.2 million, or
0.68% of the total loan portfolio. As of December 31, 2013, we had 120 commercial and industrial loans with an average loan
balance of approximately $85,000, although we originate these types of loans in amounts substantially greater than this
average. At December 31, 2013, our largest commercial and industrial loan had a principal balance of $1.0 million and was
performing in accordance with its original contractual terms.
Our commercial and industrial loans typically amortize over 10 years with interest rates that are tied to the prime rate
as published in The Wall Street Journal. Margins generally range from zero basis points to 300 basis points above the prime
rate. We also originate, to a lesser extent, 10 year fixed-rate, fully amortizing loans. In general, our commercial and industrial
loans have interest rate floors equal to the interest rate on the date the loan is originated and have prepayment penalties.
We make various types of secured and unsecured commercial and industrial loans for the purpose of working capital
and other general business purposes. The terms of these loans generally range from less than one year to a maximum of 15
years. The loans either are negotiated on a fixed-rate basis or carry adjustable interest rates indexed to a market rate index.
Commercial credit decisions are based on our credit assessment of the applicant. We evaluate the applicant’s ability to
repay in accordance with the proposed terms of the loan and assess the risks involved. Personal guarantees of the principals
9
are typically obtained. In addition to evaluating the loan applicant’s financial statements, we consider the adequacy of the
secondary sources of repayment for the loan, such as pledged collateral and the financial stability of the guarantors. Credit
agency reports of each guarantor’s personal credit history supplement our analysis of the applicant’s creditworthiness. We also
attempt to confirm with other banks and conduct trade investigations as part of our credit assessment of the borrower.
Collateral securing a loan also is analyzed to determine its marketability.
During 2013, the Company has expanded its small business lending to include unsecured loans up to $250,000 using a
scoring system developed by a third-party vendor. The scoring system provides a consistent and compliant method of timely
decisions related to these small business loans.
Commercial and industrial loans generally carry higher interest rates than one-to-four family residential real estate
loans of like maturity because they have a higher risk of default since their repayment generally depends on the successful
operation of the borrowers’ business.
One-to-Four Family Residential Real Estate Loans. At December 31, 2013, we had 353 one-to-four family
residential real estate loans outstanding with an aggregate balance of $64.8 million, or 4.36% of our total loan portfolio. As of
December 31, 2013, the average balance of one-to-four family residential real estate loans was approximately $183,000,
although we originate this type of loan in amounts substantially greater than this average. At December 31, 2013, our largest
loan of this type had a principal balance of $2.3 million and was 31 days past due at that date.
For all one-to-four family residential real estate loans originated through the origination assistance agreement with our
third-party underwriter, upon receipt of a completed loan application from a prospective borrower: (1) a credit report is
reviewed; (2) income, assets, indebtedness and certain other information are reviewed; (3) if necessary, additional financial
information is required of the borrower; and (4) an appraisal of the real estate intended to secure the proposed loan is ordered
from an independent appraiser. One-to-four family residential real estate loans sold to our third-party underwriter under a
Loan and Servicing Rights Purchase and Sale Agreement totaled $4.0 million and $11.9 million during the years ended
December 31, 2013 and 2012, respectively.
We generally do not offer “interest only” mortgage loans on one-to-four family residential real estate properties, where
the borrower pays interest for an initial period, after which the loan converts to a fully amortizing loan. We also do not offer
loans that provide for negative amortization of principal, such as “Option ARM” loans, where the borrower can pay less than
the interest owed on the loan, resulting in an increased principal balance during the life of the loan. We do not offer “subprime
loans” (loans to borrowers with weak credit histories typically characterized by payment delinquencies, previous charge-offs,
judgments, bankruptcies, or borrowers with questionable repayment capacity as evidenced by low credit scores or high debt-
burden ratios).
Home Equity Loans and Lines of Credit. At December 31, 2013, we had 772 home equity loans and lines of credit
with an aggregate outstanding balance of $46.2 million, or 3.11% of our total loan portfolio. Of this total, outstanding home
equity lines of credit totaled $20.4 million, or 1.37% of our total loan portfolio. At December 31, 2013, the average home
equity loan and line of credit balance was approximately $60,000, although we originate these types of loans in amounts
substantially greater than this average. At December 31, 2013, our largest outstanding home equity line of credit was $1.0
million, valued based on a recent appraisal, and was on non-accrual status. At December 31, 2013, our largest home equity
loan was $427,900 and was performing in accordance with its original contractual terms.
We offer home equity loans and home equity lines of credit that are secured by the borrower’s primary residence or
second home. Home equity lines of credit are adjustable rate loans tied to the prime rate as published in The Wall Street
Journal adjusted for a margin, and have a maximum term of 20 years during which time the borrower is required to make
principal payments based on a 20-year amortization. Home equity lines generally have interest rate floors and ceilings. The
borrower is permitted to draw against the line during the entire term on originations occurring prior to June 15, 2011. For
home equity loans originated from June 15, 2011, forward, the borrower is only permitted to draw against the line for the
initial 10 years. Our home equity loans typically are fully amortizing with fixed terms to 20 years. Home equity loans and
lines of credit generally are underwritten with the same criteria we use to underwrite fixed-rate, one-to-four family residential
real estate loans. Home equity loans and lines of credit may be underwritten with a loan-to-value ratio of 80% when
combined with the principal balance of the existing mortgage loan. We appraise the property securing the loan at the time of
the loan application to determine the value of the property. At the time we close a home equity loan or line of credit, we
record a mortgage to perfect our security interest in the underlying collateral.
10
Insurance premium loans. At December 31, 2013 there were no remaining insurance premium loans. We sold the
majority of our portfolio of insurance premium finance loans during the year ended December 31, 2012, and retained
cancelled loans. We held cancelled loans until their ultimate resolution, which was generally a payment from the insurance
carrier in the amount of the unearned premium that generally exceeded the loan balance.
Purchased credit-impaired (PCI) Loans. PCI loans are accounted for in accordance with Accounting Standards
Codification (ASC) Subtopic 310-30, “Loans and Debt Securities Acquired with Deteriorated Credit Quality,” since all of
these loans were acquired at a discount attributable, at least in part, to credit quality. PCI loans were initially recorded at fair
value (as determined by the present value of expected future cash flows) with no valuation allowance (i.e., allowance for loan
losses). Under ASC Subtopic 310-30, the PCI loans were aggregated and accounted for as pools of loans based on common
risk characteristics. The PCI loans had a carrying balance of approximately $59.5 million at December 31, 2013, or 4.00% of
our total loan portfolio. PCI loans consist of approximately 37% commercial real estate, 47% commercial and industrial loans
with the remaining balance in residential and home equity loans. At December 31, 2013, based on contractual principal (not
carrying balance), 6.6% of PCI loans were past due 30 to 89 days, and 14.9% were past due 90 days or more.
The difference between the undiscounted cash flows expected at acquisition and the investment in the PCI loans, or
the “accretable yield,” is recognized as interest income utilizing the level-yield method over the life of the loans in each pool.
Contractually required payments of interest and principal that exceed the undiscounted cash flows expected at acquisition, or
the “non-accretable difference,” are not recognized as a yield adjustment or as a loss accrual or a valuation allowance.
Increases in expected cash flows subsequent to the acquisition are recognized prospectively through an adjustment of the yield
on the pool over its remaining life, while decreases in expected cash flows are recognized as impairment through a loss
provision and an increase in the allowance for loan losses.
Acquired Loans. Loans acquired with no evidence of credit deterioration, are held-for-investment, and initially valued
at an estimated fair value on the date of acquisition, with no initial related allowance for loan losses. These loans are
evaluated for impairment on quarterly basis as part of our analysis of the allowance for loan losses. At December 31, 2013,
acquired loans totaled approximately $77.8 million and consisted of approximately 78% one-to four family residential loans,
17% commercial real estate loans, with the remaining balance in multifamily loans.
Non-Performing and Problem Assets
When a loan is over 15 days delinquent, we generally send the borrower a late charge notice. When a loan is 30 days
past due, we generally mail the borrower a letter reminding the borrower of the delinquency and, except for loans secured by
one-to-four family residential real estate, we attempt personal, direct contact with the borrower to determine the reason for the
delinquency, to ensure the borrower correctly understands the terms of the loan, and to emphasize the importance of making
payments on or before the due date. If necessary, additional late charges and delinquency notices are issued and the account
will be monitored. After 90 days of delinquency, we send the borrower a final demand for payment and generally refer the
loan to legal counsel to commence foreclosure and related legal proceedings. At times we may shorten these time frames.
Generally, loans (excluding PCI loans) are placed on non-accrual status when payment of principal or interest is 90
days or more delinquent unless the loan is considered well-secured and in the process of collection. Loans also are placed on
non-accrual status at any time if the ultimate collection of principal or interest in full is in doubt. When loans are placed on
non-accrual status, unpaid accrued interest is reversed, and further income is recognized only to the extent received, and only
if the principal balance is deemed fully collectible. The loan may be returned to accrual status if both principal and interest
payments are brought current and factors indicating doubtful collection no longer exist, including performance by the
borrower under the loan terms for a six-month period. Our Chief Lending Officer reports monitored loans, including all loans
rated watch, special mention, substandard, doubtful or loss, to the loan committee of the board of directors at least quarterly.
To minimize our losses on delinquent loans we work with borrowers experiencing financial difficulties and will consider
modifying existing loan terms and conditions that we would not otherwise consider, commonly referred to as troubled debt
restructurings (“TDR”). We record an impairment loss associated with TDRs, if any, based on the present value of expected
future cash flows discounted at the original loan’s effective interest rate or the underlying collateral value, less cost to sell, if the
loan is collateral dependent. Once an obligation has been restructured because of credit problems, it continues to be considered
restructured until paid in full or, if the obligation yields a market rate (a rate equal to or greater than the rate we were willing to
accept at the time of the restructuring for a new loan with comparable risk), until the year subsequent to the year in which the
restructuring takes place, provided the borrower has performed under the modified terms for a six-month period.
11
PCI loans are subject to the same internal credit review process as non-PCI loans. If and when unexpected credit
deterioration occurs at the loan pool level subsequent to the acquisition date, a provision for credit losses for PCI loans will be
charged to earnings for the full amount of the decline in the discounted expected cash flows for the pool. Under the accounting
guidance of ASC Subtopic 310-30, for acquired credit impaired loans, the allowance for loan losses on PCI loans is measured
at each financial reporting date based on future expected cash flows. This assessment and measurement is performed at the
pool level and not at the individual loan level. Accordingly, decreases in expected cash flows resulting from further credit
deterioration on a pool of acquired PCI loan pools as of such measurement date compared to those originally estimated are
recognized by recording a provision and allowance for credit losses on PCI loans. Subsequent increases in the expected cash
flows of the loans in that pool would first reduce any allowance for loan losses on PCI loans, and any excess will be accreted
prospectively as a yield adjustment.
We consider our PCI loans to be performing due to the application of the yield accretion method under ASC Topic 310-
30. ASC Topic 310-30 allows us to aggregate credit-impaired loans acquired in the same fiscal quarter into one or more pools,
provided that the loans have common risk characteristics. A pool is then accounted for as a single asset with a single
composite interest rate and an aggregate expectation of cash flows. Accordingly, loans that may have been classified as non-
performing loans are no longer classified as non-performing because, at the respective dates of acquisition, we believed that
we would fully collect the new carrying value of these loans. The new carrying value represents the contractual balance,
reduced by the portion expected to be uncollectible (referred to as the “non-accretable difference”) and by an accretable yield
(discount) that is recognized as interest income. Management’s judgment is required in reclassifying loans subject to ASC
Topic 310-30 as performing loans, and is dependent on having a reasonable expectation about the timing and amount of the
cash flows to be collected, even if a loan is contractually past due.
Non-Performing and Restructured Loans (excluding PCI Loans). The table below sets forth the amounts and
categories of our non-performing assets at the dates indicated. At December 31, 2013, 2012, 2011, 2010, and 2009, we had
troubled debt restructurings of $10.7 million, $19.3 million, $23.3 million, $20.0 million, and $10.7 million, respectively,
which are included in the appropriate categories within non-accrual loans. Additionally, we had $26.2 million, $25.7 million,
$18.3 million, $11.2 million, and $7.3 million of troubled debt restructurings on accrual status at December 31, 2013, 2012,
2011, 2010, and 2009, respectively, which do not appear in the table below. Generally, the types of concessions that we make
to troubled borrowers include reductions in interest rates and payment extensions and to a lesser extent interest and principal
forgiveness. At December 31, 2013, 84.2% of TDRs were commercial real estate loans, 0.29% were construction loans, 5.6%
were multifamily loans, 4.1% were commercial and industrial loans, 1% were home equity loans, and 4.8% were one-to-four
family residential loans. At December 31, 2013, all $26.2 million of accruing troubled debt restructurings, and $3.1 million of
the $10.7 million of non-accruing troubled debt restructurings, were performing in accordance with their restructured terms.
At December 31,
________________________________________________________________________
__________
__________
__________
2009
2011
2013
(Dollars in thousands)
__________
2010
__________
2012
Non-accrual loans:
Real estate loans:
Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . .
One-to-four family residential . . . . . . . . . . . . . .
Construction and land . . . . . . . . . . . . . . . . . . . . .
Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Home equity and lines of credit . . . . . . . . . . . . .
Commercial and industrial loans . . . . . . . . . . . . . .
Insurance premium loans . . . . . . . . . . . . . . . . . . . .
Total non-accrual loans . . . . . . . . . . . . . . . . . . .
Loans delinquent 90 days or more and still accruing:
Real estate loans:
Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . .
One-to-four family residential . . . . . . . . . . . . . .
Construction and land . . . . . . . . . . . . . . . . . . . . .
Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Home equity and lines of credit . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
12,450
2,989
108
544
1,239
441
—
__________
17,771
__________
$
22,425
6,333
2,070
1,169
1,694
1,256
—
__________
34,947
__________
$
34,659
1,338
2,131
2,175
1,766
1,575
137
__________
43,781
__________
$
46,388
1,275
5,122
4,863
181
1,323
129
__________
59,281
__________
$
28,802
2,066
6,843
2,118
62
1,740
—
__________
41,631
__________
349
270
—
—
—
2
13
—
—
72
—
—
—
1,108
404
—
59
—
—
—
—
—
—
—
—
—
—
—
32
12
Commercial and industrial loans . . . . . . . . . . . . . . .
Total loans delinquent 90 days or more and
At December 31,
________________________________________________________________________
__________
__________
__________
2009
2011
2013
(Dollars in thousands)
—
__________
38
__________
—
__________
—
__________
191
__________
__________
2010
__________
2012
still accruing . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total non-performing loans . . . . . . . . . . . . . . . . .
Other real estate owned . . . . . . . . . . . . . . . . . . . . . .
Total non-performing assets . . . . . . . . . . . . . . . . . . $
32
__________
17,803
__________
634
__________
18,437
__________
__________
621
__________
35,568
__________
870
__________
$
36,438
__________
__________
85
__________
43,866
__________
3,359
__________
$
47,225
__________
__________
1,609
__________
60,890
__________
171
__________
$
61,061
__________
__________
191
__________
41,822
__________
1,938
__________
$
43,760
__________
__________
Ratios:
Non-performing loans to total loans
held-for-investment, net . . . . . . . . . . . . . . . . . .
1.20%
2.86%
4.08%
7.36%
5.73%
Non-performing originated loans to originated
loans held-for-investment . . . . . . . . . . . . . . . .
Non-performing assets to total assets . . . . . . . . .
1.18
0.68
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,702,764
Loans held-for-investment, net . . . . . . . . . . . . . . . . $1,489,476
3.34
1.30
$2,813,201
$1,242,982
4.45
1.99
$2,376,918
$1,074,467
7.36
2.72
$2,247,167
$ 827,591
5.73
2.19
$2,002,274
$ 729,269
At December 31, 2013, based on contractual principal, 6.6% of PCI loans were past due 30 to 89 days, and 14.9%
were past due 90 days or more. At December 31, 2012, based on contractual principal, 5.4% of PCI loans were past due 30 to
89 days, and 11.4% were past due 90 days or more.
The table below sets forth the property types collateralizing non-accrual commercial real estate loans at December 31,
2013.
Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Office buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restaurants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accommodations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
At December 31, 2013
_______________________
_________
_________
Percent
Amount
(in thousands)
$ 7,052
767
2,443
1,162
1,026
_________
$ 12,450
_________
_________
56.64%
6.2
19.6
9.3
8.2
_________
100.0%
_________
_________
Other Real Estate Owned. Real estate acquired by us as a result of foreclosure or by deed in lieu of foreclosure is
classified as real estate owned. On the date the property is acquired, it is recorded at the lower of cost or estimated fair value,
establishing a new cost basis. Estimated fair value generally represents the sale price a buyer would be willing to pay on the
basis of current market conditions, including normal terms from other financial institutions, less the estimated costs to sell the
property. Holding costs and declines in estimated fair value result in charges to expense after acquisition. Other real estate
owned consisted of four properties with an aggregate carrying value of approximately $634,000 at December 31, 2013, as
compared to $870,000 at December 31, 2012.
Potential Problem Loans and Classification of Assets. The current economic environment continues to negatively
affect certain borrowers. Our loan officers and credit administration department continue to monitor their loan portfolios,
including evaluation of borrowers’ business operations, current financial condition, underlying values of any collateral, and
assessment of their financial prospects in the current and deteriorating economic environment. Based on these evaluations, we
determine an appropriate strategy to assist borrowers, with the objective of maximizing the recovery of the related loan
balances.
Our policies, consistent with regulatory guidelines, provide for the classification of loans and other assets that are
considered to be of lesser quality as substandard, doubtful, or loss assets. An asset is considered 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 include those assets characterized by the distinct possibility that we 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, on the basis of currently
13
existing facts, conditions and values, highly questionable and improbable. Assets (or portions of assets) classified as loss are
those considered uncollectible and of such little value that their continuance as assets is not warranted. Assets that do not
expose us to risk sufficient to warrant classification in one of the aforementioned categories, but which possess potential
weaknesses that deserve our close attention, are designated as special mention. At December 31, 2013, classified assets,
excluding loans on nonaccrual status consisted of substandard assets of $39.7 million and no doubtful or loss assets. We also
had $27.4 million of assets designated as special mention. At December 31, 2012, classified assets, excluding loans on non-
accrual status, consisted of substandard assets of $38.7 million and no doubtful or loss assets. We also had $42.4 million of
assets designated as special mention.
Our determination as to the classification of our assets (and the amount of our loss allowances) is subject to review by
our principal federal regulator, the Office of the Comptroller of the Currency, which can require that we adjust our
classification and related loss allowances. We regularly review our asset portfolio to determine whether any assets require
classification in accordance with applicable regulations. We also engage the services of a third-party to review, on a test basis,
our classifications on a semi-annual basis.
At December 31, 2013, the Company had $13.3 million of accruing loans that were 30 to 89 days delinquent, as
compared to $14.8 million at December 31, 2012. The following table sets forth the total amounts of delinquencies for
accruing loans that were 30 to 89 days past due by type and by amount at the dates indicated.
Real estate loans:
Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
One- to four-family residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction and land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Home equity and lines of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial and industrial loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for Loan Losses
December 31,
________________________
_________
_________
2012
2013
(in thousands)
$ 4,274
5,644
—
2,483
94
815
21
_________
$13,331
_________
_________
$ 4,736
5,584
159
2,731
44
1,467
59
_________
$14,780
_________
_________
We provide for loan losses based on the consistent application of our documented allowance for loan loss
methodology. Loan losses are charged to the allowance for loans losses and recoveries are credited to it. Additions to the
allowance for loan losses are provided by charges against income based on various factors which, in our judgment, deserve
current recognition in estimating probable losses inherent in the portfolio. We regularly review the loan portfolio and make
adjustments as necessary in order to maintain the allowance for loan losses in accordance with U.S. GAAP. The allowance for
loan losses consists primarily of the following two components:
(1)
Specific allowances are established for impaired loans excluding PCI loans (generally defined by the
Company as non-accrual loans with an outstanding balance of $500,000 or greater and all loans restructured
in troubled debt restructurings). The amount of impairment, if any, provided for as a specific reserve
determined by the deficiency, if any, between the present value of expected future cash flows discounted at
the original loan’s effective interest rate or the underlying collateral value (less estimated costs to sell) if the
loan is collateral dependent, and the carrying value of the loan. Impaired loans that have no impairment
losses are not considered for general allowances described below. Generally, the Company charges down a
loan to the estimated fair value of the underlying collateral, less costs to sell for collateral dependent loans
and, if necessary, maintains a specific reserve in the allowance for loan losses related to cash flow
dependent impaired loans where the present value of the expected future cash flows, discounted at the loan’s
original contractual interest rate is less than the carrying value of the loan unless management determines
that such shortfall should be charged off.
14
(2) General allowances are established for loan losses on a portfolio basis for originated loans that do not meet
the definition of impaired. The portfolio is grouped into similar risk characteristics, primarily loan type,
loan-to-value, if collateral dependent, and internal credit risk ratings. We apply an estimated loss rate to
each loan group. The loss rates applied are based on our cumulative prior two year net loss experience
adjusted, as appropriate, for the environmental factors discussed below. This evaluation is inherently
subjective, as it requires material estimates that may be susceptible to significant revisions based upon
changes in economic and real estate market conditions. Actual loan losses may be significantly more than
the allowance for loan losses we have established, which could have a material negative effect on our
financial results. Within general allowances is an unallocated reserve established to recognize losses related
to the inherent subjective nature of the appraisal process and the internal credit risk rating process.
The adjustments to our loss experience are based on our evaluation of several environmental factors, including:
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
changes in local, regional, national, and international economic and business conditions and developments that
affect the collectability of our portfolio, including the condition of various market segments;
changes in the nature and volume of our portfolio and in the terms of our loans;
changes in the experience, ability, and depth of lending management and other relevant staff;
changes in the volume and severity of past due loans, the volume of non-accrual loans, and the volume and
severity of adversely classified or graded loans;
changes in the quality of our loan review system;
changes in the value of underlying collateral for collateral-dependent loans;
the existence and effect of any concentrations of credit, and changes in the level of such concentrations; and
the effect of other external factors such as competition and legal and regulatory requirements on the level of
estimated credit losses in our existing portfolio.
In evaluating the estimated loss factors to be utilized for each loan group, management also reviews actual loss history
over an extended period of time as reported by the Federal Deposit Insurance Corporation for institutions both nationally and
in our market area for periods that are believed to have been under similar economic conditions.
We evaluate the allowance for loan losses based on the combined total of the impaired and general components.
Generally when the loan portfolio increases, absent other factors, our allowance for loan loss methodology results in a higher
dollar amount of estimated probable losses. Conversely, when the loan portfolio decreases, absent other factors, our allowance
for loan loss methodology results in a lower dollar amount of estimated probable losses.
We also maintain an unallocated component related to the general loss allocation. Management does not target a
specific unallocated percentage of the total general allocation, or total allowance for loan losses. The primary purpose of the
unallocated component is to account for the inherent imprecision of the loss estimation process related primarily to periodic
updating of appraisals on impaired loans, as well as periodic updating of commercial loan credit risk ratings by loan officers
and our internal credit audit process. Adjustments to the provision for loans due to the receipt of updated appraisals is
mitigated by management’s quarterly review of real estate market index changes, and reviews of property valuation trends
noted in current appraisals being received on other impaired and unimpaired loans. These changes in indicators of value are
applied to impaired loans that are awaiting updated appraisals.
Each quarter we evaluate the allowance for loan losses and adjust the allowance as appropriate through a provision or
recovery for loan losses. While we use the best information available to make evaluations, future adjustments to the allowance
may be necessary if conditions differ substantially from the information used in making the evaluations. In addition, as an
integral part of their examination process, the Office of the Comptroller of the Currency will periodically review the
allowance for loan losses. The Office of the Comptroller of the Currency may require us to adjust the allowance based on
their analysis of information available to them at the time of their examination. Our last completed Safety and Soundness
regulatory examination was as of September 30, 2013.
15
The following table sets forth activity in our allowance for loan losses for the years indicated.
Balance at beginning of year . . . . . . . . . . . . . . . . . . . $
At or For the Years Ended December 31,
________________________________________________________________________
__________
__________
__________
__________
__________
2010
2009
2011
2012
2013
(Dollars in thousands)
$
$
15,414
21,819
__________
__________
$
26,836
__________
$
8,778
__________
26,424
__________
Charge-offs:
Commercial real estate . . . . . . . . . . . . . . . . . . . . . .
One- to four-family residential . . . . . . . . . . . . . . .
Construction and land . . . . . . . . . . . . . . . . . . . . . .
Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance premium finance loans . . . . . . . . . . . . .
Commercial and industrial . . . . . . . . . . . . . . . . . . .
Home equity and lines of credit . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total charge-offs . . . . . . . . . . . . . . . . . . . . . . . . .
(1,208)
(414)
—
(657)
—
(379)
(491)
(25)
__________
(3,174)
Recoveries:
Commercial real estate . . . . . . . . . . . . . . . . . . . . . .
Construction and land . . . . . . . . . . . . . . . . . . . . . .
Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial and industrial . . . . . . . . . . . . . . . . . . .
Insurance premium finance loans . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net (charge-offs) recoveries . . . . . . . . . . . . . . . . . .
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . .
Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . $
Ratios:
1
567
18
201
—
73
__________
860
__________
(2,314)
1,927
__________
26,037
__________
__________
(1,828)
(1,300)
(43)
(729)
(198)
(90)
(2)
(3)
__________
(4,193)
107
—
9
86
18
25
__________
245
__________
(3,948)
3,536
__________
$
26,424
__________
__________
(5,398)
(101)
(693)
(718)
(70)
(638)
(62)
—
__________
(7,680)
55
—
—
23
30
—
__________
108
__________
(7,572)
12,589
__________
$
26,836
__________
__________
(987)
—
(443)
(2,132)
(101)
(36)
—
—
__________
(3,699)
—
—
—
—
20
—
__________
20
__________
(3,679)
10,084
__________
$
21,819
__________
__________
(1,348)
(63)
(686)
(164)
—
(141)
—
—
__________
(2,402)
—
—
—
—
—
—
__________
—
__________
(2,402)
9,038
__________
$
15,414
__________
__________
Net charge-offs to average loans outstanding . . . .
Allowance for loan losses to non-performing
0.17%
0.36%
0.78%
0.47%
0.37%
loans held-for- investment at end of year . . . . .
150.23
87.73
66.40
35.83
36.86
Allowance for loan losses to originated loans
held-for- investment, net at end of year . . . . . . .
Allowance for loan losses to total loans
held-for- investment at end of year . . . . . . . . . .
1.93
1.75
2.48
2.13
2.72
2.50
2.64
2.64
2.11
2.11
At December 31, 2013 and 2012, the allowance for loan losses related to PCI loans was $588,000 and $236,000,
respectively. Loans held-for-sale are excluded from the allowance for loan losses coverage ratios in the table above.
Allocation of Allowance for Loan Losses. The following tables set forth the allowance for loan losses allocated by loan
category and the percent of loans in each category to total loans at the dates indicated. The allowance for loan losses allocated
to each category is not necessarily indicative of future losses in any particular category and does not restrict the use of the
allowance to absorb losses in other categories.
16
At December 31,
2013
_______________________________
Percent of Loans
in Each
Category to
_____________
Total Loans
Allowance for
___________
Loan Losses
2012
_______________________________
Percent of Loans
in Each
Category to
_____________
Total Loans
Allowance for
__________
Loan Losses
2011
________________________________
Percent of
Loans in Each
Allowance for Category to
____________
__________
Total Loans
Loan Losses
(Dollars in thousands)
Real estate loans:
Commercial . . . . . . . . . . . . . . . . . $
One-to-four family residential . . .
Construction and land . . . . . . . . . .
Multifamily . . . . . . . . . . . . . . . . . .
Home equity and lines of credit . .
Commercial and industrial . . . . . . . .
Insurance premium loans . . . . . . . . .
Purchase credit-impaired (PCI) . . . .
Loans Acquired . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . .
Total allocated allowance . . . . . . .
12,619
875
205
9,374
860
425
—
588
—
67
___________
25,013
Unallocated . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . $
1,024
___________
26,037
___________
___________
22.89% $
25.43% $
4.36
0.95
58.61
3.11
0.68
—
4.00
—
5.39
_____________
100.00%
_____________
_____________
14,480
623
994
7,086
623
1,160
3
236
—
18
__________
25,223
5.22
1.87
49.18
2.71
1.19
—
6.07
—
8.33
_____________
100.00%
_____________
_____________
15,180
967
1,189
6,772
418
975
186
—
—
40
__________
25,727
30.48%
6.77
2.19
42.72
2.76
1.18
5.51
8.25
—
0.14
____________
100.00%
____________
____________
1,201
__________
$
26,424
__________
__________
1,109
__________
$
26,836
__________
__________
At December 31,
2010
_______________________________
Percent of Loans
in Each
Category to
_____________
Total Loans
Allowance for
___________
Loan Losses
2009
_______________________________
Percent of Loans
in Each
Category to
_____________
Total Loans
Allowance for
__________
Loan Losses
(Dollars in thousands)
Real estate loans:
Commercial . . . . . . . . . . . . . . . . . $
One-to-four family residential . . .
Construction and land . . . . . . . . . .
Multifamily . . . . . . . . . . . . . . . . . .
Home equity and lines of credit . .
Commercial and industrial . . . . . . . .
Insurance premium finance loans . . .
Purchase credit-impaired (PCI) . . . .
Loans Acquired . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . .
Total allocated allowance . . . . . . .
Unallocated . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . $
12,654
570
1,855
5,137
242
719
—
111
—
28
___________
21,316
503
___________
21,819
___________
___________
Investments
41.04% $
9.44
4.24
34.30
3.40
2.06
—
5.39
—
0.13
_____________
100.00%
_____________
_____________
8,403
163
2,409
1,866
210
1,877
101
—
—
34
__________
15,063
351
__________
$
15,414
__________
__________
44.99%
12.48
6.11
24.48
3.58
2.64
5.54
—
—
0.18
_____________
100.00%
_____________
_____________
We conduct securities portfolio transactions in accordance with our board approved investment policy which is
reviewed at least annually by the risk committee of the board of directors. Any changes to the policy are subject to ratification
by the full board of directors. This policy dictates that investment decisions give consideration to the safety of the investment,
liquidity requirements, potential returns, the ability to provide collateral for pledging requirements, and consistency with our
interest rate risk management strategy. Our Chief Investment Officer executes our securities portfolio transactions, within
policy requirements, with the approval of either the Chief Executive Officer or the President. NSB Services Corp.’s and NSB
Realty Trust’s investment officers execute security portfolio transactions in accordance with investment policies that
substantially mirror Northfield Bank’s investment policy. All purchase and sale transactions are reviewed by the risk
committee at least quarterly.
17
Our current investment policy permits investments in mortgage-backed securities, including pass-through securities
and real estate mortgage investment conduits (REMICs). The investment policy also permits, with certain limitations,
investments in debt securities issued by the U.S. Government, agencies of the U.S. Government or U.S. Government-
sponsored enterprises (GSEs), asset-backed securities, money market mutual funds, federal funds, investment grade corporate
bonds, reverse repurchase agreements, and certificates of deposit.
Northfield Bank’s investment policy does not permit investment in preferred and common stock of other entities
including U.S. Government sponsored enterprises, other than our required investment in the common stock of the Federal
Home Loan Bank of New York or as permitted for community reinvestment purposes or for the purposes of funding the
Bank’s deferred compensation plan. Northfield Bancorp, Inc. may invest in equity securities of other financial institutions up
to certain limitations. As of December 31, 2013, we held no asset-backed securities other than mortgage-backed securities.
Our board of directors may change these limitations in the future.
Our current investment policy does not permit hedging through the use of such instruments as financial futures or
interest rate options and swaps.
At the time of purchase, we designate a security as either held-to-maturity, available-for-sale, or trading, based upon
our ability and intent to hold such securities. Trading securities and securities available-for-sale are reported at estimated fair
value, and securities held-to-maturity are reported at amortized cost. A periodic review and evaluation of the available-for-sale
and held-to-maturity securities portfolios is conducted to determine if the estimated fair value of any security has declined
below its carrying value and whether such impairment is other-than-temporary. If such impairment is deemed to be other-
than-temporary, the security is written down to a new cost basis and the resulting loss is charged against earnings. The
estimated fair values of our securities are obtained from an independent nationally recognized pricing service (see
“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies” for
further discussion). At December 31, 2013, our investment portfolio consisted primarily of mortgage-backed securities
guaranteed by GSEs and to a lesser extent private label mortgage-backed securities, mutual funds and corporate debt
securities. The market for these securities primarily consists of other financial institutions, insurance companies, real estate
investment trusts, and mutual funds.
We purchase mortgage-backed securities insured or guaranteed primarily by the Federal National Mortgage
Association (“Fannie Mae”), the Federal Home Loan Mortgage Corporation (“Freddie Mac”), or the Government National
Mortgage Association (“Ginnie Mae”), and to a lesser extent, securities issued by private companies (private label). We invest
in mortgage-backed securities to achieve positive interest rate spreads with minimal administrative expense, and to lower our
credit risk as a result of the guarantees provided by Fannie Mae, Freddie Mac, or Ginnie Mae as well as to provide us
liquidity to fund loan originations and deposit outflows. In September 2008, the Federal Housing Finance Agency placed
Freddie Mac and Fannie Mae into conservatorship. The U.S. Treasury Department has established financing agreements to
ensure that Freddie Mac and Fannie Mae meet their obligations to holders of mortgage-backed securities that they have issued
or guaranteed.
Mortgage-backed securities are securities sold in the secondary market that are collateralized by pools of mortgages.
Certain types of mortgage-backed securities are commonly referred to as “pass-through” certificates because the principal and
interest of the underlying loans is “passed through” pro rata to investors, net of certain costs, including servicing and
guarantee fees, in proportion to an investor’s ownership in the entire pool. The issuers of such securities, pool mortgages and
resell the participation interests in the form of securities to investors. The interest rate on the security is lower than the interest
rates on the underlying loans to allow for payment of servicing and guaranty fees. Ginnie Mae, a U.S. Government agency,
and GSEs, such as Fannie Mae and Freddie Mac, may guarantee the payments, or guarantee the timely payment of principal
and interest to investors.
Mortgage-backed securities are more liquid than individual mortgage loans since there is a more active market for
such securities. In addition, mortgage-backed securities may be used to collateralize our specific liabilities and obligations.
Investments in mortgage-backed securities issued or guaranteed by GSEs involve a risk that actual payments will be greater or
less than estimated at the time of purchase, which may require adjustments to the amortization of any premium or accretion of
any discount relating to such interests, thereby affecting the net yield on our securities. We periodically review current
prepayment speeds to determine whether prepayment estimates require modification that could cause adjustment of
amortization or accretion.
REMICs are a type of mortgage-backed security issued by special-purpose entities that aggregate pools of mortgages
and mortgage-backed securities and create different classes of securities with varying maturities and amortization schedules,
18
as well as a residual interest, with each class possessing different risk characteristics. The cash flows from the underlying
collateral are generally divided into “tranches” or classes that have descending priorities with respect to the distribution of
principal and interest cash flows.
The timely payment of principal and interest on these REMICs is generally supported (credit enhanced) in varying
degrees by either insurance issued by a financial guarantee insurer, letters of credit, over collateralization, or subordination
techniques. Substantially all of these securities are rated “AAA” by Standard & Poor’s or Moody’s at the time of purchase.
Privately issued REMICs and pass-throughs can be subject to certain credit-related risks normally not associated with U.S.
Government agency and GSE mortgage-backed securities. The loss protection generally provided by the various forms of
credit enhancements is limited, and losses in excess of certain levels are not protected. Furthermore, the credit enhancement
itself is subject to the creditworthiness of the credit enhancer. Thus, in the event a credit enhancer does not fulfill its
obligations, the holder could be subject to risk of loss similar to a purchaser of a whole loan pool. Management believes that
the credit enhancements are adequate to protect us from material losses on our private label mortgage-backed securities
investments.
At December 31, 2013, our corporate bond portfolio consisted of investment-grade securities with remaining
maturities generally shorter than three years. Our investment policy provides that we may invest up to 15% of our tier-one
risk-based capital in corporate bonds from individual issuers which, at the time of purchase, are within the three highest
investment-grade ratings from Standard & Poor’s or Moody’s. The maturity of these bonds may not exceed 10 years, and
there is no aggregate limit for this security type. Corporate bonds from individual issuers with investment-grade ratings, at the
time of purchase, below the top three ratings are limited to the lesser of 1% of our total assets or 15% of our tier-one risk-
based capital, and must have a maturity of less than one year. Aggregate holdings of this security type cannot exceed 5% of
our total assets. Additionally, at the time of purchase, management performs due diligence to conclude that the security meets
the regulatory standard for investment-grade. Bonds that subsequently experience a decline in credit rating below investment
grade are monitored at least quarterly.
The following table sets forth the amortized cost and estimated fair value of our available-for-sale and held-to-maturity
securities portfolios (excluding Federal Home Loan Bank of New York common stock) at the dates indicated. As of December
31, 2013, 2012, and 2011, we also had a trading portfolio with a market value of $6.0 million, $4.7 million, and $4.1 million,
respectively, consisting of mutual funds quoted in actively traded markets. These securities are utilized to fund non-qualified
deferred compensation obligations.
At December 31,
_______________________________ _______________________________ ____________________________________
Estimated Fair
Value
______________
Estimated Fair
Amortized Cost
Value
______________ ______________
Estimated Fair
Value
______________
Amortized Cost
______________
Amortized Cost
______________
2011
2013
2012
(In thousands)
366,884
—
$
370,344
—
$
456,441 $
—
479,338
—
$
490,184 $
8,770
514,893
7,515
Securities available-for-sale:
Mortgage-backed securities:
Pass-through certificates:
GSEs . . . . . . . . . . . . . . . . . . . . . . $
Non-GSEs . . . . . . . . . . . . . . . . .
REMICs:
GSEs . . . . . . . . . . . . . . . . . . . . . .
Non-GSEs . . . . . . . . . . . . . . . . .
Equity investments(1) . . . . . . . . . . .
Corporate bonds . . . . . . . . . . . . . . .
Total securities available-for-sale . . $
(1) Mutual funds
497,575
4,474
510
76,491
______________
945,934
______________
______________
694,087
701,117
7,543
7,776
12,998
12,998
73,708
74,402
______________
$ 1,244,777 $ 1,275,631
______________
______________
426,362
31,114
11,787
100,922
______________ ______________
430,889
32,936
11,835
100,657
______________
$ 1,069,139 $ 1,098,725
______________
______________
______________ ______________
______________ ______________
485,227
4,552
510
76,452
______________
$
937,085
______________
______________
19
The following table sets forth the amortized cost and estimated fair value of securities as of December 31, 2013, that
exceeded 10% of our stockholders’ equity as of that date.
At December 31, 2013
Amortized
Cost
_________________
Estimated
Fair Value
________________
(in thousands)
Mortgage-backed securities:
Freddie Mac . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$423,262
$424,234
$417,728
$421,366
Portfolio Maturities and Yields. The composition and maturities of the investment securities portfolio at December 31,
2013, are summarized in the following table. Maturities are based on the final contractual payment dates, and do not reflect
the effect of scheduled principal repayments, prepayments, or early redemptions that may occur. All of our securities at
December 31, 2013, were taxable securities.
More than One Year More than Five Years
through Five Years
Weighted
One Year or Less
__________________ __________________ __________________ __________________ ____________________________
Weighted
Weighted
Amortized Average Amortized Average Amortized Average Amortized Average Amortized
Average
Yield
Yield
Cost
_________ _________ __________ __________ __________ __________ __________ __________ ____________ ____________ ____________
(Dollars in thousands)
through Ten Years More than Ten Years
Weighted
Fair
Value
Weighted
Yield
Yield
Yield
Total
Cost
Cost
Cost
Cost
Securities available-
for-sale:
Mortgage-backed
securities:
Pass-through
certificates:
GSEs . . . . . . . . . . . . . $
REMICs:
GSEs . . . . . . . . . . . . .
Non-GSEs . . . . . . . . .
Equity investments . . . . .
Corporate bonds . . . . . . .
— 0.00% $ 18,591
4.27% $ 141,574
3.07% $ 206,719
2.57% $ 366,884 $ 370,344
2.85%
— 0.00%
— 0.00%
510
0.01%
— 0.00%
2,992
4,007
1.51%
3.92%
— 0.00%
0.82%
76,491
__________
83,530
2.02%
— 0.00%
— 0.00%
— 0.00%
411,053
467
1.71%
0.57%
— 0.00%
— 0.00%
__________
485,227
4,552
510
76,452
__________ __________
497,575
4,474
510
76,491
1.76%
3.57%
0.01%
0.82%
__________
__________
Total securities
available-for-sale . . . . $
510
__________
__________
Sources of Funds
0.01% $ 102,081
__________
__________
1.59% $ 225,104
__________
__________
2.68% $ 618,239
__________
__________
2.00% $ 945,934 $ 937,085
__________ __________
__________ __________
2.11%
General. Deposits traditionally have been our primary source of funds for our securities and lending activities. We also
borrow from the Federal Home Loan Bank of New York and other financial institutions to supplement cash flow needs, to
manage the maturities of liabilities for interest rate and investment risk management purposes, and to manage our cost of
funds. Our additional sources of funds are the proceeds of loan sales, scheduled loan and investment payments, maturing
investments, loan prepayments, brokered deposits, and retained income on other earning assets.
Deposits. We accept deposits primarily from the areas in which our offices are located. We rely on our convenient
locations, customer service, and competitive products and pricing to attract and retain deposits. We offer a variety of deposit
accounts with a range of interest rates and terms. Our deposit accounts consist of transaction accounts (NOW and non-interest
bearing checking accounts), savings accounts (money market, passbook, and statement savings), and certificates of deposit,
including individual retirement accounts. We accept brokered deposits when it is deemed cost effective. At December 31,
2013 and 2012, we had brokered deposits totaling $695,000 and $664,000, respectively.
Interest rates offered generally are established weekly, while maturity terms, service fees, and withdrawal penalties are
reviewed on a periodic basis. Deposit rates and terms are based primarily on current operating strategies, market interest rates,
and liquidity requirements.
At December 31, 2013, we had a total of $307.9 million in certificates of deposit, of which $215.7 million had
remaining maturities of one year or less.
20
The following tables set forth the distribution of our average total deposit accounts, by account type, for the periods
indicated.
Non-interest bearing
For the Year Ended December 31,
2012
__________________________________ __________________________________ __________________________________
2011
2013
Average
Balance
Percent
Weighted
Average
Rate
Average
Balance
Weighted
Average
Rate
Average
Balance
Percent
Weighted
Average
Rate
Percent
(Dollars in thousands)
demand . . . . . . . . . . . . $ 222,832
114,702
471,220
396,903
370,351
NOW . . . . . . . . . . . . . . . .
Money market accounts . .
Savings . . . . . . . . . . . . . .
Certificates of deposit . . .
Total deposits . . . . . . . $1,576,008
14.14%
7.28
29.90
25.18
23.50
0.00% $ 173,854
97,224
0.39
438,151
0.32
381,835
0.17
480,194
1.04
11.06%
6.19
27.89
24.30
30.56
0.00% $ 131,224
80,487
0.65
352,111
0.59
308,532
0.24
566,619
1.17
9.12%
5.59
24.47
21.44
39.38
_________ _________
100.00%
_________ _________
_________ _________
0.41% $1,571,258
_________ _________
100.00%
_________ _________
_________ _________
0.63% $1,438,973
_________ _________
100.00%
_________ _________
_________ _________
0.00%
1.00
0.80
0.33
1.34
0.85%
As of December 31, 2013, the aggregate amount of our outstanding certificates of deposit in amounts greater than or
equal to $100,000 was $135.7 million. The following table sets forth the maturity of these certificates at December 31, 2013.
Three months or less . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Over three months through six months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Over six months through one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Over one year to three years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Over three years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
At December 31,
___________
2013
(In thousands)
25,194
$
24,961
38,216
45,167
2,189
___________
135,727
$
___________
___________
Borrowings. Our borrowings consist primarily of securities sold under agreements to repurchase (repurchase
agreements) with third-party financial institutions, as well as advances from the Federal Home Loan Bank of New York and
the Federal Reserve Bank. As of December 31, 2013, our repurchase agreements totaled $181.0 million, or 9.1% of total
liabilities, capitalized lease obligations totaled $1.2 million, or 0.06% of total liabilities, floating rate advances totaled
$2.5 million, or 0.12% of total liabilities, and our Federal Home Loan Bank advances totaled $285.7 million, or 7.8% of total
liabilities. At December 31, 2013, the Company had the ability to obtain additional funding from the Federal Home Loan
Bank of New York (the “FHLB”) and Federal Reserve Bank discount window of approximately $797.3 million, utilizing
unencumbered securities of $537.4 million and multifamily loans of $343.0 million. Repurchase agreements are primarily
secured by mortgage-backed securities. Advances from the Federal Home Loan Bank of New York are secured by our
investment in the common stock of the Federal Home Loan Bank of New York as well as by pledged mortgage-backed
securities.
The following table sets forth information concerning balances and interest rates on our borrowings at and for the
years indicated:
Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average balance during year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maximum outstanding at any month end . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average interest rate at end of year . . . . . . . . . . . . . . . . . . . . . . .
Average interest rate during year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employees
At or For the Years Ended December 31,
2013
____________
$ 470,325
$ 429,332
$ 492,181
2012
____________
(Dollars in thousands)
$ 419,122
$ 484,687
$ 523,768
2011
____________
$ 481,934
$ 476,413
$ 535,447
2.08%
2.43%
2.58%
2.64%
2.64%
2.76%
As of December 31, 2013, we had 287 full-time employees and 39 part-time employees. Our employees are not
represented by any collective bargaining group. Management believes that we have a good working relationship with our
employees.
21
Subsidiary Activities
Northfield-Bancorp, Inc. owns 100% of Northfield Investments, Inc., an inactive New Jersey investment company, and
100% of Northfield Bank. Northfield Bank owns 100% of NSB Services Corp., a Delaware corporation, which in turn owns
100% of the voting common stock of NSB Realty Trust. NSB Realty Trust is a Maryland real estate investment trust that
holds mortgage loans, mortgage-backed securities and other investments. These entities enable us to segregate certain assets
for management purposes, and promote our ability to raise regulatory capital in the future through the sale of preferred stock
or other capital-enhancing securities or borrow against assets or stock of these entities for liquidity purposes. At December 31,
2013, Northfield Bank’s investment in NSB Services Corp. was $637.7 million, and NSB Services Corp. had assets of $637.8
million and liabilities of $106,000 at that date. At December 31, 2013, NSB Services Corp.’s investment in NSB Realty Trust
was $643.3 million, and NSB Realty Trust had $643.4 million in assets, and liabilities of $14,000 at that date. NSB Insurance
Agency, Inc. is a New York corporation that receives nominal commissions from the sale of life insurance by employees of
Northfield Bank. At December 31, 2013, Northfield Bank’s investment in NSB Insurance Agency was approximately $1,000.
Legal Proceedings
In the normal course of business, we may be party to various outstanding legal proceedings and claims. In the opinion
of management, the consolidated financial statements will not be materially affected by the outcome of such legal proceedings
and claims as of December 31, 2013.
Expense and Tax Allocation Agreements
Northfield Bank entered into an agreement with Northfield-Bancorp, Inc. to provide it with certain administrative
support services, whereby Northfield Bank will be compensated at not less than the fair market value of the services provided.
In addition, Northfield Bank and Northfield Bancorp, Inc. entered into an agreement to establish a method for allocating and
for reimbursing the payment of their consolidated tax liability.
Properties
We operate from our corporate office located at 581 Main Street, Woodbridge, New Jersey and our additional 29
branch offices located in New York and New Jersey, and our commercial loan center in Brooklyn, NY. Our branch offices are
located in the New York counties of Richmond, and Kings and the New Jersey counties of Middlesex and Union. The net
book value of our premises, land, and equipment was $29.1 million at December 31, 2013.
SUPERVISION AND REGULATION
General
Northfield Bank is a federally chartered savings bank that is regulated, examined and supervised by the Office of the
Comptroller of the Currency and the Federal Deposit Insurance Corporation. This regulation and supervision establishes a
comprehensive framework of activities in which an institution may engage and is intended primarily for the protection of the
Federal Deposit Insurance Corporation’s deposit insurance fund and depositors, and not for the protection of security holders.
Under this system of federal regulation, financial institutions are periodically examined to ensure that they satisfy applicable
standards with respect to their capital adequacy, assets, management, earnings, liquidity and sensitivity to market interest
rates. Northfield Bank also is regulated to a lesser extent by the Federal Reserve Board, governing reserves to be maintained
against deposits and other matters, including payments of dividends and the repurchase of shares of common stock. The
Office of the Comptroller of the Currency examines Northfield Bank and prepares reports for the consideration of its board of
directors on any operating deficiencies. Northfield Bank’s relationship with its depositors and borrowers also is regulated to a
great extent by federal law and, to a much lesser extent, state law, especially in matters concerning the ownership of deposit
accounts and the form and content of Northfield Bank’s loan documents. Northfield Bank is also a member of and owns stock
in the Federal Home Loan Bank of New York, which is one of the twelve regional banks in the Federal Home Loan Bank
System.
As a savings and loan holding company, Northfield Bancorp, Inc. is required to comply with the rules and regulations
of the Federal Reserve Board. It is required to file certain reports with and is subject to examination by and the enforcement
authority of the Federal Reserve Board. Northfield Bancorp, Inc. is also subject to the rules and regulations of the Securities
and Exchange Commission under the federal securities laws.
22
Any change in applicable laws or regulations, whether by the Federal Deposit Insurance Corporation, the Office of the
Comptroller of the Currency, the Federal Reserve Board, or Congress, could have a material adverse effect on Northfield
Bancorp, Inc. and Northfield Bank and their operations.
Set forth below is a brief description of material regulatory requirements that are or will be applicable to Northfield
Bank and Northfield Bancorp, Inc. The description is limited to certain material aspects of the statutes and regulations
addressed and is not intended to be a complete description of such statutes and regulations and their effects on Northfield
Bank and Northfield Bancorp, Inc.
The Dodd-Frank Act
The Dodd-Frank Act significantly changed the bank regulatory structure and has affected the lending, investment,
trading and operating activities of depository institutions and their holding companies. The Dodd-Frank Act eliminated our
primary federal regulator, the Office of Thrift Supervision, as of July 21, 2011, and required Northfield Bank to be supervised
and examined by the Office of the Comptroller of the Currency, the primary federal regulator for national banks. On the same
date, the Federal Reserve Board assumed regulatory jurisdiction over savings and loan holding companies, in addition to its
role of supervising bank holding companies.
The Dodd-Frank Act also created a new Consumer Financial Protection Bureau with expansive powers to supervise
and enforce consumer protection laws. The Consumer Financial Protection Bureau has broad rule-making authority for a wide
range of consumer protection laws that apply to all banks and savings institutions, including the authority to prohibit “unfair,
deceptive or abusive” acts and practices. The Consumer Financial Protection Bureau has examination and enforcement
authority over all banks and savings institutions with more than $10 billion in assets. Banks and savings institutions with $10
billion or less in assets, such as Northfield Bank, will continue to be examined by their applicable federal bank regulators. The
legislation gives state attorneys general the ability to enforce applicable federal consumer protection laws.
The Dodd-Frank Act also broadened the base for Federal Deposit Insurance Corporation assessments for deposit
insurance, permanently increased the maximum amount of deposit insurance to $250,000 per depositor. The legislation also,
among other things, requires originators of certain securitized loans to retain a portion of the credit risk, stipulates regulatory
rate-setting for certain debit card interchange fees, repealed restrictions on the payment of interest on commercial demand
deposits and contains a number of reforms related to mortgage originations. The Dodd-Frank Act increased shareholder
influence over boards of directors by requiring companies to give shareholders a non-binding vote on executive compensation
and so-called “golden parachute” payments. The legislation also directs the Federal Reserve Board to promulgate rules
prohibiting excessive compensation paid to company executives, regardless of whether the company is publicly traded or not.
Many of the provisions of the Dodd-Frank Act are subject to delayed effective dates and/or require the issuance of
implementing regulations. Their effect on operations cannot yet be assessed fully. However, there is a significant possibility
that the Dodd-Frank Act will, in the long run, increase regulatory burden, compliance costs and interest expense for Northfield
Bank and Northfield Bancorp, Inc.
Business Activities
A federal savings bank derives its lending and investment powers from the Home Owners’ Loan Act, as amended, and
the regulations of the Office of the Comptroller of the Currency. Under these laws and regulations, Northfield Bank may
originate mortgage loans secured by residential and commercial real estate, commercial business loans and consumer loans,
and it may invest in certain types of debt securities and certain other assets. Certain types of lending, such as commercial and
consumer loans, are subject to aggregate limits calculated as a specified percentage of Northfield Bank’s capital or assets.
Northfield Bank also may establish subsidiaries that may engage in a variety of activities, including some that are not
otherwise permissible for Northfield Bank, including real estate investment and securities and insurance brokerage.
The Dodd-Frank Act removed federal statutory restrictions on the payment of interest on commercial demand deposit
accounts, effective July 21, 2011.
Loans-to-One-Borrower
We generally may not make a loan or extend credit to a single or related group of borrowers in excess of 15% of
Northfield Bank’s unimpaired capital and unimpaired surplus. An additional amount may be lent, equal to 10% of unimpaired
capital and unimpaired surplus, if the loan is secured by readily marketable collateral, which is defined to include certain
23
financial instruments and bullion, but generally does not include real estate. As of December 31, 2013, we were in compliance
with our loans-to-one-borrower limitations.
Qualified Thrift Lender Test
Northfield Bank is required to satisfy a qualified thrift lender (“QTL”) test, under which we either must qualify as a
“domestic building and loan” association as defined by the Internal Revenue Code or maintain at least 65% of our “portfolio
assets” in “qualified thrift investments.” “Qualified thrift investments” consist primarily of residential mortgages and related
investments, including mortgage-backed and related securities. “Portfolio assets” generally mean total assets less specified
liquid assets up to 20% of total assets, goodwill and other intangible assets and the value of property used to conduct
business. A savings institution that fails the qualified thrift lender test must operate under specified restrictions. The Dodd-
Frank Act made noncompliance with the QTL test also subject to agency enforcement action for a violation of law. As of
December 31, 2013, we maintained 81.6% of our portfolio assets in qualified thrift investments and, therefore, we met the
qualified thrift lender test.
Standards for Safety and Soundness
Federal law requires each federal banking agency to prescribe for insured depository institutions under its jurisdiction
standards relating to, among other things, internal controls, information systems and internal audit systems, loan
documentation, credit underwriting, interest rate risk exposure, asset growth, employee compensation, and other operational
and managerial standards as the agency deems appropriate. The federal banking agencies adopted Interagency Guidelines
Prescribing Standards for Safety and Soundness to implement the safety and soundness standards required under federal law.
The guidelines set forth the safety and soundness standards that the federal banking agencies use to identify and address
problems at insured depository institutions before capital becomes impaired. If the appropriate federal banking agency
determines that an institution fails to meet any standard prescribed by the guidelines, the agency may require the institution to
submit to the agency an acceptable plan to achieve compliance with the standard. If an institution fails to submit or implement
an acceptable plan, the appropriate federal banking agency may issue an enforceable order requiring correction of the
deficiencies.
Capital Requirements
Federal regulations require savings institutions to meet three minimum capital standards: a 1.5% tangible capital ratio,
a 4% leverage ratio (3% for institutions receiving the highest rating on the CAMELS (capital adequacy, asset quality,
management capability, earnings, liquidity, and sensitivity to market risk) rating system and an 8% risk-based capital ratio. In
addition, the prompt corrective action standards discussed below also establish, in effect, a minimum 2% tangible capital
standard, a 4% leverage ratio (3% for institutions receiving the highest rating on the CAMELS financial institution rating
system) and, together with the risk-based capital standard itself, a 4% Tier 1 risk-based capital standard. Federal regulations
also require that in meeting the tangible, leverage and risk-based capital standards, institutions must generally deduct
investments in and loans to subsidiaries engaged in activities as principal that are not permissible for a national bank.
The risk-based capital standard for savings institutions requires the maintenance of Tier 1 (core) and total capital
(which is defined as core capital and supplementary capital) to risk-weighted assets of at least 4% and 8%, respectively. In
determining the amount of risk-weighted assets, all assets, including certain off-balance sheet assets, are multiplied by a risk-
weight factor of 0% to 100%, assigned by capital regulations based on the risks believed inherent in the type of asset. Core
capital is defined as common shareholders’ equity (including retained earnings), certain noncumulative perpetual preferred
stock and related surplus and minority interests in equity accounts of consolidated subsidiaries, less intangibles other than
certain mortgage servicing rights and credit card relationships. The components of supplementary capital currently include
cumulative preferred stock, long-term perpetual preferred stock, mandatory convertible securities, subordinated debt and
intermediate preferred stock, the allowance for loan and lease losses limited to a maximum of 1.25% of risk-weighted assets,
and up to 45% of unrealized gains on available-for-sale equity securities with readily determinable fair market values. Overall,
the amount of supplementary capital included as part of total capital cannot exceed 100% of core capital. Additionally, a
savings institution that retains credit risk in connection with an asset sale may be required to maintain additional regulatory
capital because of the recourse back to the savings bank. In assessing an institution’s capital adequacy, the Office of the
Comptroller of the Currency takes into consideration not only these numeric factors but also qualitative factors as well, and
has the authority to establish higher capital requirements for individual associations where necessary.
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In July 2013, the Office of the Comptroller of the Currency and the other federal bank regulatory agencies issued a
final rule that will revise their leverage and risk-based capital requirements and the method for calculating risk-weighted
assets to make them consistent with agreements that were reached by the Basel Committee on Banking Supervision and
certain provisions of the Dodd-Frank Act. Among other things, the rule establishes a new common equity Tier 1 minimum
capital requirement (4.5% of risk-weighted assets), increases the minimum Tier 1 capital to risk-based assets requirement
(from 4% to 6% of risk-weighted assets) and assigns a higher risk weight (150%) to exposures that are more than 90 days
past due or are on nonaccrual status and to certain commercial real estate facilities that finance the acquisition, development
or construction of real property. The final rule also requires unrealized gains and losses on certain “available-for-sale”
securities holdings to be included for purposes of calculating regulatory capital requirements unless a one-time opt-in or opt-
out is exercised. The rule limits a banking organization’s capital distributions and certain discretionary bonus payments to
executive officers if the banking organization does not hold a “capital conservation buffer” consisting of 2.5% of common
equity Tier 1 capital to risk-weighted assets in addition to the amount necessary to meet its minimum risk-based capital
requirements. The final rule also implements the Dodd-Frank Act’s directive to apply to savings and loan holding companies
consolidated capital requirements that are not less stringent than those applicable to their subsidiary institutions. The final rule
is effective January 1, 2015. The “capital conservation buffer” will be phased in from January 1, 2016 to January 1, 2019,
when the full capital conservation buffer will be effective.
At December 31, 2013, Northfield Bank met each of its capital requirements.
Prompt Corrective Regulatory Action
Under federal Prompt Corrective Action rules, the Office of the Comptroller of the Currency is required to take
supervisory actions against undercapitalized savings institutions under its jurisdiction, the severity of which depends upon the
institution’s level of capital. A savings institution that has total risk-based capital of less than 8% or a leverage ratio or a Tier
1 risk-based capital ratio that generally is less than 4% is considered to be undercapitalized. A savings institution that has total
risk-based capital less than 6%, a Tier 1 core risk-based capital ratio of less than 3% or a leverage ratio that is less than 3% is
considered to be “significantly undercapitalized.” A savings institution that has a tangible capital to assets ratio equal to or
less than 2% is deemed to be “critically undercapitalized.”
Generally, the Office of the Comptroller of the Currency is required to appoint a receiver or conservator for a savings
institution that is “critically undercapitalized” within specific time frames. The regulations also provide that a capital
restoration plan must be filed with the Office of the Comptroller of the Currency within 45 days of the date a savings
institution receives notice that it is “undercapitalized,” “significantly undercapitalized” or “critically undercapitalized.” Any
holding company for the savings institution required to submit a capital restoration plan must guarantee the lesser of an
amount equal to 5% of the savings institution’s assets at the time it was notified or deemed to be undercapitalized by the
Office of the Comptroller of the Currency, or the amount necessary to restore the savings institution to adequately capitalized
status. This guarantee remains in place until the Office of the Comptroller of the Currency notifies the savings institution that
it has maintained adequately capitalized status for each of four consecutive calendar quarters, and the Office of the
Comptroller of the Currency has the authority to require payment and collect payment under the guarantee. Various
restrictions, such as on capital distributions and growth, also apply to “undercapitalized” institutions. The Office of the
Comptroller of the Currency may also take any one of a number of discretionary supervisory actions against undercapitalized
institutions, including the issuance of a capital directive and the replacement of senior executive officers and directors.
In connection with the final capital rule described earlier, the federal banking agencies have adopted revisions,
effective January 1, 2015, to the prompt corrective action framework. Under the revised prompt corrective action
requirements, insured depository institutions would be required to meet the following in order to qualify as “well capitalized:”
(1) a common equity Tier 1 risk-based capital ratio of 6.5%; (2) a Tier 1 risk-based capital ratio of 8% (increased from 6%);
(3) a total risk-based capital ratio of 10% (unchanged from current rules) and (4) a Tier 1 leverage ratio of 5% (unchanged
from the current rules).
Capital Distributions
Federal regulations restrict capital distributions by savings institutions, which include cash dividends, stock
repurchases and other transactions charged to the capital account of a savings institution. A federal savings institution must
file an application with the Office of the Comptroller of the Currency for approval of the capital distribution if:
(cid:127)
the total capital distributions for the applicable calendar year exceeds the sum of the institution’s net income for that
year to date plus the institution’s retained net income for the preceding two years that is still available for dividend;
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(cid:127)
(cid:127)
(cid:127)
the institution would not be at least adequately capitalized following the distribution;
the distribution would violate any applicable statute, regulation, agreement or written regulatory condition; or
the institution is not eligible for expedited review of its filings (i.e., generally, institutions that do not have safety
and soundness, compliance and Community Reinvestment Act ratings in the top two categories or fail a capital
requirement).
A savings institution that is a subsidiary of a holding company, which is the case with Northfield Bank, must file a
notice with the Federal Reserve Board at least 30 days before the board of directors declares a dividend or approves a capital
distribution and receive Federal Reserve Board non-objection to the payment of the dividend.
Applications or notices may be denied if the institution will be undercapitalized after the dividend, the proposed
dividend raises safety and soundness concerns or the proposed dividend would violate a law, regulation enforcement order or
regulatory condition.
In the event that a savings institution’s capital falls below its regulatory requirements or it is notified by the regulatory
agency that it is in need of more than normal supervision, its ability to make capital distributions would be restricted. In
addition, any proposed capital distribution could be prohibited if the regulatory agency determines that the distribution would
constitute an unsafe or unsound practice.
Transactions with Related Parties
A savings institution’s authority to engage in transactions with related parties or “affiliates” is limited by Sections 23A
and 23B of the Federal Reserve Act and its implementing regulation, Federal Reserve Board Regulation W. The term
“affiliate” generally means any company that controls or is under common control with an institution, including Northfield
Bancorp, Inc. and its non-savings institution subsidiaries. Applicable law limits the aggregate amount of “covered”
transactions with any individual affiliate, including loans to the affiliate, to 10% of the capital and surplus of the savings
institution. The aggregate amount of covered transactions with all affiliates is limited to 20% of the savings institution’s
capital and surplus. Certain covered transactions with affiliates, such as loans to or guarantees issued on behalf of affiliates,
are required to be secured by specified amounts of collateral. Purchasing low quality assets from affiliates is generally
prohibited. Regulation W also provides that transactions with affiliates, including covered transactions, must be on terms and
under circumstances, including credit standards, that are substantially the same or at least as favorable to the institution as
those prevailing at the time for comparable transactions with non-affiliated companies. In addition, savings institutions are
prohibited by law from lending to any affiliate that is engaged in activities that are not permissible for bank holding
companies and no savings institution may purchase the securities of any affiliate other than a subsidiary.
Our authority to extend credit to executive officers, directors and 10% or greater shareholders (“insiders”), as well as
entities controlled by these persons, is governed by Sections 22(g) and 22(h) of the Federal Reserve Act and its implementing
regulation, Federal Reserve Board Regulation O. Among other things, loans to insiders must be made on terms substantially
the same as those offered to unaffiliated individuals and not involve more than the normal risk of repayment. There is an
exception for bank-wide lending programs that do not discriminate in favor of insiders. Regulation O also places individual
and aggregate limits on the amount of loans that may be made to insiders based, in part, on the institution’s capital position,
and requires that certain prior board approval procedures be followed. Extensions of credit to executive officers are subject to
additional restrictions on the types and amounts of loans that may be made. At December 31, 2013, we were in compliance
with these regulations.
Enforcement
The Office of the Comptroller of the Currency has primary enforcement responsibility over federal savings
institutions, including the authority to bring enforcement action against “institution-related parties,” including officers,
directors, certain shareholders, and attorneys, appraisers and accountants who knowingly or recklessly participate in wrongful
action likely to have an adverse effect on an insured institution. Formal enforcement action may range from the issuance of a
capital directive or cease and desist order to removal of officers and/or directors of the institution, receivership,
conservatorship or the termination of deposit insurance. Civil penalties cover a wide range of violations and actions, and
range up to $25,000 per day, unless a finding of reckless disregard is made, in which case penalties may be as high as $1
million per day.
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Deposit Insurance
Northfield Bank is a member of the Deposit Insurance Fund, which is administered by the Federal Deposit Insurance
Corporation. Deposit accounts in Northfield Bank are insured up to a maximum of $250,000 for each separately insured
depositor by the Federal Deposit Insurance Corporation.
The Federal Deposit Insurance Corporation imposes an assessment for deposit insurance on all depository institutions.
Under the Federal Deposit Insurance Corporation’s risk-based assessment system, insured institutions are assigned to risk
categories based on supervisory evaluations, regulatory capital levels and certain other factors. An institution’s assessment rate
depends upon the category to which it is assigned and certain adjustments specified by Federal Deposit Insurance Corporation
regulations, with less risky institutions paying lower rates. Assessment rates (inclusive of possible adjustments) currently
range from two and one half to 45 basis points of each institution’s total assets less tangible capital. The Federal Deposit
Insurance Corporation may increase or decrease the scale uniformly, except that no adjustment can deviate more than two
basis points from the base scale without notice and comment rulemaking. The Federal Deposit Insurance Corporation’s
current system represents a change, required by the Dodd-Frank Act, from its prior practice of basing the assessment on an
institution’s volume of deposits.
In addition to the Federal Deposit Insurance Corporation assessments, the Financing Corporation is authorized to
impose and collect, through the Federal Deposit Insurance Corporation, assessments for anticipated payments, issuance costs
and custodial fees on bonds issued by the Financing Corporation in the 1980s to recapitalize the former Federal Savings and
Loan Insurance Corporation. The bonds issued by the Financing Corporation are due to mature in 2017 through 2019. For the
quarter ended December 31, 2013, the annualized Financing Corporation assessment was equal to 0.62 basis points of total
quarterly average assets less quarterly average tangible capital.
The Dodd-Frank Act increased the minimum target ratio for the Deposit Insurance Fund from 1.15% of estimated
insured deposits to 1.35% of estimated insured deposits. The Federal Deposit Insurance Corporation must seek to achieve the
1.35% ratio by September 30, 2020. Insured institutions with assets of $10 billion or more are supposed to fund the increase.
The Dodd-Frank Act eliminated the 1.5% maximum fund ratio, instead leaving it to the discretion of the Federal Deposit
Insurance Corporation and the Federal Deposit Insurance Corporation has exercised that discretion by establishing a long-
term fund ratio of 2%.
The Federal Deposit Insurance Corporation has authority to increase insurance assessments. Any significant increases
would have an adverse effect on the operating expenses and results of operations of Northfield Bank. Management cannot
predict what assessment rates will be in the future.
Insurance of deposits may be terminated by the Federal Deposit Insurance Corporation upon a finding that an
institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has
violated any applicable law, regulation, rule, order or condition imposed by the FDIC. Management of Northfield Bank does
not know of any practice, condition or violation that may lead to termination of our deposit insurance.
Federal Home Loan Bank System
Northfield Bank is a member of the Federal Home Loan Bank System, which consists of 12 regional Federal Home
Loan Banks. The Federal Home Loan Bank System provides a central credit facility primarily for member institutions. As a
member of the Federal Home Loan Bank of New York, we are required to acquire and hold a specified amount of shares of
capital stock in Federal Home Loan Bank.
Community Reinvestment Act and Fair Lending Laws
Savings institutions have a responsibility under the Community Reinvestment Act and related regulations to help meet
the credit needs of their communities, including low- and moderate-income neighborhoods. An institution’s failure to comply
with the provisions of the Community Reinvestment Act could, at a minimum, result in regulatory restrictions on certain
activities such as branching and acquisitions. Northfield Bank received a “Satisfactory” Community Reinvestment Act rating
in its most recent examination.
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Other Regulations
Interest and other charges collected or contracted for by Northfield Bank are subject to state usury laws and federal
laws concerning interest rates. Northfield Bank’s operations are also subject to federal laws applicable to credit transactions,
such as the:
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers;
Real Estate Settlement Procedures Act, requiring that borrowers for mortgage loans for one-to-four family
residential real estate receive various disclosures, including good faith estimates of settlement costs, lender
servicing and escrow account practices, and prohibiting certain practices that increase the cost of settlement
services;
Home Mortgage Disclosure Act, requiring financial institutions to provide information to enable the public and
public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing
needs of the community it serves;
Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in
extending credit;
Fair Credit Reporting Act, governing the use and provision of information to credit reporting agencies;
Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection
agencies;
Truth in Savings Act; and
Rules and regulations of the various federal agencies charged with the responsibility of implementing such
federal laws.
The operations of Northfield Bank also are subject to the:
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records
and prescribes procedures for complying with administrative subpoenas of financial records;
Electronic Funds Transfer Act, which governs automatic deposits to and withdrawals from deposit accounts and
customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking
services;
Check Clearing for the 21st Century Act (also known as “Check 21”), which gives “substitute checks,” such as
digital check images and copies made from that image, the same legal standing as the original paper check;
The USA PATRIOT Act, which requires banks and savings institutions to, among other things, establish
broadened anti-money laundering compliance programs and due diligence policies and controls to ensure the
detection and reporting of money laundering. Such required compliance programs are intended to supplement
pre-existing compliance requirements that apply to financial institutions under the Bank Secrecy Act and the
Office of Foreign Assets Control regulations; and
The Gramm-Leach-Bliley Act, which places limitations on the sharing of consumer financial information by
financial institutions with unaffiliated third parties and requires all financial institutions offering products or
services to retail customers to provide such customers with the financial institution’s privacy policy and allow
such customers the opportunity to “opt out” of the sharing of certain personal financial information with
unaffiliated third parties.
Holding Company Regulation
Northfield Bancorp, Inc. is a unitary savings and loan holding company subject to regulation and supervision by the
Federal Reserve Board. The Federal Reserve Board has enforcement authority over Northfield Bancorp, Inc. and its non-
savings institution subsidiaries. Among other things, that authority permits the Federal Reserve Board to restrict or prohibit
activities that are determined to be a risk to Northfield Bank.
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As a savings and loan holding company, Northfield Bancorp, Inc. activities are limited to those activities permissible
by law for financial holding companies or multiple savings and loan holding companies. A financial holding company may
engage in activities that are financial in nature, incidental to financial activities or complementary to a financial activity. Such
activities include lending and other activities permitted for bank holding companies, insurance and underwriting equity
securities. The Dodd-Frank Act added that any savings and loan holding company that engages in activities that are solely
permissible for a financial holding company must meet the qualitative requirements for a bank holding company to be a
financial holding company and conduct the activities in accordance with the requirements that would apply to a financial
holding company’s conduct of the activity.
Federal law prohibits a savings and loan holding company, directly or indirectly, or through one or more subsidiaries,
from acquiring more than 5% of another savings institution or savings and loan holding company without prior written
approval of the Federal Reserve Board and from acquiring or retaining control of any depository not insured by the Federal
Deposit Insurance Corporation. In evaluating applications by holding companies to acquire savings institutions, the Federal
Reserve Board must consider such things as the financial and managerial resources and future prospects of the company and
institution involved, the effect of the acquisition on and the risk to the federal deposit insurance fund, the convenience and
needs of the community and competitive factors. An acquisition by a savings and loan holding company of a savings
institution in another state to be held as a separate subsidiary may not be approved unless it is a supervisory acquisition under
Section 13(k) of the Federal Deposit Insurance Act or the law of the state in which the target is located authorizes such
acquisitions by out-of-state companies.
Savings and loan holding companies have not historically been subjected to consolidated regulatory capital
requirements. However, the Dodd-Frank Act requires the Federal Reserve Board to set for all depository institution holding
companies minimum consolidated capital levels that are as stringent as those required for the insured depository subsidiaries.
The previously discussed final rule regarding regulatory capital requirements implements the Dodd-Frank Act as to savings
and loan holding companies. Consolidated regulatory capital requirements identical to those applicable to the subsidiary
depository institutions will apply to savings and loan holding companies as of January 1, 2015. As is the case with institutions
themselves, the capital conservation buffer will be phased in between 2016 and 2019. The Dodd-Frank Act extended the
“source of strength” doctrine to savings and loan holding companies. The Federal Reserve Board has issued regulations
implementing the “source of strength” policy that requires holding companies act as a source of strength to their subsidiary
depository institutions by providing capital, liquidity, and other support in times of financial stress.
The Federal Reserve Board has issued a policy statement regarding the payment of dividends and the repurchase of
shares of common stock by bank holding companies that it has made applicable to savings and loan holding companies as
well. In general, the policy provides that dividends should be paid only out of current earnings and only if the prospective rate
of earnings retention by the holding company appears consistent with the organization’s capital needs, asset quality and
overall financial condition. Regulatory guidance provides for prior regulatory review of capital distributions in certain
circumstances such as where the company’s net income for the past four quarters, net of dividends previously paid over that
period, is insufficient to fully fund the dividend or the company’s overall rate of earnings retention is inconsistent with the
company’s capital needs and overall financial condition. The ability of a holding company to pay dividends may be restricted
if a subsidiary bank becomes undercapitalized. The policy statement also provides for regulatory review prior to a holding
company redeeming or repurchasing regulatory capital instruments when the holding company is experiencing financial
weaknesses or redeeming or repurchasing common stock or perpetual preferred stock that would result in a net reduction as of
the end of a quarter in the amount of such equity instruments outstanding compared with the beginning of the quarter in
which the redemption or repurchase occurred. These regulatory policies could affect the ability of Northfield-Delaware to pay
dividends, repurchase shares of common stock or otherwise engage in capital distributions.
Federal Securities Laws
Northfield Bancorp, Inc.’s common stock is registered with the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended. Northfield Bancorp, Inc. is subject to the information, proxy solicitation,
insider trading restrictions, and other requirements under the Securities Exchange Act of 1934.
Sarbanes-Oxley Act of 2002
The Sarbanes-Oxley Act of 2002 addresses, among other issues, corporate governance, auditing and accounting,
executive compensation, and enhanced and timely disclosure of corporate information. As directed by the Sarbanes-Oxley
Act, our Chief Executive Officer and Chief Financial Officer are required to certify that our quarterly and annual reports do
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not contain any untrue statement of a material fact. The rules adopted by the Securities and Exchange Commission under the
Sarbanes-Oxley Act have several requirements, including having these officers certify that: (i) they are responsible for
establishing, maintaining and regularly evaluating the effectiveness of our disclosure controls and procedures and internal
control over financial reporting; (ii) they have made certain disclosures to our auditors and the audit committee of the board of
directors about our internal control over financial reporting; and (iii) they have included information in our quarterly and
annual reports about the effectiveness of our disclosure controls and procedures and whether there have been any changes in
our internal control over financial reporting or in other factors that could materially affect internal control over financial
reporting.
Change in Control Regulations
Under the Change in Bank Control Act, no person may acquire control of a savings and loan holding company such as
Northfield Bancorp, Inc. unless the Federal Reserve Board has been given 60 days prior written notice and has not issued a
notice disapproving the proposed acquisition, taking into consideration certain factors, including the financial and managerial
resources of the acquirer and the competitive effects of the acquisition. Control, as defined under federal law, means
ownership, control of or holding irrevocable proxies representing more than 25% of any class of voting stock, control in any
manner of the election of a majority of the institution’s directors, or a determination by the regulator that the acquirer has the
power to direct, or directly or indirectly to exercise a controlling influence over, the management or policies of the institution.
Acquisition of more than 10% of any class of a savings and loan holding company’s voting stock constitutes a rebuttable
determination of control under the regulations under certain circumstances including where, as is the case with Northfield
Bancorp, Inc., the issuer has registered securities under Section 12 of the Securities Exchange Act of 1934.
In addition, federal regulations provide that no company may acquire control of a savings and loan holding company
without the prior approval of the Federal Reserve Board. Any company that acquires such control becomes a “savings and
loan holding company” subject to registration, examination and regulation by the Federal Reserve Board.
Federal Taxation
TAXATION
General. Northfield Bank and Northfield Bancorp, Inc. are subject to federal income taxation in the same general
manner as other corporations, with some exceptions discussed below. The following discussion of federal taxation is intended
only to summarize certain pertinent federal income tax matters and is not a comprehensive description of the tax rules
applicable to Northfield Bancorp, Inc. or Northfield Bank.
Northfield-Federal’s consolidated federal tax returns are currently under audit for the tax years of 2009 and 2010.
Method of Accounting. For federal income tax purposes, Northfield Bancorp, Inc. currently reports its income and
expenses on the accrual method of accounting and uses a tax year ending December 31 for filing its federal and state income
tax returns.
Bad Debt Reserves. Historically, Northfield Bank was subject to special provisions in the tax law applicable to
qualifying savings banks regarding allowable tax bad debt deductions and related reserves. Tax law changes were enacted in
1996 that eliminated the ability of savings banks to use the percentage of taxable income method for computing tax bad debt
reserves for tax years after 1995, and required recapture into taxable income over a six-year period of all bad debt reserves
accumulated after a savings bank’s last tax year beginning before January 1, 1988. Northfield Bank recaptured its post
December 31, 1987, bad-debt reserve balance over the six-year period ended December 31, 2004.
Northfield Bancorp, Inc. is required to use the specific charge off method to account for tax bad debt deductions.
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Taxable Distributions and Recapture. Prior to 1996, bad debt reserves created prior to 1988 were subject to recapture
into taxable income if Northfield Bank failed to meet certain thrift asset and definitional tests or made certain distributions.
Tax law changes in 1996 eliminated thrift-related recapture rules. However, under current law, pre-1988 tax bad debt reserves
remain subject to recapture if Northfield Bank makes certain non-dividend distributions, repurchases any of its common stock,
pays dividends in excess of earnings and profits, or fails to qualify as a “bank” for tax purposes.
At December 31, 2013, the total federal pre-base year bad debt reserve of Northfield Bank was approximately $5.9
million.
Alternative Minimum Tax. The Internal Revenue Code of 1986, as amended, imposes an alternative minimum tax at a
rate of 20% on a base of regular taxable income plus certain tax preferences, less any available exemption. The alternative
minimum tax is imposed to the extent it exceeds the regular income tax. Net operating losses can offset no more than 90% of
alternative taxable income. Certain payments of alternative minimum tax may be used as credits against regular tax liabilities
in future years. Northfield Bancorp, Inc.’s consolidated group has not been subject to the alternative minimum tax and has no
such amounts available as credits for carryover.
Net Operating Loss Carryovers. A financial institution may carry back net operating losses to the preceding two
taxable years and forward to the succeeding 20 taxable years. At December 31, 2013, Northfield Bancorp, Inc.’s consolidated
group had no net operating loss carryforwards for federal income tax purposes.
Corporate Dividends-Received Deduction. Northfield Bancorp, Inc. may exclude from its federal taxable income
100% of dividends received from Northfield Bank as a wholly-owned subsidiary by filing consolidated tax returns. The
corporate dividends-received deduction is 80% when the corporation receiving the dividend owns at least 20% of the stock of
the distributing corporation. The dividends-received deduction is 70% when the corporation receiving the dividend owns less
than 20% of the distributing corporation.
State Taxation
Northfield Bank reports income on a calendar year basis to New York State. New York State franchise tax on
corporations is imposed in an amount equal to the greater of (a) 7.1% of “entire net income” allocable to New York State, (b)
3% of “alternative entire net income” allocable to New York State, or (c) 0.01% of the average value of assets allocable to
New York State plus nominal minimum tax of $250 per company. Entire net income is based on federal taxable income,
subject to certain modifications. Alternative entire net income is equal to entire net income without certain modifications.
Northfield Bank reports income on a calendar year basis to New York City. New York City franchise tax on
corporations is imposed in an amount equal to the greater of (a) 9.0% of “entire net income” allocable to New York State, (b)
3% of “alternative entire net income” allocable to New York City, or (c) 0.01% of the average value of assets allocable to New
York City plus nominal minimum tax of $250 per company. Entire net income is based on federal taxable income, subject to
certain modifications. Alternative entire net income is equal to entire net income without certain modifications.
Northfield Bancorp, Inc. and Northfield Bank file New Jersey Corporation Business Tax returns on a calendar year
basis. Generally, the income derived from New Jersey sources is subject to New Jersey tax. Northfield-Delaware and
Northfield Bank pay the greater of the corporate business tax at 9% of taxable income or the minimum tax of $1,200 per
entity.
At December 31, 2005, Northfield Bank did not meet the definition of a domestic building and loan association for
New York State and City tax purposes. As a result, we were required to recognize a $2.2 million deferred tax liability for state
and city thrift-related base-year bad debt reserves accumulated after December 31, 1987.
Our New York City tax returns are currently under audit for tax years 2007, 2008, and 2009.
As a Delaware business corporation, Northfield Bancorp, Inc. is required to file an annual report with and pay
franchise taxes to the state of Delaware.
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ITEM 1A. RISK FACTORS
The material risks and uncertainties that management believes affect us are described below. You should carefully
consider the risks and uncertainties described below, together with all of the other information included or incorporated by
reference herein. The risks and uncertainties described below are not the only ones facing us. Additional risks and
uncertainties that management is not aware of or focused on or that management currently deems immaterial may also impair
our business operations. This report is qualified in its entirety by these risk factors. See also, “Forward-Looking Statements.”
Our concentration in multifamily loans and commercial real estate loans could expose us to increased lending risks and
related loan losses.
Our current business strategy is to continue to emphasize multifamily loans and to a lesser extent commercial real
estate loans. At December 31, 2013, $1.2 billion, or 89.6% of our originated total loan portfolio held-for-investment, consisted
of multifamily and commercial real estate loans.
These types of loans generally expose a lender to greater risk of non-payment and loss than one-to-four family
residential mortgage loans because repayment of the loans often depends on the successful operation of the properties and the
income stream of the borrowers. Such loans typically involve larger loan balances to single borrowers or groups of related
borrowers compared to one-to-four family residential mortgage loans. Also, many of our borrowers have more than one of
these types of loans outstanding. Consequently, an adverse development with respect to one loan or one credit relationship can
expose us to a significantly greater risk of loss compared to an adverse development with respect to a one-to-four family
residential real estate loan.
In addition, if loans that are collateralized by real estate become troubled and the value of the real estate has been
significantly impaired, then we may not be able to recover the full contractual amount of principal and interest that we
anticipated at the time we originated the loan, which could cause us to increase our provision for loan losses and adversely
affect our operating results and financial condition.
A significant portion of our loan portfolio is unseasoned. It is difficult to judge the future performance of unseasoned
loans.
Our net loan portfolio has grown to $1.46 billion at December 31, 2013, from $581.2 million at December 31, 2008. A
large portion of this increase is due to increases in multifamily real estate loans. It is difficult to assess the future performance
of these recently originated loans because our relatively limited experience in multifamily lending does not provide us with a
significant payment history from which to judge future collectability, especially in the current weak economic environment.
These loans may experience higher delinquency or charge-off levels than our historical loan portfolio experience, which could
adversely affect our future performance.
If our allowance for loan losses is not sufficient to cover actual loan losses, our earnings and capital could decrease.
We make various assumptions and judgments about the collectability of our loan portfolio, including the
creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for the repayment of
many of our loans. In determining the amount of the allowance for loan losses, we review our loans and our loss and
delinquency experience, as well as the experience of other similarly situated institutions, and we evaluate other factors
including, among other things, current economic conditions. If our assumptions are incorrect, or if delinquencies do not
continue to improve or non-accrual and non-performing loans increase, our allowance for loan losses may not be sufficient to
cover losses inherent in our loan portfolio, which would require additions to our allowance. Material additions to our
allowance would materially decrease our net income.
In addition, bank regulators periodically review our allowance for loan losses and, based on information available to
them at the time of their review, may require us to increase our allowance for loan losses or recognize further loan charge-
offs. An increase in our allowance for loan losses or loan charge-offs as required by these regulatory authorities may have a
material adverse effect on our financial condition and results of operations.
Because most of our borrowers are located in the New York metropolitan area, a prolonged downturn in the local
economy, or a decline in local real estate values, could cause an increase in non-performing loans or a decrease in loan
demand, which would reduce our profits.
Substantially all of our loans are secured by real estate located in our primary market areas. Continued weakness in
our local economy and our local real estate markets could adversely affect the ability of our borrowers to repay their loans
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and the value of the collateral securing our loans, which could adversely affect our results of operations. Real estate values are
affected by various factors, including supply and demand, changes in general or regional economic conditions, interest rates,
governmental rules or policies, natural disasters, and the threat of terrorist attacks. Continued weakness in economic
conditions also could result in reduced loan demand and a decline in loan originations. In particular, a significant decline in
real estate values would likely lead to a decrease in new multifamily, commercial real estate, and home equity loan
originations and increased delinquencies and defaults in our real estate loan portfolio.
Strong competition within our market areas may limit our growth and profitability.
Competition in the banking and financial services industry is intense. In our market areas, we compete with
commercial banks, savings institutions, mortgage brokerage firms, credit unions, finance companies, mutual funds, money
market funds, insurance companies, and brokerage and investment banking firms operating locally and elsewhere. Some of
our competitors have greater name recognition and market presence and offer certain services that we do not or cannot
provide, all of which benefit them in attracting business. In addition, larger competitors may be able to price loans and
deposits more aggressively than we do.
We have been negatively affected by current market and economic conditions. A continuation or worsening of these
conditions could adversely affect our operations, financial condition, and earnings.
Although the U.S. economy has emerged from the severe recession that occurred in 2008 and 2009, economic growth
has been slow and unemployment levels remain high despite the Federal Reserve Board’s unprecedented efforts to maintain
low market interest rates and encourage economic growth. Recovery by many businesses has been impaired by lower
consumer spending. A discontinuation or further reduction of the Federal Reserve Board’s bond purchasing program could
result in higher interest rates and reduced economic activity. Moreover, a return to prolonged deteriorating economic
conditions could significantly affect the markets in which we do business, the value of our loans and investments, and our
ongoing operations, costs and profitability. Further declines in real estate values and sales volumes and continued elevated
unemployment levels may result in greater loan delinquencies, increases in our non-performing, criticized and classified assets
and a decline in demand for our products and services. These events may cause us to incur losses and may adversely affect
our financial condition and results of operations.
There are potential higher risks stemming from the loans we acquired in our Federal Deposit Insurance Corporation-
assisted transaction.
The credit risk associated with the loans and other real estate owned we acquired in our FDIC-assisted acquisition of
First State Bank in October 2011 were substantially mitigated by the discount we received from the FDIC; however, these
assets are not without risk of loss. Although these acquired assets were initially accounted for at fair value, which reflects an
estimate of expected credit losses related to these assets, we did not purchase the assets with loss share from the FDIC. To the
extent future cash flows are less than those estimated at time of acquisition, we will recognize impairment losses on the
underlying loan pools. Fluctuations in national, regional and local economic conditions and other factors may increase the
level of charge-offs on the loans we acquired in this transaction and correspondingly reduce our net income.
The composition of our balance sheet continues to be more heavily weighted towards loans and therefore changes in
market interest rates in an increasing rate environment could adversely affect our financial condition and results of
operations.
Our financial condition and results of operations are significantly affected by changes in market interest rates. Our
results of operations substantially depend on our net interest income, which is the difference between the interest income we
earn on our interest-earning assets and the interest expense we pay on our interest-bearing liabilities. Our interest-bearing
liabilities generally reprice or mature more quickly than our interest-earning assets. If rates increase rapidly, we would likely
have to increase the rates we pay on our deposits and borrowed funds more quickly than any changes in interest rates earned
on our loans and investments, resulting in a negative effect on interest spreads and net interest income. In addition, the effect
of rising rates could be compounded if deposit customers move funds from savings accounts to higher rate certificate of
deposit accounts. Conversely, should market interest rates fall below current levels, our net interest margin could also be
negatively affected if competitive pressures keep us from further reducing rates on our deposits, while the yields on our assets
decrease more rapidly through loan prepayments and interest rate adjustments.
Our balance sheet composition continues to shift towards investments in assets with longer durations.
We are subject to reinvestment risk associated with changes in interest rates. Changes in interest rates may affect the
average life of loans and mortgage-related securities. Decreases in interest rates often result in increased prepayments of loans
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and mortgage-related securities, as borrowers refinance their loans to reduce borrowings costs. Under these circumstances, we
are subject to reinvestment risk to the extent we are unable to reinvest the cash received from such prepayments in loans or
other investments that have interest rates that are comparable to the interest rates on existing loans and securities.
Increases in interest rates may also decrease loan demand and/or may make it more difficult for borrowers to repay
adjustable rate loans. Additionally, increases in interest rates may increase capitalization rates utilized in valuing income
producing properties which results in lower appraised values limiting the ability of potential borrowers to refinance existing
debt and may result in higher charge-offs of our non-performing collateral dependent loans.
Changes in interest rates also affect the carrying value of our interest earning assets and in particular our securities
portfolio. Generally, the value of securities fluctuates inversely with changes in interest rates. At December 31, 2013, the fair
value of our securities portfolio (excluding Federal Home Loan Bank of New York stock) totaled $937.1 million.
At December 31, 2013, our simulation model indicated that our net portfolio value (the net present value of our interest-
earning assets and interest-bearing liabilities) would decrease by 19.05% if there was an instantaneous parallel 200 basis point
increase in market interest rates. 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 likely differ from actual results.
Historically low interest rates may adversely affect our net interest income and profitability.
The Federal Reserve Board has recently maintained interest rates at historically low levels through its targeted federal
funds rate and purchases of mortgage-backed securities. As a general matter, our interest-bearing liabilities reprice or mature
more quickly than our interest-earning assets, which has resulted in increases in net interest income in the short term. Our
ability to lower our interest expense is limited at these interest rate levels while the average yield on our interest-earning
assets may continue to decrease. The Federal Reserve Board has previously indicated its intention to maintain low interest
rates until the unemployment rate is 6.5% or lower. Accordingly, our net interest income (the difference between interest
income earned on assets and interest expense paid on liabilities) may decrease, which may have an adverse affect on our
profitability.
If our investment in the common stock of the Federal Home Loan Bank of New York is classified as other-than-
temporarily impaired or as permanently impaired, earnings and stockholders’ equity could decrease.
We own stock of the Federal Home Loan Bank of New York, which is part of the Federal Home Loan Bank system.
The Federal Home Loan Bank of New York common stock is held to qualify for membership in the Federal Home Loan Bank
of New York and to be eligible to borrow funds under the Federal Home Loan Bank of New York’s advance programs. The
aggregate cost of our Federal Home Loan Bank of New York common stock as of December 31, 2013, was $17.5 million
based on its par value. There is no market for Federal Home Loan Bank of New York common stock.
Although the Federal Home Loan Bank of New York is not reporting current operating difficulties, it is possible that
the capital of the Federal Home Loan Bank system, including the Federal Home Loan Bank of New York, could be
substantially diminished. This could occur with respect to an individual Federal Home Loan Bank due to the requirement that
each Federal Home Loan Bank is jointly and severally liable along with the other Federal Home Loan Banks for the
consolidated obligations issued through the Office of Finance, a joint office of the Federal Home Loan Banks, or due to the
merger of a Federal Home Loan Bank experiencing operating difficulties into a stronger Federal Home Loan Bank.
Consequently, there continues to be a risk that our investment in Federal Home Loan Bank of New York common stock could
be deemed other-than-temporarily impaired at some time in the future, and if this occurs, it would cause our earnings and
stockholders’ equity to decrease by the impairment charge.
Changes in our accounting policies or in accounting standards could materially affect how we report our financial
condition and results of operations.
Our accounting policies are essential to understanding our financial results and condition. Some of these policies
require the use of estimates and assumptions that may affect the value of our assets or liabilities and financial results. Some of
our accounting policies are critical because they require management to make difficult, subjective, and complex judgments
about matters that are inherently uncertain and because it is likely that materially different amounts would be reported under
different conditions or using different assumptions. If such estimates or assumptions underlying our financial statements are
incorrect, we may experience material losses.
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From time to time, the Financial Accounting Standards Board and the Securities and Exchange Commission change
the financial accounting and reporting standards or the interpretation of those standards that govern the preparation of our
financial statements. These changes are beyond our control, can be hard to predict and could materially impact how we report
our results of operations and financial condition. We could also be required to apply a new or revised standard retroactively,
resulting in our restating prior period financial statements in material amounts.
The need to account for certain assets at estimated fair value may adversely affect our results of operations.
We report certain assets, including securities, at estimated fair value. Generally, for assets that are reported at fair value,
we use quoted market prices or valuation models that utilize observable market inputs to estimate fair value. Because we carry
these assets on our books at their estimated fair value, we may incur losses even if the asset in question presents minimal credit
risk. Elevated delinquencies, defaults, and estimated losses from the disposition of collateral in our private-label mortgage-
backed securities portfolio may require us to recognize additional other-than-temporary impairments in future periods with
respect to our securities portfolio. The amount and timing of any impairment recognized will depend on the severity and
duration of the decline in the estimated fair value of the securities and our estimation of the anticipated recovery period.
We hold certain intangible assets that could be classified as impaired in the future. If these assets are considered to be
either partially or fully impaired in the future, our earnings and the book values of these assets would decrease.
We are required to test our goodwill for impairment on a periodic basis. The impairment testing process considers a
variety of factors, including the current market price of our common shares, the estimated net present value of our assets and
liabilities and information concerning the terminal valuation of similarly situated insured depository institutions. It is possible
that future impairment testing could result in a partial or full impairment of the value of our goodwill. If an impairment
determination is made in a future reporting period, our earnings and the book value of goodwill will be reduced by the
amount of the impairment.
Because the nature of the financial services business involves a high volume of transactions, we face significant
operational risks.
We operate in diverse markets and rely on the ability of our employees and systems to process a high number of
transactions over short periods of time. Operational risk is the risk of loss resulting from our operations, including but not
limited to, the risk of fraud by employees or persons outside our company, the execution of unauthorized transactions by
employees, errors relating to transaction processing and technology, breaches of the internal control system and compliance
requirements, and business continuation and disaster recovery. Insurance coverage may not be available for such losses, or
where available, such losses may exceed insurance limits. This risk of loss also includes the potential legal actions that could
arise as a result of an operational deficiency or as a result of noncompliance with applicable regulatory standards, adverse
business decisions or their implementation, and customer attrition due to potential negative publicity. In the event of a
breakdown in the internal control system, improper operation of systems or improper employee actions, we could suffer
financial loss, face regulatory action, and suffer damage to our reputation.
We are required to maintain a significant percentage of our total assets in residential mortgage loans and investments
secured by residential mortgage loans, which restricts our ability to diversify our loan portfolio.
A federal savings bank differs from a commercial bank in that it is required to maintain at least 65% of its total assets
in “qualified thrift investments” which generally include loans and investments for the purchase, refinance, construction,
improvement, or repair of residential real estate, as well as home equity loans, education loans and small business loans. To
maintain our federal savings bank charter we have to be a “qualified thrift lender” or “QTL” in nine out of each 12
immediately preceding months. The QTL requirement limits the extent to which we can grow our commercial loan portfolio,
and failing the QTL test can result in an enforcement action. However, a loan that does not exceed $2 million (including a
group of loans to one borrower) that is for commercial, corporate, business, or agricultural purposes is included in our
qualified thrift investments. As of December 31, 2013, we maintained 81.6% of our portfolio assets in qualified thrift
investments. Because of the QTL requirement, we may be limited in our ability to change our asset mix and increase the yield
on our earning assets by growing our commercial loan portfolio.
In addition, if we continue to grow our commercial real estate loan portfolio and our residential mortgage loan
portfolio decreases, it is possible that in order to maintain our QTL status, we could be forced to buy mortgage-backed
securities or other qualifying assets at times when the terms of such investments may not be attractive. Alternatively, we may
find it necessary to pursue different structures, including converting Northfield Bank’s savings bank charter to a commercial
bank charter.
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Risks associated with system failures, interruptions, or breaches of security could negatively affect our earnings.
Information technology systems are critical to our business. We use various technology systems to manage our
customer relationships, general ledger, securities, deposits, and loans. We have established policies and procedures to prevent
or limit the impact of system failures, interruptions, and security breaches, but such events may still occur or may not be
adequately addressed if they do occur. In addition, any compromise of our systems could deter customers from using our
products and services. Although we rely on security systems to provide security and authentication necessary to effect the
secure transmission of data, these precautions may not protect our systems from compromises or breaches of security.
In addition, we outsource a majority of our data processing to certain third-party providers. If these third-party
providers encounter difficulties, or if we have difficulty communicating with them, our ability to adequately process and
account for transactions could be affected, and our business operations could be adversely affected. Threats to information
security also exist in the processing of customer information through various other vendors and their personnel.
The occurrence of any system failures, interruption, or breach of security could damage our reputation and result in a loss
of customers and business thereby subjecting us to additional regulatory scrutiny, or could expose us to litigation and possible
financial liability. Any of these events could have a material adverse effect on our financial condition and results of operations.
We are subject to extensive regulatory oversight.
We are subject to extensive supervision, regulation, and examination by the Office of the Comptroller of the Currency,
the Federal Reserve Board and the Federal Deposit Insurance Corporation. As a result, we are limited in the manner in which
we conduct our business, undertake new investments and activities, and obtain financing. This regulatory structure is designed
primarily for the protection of the Deposit Insurance Fund and our depositors, and not to benefit our stockholders. This
regulatory structure also gives the regulatory authorities extensive discretion in connection with their supervisory and
enforcement actions and examination policies, including policies with respect to capital levels, the timing and amount of
dividend payments, the classification of assets, the establishment of adequate loan loss reserves for regulatory purposes and
the timing and amounts of assessments and fees.
In addition, we must comply with significant anti-money laundering and anti-terrorism laws and regulations,
Community Reinvestment Act laws and regulations, and fair lending laws and regulations. Government agencies have the
authority to impose monetary penalties and other sanctions on institutions that fail to comply with these laws and regulations,
which could significantly affect our business activities, including our ability to acquire other financial institutions or expand
our branch network.
Legislative or regulatory responses to perceived financial and market problems could impair our rights against borrowers.
Federal, state and local laws and policies could reduce the amount distressed borrowers are otherwise contractually
obligated to pay under their mortgage loans, and may limit the ability of lenders to foreclose on mortgage collateral.
Restrictions on Northfield Bank’s rights as creditor could result in increased credit losses on our loans and mortgage-backed
securities, or increased expense in pursuing our remedies as a creditor.
Non-compliance with the USA PATRIOT Act, Bank Secrecy Act, or other laws and regulations could result in fines or
sanctions.
The USA PATRIOT and Bank Secrecy Acts require financial institutions to develop programs to prevent financial
institutions from being used for money laundering and terrorist activities. If such activities are detected, financial institutions
are obligated to file suspicious activity reports with the U.S. Treasury’s Office of Financial Crimes Enforcement Network.
These rules require financial institutions to establish procedures for identifying and verifying the identity of customers
seeking to open new financial accounts. Failure to comply with these regulations could result in fines or sanctions. During the
last year, several banking institutions have received large fines for non-compliance with these laws and regulations. While we
have developed policies and procedures designed to assist in compliance with these laws and regulations, these policies and
procedures may not be effective in preventing violations of these laws and regulations.
Changes in the structure of Fannie Mae and Freddie Mac (“GSEs”) and the relationship among the GSEs, the federal
government and the private markets, or the conversion of the current conservatorship of the GSEs into receivership, could
result in significant changes to our securities portfolio.
The GSEs are currently in conservatorship, with its primary regulator, the Federal Housing Finance Agency, acting as
conservator. We cannot predict if, when or how the conservatorships will end, or any associated changes to the GSEs’ business
36
structure that could result. We also cannot predict whether the conservatorships will end in receivership. There are several
proposed approaches to reform the GSEs which, if enacted, could change the structure of the GSEs and the relationship
among the GSEs, the government and the private markets, including the trading markets for agency conforming mortgage
loans and markets for mortgage-related securities in which we participate. We cannot predict the prospects for the enactment,
timing or content of legislative or rulemaking proposals regarding the future status of the GSEs. Accordingly, there continues
to be uncertainty regarding the future of the GSEs, including whether they will continue to exist in their current form. GSE
reform, if enacted, could result in a significant change and adversely impact our business operations.
Financial reform legislation has, among other things, tightened capital standards, and created the Consumer Financial
Protection Bureau, resulting in new laws and regulations that are expected to increase our costs of operations.
The Dodd-Frank Act requires various federal agencies to adopt a broad range of new implementing rules and
regulations, and to prepare numerous studies and reports for Congress. The federal agencies are given significant discretion in
drafting the implementing rules and regulations, and consequently, many of the details and much of the impact of the Dodd-
Frank Act may not be known for many months or years.
Among other things, as a result of the Dodd-Frank Act:
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
the Office of the Comptroller of the Currency became the primary federal regulator for federal savings
associations such as Northfield Bank (replacing the Office of Thrift Supervision), and the Federal Reserve Board
now supervises and regulates all savings and loan holding companies that were formerly regulated by the Office
of Thrift Supervision, including Northfield-Federal and Northfield Bancorp, MHC;
the Federal Reserve Board is required to set minimum capital levels for depository institution holding companies
that are as stringent as those required for the insured depository subsidiaries, and the components of Tier 1
capital are required to be restricted to capital instruments that are currently considered to be Tier 1 capital for
insured depository institutions. There is a five-year transition period (from the July 21, 2010 effective date of the
Dodd-Frank Act) before the capital requirements will apply to savings and loan holding companies;
the federal banking regulators are required to implement new leverage and capital requirements that take into
account off-balance sheet activities and other risks, including risks relating to securitized products and
derivatives;
a Consumer Financial Protection Bureau has been established, which has broad powers to supervise and enforce
consumer protection laws. The Consumer Financial Protection Bureau has broad rule-making authority for a
wide range of consumer protection laws that apply to all banks and savings institutions, including the authority
to prohibit “unfair, deceptive or abusive” acts and practices. The Consumer Financial Protection Bureau has
examination and enforcement authority over all banks and savings institutions with more than $10 billion in
assets. Banks and savings institutions with $10 billion or less in assets, like Northfield Bank, will be examined
by their applicable bank regulators; and
federal preemption rules that have been applicable for national banks and federal savings banks have been
weakened, and state attorney generals have the ability to enforce federal consumer protection laws.
In addition to the risks noted above, we expect that our operating and compliance costs, and possibly our interest
expense, could increase as a result of the Dodd-Frank Act and the implementing rules and regulations. The need to comply
with additional rules and regulations, as well as state laws and regulations to which we were not previously subject, will also
divert management’s time from managing the remainder of our operations. Higher capital levels could require us to maintain
higher levels of assets that earn less interest and dividend income.
Changes in the valuation of our securities portfolio could hurt our profits.
Our securities portfolio may be impacted by fluctuations in market value, potentially reducing accumulated other
comprehensive income and/or earnings. Fluctuations in market value may be caused by changes in market interest rates, lower
market prices for securities and limited investor demand. Management evaluates securities for other-than-temporary
impairment on a monthly basis, with more frequent evaluation for selected issues. In analyzing a debt issuer’s financial
condition, management considers whether the securities are issued by the federal government or its agencies, whether
downgrades by bond rating agencies have occurred, industry analysts’ reports and, to a lesser extent given the relatively
insignificant levels of depreciation in our debt portfolio, spread differentials between the effective rates on instruments in the
portfolio compared to risk-free rates. In analyzing an equity issuer’s financial condition, management considers industry
37
analysts’ reports, financial performance and projected target prices of investment analysts within a one-year time frame. If this
evaluation shows impairment to the actual or projected cash flows associated with one or more securities, a potential loss to
earnings may occur. Changes in interest rates can also have an adverse effect on our financial condition, as our available-for-
sale securities are reported at their estimated fair value, and therefore are impacted by fluctuations in interest rates. We
increase or decrease our stockholders’ equity by the amount of change in the estimated fair value of the available-for-sale
securities, net of taxes. The declines in market value could result in other-than-temporary impairments of these assets, which
would lead to accounting charges that could have a material adverse effect on our net income and capital levels.
Effective December 10, 2013, pursuant to the Dodd-Frank Act, federal banking and securities regulators issued final
rules to implement Section 619 of the Dodd-Frank Act (the “Volcker Rule”). Generally, subject to a transition period and
certain exceptions, the Volcker Rule restricts insured depository institutions and their affiliated companies from engaging in
short-term proprietary trading of certain securities, investing in funds with collateral comprised of less than 100% loans that
are not registered with the Securities and Exchange Commission and from engaging in hedging activities that do not hedge a
specific identified risk. After the transition period, the Volcker Rule prohibitions and restrictions will apply to banking entities
unless an exception applies. We are currently analyzing the impact of the Volcker Rule on our investment portfolio, and if any
changes are required to our investment strategies that could negatively affect our earnings.
We will become subject to more stringent capital requirements, which may adversely impact our return on equity, require
us to raise additional capital, or constrain us from paying dividends or repurchasing shares.
In July 2013, the federal banking agencies approved a new rule that will substantially amend the regulatory risk-based
capital rules applicable to Northfield Bank and Northfield Bancorp, Inc.. The final rule implements the “Basel III” regulatory
capital reforms and changes required by the Dodd-Frank Act.
The final rule includes new minimum risk-based capital and leverage ratios, which will be effective for us on January 1,
2015, and refines the definition of what constitutes “capital” for purposes of calculating these ratios. The new minimum capital
requirements will be: (i) a new common equity Tier 1 capital ratio of 4.5%; (ii) a Tier 1 to risk-based assets capital ratio of 6%
(increased from 4%); (iii) a total capital ratio of 8% (unchanged from current rules); and (iv) a Tier 1 leverage ratio of 4%. The
final rule also establishes a “capital conservation buffer” of 2.5%, and will result in the following minimum ratios: (i) a common
equity Tier 1 capital ratio of 7.0%, (ii) a Tier 1 to risk-based assets capital ratio of 8.5%, and (iii) a total capital ratio of 10.5%.
The new capital conservation buffer requirement would be phased in beginning in January 2016 at 0.625% of risk-weighted
assets and would increase each year until fully implemented in January 2019. An institution will be subject to limitations on
paying dividends, engaging in share repurchases, and paying discretionary bonuses if its capital level falls below the buffer
amount. These limitations will establish a maximum percentage of eligible retained income that can be utilized for such actions.
We have analyzed the effects of these new capital requirements, and we believe that Northfield Bank and the Company
would meet all of these new requirements, including the full 2.5% capital conservation buffer, as if these new requirements
had been in effect as of December 31, 2013.
The application of more stringent capital requirements could, among other things, result in lower returns on equity, require
the raising of additional capital, and result in regulatory actions if we were to be unable to comply with such requirements.
Furthermore, the imposition of liquidity requirements in connection with the implementation of Basel III could result in our having
to lengthen the term of our funding, restructure our business models, and/or increase our holdings of liquid assets. Implementation
of changes to asset risk weightings for risk-based capital calculations, items included or deducted in calculating regulatory capital
and/or additional capital conservation buffers could result in management modifying its business strategy, and could limit our
ability to make distributions, including paying out dividends or buying back shares. Specifically, beginning in 2016, Northfield
Bancorp Inc.’s ability to pay dividends will be limited if does not have the capital conservation buffer required by the new capital
rules, which may limit our ability to pay dividends to stockholders. See “Supervision and Regulation.”
A discontinuation or reduction of the Federal Reserve Board’s bond purchasing program may adversely affect our ability
to originate loans.
The Federal Reserve Board has undertaken an unprecedented bond purchase program, known as “quantitative easing.”
This program is designed to keep market interest rates low and encourage growth. A discontinuation or reduction of the
Federal Reserve Board’s bond repurchase program would likely cause an increase in market interest rates, which may reduce
our loan originations.
The value of our deferred tax asset could be reduced if corporate tax rates in the U.S. are decreased.
There have been recent discussions by the executive branch regarding potentially decreasing the U.S. corporate tax
rate. While we may benefit in some respects from any decreases in these corporate tax rates, any reduction in the U.S.
38
corporate tax rate would result in a decrease to the value of our net deferred tax asset, which could negatively affect our
financial condition and results of operations.
The value of our deferred tax asset could also be reduced if proposed legislation is enacted by the State of New York.
There have been recent discussions by representatives of the State of New York regarding changing how taxable
income is apportioned for banking entities like ours and decreasing the corporate tax rate. While we may benefit in some
respects from any decreases in these corporate tax rates, any reduction in the corporate tax rate would result in a significant
decrease to the value of our net deferred tax asset, which could negatively affect our financial condition and results of
operations.
Our financial condition and results of operations could be negatively affected if we fail to grow or fail to manage our
growth effectively.
We may not be able to expand our market presence in our existing markets, and any such expansion, including the
costs associated with de novo branching or acquisitions, may adversely affect our results of operations. Failure to effectively
grow could have a material adverse effect on our business, future prospects, financial condition, or results of operations and
could adversely affect our ability to successfully implement our business strategy. In addition, if we grow more slowly than
anticipated, our operating results could be adversely affected.
Our ability to grow successfully will depend on a variety of factors including the continued availability of desirable
business opportunities, the competitive responses from other financial institutions in our market areas and our ability to
manage our growth.
Our risk management framework may not be effective in mitigating risk and reducing the potential for significant losses.
Our risk management framework is designed to minimize risk and loss to us. We seek to identify, measure, monitor,
report and control our exposure to the types of risk to which we are subject, including strategic, market, liquidity, compliance
and operational risks, among others. While we employ a broad and diversified set of risk monitoring and mitigation
techniques, those techniques are inherently limited because they cannot anticipate the existence or future development of
currently unanticipated or unknown risks. Recent economic conditions, heightened legislative and regulatory scrutiny of the
financial services industry, among other developments, have resulted in a heightened level of risk for us. Accordingly, we
could suffer losses as a result of our failure to properly anticipate and manage these risks.
Our business may be adversely affected by an increasing prevalence of fraud and other financial crimes.
Our loans to businesses and individuals and our deposit relationships and related transactions are subject to exposure
to the risk of loss due to fraud and other financial crimes. Nationally, reported incidents of fraud and other financial crimes
have increased. We have also experienced losses due to apparent fraud and other financial crimes. While we have policies and
procedures designed to prevent such losses, losses may still occur.
Acquisitions and stock repurchases may disrupt our business and dilute stockholder value.
We regularly evaluate merger and acquisition opportunities and conduct due diligence activities related to possible
transactions with other financial institutions and financial services companies. As a result, negotiations may take place and
future mergers or acquisitions involving cash, debt, or equity securities may occur at any time. We seek acquisition partners
that offer us either significant market presence or the potential to expand our market footprint and improve profitability
through economies of scale or expanded services.
Acquiring other banks, businesses, or branches may have an adverse impact on our financial results and may involve
various other risks commonly associated with acquisitions.
The repurchase of shares of common stock may have an effect on our business and stockholder value.
Various factors may make takeover attempts more difficult to achieve.
Our certificate of incorporation and bylaws, federal regulations, Northfield Bank’s charter, Delaware law, shares of
restricted stock and stock options that we have granted or may grant to employees and directors, stock ownership by our
management and directors and employment agreements that we have entered into with our executive officers, and various
other factors may make it more difficult for companies or persons to acquire control of Northfield Bancorp, Inc. without the
consent of our board of directors.
39
Our funding sources may prove insufficient to replace deposits at maturity and support our future growth.
We must maintain sufficient funds to respond to the needs of depositors and borrowers. As a part of our liquidity
management, we use a number of funding sources in addition to core deposit growth and repayments and maturities of loans
and investments. As we continue to grow, we are likely to become more dependent on these sources, which include Federal
Home Loan Bank advances, proceeds from the sale of loans; federal funds purchased and brokered certificates of deposit.
Adverse operating results or changes in industry conditions could lead to difficulty or an inability to access these additional
funding sources. Our financial flexibility will be severely constrained if we are unable to maintain our access to funding or if
adequate financing is not available to accommodate future growth at acceptable interest rates. If we are required to rely more
heavily on more expensive funding sources to support future growth, our revenues may not increase proportionately to cover
our costs. In this case, our operating margins and profitability would be adversely affected.
We may not pay dividends on our shares of common stock.
Although we currently pay dividends on a quarterly basis stockholders are not entitled to receive dividends. Federal
regulations may also restrict capital distributions, which include cash dividends, to ensure the institution maintains adequate
capital requirements.
If we are required to repurchase mortgage loans that we have previously sold, it could negatively affect our earnings.
One of our sources of non-interest income is our mortgage banking, which involves originating residential mortgage
loans for sale in the secondary market under agreements that contain representations and warranties related to, among other
things, the origination and characteristics of the mortgage loans. We may be required to repurchase mortgage loans that we
have sold in cases of borrower default or breaches of these representations and warranties. If we are required to repurchase
mortgage loans or provide indemnification or other recourse, this could increase our costs and thereby affect our future
earnings.
ITEM 1B. UNRESOLVED STAFF COMMENTS
There are no unresolved staff comments.
ITEM 2. PROPERTIES
The Company operates from the Bank’s home office in Staten Island, New York, our corporate offices located at 581
Main Street, Woodbridge, New Jersey, and our additional 29 branch offices located in New York and New Jersey, and its
lending office located in Brooklyn, New York. Our branch offices are located in the New York Counties of Richmond, and
Kings and the New Jersey Counties of Middlesex and Union. The net book value of our premises, land, and equipment was
$29.1 million at December 31, 2013.
ITEM 3. LEGAL PROCEEDINGS
In the normal course of business, we may be party to various outstanding legal proceedings and claims. In the opinion
of management, the consolidated financial statements will not be materially affected by the outcome of such legal proceedings
and claims as of December 31, 2013.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
40
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Our shares of common stock are traded on the NASDAQ Global Select Market under the symbol “NFBK.” The
approximate number of holders of record of Northfield Bancorp, Inc.’s common stock as of February 28, 2014, was 5,520.
Certain shares of Northfield Bancorp, Inc. are held in “nominee” or “street” name and accordingly, the number of beneficial
owners of such shares is not known or included in the foregoing number. The following table presents quarterly market
information for Northfield Bancorp, Inc. common stock for the years ended December 31, 2013 and 2012. The following
information was provided by the NASDAQ Global Stock Market.
Quarter ended December 31, 2013 . . . . . . . . . . . . . . . . . . .
Quarter ended September 30, 2013 . . . . . . . . . . . . . . . . . .
Quarter ended June 30, 2013 . . . . . . . . . . . . . . . . . . . . . . .
Quarter ended March 31, 2013 . . . . . . . . . . . . . . . . . . . . .
Quarter ended December 31, 2012 . . . . . . . . . . . . . . . . . . .
Quarter ended September 30, 2012 . . . . . . . . . . . . . . . . . .
Quarter ended June 30, 2012 . . . . . . . . . . . . . . . . . . . . . . .
Quarter ended March 31, 2012 . . . . . . . . . . . . . . . . . . . . .
High
______________
13.43
$
12.50
$
11.92
$
11.50
$
11.69
$
11.48
$
10.53
$
11.75
$
Low
______________
12.00
$
11.46
$
11.21
$
10.73
$
10.02
$
9.96
$
9.24
$
9.30
$
Dividends
______________
0.06
$
0.06
$
0.31
$
0.06
$
—
$
—
$
$
—
0.09
$
Stock price and dividends have been restated to reflect the completion of our second-step conversion in 2013 at an
exchange ratio of 1.4029-to-one.
The sources of funds for the payment of a cash dividend are the retained proceeds from the sale of shares of common
stock and earnings on those proceeds, interest, and principal payments on Northfield Bancorp, Inc.’s investments, including its
loan to Northfield Bank’s Employee Stock Ownership Plan, and dividends from Northfield Bank.
For a discussion of Northfield Bank’s ability to pay dividends, see “Supervision and Regulation.”
41
Stock Performance Graph
Set forth below is a stock performance graph (Source: SNL Financial) comparing (a) the cumulative total return on the
Northfield Bancorp, Inc.’s common stock for the period December 31, 2007, through December 31, 2013, (b) the cumulative
total return of the stocks included in the NASDAQ Composite Index over such period, and, (c) the cumulative total return on
stocks included in the NASDAQ Bank Index over such period. Cumulative return assumes the reinvestment of dividends, and
is expressed in dollars based on an assumed investment of $100.
Index
__________
Northfield Bancorp, Inc. . . . . . . . . . . . .
NASDAQ Composite Index . . . . . . . . . .
NASDAQ Bank Index . . . . . . . . . . . . . .
12/31/08
__________
100.00
100.00
100.00
12/31/09
__________
121.85
145.36
83.70
Period Ending
12/31/10
__________
121.80
171.74
95.55
12/31/11
__________
131.74
170.38
85.52
12/31/12
__________
143.09
200.63
101.50
12/31/13
__________
181.13
281.22
143.84
Northfield Bancorp, Inc. had in effect at December 31, 2013, the 2008 Equity Incentive Plan which was approved by
stockholders on December 17, 2008. The 2008 Equity Incentive Plan provides for the issuance of up to 4,311,796 equity
awards. As of December 31, 2013, the Compensation Committee of the Board of Directors awarded 1,171,856 shares of
restricted stock, and 2,928,410 stock options with tandem stock appreciation rights. These share amounts have been restated
as a result of the completion of the second-step conversion at a ratio of 1.4029-to-one.
42
Issuer Purchases of Equity Securities
The following table shows the Company’s repurchase of its common stock for each calendar month in the three
months ended December 31, 2013.
Period
_______
October 1, 2013, through October 31, 2013 . . . . . .
November 1, 2013, through November 30, 2013 . .
December 1, 2013, through December 31, 2013 . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Number
of Shares
Purchased
______________
—
—
27,182
______________
27,182
______________
______________
Average
Price Paid per
Share
_______________
—
—
12.75
12.75
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs (1)
_______________
—
—
27,182
_______________
27,182
_______________
_______________
Maximum Number
of Shares that May Yet
Be Purchased Under
Plans or Programs (1)
__________________
27,182
27,182
—
(1) On July 31, 2013, Northfield Bancorp, Inc.’s Board of Directors authorized the repurchase of up to 300,093 shares of
common stock to fund grants of restricted stock under its 2008 Equity Incentive Plan. The Company has received a non-
objection letter from the Federal Reserve Board with respect to these repurchases, and conducted such repurchases in
accordance with a Rule 10b5-1 trading plan.
43
ITEM 6. SELECTED FINANCIAL DATA
The summary information presented below at the dates or for each of the years presented is derived in part from our
consolidated financial statements. The following information is only a summary, and should be read in conjunction with our
consolidated financial statements and notes included in this Annual Report.
At December 31,
_____________________________________________________________________________
____________ ____________ ____________ ____________ ____________
2011
(In thousands)
2009
2010
2013
2012
Selected Financial Condition Data:
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Cash and cash equivalents . . . . . . . . . . . . . . . . .
Trading securities . . . . . . . . . . . . . . . . . . . . . . . .
Securities available-for-sale,
2,702,764 $ 2,813,201 $ 2,376,918 $ 2,247,167 $ 2,002,274
42,544
3,403
128,761
4,677
61,239
5,998
65,269
4,146
43,852
4,095
at estimated market value . . . . . . . . . . . . . . . .
Securities held-to-maturity . . . . . . . . . . . . . . . . .
Loans held-for-sale . . . . . . . . . . . . . . . . . . . . . . .
Loans held-for-sale (non-performing) . . . . . . . .
Loans held-for-investment:
Purchased credit-impaired (PCI) loans . . . . . .
Loans acquired . . . . . . . . . . . . . . . . . . . . . . . .
Originated loans, net . . . . . . . . . . . . . . . . . . . .
Loans held-for-investment, net . . . . . . . . . . . . .
Allowance for loan losses . . . . . . . . . . . . . . . .
Net loans held-for-investment . . . . . . . . . . . . . .
Bank owned life insurance . . . . . . . . . . . . . . . . .
Federal Home Loan Bank of
937,085
—
—
471
1,275,631
2,220
—
5,447
1,098,725
3,617
452
3,448
1,244,313
5,060
1,170
—
1,131,803
6,740
—
—
—
—
729,269
____________ ____________ ____________ ____________ ____________
729,269
(15,414)
____________ ____________ ____________ ____________ ____________
713,855
43,751
75,349
101,433
1,066,200
1,242,982
(26,424)
1,216,558
93,042
59,468
77,817
1,352,191
1,489,476
(26,037)
1,463,439
125,113
88,522
—
985,945
1,074,467
(26,836)
1,047,631
77,778
—
—
827,591
827,591
(21,819)
805,772
74,805
New York stock, at cost . . . . . . . . . . . . . . . . .
Other real estate owned . . . . . . . . . . . . . . . . . . .
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Borrowed funds . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . .
Total stockholders’ equity . . . . . . . . . . . . . . . . . . $
17,516
634
1,492,689
470,325
1,986,656
716,108
12,550
870
1,956,860
419,122
2,398,328
414,873
12,677
3,359
1,493,526
481,934
1,994,268
382,650
9,784
171
1,372,842
391,237
1,850,450
396,717
6,421
1,938
1,316,885
279,424
1,610,734
391,540
Years Ended December 31,
_____________________________________________________________________________
____________ ____________ ____________ ____________ ____________
2011
(In thousands)
2009
2013
2010
2012
Selected Operating Data:
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . $
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . .
85,568
28,977
____________ ____________ ____________ ____________ ____________
91,017 $
25,413
86,495 $
24,406
92,470 $
16,948
91,539 $
22,644
Net interest income before provision
for loan losses . . . . . . . . . . . . . . . . . . . . . . .
Provision for loan losses . . . . . . . . . . . . . . . . . . .
Net interest income after provision
56,591
9,038
____________ ____________ ____________ ____________ ____________
68,895
3,536
62,089
10,084
75,522
1,927
65,604
12,589
for loan losses . . . . . . . . . . . . . . . . . . . . . . .
73,595
65,359
53,015
52,005
47,553
Non-interest income:
Bargain purchase gain, net of tax . . . . . . . . . .
Non-interest income (other) . . . . . . . . . . . . . .
Non-interest expense . . . . . . . . . . . . . . . . . . . . .
Income before income taxes . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net income per common share basic . . . . . . . . . $
Net income per common share diluted . . . . . . . . $
Weighted average basic shares outstanding . . . .
Weighted average diluted shares outstanding . . .
—
10,161
53,873
29,883
10,736
19,147 $
0.35 $
0.34 $
—
5,393
34,254
____________ ____________ ____________ ____________ ____________
18,692
6,618
____________ ____________ ____________ ____________ ____________
12,074
____________ ____________ ____________ ____________ ____________
____________ ____________ ____________ ____________ ____________
0.20
0.20
59,495,301
59,673,193
3,560
8,275
41,530
23,320
6,497
16,823 $
0.30 $
0.30 $
—
6,842
38,684
20,163
6,370
13,793 $
0.24 $
0.24 $
—
8,586
48,998
24,947
8,916
16,031 $
0.30 $
0.29 $
58,066,110
58,461,615
54,339,467
55,115,680
56,216,794
56,842,889
54,637,680
55,560,309
Note: Weighted average basic and diluted shares have been restated to reflect the completion of our second-step conversion at
an exchange ratio of 1.4029-to-one.
44
At or For the Years Ended December 31,
2011
___________ ___________ ___________ ___________ ___________
2010
2009
2012
2013
Selected Financial Ratios and Other Data:
Performance Ratios:
Return on assets (ratio of net income to average total assets)(1) . . . . . . . .
Return on equity (ratio of net income to average equity)(1) . . . . . . . . . . .
Interest rate spread (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net interest margin (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividend payout ratio(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Efficiency ratio(1) (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-interest expense to average total assets(1) . . . . . . . . . . . . . . . . . . . . .
Average interest-earning assets to average interest-bearing liabilities . . . .
Average equity to average total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset Quality Ratios:
Non-performing assets to total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-performing loans to total loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Originated non-performing loans to orginated loans (7) . . . . . . . . . . . . . .
Allowance for loan losses to non-performing loans held-for-investment (8) . .
Allowance for loan losses to total loans held-for-investment, net (9) . . . .
Allowance for loan losses to originated loans held-for-investment, net (7) . .
Capital Ratios:
Total capital (to risk-weighted assets)(5) . . . . . . . . . . . . . . . . . . . . . . . . . .
Tier I capital (to risk-weighted assets)(5) . . . . . . . . . . . . . . . . . . . . . . . . . .
Tier I capital (to adjusted assets)(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Data:
Number of full service offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Full time equivalent employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.70%
2.70
2.68
2.97
140.28
62.87
1.97
142.73
25.90
0.65%
4.08
2.76
2.98
10.74
63.24
1.99
122.83
15.94
0.72%
4.27
2.75
3.01
22.00
53.63
1.79
122.23
16.95
0.65%
3.46
2.78
3.10
23.98
56.12
1.82
125.52
18.81
0.64%
3.09
2.66
3.16
24.54
55.26
1.82
130.44
20.82
0.68
1.19
1.18
150.23
1.75
1.93
28.94
27.69
19.88
30
306
1.30
2.86
2.98
87.73
2.13
2.48
22.30
21.04
12.65
29
306
1.99
4.07
4.43
66.40
2.50
2.72
24.71
23.42
13.42
24
277
2.72
7.36
7.36
35.83
2.64
2.64
27.39
26.12
13.43
20
243
2.19
5.73
5.73
36.86
2.11
2.11
28.52
27.24
14.35
18
223
(1) 2011 performance ratios include an after tax bargain purchase gain of $3.6 million associated with the FDIC-assisted
acquisition of a failed bank. 2010 performance ratios include a $1.8 million charge ($1.2 million after-tax) related to costs
associated with Northfield Bancorp, Inc.’s postponed second-step offering, and a $738,000 benefit related to the
elimination of deferred tax liabilities associated with a change in New York state tax law. 2009 performance ratios include
a $770,000 expense ($462,000 after-tax) related to a special FDIC deposit insurance assessment.
(2) The net interest margin represents net interest income as a percent of average interest-earning assets for the period.
(3) The interest rate spread represents the difference between the weighted-average yield on interest earning assets and the
weighted-average costs of interest-bearing liabilities.
(4) The efficiency ratio represents non-interest expense divided by the sum of net interest income and non-interest income.
(5) Capital ratios are presented for Northfield Bank only.
(6) Dividend payout ratio is calculated as total dividends declared for the year (excluding any dividends waived by Northfield
Bancorp, MHC) divided by net income for the year. 2013 includes special dividend of $0.25 per share
(7) Excludes PCI loans held-for-investment.
(8) Excludes non-performing loans held-for-sale, carried at aggregate lower of cost or estimated fair value, less costs to sell.
(9) Includes PCI loans held-for-investment.
45
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion should be read in conjunction with the Consolidated Financial Statements of Northfield
Bancorp, Inc. and the Notes thereto included elsewhere in this report (collectively, the “Financial Statements”).
Overview
Net income was $19.1 million and $16.0 million for the years ended December 31, 2013 and 2012, respectively.
Significant variances from the comparable prior year are as follows: a $6.6 million increase in net interest income, a $1.6
million decrease in the provision for loan losses, a $1.6 million increase in non-interest income, a $4.9 million increase in
non-interest expense, and a $1.8 million increase in income tax expense.
Our assets decreased by 3.9% to $2.70 billion at December 31, 2013, from $2.81 billion at December 31, 2012. The
decrease in total assets was primarily attributable decreases of $338.5 million, or 26.5%, in securities available-for-sale and
$67.5 million in cash and cash equivalents. These decreases were somewhat offset by increases of $246.9 million in net loans
held-for-investment, $32.1 million in bank owned life insurance and $19.0 million in other assets.
Our liabilities decreased by $411.7 million primarily due to a decrease in deposits by a $464.2 million to $1.49 billion
at December 31, 2013, from $1.96 billion at December 31, 2012, partially offset by an increase in borrowed funds which
increased by $51.2 million to $470.3 million at December 31, 2013, from $419.1 million at December 31, 2012. The decrease
in deposits at December 31, 2013 from December 31, 2012, was $174.6 million, or 10.5%, after excluding the deposits of
$289.6 million used to purchase stock in the second-step conversion in the first quarter of 2013.
Our stockholders’ equity increased by 72.6% to $716.1 million at December 31, 2013, from $414.9 million at
December 31, 2012. This increase was primarily attributable to a $330.1 million increase related to the net proceeds from the
stock conversion, net income of $19.1 million for the year ended December 31, 2013, and a $5.4 million increase related to
ESOP and equity award activity. These increases were partially offset by a $22.9 million decrease in accumulated other
comprehensive income as a result of an increased interest rate environment, treasury share repurchases of $3.6 million, and
dividend payments of $26.9 million, which included a special dividend of $14.5 million paid on May 22, 2013.
Critical Accounting Policies
Critical accounting policies are defined as those that involve significant judgments and uncertainties, and could
potentially result in materially different results under different assumptions and conditions. We believe that the most critical
accounting policies upon which our financial condition and results of operation depend, and which involve the most complex
subjective decisions or assessments, are the following:
Allowance for Loan Losses, Impaired Loans, and Other Real Estate Owned. The allowance for loan losses is the
estimated amount considered necessary to cover probable and reasonably estimable credit losses inherent in the loan portfolio
at the balance sheet date. The allowance is established through the provision for loan losses that is charged against income. In
determining the allowance for loan losses, we make significant estimates and judgments. The determination of the allowance
for loan losses is considered a critical accounting policy by management because of the high degree of judgment involved, the
subjectivity of the assumptions used, and the potential for changes in the economic environment that could result in changes
to the amount of the recorded allowance for loan losses.
The allowance for loan losses has been determined in accordance with GAAP. We are responsible for the timely and
periodic determination of the amount of the allowance required. We believe that our allowance for loan losses is adequate to
cover identifiable losses, as well as estimated losses inherent in our portfolio for which certain losses are probable but not
specifically identifiable.
Management performs a formal quarterly evaluation of the adequacy of the allowance for loan losses. This quarterly
process is performed by the accounting department, in conjunction with the credit administration department, and approved
by the Controller. The Chief Financial Officer performs a final review of the calculation. All supporting documentation with
regard to the evaluation process is maintained by the accounting department. Each quarter a summary of the allowance for
loan losses is presented by the Chief Financial Officer to the audit committee of the board of directors.
The analysis of the allowance for loan losses has a component for impaired loans held-for-investment, PCI loans, and
a component for general loan losses, including unallocated reserves. Management has defined an impaired loan (excluding
46
PCI loans) to be a loan for which it is probable, based on current information, that we will not collect all amounts due in
accordance with the contractual terms of the loan agreement. We have defined the population of impaired loans to be all non-
accrual loans with an outstanding balance of $500,000 or greater, and all loans subject to a troubled debt restructuring.
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 a detailed evaluation of each impaired loan and generally obtains
updated appraisals as part of the evaluation. In addition, management adjusts estimated fair values down to appropriately
consider recent market conditions, our willingness to accept a lower sales price to effect a quick sale, and costs to dispose of
any supporting collateral. Determining the estimated fair value of underlying collateral (and related costs to sell) can be
difficult in illiquid real estate markets and is subject to significant assumptions and estimates. Management employs an
independent third-party expert in appraisal preparation and review to ascertain the reasonableness of updated appraisals.
Projecting the expected cash flows under troubled debt restructurings 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, and could have a material effect on our
financial results.
The second component of the allowance for loan losses is the general loss allocation. This assessment excludes
impaired loans, trouble debt restructured, held-for-sale and purchased credit-impaired (PCI) loans, with loans being grouped
into similar risk characteristics, primarily loan type, loan-to-value (if collateral dependent) and internal credit risk rating. We
apply an estimated loss rate to each loan group. The loss rates applied are based on our loss experience as adjusted for our
qualitative assessment of relevant changes related to: underwriting standards; delinquency trends; collection, charge-off and
recovery practices; the nature or volume of the loan group; changes in lending staff; concentration of loan type; current
economic conditions; and other relevant factors considered appropriate by management. In evaluating the estimated loss
factors to be utilized for each loan group, management also reviews actual loss history over an extended period of time as
reported by the Federal Deposit Insurance Corporation for institutions both nationally and in our market area, during periods
that are believed to have been under similar economic conditions. This evaluation is inherently subjective as it requires
material estimates that may be susceptible to significant revisions based on changes in economic and real estate market
conditions. Actual loan losses may be significantly different than the allowance for loan losses we have established, and could
have a material effect on our financial results. We also maintain an unallocated component related to the general loss
allocation. Management does not target a specific unallocated percentage of the total general allocation, or total allowance for
loan losses. The primary purpose of the unallocated component is to account for the inherent imprecision of the loss
estimation process related primarily to periodic updating of appraisals on impaired loans, as well as periodic updating of
commercial loan credit risk ratings by loan officers and our internal credit audit process. Generally, management will establish
higher levels of unallocated reserves between independent credit audits, and between appraisal reviews for larger impaired
loans. Adjustments to the provision for loans due to the receipt of updated appraisals is mitigated by management’s quarterly
review of real estate market index changes, and reviews of property valuation trends noted in current appraisals being received
on other impaired and unimpaired loans. These changes in indicators of value are applied to impaired loans that are awaiting
updated appraisals.
We have a concentration of loans secured by real property located in New York City, New Jersey, and Eastern
Pennsylvania. As a substantial amount of our loan portfolio is collateralized by real estate, appraisals of the underlying value
of property securing loans are critical in determining the amount of the allowance required for specific loans. Assumptions for
appraisal valuations are instrumental in determining the value of properties. Overly optimistic assumptions or negative
changes to assumptions could significantly impact the valuation of a property securing a loan and the related allowance
determined. The assumptions supporting such appraisals are reviewed by management and an independent third-party
appraiser to determine that the resulting values reasonably reflect amounts realizable on the collateral. Based on the
composition of our loan portfolio, we believe the primary risks are increases in interest rates, a decline in the economy
generally, or a decline in real estate market values in New York or New Jersey. Any one or a combination of these events may
adversely affect our loan portfolio resulting in delinquencies, increased loan losses, and future loan loss provisions.
Although we believe we have established and maintained the allowance for loan losses at adequate levels, changes
may be necessary if future economic or other conditions differ substantially from our estimation of the current operating
environment. Although management uses the information available, the level of the allowance for loan losses remains an
estimate that is subject to significant judgment and short-term change. In addition, the Office of the Comptroller of the
Currency, as an integral part of their examination process, will review our allowance for loan losses and may require us to
recognize adjustments to the allowance based on their judgments about information available to them at the time of their
examination.
47
We also maintain an allowance for estimated losses on off-balance sheet credit risks related to loan commitments and
standby letters of credit. Management utilizes a methodology similar to its allowance for loan loss methodology to estimate
losses on these items. The allowance for estimated credit losses on these items is included in other liabilities and any changes
to the allowance are recorded as a component of other non-interest expense.
Real estate acquired by us as a result of foreclosure or by deed in lieu of foreclosure is classified as other real estate
owned. When we acquire other real estate owned, we generally obtain a current appraisal to substantiate the net carrying value
of the asset. The asset is recorded at the lower of cost or estimated fair value, establishing a new cost basis. Holding costs and
declines in estimated fair value result in charges to expense after acquisition.
Purchased Credit-Impaired Loans. Purchased credit-impaired loans, or “PCI” loans, are subject to our internal credit
review. If and when credit deterioration occurs at the loan pool level subsequent to the acquisition date, a provision for credit
losses for PCI loans will be charged to earnings for the full amount of the decline in expected cash flows for the pool. Under
the accounting guidance of ASC Topic 310-30, for acquired credit impaired loans, the allowance for loan losses on PCI loans
is measured at each financial reporting date based on future expected cash flows. This assessment and measurement is
performed at the pool level and not at the individual loan level. Accordingly, decreases in expected cash flows resulting from
further credit deterioration, on a pool basis, as of such measurement date compared to those originally estimated are
recognized by recording a provision and allowance for credit losses on PCI loans. Subsequent increases in the expected cash
flows of the loans in each pool would first reduce any allowance for loan losses on PCI loans; and any excess will be accreted
prospectively as a yield adjustment. The analysis of expected cash flows for pools incorporates updated pool level expected
prepayment rates, default rates, and delinquency levels, and loan level loss severity given default assumptions. The expected
cash flows are estimated based on factors which include loan grades established in Northfield Bank’s ongoing credit review
program, likelihood of default based on observations of specific loans during the credit review process as well as applicable
industry data, loss severity based on updated evaluation of cash flows from available collateral, and the contractual terms of
the underlying loan agreement. Actual cash flows could differ from those expected, and others provided with the same
information could draw different reasonable conclusions and calculate different expected cash flows.
Goodwill and Other Intangibles. We record all assets and liabilities in acquisitions, including goodwill and other
intangible assets, at fair value as of the acquisition date, and expense all acquisition related costs as incurred as required by
ASC Topic 805, “Business Combinations.” Goodwill totaling $16.2 million at December 31, 2013, is not amortized but is
subject to annual tests for impairment or more often if events or circumstances indicate it may be impaired. Other intangible
assets, such as core deposit intangibles, are amortized over their estimated useful lives and are subject to impairment tests if
events or circumstances indicate a possible inability to realize the carrying amount. Such evaluation of other intangible assets
is based on undiscounted cash flow projections. The initial recording of goodwill and other intangible assets requires
subjective judgments concerning estimates of the fair value of the acquired assets and assumed liabilities.
The goodwill impairment analysis is generally a two-step test. However, we may, under Accounting Standards Update
(ASU) No. 2011-08, “Testing Goodwill for Impairment,” first assess qualitative factors to determine whether it is necessary to
perform the two-step quantitative goodwill impairment test. Under this new ASU, we are not required to calculate the fair
value of our reporting unit if, based on a qualitative assessment, we determine that it was more likely than not that the unit’s
fair value was not less than its carrying amount. During 2013, we elected to perform step one of the two-step goodwill
impairment test for our reporting unit, but (under the ASU) we will be permitted to perform the optional qualitative
assessment in future periods. The first step compares the fair value of the reporting unit with its carrying amount, including
goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not
impaired; however, if the carrying amount of the reporting unit exceeds its fair value, an additional step must be performed.
That additional step compares the implied fair value of the reporting unit’s goodwill with the carrying amount of that
goodwill. The implied fair value of goodwill is determined in a manner similar to the amount of goodwill calculated in a
business combination, i.e., by measuring the excess of the estimated fair value of the reporting unit, as determined in the first
step above, over the aggregate estimated fair values of the individual assets, liabilities, and identifiable intangibles, as if the
reporting unit was being acquired in a business combination at the impairment test date. An impairment loss is recorded to the
extent that the carrying amount of goodwill exceeds its implied fair value. The loss establishes a new basis in the goodwill
and subsequent reversal of goodwill impairment losses are not permitted.
Securities Valuation and Impairment. Our securities portfolio is comprised of mortgage-backed securities and to a
lesser extent corporate bonds, agency bonds, and mutual funds. Our available-for-sale securities portfolio is carried at
estimated fair value, with any unrealized gains or losses, net of taxes, reported as accumulated other comprehensive income or
loss in stockholders’ equity. Our trading securities portfolio is reported at estimated fair value. Our held-to-maturity securities
portfolio, consisting of debt securities for which we have a positive intent and ability to hold to maturity, is carried at
48
amortized cost. We conduct a quarterly review and evaluation of the available-for-sale and held-to-maturity securities
portfolios to determine if the estimated fair value of any security has declined below its amortized cost, and whether such
decline is other-than-temporary. If such decline is deemed other-than-temporary, we adjust the cost basis of the security by
writing down the security to estimated fair value through a charge to current period operations. The estimated fair values of
our securities are primarily affected by changes in interest rates, credit quality, and market liquidity.
Management is responsible for determining the estimated fair value of the securities in our portfolio. In determining
estimated fair values, each quarter management utilizes the services of an independent third-party service, recognized as a
specialist in pricing securities. 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, if identifiable. Where
necessary, the independent third-party pricing service estimates fair value using models employing techniques such as
discounted cash flow analyses. The assumptions used in these models typically include assumptions for interest rates, credit
losses, and prepayments, utilizing observable market data, where available. Where the market price of the same or similar
securities is not available, the valuation becomes more subjective and involves a high degree of judgment. In addition, we
compare securities prices to a second independent pricing service that is utilized as part of our asset liability risk management
process and analyze significant anomalies in pricing including significant fluctuations, or lack thereof, in relation to other
securities. At December 31, 2013, and for each quarter end in 2013, all securities were priced by an independent third-party
pricing service, and management made no adjustment to the prices received.
Determining that a security’s decline in estimated fair value is other-than-temporary is inherently subjective, and
becomes increasing difficult as it relates to mortgage-backed securities that are not guaranteed by the U.S. Government, or a
U.S. Government Sponsored Enterprise (e.g., Fannie Mae and Freddie Mac). In performing our evaluation of securities in an
unrealized loss position, we consider among other things, the severity and duration of time that the security has been in an
unrealized loss position and the credit quality of the issuer. As it relates to private label mortgage-backed securities not
guaranteed by the U.S. Government, Fannie Mae, or Freddie Mac, we perform a review of the key underlying loan collateral
risk characteristics including, among other things, origination dates, interest rate levels, composition of variable and fixed
rates, reset dates (including related pricing indices), current loan to original collateral values, locations of collateral,
delinquency status of loans, and current credit support. In addition, for securities experiencing declines in estimated fair
values of over 10%, as compared to its amortized cost, management also reviews published historical and expected
prepayment speeds, underlying loan collateral default rates, and related historical and expected losses on the disposal of the
underlying collateral on defaulted loans. This evaluation is inherently subjective as it requires estimates of future events, many
of which are difficult to predict. Actual results could be significantly different than our estimates and could have a material
effect on our financial results.
Federal Home Loan Bank Stock Impairment Assessment. Northfield Bank is a member of the Federal Home Loan
Bank System, which consists of 12 regional Federal Home Loan Banks, through its membership in the Federal Home Loan
Bank of New York. As a member of the Federal Home Loan Bank of New York, Northfield Bank is required to acquire and
hold shares of common stock in the Federal Home Loan Bank of New York in an amount determined by a “membership”
investment component and an “activity-based” investment component. As of December 31, 2013, Northfield Bank was in
compliance with its ownership requirement. At December 31, 2013, Northfield Bank held $17.5 million of Federal Home
Loan Bank of New York common stock. In performing our evaluation of our investment in Federal Home Loan Bank of New
York stock, on a quarterly basis, management reviews the Federal Home Loan Bank of New York’s most recent financial
statements and determines whether there have been any adverse changes to its capital position as compared to the trailing
period. In addition, management reviews the Federal Home Loan Bank of New York’s most recent President’s Report in order
to determine whether or not a dividend has been declared for the current reporting period. Furthermore, management obtains
the credit rating of the Federal Home Loan Bank of New York from an accredited credit rating service to ensure that no
downgrades have occurred. At December 31, 2013, it was determined by management that Northfield Bank’s investment in
Federal Home Loan Bank of New York common stock was not impaired.
Deferred Income Taxes. We use the asset and liability method of accounting for income taxes. Under this method,
deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. If it is determined that it is more likely than not that the deferred tax assets
will not be realized, a valuation allowance is established. We consider the determination of this valuation allowance to be a
critical accounting policy because of the need to exercise significant judgment in evaluating the amount and timing of
recognition of deferred tax liabilities and assets, including projections of future taxable income. These judgments and
estimates are reviewed quarterly as regulatory and business factors change. A valuation allowance for deferred tax assets may
49
be required if the amounts of taxes recoverable through loss carry backs decline, or if we project lower levels of future taxable
income. Such a valuation allowance would be established and any subsequent changes to such allowance would require an
adjustment to income tax expense that could adversely affect our operating results.
Stock Based Compensation. We recognize the cost of employee services received in exchange for awards of equity
instruments based on the grant-date fair value.
We estimate the per share fair value of options on the date of grant using the Black-Scholes option pricing model
using assumptions for the expected dividend yield, expected stock price volatility, risk-free interest rate and expected option
term. These assumptions are based on our judgments regarding future option exercise experience and market conditions.
These assumptions are subjective in nature, involve uncertainties, and, therefore, cannot be determined with precision. The
Black-Scholes option pricing model also contains certain inherent limitations when applied to options that are not traded on
public markets.
The per share fair value of options is highly sensitive to changes in assumptions. In general, the per share fair value of
options will move in the same direction as changes in the expected stock price volatility, risk-free interest rate and expected
option term, and in the opposite direction of changes in the expected dividend yield. The use of different assumptions or
different option pricing models could result in materially different per share fair values of options.
As our common stock did not have a significant amount of historical price volatility, we utilized the historical stock
price volatility of a peer group when pricing stock options at the date of grant.
Comparison of Financial Condition at December 31, 2013 and 2012
Total assets decreased $110.4 million, or 3.9%, to $2.70 billion at December 31, 2013, from $2.81 billion at December
31, 2012. The decrease was primarily attributable to decreases in cash and cash equivalents of $67.5 million, securities
available-for-sale of $338.5 million, partially offset by increases in net loans held-for-investment of $246.9 million, bank
owned life insurance of $32.1 million and other assets of $18.6 million.
Cash and cash equivalents decreased by $67.5 million, or 52.4%, to $61.2 million at December 31, 2013, from $128.8
million at December 31, 2012. Balances fluctuate based on the timing of receipt of security and loan repayments and the
redeployment of cash into higher yielding assets, or the funding of deposit or borrowing obligations.
The Company’s securities available-for-sale portfolio totaled $937.1 million at December 31, 2013, compared to $1.28
billion at December 31, 2012. At December 31, 2013, $855.6 million of the portfolio consisted of residential mortgage-
backed securities issued or guaranteed by Fannie Mae, Freddie Mac, or Ginnie Mae. The Company also held residential
mortgage-backed securities not guaranteed by these three entities, referred to as “private label securities.” The private label
securities had an amortized cost of $4.5 million and an estimated fair value of $4.6 million at December 31, 2013. In addition
to the above mortgage-backed securities, the Company held $76.5 million in corporate bonds that were all considered
investment grade at December 31, 2013, and $510,000 of equity investments in money market mutual funds.
Securities held-to-maturity decreased to zero at December 31, 2013, from $2.2 million at December 31, 2012. The
decrease was attributable to transfers to available-for-sale during the year ended December 31, 2013.
Originated loans held-for-investment, net, totaled $1.35 billion at December 31, 2013, as compared to $1.07 billion at
December 31, 2012. The increase was primarily due to an increase in multifamily real estate loans, which increased $260.8
million, or 42.7%, to $871.0 million at December 31, 2013, from $610.1 million at December 31, 2012, commercial real
estate loans of $24.7 million and home equity and lines of credit of $12.7 million. These increases were partially offset by a
decrease of $9.1 million in construction and land loans and a decrease of $4.6 million in commercial and industrial loans.
Currently, management is primarily focused on originating multifamily loans, with less emphasis on other loan types. The
following table details our multifamily originations for the year ended December 31, 2013 (dollars in thousands):
Originations
___________
$
354,926
28,879
___________
383,805
___________
___________
Weighted Average
Interest Rate
_____________
3.54%
4.00%
3.57%
Weighted Average
Loan-to-Value Ratio
________________
61%
34%
59%
(F)ixed or
(V)ariable
________
V
F
Weighted Average Months to
Next Rate Change or Maturity
for Fixed Rate Loans
________________________
95
174
Amortization
Term
_____________
20 to 30 Years
5 to 15 Years
50
Purchased credit-impaired (PCI) loans, primarily acquired as part of a transaction with the FDIC, totaled $59.5 million
at December 31, 2013, as compared to $75.3 million at December 31, 2012. The Company recorded accretion of interest
income of $5.7 million for the year ended December 31, 2013. Additionally, in 2013 the Company reclassified approximately
$5.3 million from the non-accretable yield to the accretable yield as a result of improving cash flows which will be
recognized into income over the remaining life of the portfolio.
Bank owned life insurance increased $32.1 million, or 34.5%, to $125.1 million at December 31, 2013. The increase
resulted primarily from purchases of $28.7 million and income earned of $3.6 million on bank owned life insurance for the
year ended December 31, 2013, which was partially offset by death benefits received.
Federal Home Loan Bank of New York stock, at cost, increased $5.0 million, or 39.6%, to $17.5 million at December
31, 2013, from $12.6 million at December 31, 2012. This increase was attributable to an increase in borrowings outstanding
with the Federal Home Loan Bank of New York over the same time period.
Premises and equipment, net, decreased $728,000, or 2.4%, to $29.1 million at December 31, 2013, from $29.8
million at December 31, 2012. This decrease was primarily attributable to depreciation expense of $3.6 million, the sale of a
vacant parcel of land, partially offset by the completion of leasehold improvements made to the branch opened during the year
and the renovation of existing branches.
Other real estate owned decreased $236,000 to $634,000 at December 31, 2013, from $870,000 at December 31, 2012.
This decrease was attributable to sales during the year.
Other assets increased $18.6 million, or 96.0%, to $37.9 million at December 31, 2013, from $19.4 million at
December 31, 2012. The increase in other assets was primarily attributable to an increase in net deferred tax assets, due to an
decrease in deferred tax liabilities associated with a reduction in net unrealized gains on securities available-for-sale and the
amortization of prepaid FDIC insurance.
Deposits decreased $464.2 million, or 23.7%, to $1.49 billion at December 31, 2013, from $1.96 billion at December
31, 2012. The decrease in deposits for the year ended December 31, 2013, was $174.6 million, or 10.5%, after excluding the
deposits of $289.6 million used to purchase stock in the second-step conversion in the first quarter of 2013. The decrease was
attributable to decreases of $175.2 million in certificates of deposit accounts and $60.4 million in money market accounts,
partially offset by increases of $47.6 million in transaction accounts and $13.4 million in savings accounts. The decline in
deposits resulted from the Company’s decision not to retain higher cost time deposits and to fund loan growth with cash flow
from the Company’s securities portfolio..
Borrowings, consisting primarily of Federal Home Loan Bank advances and repurchase agreements, increased by
$51.2 million, or 12.2%, to $470.3 million at December 31, 2013, from $419.1 million at December 31, 2012. Management
utilizes borrowings to mitigate interest rate risk, for short-term liquidity, and to a lesser extent as part of leverage strategies.
Accrued expenses and other liabilities decreased $1.7 million to $17.2 million at December 31, 2013, from $18.9
million at December 31, 2012.
Total stockholders’ equity increased by $301.2 million to $716.1 million at December 31, 2013, from $414.9 million at
December 31, 2012. This increase was primarily attributable to a $330.1 million increase related to the net proceeds from the
stock conversion, net income of $19.1 million for the year ended December 31, 2013, and a $5.4 million increase related to
ESOP and equity award activity. These increases were partially offset by a $22.9 million decrease in accumulated other
comprehensive income as a result of an increased interest rate environment, treasury share repurchases of $3.6 million, and
dividend payments of $26.9 million, which included a special dividend of $14.5 million paid on May 22, 2013.
Comparison of Operating Results for the Years Ended December 31, 2013 and 2012
Net Income. Net income was $19.1 million and $16.0 million for the years ended December 31, 2013 and 2012,
respectively. Significant variances from the prior year are as follows: a $6.6 million increase in net interest income, a $1.6
million decrease in the provision for loan losses, a $1.6 million increase in non-interest income, a $4.9 million increase in
non-interest expense, and a $1.8 million increase in income tax expense.
51
Interest Income. Interest income increased by $931,000, or 1.0%, to $92.5 million for the year ended December 31,
2013, as compared to $91.5 million for the year ended December 31, 2012. The increase was primarily the result of an
increase in average interest-earning assets of $232.3 million, or 10.1%. The increase in average interest-earning assets was
due primarily to an increase of $238.7 million in average loans outstanding, other securities of $13.2 million and $4.7 million
in interest-earning assets in other financial institutions, which were partially offset by a $24.8 million decrease in mortgage-
backed securities. This was partially offset by a 33 basis point decrease in yields earned on interest-earning assets to 3.63%
from 3.96% for the prior year. The rates earned on all earning assets decreased due to the general decline in market interest
rates for these asset types.
Interest Expense. Interest expense decreased $5.7 million, or 25.2%, to $16.9 million for the year ended December
31, 2013, from $22.6 million for the year ended December 31, 2012. The decrease was attributable to a decrease in interest
expense on borrowings of $2.4 million, or 18.4% and a decrease in interest expense on deposits of $3.3 million, or 33.9%.
The decrease in interest expense on borrowings was primarily attributable to a decrease of 21 basis points, or 8.0%, in the cost
of borrowings, reflecting lower market interest rates for borrowed funds, assisted by a decrease of $55.4 million, or 11.42%,
in average borrowings outstanding. The decrease in interest expense on deposits was attributable to a decrease in the cost of
interest-bearing deposits of 22 basis points, or 31.4%, to 0.48% for the year ended December 31, 2013, from 0.70% for the
year ended December 31, 2012, reflecting lower market interest rates for short-term deposits. The decrease in the cost of
deposits was further assisted by a decrease of $44.2 million, or 3.2%, in average interest-bearing deposits. The decrease in
average deposit balances was attributable to a decrease of $109.8 million in certificates of deposit, partially offset by an
increase of $65.6 million in savings, NOW, and money market accounts.
Net Interest Income. Net interest income for the year ended December 31, 2013, increased $6.6 million, or 9.6%, as
the $232.3 million, or 10.1%, increase in our interest-earning assets more than offset the one basis point decrease in our net
interest margin to 2.97%. The increase in average interest-earning assets was due primarily to increases in average net loans
outstanding of $238.7 million, other securities of $13.2 million, and deposits in financial institutions of $4.7 million partially
offset by a decrease in mortgage-backed securities of $24.8 million. The December 31, 2013 year included loan prepayment
income of $2.2 million compared to $1.5 million for the year ended December 31, 2012. The year ended December 31, 2013,
also included a recovery of $256,000 of interest that was previously applied to principal. Rates paid on interest-bearing
liabilities decreased 25 basis points to 0.95% for the current year as compared to 1.20% for the prior year. This was offset by
a 33 basis point decrease in yields earned on interest earning assets to 3.63% for the year ended December 31, 2013, as
compared to 3.96% for 2012.
Provision for Loan Losses. The provision for loan losses decreased $1.6 million, or 45.5%, to $1.9 million for the
year ended December 31, 2013, from $3.5 million for the year ended December 31, 2012. The decrease in the provision for
loan losses resulted primarily from a decrease in net charge-offs of approximately $1.6 million, and a decrease in non-
performing loans, partially offset by loan growth. Originated loan growth was approximately 26.8% for the year ended
December 31, 2013, compared to 8.1% for the year ended December 31, 2012. Net charge-offs were $2.3 million for the year
ended December 31, 2013, compared to net charge-offs of $3.9 million for the year ended December 31, 2012.
Non-interest Income. Non-interest income increased $1.6 million, or 18.3%, to $10.2 million for the year ended
December 31, 2013, from $8.6 million for the year ended December 31, 2012. This increase was primarily a result of an
increase of $683,000 in gain on securities transactions, net, a $724,000 increase in income on bank owned life insurance, and
a $401,000 increase in other non-interest income that was primarily related to the sale of vacant land adjacent to a branch,
partially offset by an increase of $410,000 in other-than-temporary impairment losses on securities. Securities gains in 2013
included $963,000 related to the Company’s trading portfolio, while 2012 included securities gains of $384,000 related to the
Company’s trading portfolio.
Non-interest Expense. Non-interest expense increased $4.9 million, or 9.9%, for the year ended December 31, 2013,
compared to the year ended December 31, 2012. This was due primarily to a $3.0 million increase in compensation and
employee benefits which is related to increased staff due to branch openings and the Flatbush Federal Bancorp merger
(Merger), additional ESOP expense related to the issuance of shares in the second step conversion. The increase in non-
interest expense also includes to a lesser extent salary adjustments effective January 1, 2013, and includes an increase of
$579,000 in expense related to the Company’s deferred compensation plan which is described above, and had no effect on net
income. Additionally, there was a $1.5 million increase in occupancy expense primarily related to new branches, the Merger,
and the renovation of existing branches, and a $562,000 increase in data processing fees due to data conversion charges
related to the Merger. This increase was partially offset by a $394,000 decrease in professional fees.
52
Income Tax Expense. The Company recorded income tax expense of $10.7 million for the year ended December 31,
2013, compared to $8.9 million for the year ended December 31, 2012. The effective tax rate for the year ended December
31, 2013, was 35.9%, as compared to 35.7% for the year ended December 31, 2012.
Comparison of Operating Results for the Years Ended December 31, 2012 and 2011
Net Income. Net income was $16.0 million and $16.8 million for the years ended December 31, 2012 and 2011,
respectively. Significant variances from the prior year are as follows: a $3.3 million increase in net interest income, a $9.1
million decrease in the provision for loan losses, a $3.2 million decrease in non-interest income, a $7.5 million increase in
non-interest expense, and a $2.4 million increase in income tax expense.
Interest Income. Interest income increased by $522,000, or 0.6%, to $91.5 million for the year ended December 31,
2012, as compared to $91.0 million for the year ended December 31, 2011. The increase was primarily the result of an
increase in average interest-earning assets of $131.1 million, or 6.0%. The increase in average interest-earning assets was due
primarily to a $171.7 million increase in average loans outstanding, which was partially offset by a $7.4 million decrease in
interest-earning assets in other financial institutions, a $21.6 million decrease in mortgage-backed securities, and a $14.5
million decrease in other securities. This was partially offset by a 21 basis point decrease in yields earned on interest-earning
assets to 3.96% from 4.17% for the prior year. The rates earned on loans and mortgage-backed securities decreased due to the
general decline in market interest rates for these asset types.
Interest Expense. Interest expense decreased $2.8 million, or 10.9%, to $22.6 million for the year ended December
31, 2012, from $25.4 million for the year ended December 31, 2011. The decrease was attributable to a decrease in interest
expense on borrowings of $355,000, or 2.7% and a decrease in interest expense on deposits of $2.4 million, or 19.7%. The
decrease in interest expense on borrowings was primarily attributable to a decrease of 12 basis points, or 4.3%, in the cost of
borrowings, reflecting lower market interest rates for borrowed funds, partially offset by an increase of $8.3 million, or 1.7%,
in average borrowings outstanding. The decrease in interest expense on deposits was attributable to a decrease in the cost of
interest-bearing deposits of 24 basis points, or 25.5%, to 0.70% for the year ended December 31, 2012, from 0.94% for the
year ended December 31, 2011, reflecting lower market interest rates for short-term deposits. The decrease in the cost of
deposits was partially offset by an increase of $89.7 million, or 6.1%, in average interest-bearing deposits outstanding.
Net Interest Income. Net interest income increased $3.3 million, or 5.0%, as average net interest-earning assets
increased by $33.2 million to $429.8 million which more than offset the three basis point decrease in our net interest margin
to 2.98%. The increase in average interest-earning assets was due primarily to a $171.7 million increase in average loans
outstanding, which was partially offset by a $7.4 million decrease in interest-earning assets in other financial institutions, a
$21.6 million decrease in mortgage-backed securities, and a $14.5 million decrease in other securities. The year ended
December 31, 2012, included loan prepayment income of $1.5 million compared to $812,000 for the year ended December
31, 2011. Rates paid on interest-bearing liabilities decreased 22 basis points to 1.20% from 1.42% for the prior year. This was
partially offset by a 21 basis point decrease in yields earned on interest-earning assets to 3.96% from 4.17% for the prior year.
Provision for Loan Losses. The provision for loan losses decreased $9.1 million, or 71.9%, to $3.5 million for the
year ended December 31, 2012, from $12.6 million for the year ended December 31, 2011. The decrease in the provision for
loan losses was due primarily to a decrease in charge-offs, a shift in the composition of our loan portfolio to multifamily
loans, which generally require lower general reserves than our commercial real estate loans, and a decrease in non-performing
loans and other asset quality indicators during the year ended December 31, 2012, compared to the year ended December 31,
2011. The Company recorded net charge-offs of $3.9 million (including $1.2 million related to loans transferred to held-for-
sale) and $7.6 million (including $4.0 million related to loans transferred to held-for-sale) during the years ended December
31, 2012 and 2011, respectively.
Non-interest Income. Non-interest income decreased $3.2 million, or 27.5%, to $8.6 million for the year ended
December 31, 2012, as compared to $11.8 million for the year ended December 31, 2011. This decrease was primarily a
result of a $3.6 million bargain purchase gain, net of tax, during 2011 partially offset by a decrease in losses on other-than-
temporary-impairment of securities of $385,000.
Non-interest Expense. Non-interest expense increased $7.5 million, or 18.0%, to $49.0 million for the year ended
December 31, 2012, from $41.5 million for the year ended December 31, 2011, due primarily to a $2.5 million increase in
compensation and employee benefits primarily resulting from increased staff associated with branch openings and
acquisitions, a $1.9 million increase in occupancy expense and a $259,000 increase in furniture and equipment expense each
primarily relating to new branches and the renovation of existing branches, a $964,000 increase in data processing fees
primarily related to conversion costs associated with the FDIC-assisted transaction, a $945,000 increase in professional fees
53
related to merger activity, and an increase in other non-interest expense of $904,000 primarily related to costs associated with
other real estate owned.
Income Tax Expense. The Company recorded income tax expense of $8.9 million for the year ended December 31,
2012, compared to $6.5 million for the year ended December 31, 2011. The effective tax rate for the year ended December
31, 2012, was 35.7%, as compared to 27.8% for the year ended December 31, 2011. The increase in the effective tax rate was
primarily attributable to certain merger related expenses from the Flatbush Federal transaction which are not deductible for
tax purposes and the recording of the bargain purchase gain net of tax expense in non-interest income during 2011.
Average Balances and Yields. The following tables set forth average balance sheets, average yields and costs, and
certain other information for the years indicated. No tax-equivalent yield adjustments have been made, as we had no tax-free
interest-earning assets during the years. All average balances are daily average balances based upon amortized costs. Non-
accrual loans were included in the computation of average balances. The yields set forth below include the effect of deferred
fees, discounts, and premiums that are amortized or accreted to interest income or interest expense.
For the Years Ended December 31,
Average
Outstanding
Balance
_____________
2013
Interest
___________
Average
Average
Yield/ Outstanding
Balance
Rate
___________
___________
2012
Interest
___________
Average
Yield/
Rate
___________
Average
Outstanding
Balance
_______________
2011
Interest
___________
Average
Yield/
Rate
___________
(Dollars in thousands)
Interest-earning assets:
Loans . . . . . . . . . . . . . . . . . . . . . $ 1,339,348
1,014,856
Mortgage-backed securities . . . .
Other securities . . . . . . . . . . . . .
129,908
Federal Home Loan Bank
$ 68,472
21,920
1,459
5.11% $ 1,100,632
1,039,677
2.16
116,664
1.12
$ 61,514
26,791
2,588
5.59% $
2.58
2.22
928,904
1,061,308
131,136
$ 55,066
32,033
3,314
of New York stock . . . . . . . . .
Interest-earning deposits . . . . . .
Total interest-earning assets . .
Non-interest-earning assets . . . .
13,905
46,156
2,544,173
192,007
_____________
Total assets . . . . . . . . . . . . . . . $ 2,736,180
_____________
_____________
536
___________ ___________
83
92,470
Interest-bearing liabilities:
Savings, NOW, and money
market accounts . . . . . . . . . . . $
Certificates of deposit . . . . . . . .
Total interest-bearing
deposits . . . . . . . . . . . . . . . . .
Borrowings . . . . . . . . . . . . . . . .
Total interest-bearing
liabilities . . . . . . . . . . . . . . . .
Non-interest-bearing
2,635
___________ ___________
3,866
982,825
370,351
6,501
___________ ___________
10,447
1,353,176
429,332
deposits . . . . . . . . . . . . . . . . .
222,832
Accrued expenses and other
liabilities . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . .
Stockholders’ equity . . . . . . . . .
22,176
_____________
708,664
_____________
Total liabilities and
stockholders’ equity . . . . . . . . $ 2,736,180
_____________
_____________
Net interest income . . . . . . . . . .
Net interest rate spread (1) . . . .
Net interest-earning . . . . . . . . . . $
761,665
_____________
_____________
2,027,516
___________
$ 75,522
___________
assets (2)
Net interest margin (3) . . . . . . .
Average interest-earning
assets to interest-bearing
liabilities . . . . . . . . . . . . . . . .
5.93%
3.02
2.53
4.20
0.34
4.17
3.85
0.18
3.63
0.27
1.04
0.48
2.43
591
___________ ___________
55
91,539
13,391
41,462
2,311,826
153,827
___________
$ 2,465,653
___________
___________
$
4,136
___________ ___________
5,701
917,210
480,194
9,837
___________ ___________
12,807
1,397,404
484,687
4.41
0.13
3.96
0.45
1.19
0.70
2.64
439
___________ ___________
165
91,017
10,459
48,903
2,180,710
141,466
_______________
$ 2,322,176
_______________
_______________
$
4,651
___________ ___________
7,600
741,130
566,619
12,251
___________ ___________
13,162
1,307,749
476,413
0.63
1.34
0.94
2.76
173,854
16,802
___________
392,906
___________
$ 2,465,653
___________
___________
$
429,735
___________
___________
2,072,747
___________
$ 68,895
___________
2.68
2.97%
2.76
2.98%
131,224
13,260
_______________
393,530
_______________
$ 2,322,176
_______________
_______________
$
396,548
_______________
_______________
1,928,646
___________
$ 65,604
___________
2.75
3.01%
1,782,508
16,948
0.95
1,882,091
22,644
1.20
1,784,162
25,413
1.42
142.73%
122.83%
122.23%
(1) Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the
weighted average rate of interest-bearing liabilities.
(2) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.
(3) Net interest margin represents net interest income divided by average total interest-earning assets.
54
Rate/Volume Analysis
The following table presents the effects of changing rates and volumes on our net interest income for the years
indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The
volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The total
column represents the sum of the prior columns. For purposes of this table, changes attributable to both rate and volume,
which cannot be segregated, have been allocated proportionately based on the changes due to rate and the changes due to
volume.
Year Ended December 31,
2013 vs. 2012
________________________________________
Year Ended December 31,
2012 vs. 2011
________________________________________
Increase (Decrease) Due to
_________________________
_________
_________
Rate
Volume
Total
Increase
_________
(Decrease)
Increase (Decrease) Due to
_________________________
_________
_________
Rate
Volume
(In thousands)
Interest-earning assets:
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,554
(623)
Mortgage-backed securities . . . . . . . . . . . . .
268
Other securities . . . . . . . . . . . . . . . . . . . . . . .
22
Federal Home Loan Bank of New York stock . .
6
Interest-earning deposits . . . . . . . . . . . . . . . .
_________
12,227
Total interest-earning assets . . . . . . . . . . .
_________
Interest-bearing liabilities:
Savings, NOW and money market accounts . .
Certificates of deposit . . . . . . . . . . . . . . . . . .
Total deposits . . . . . . . . . . . . . . . . . . . . . .
Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . .
Total interest-bearing liabilities . . . . . . . .
293
(1,141)
_________
(848)
(1,069)
_________
(1,917)
_________
Change in net interest income . . . . . . . . . . . . . $ 14,144
_________
_________
$
(5,596)
(4,248)
(1,397)
(77)
22
_________
(11,296)
_________
(1,794)
(694)
_________
(2,488)
(1,291)
_________
(3,779)
_________
(7,517)
$
_________
_________
$
6,958
(4,871)
(1,129)
(55)
28
_________
931
_________
(1,501)
(1,835)
_________
(3,336)
(2,360)
_________
(5,696)
_________
6,627
$
_________
_________
$
9,347
(643)
(344)
129
(22)
_________
8,467
_________
3,071
(1,090)
_________
1,981
236
_________
2,217
_________
6,250
$
_________
_________
$
(2,899)
(4,599)
(382)
23
(88)
_________
(7,945)
_________
(3,488)
(907)
_________
(4,395)
(591)
_________
(4,986)
_________
(2,959)
$
_________
_________
Total
Increase
_________
(Decrease)
$
6,448
(5,242)
(726)
152
(110)
_________
522
_________
(417)
(1,997)
_________
(2,414)
(355)
_________
(2,769)
_________
3,291
$
_________
_________
Asset Quality
Purchased Credit Impaired (“PCI”) Loans
PCI loans were 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 ($59.5
million at December 31, 2013) as accruing, even though they may be contractually past due. At December 31, 2013, based on
contractual principal, 6.6% of PCI loans were past due 30 to 89 days, and 14.9% were past due 90 days or more, as compared
to 5.4% and 11.4%, respectively, at December 31, 2012. The amount and timing of expected cash flows as of December 31,
2013 did not change significantly from December 31, 2012.
Originated and Acquired Loans
General. Maintaining loan quality historically has been, and will continue to be, a key element of our business
strategy. We employ conservative underwriting standards for new loan originations and maintain sound credit administration
practices while the loans are outstanding. In addition, substantially all of our loans are secured, predominantly by real estate.
At December 31, 2013, our non-performing loans totaled $17.8 million or 1.20% of total loans held-for-investment. At the
same time, net charge-offs have remained low at 0.17% of average loans outstanding for the year ended December 31, 2013,
0.36% for the year ended December 31, 2012, and 0.78% for the year ended December 31, 2011. Net charge-offs in 2013
include $856,000 related to the transfer of $2.4 million of loans from held-for-investment to held-for-sale and $1.3 million
related to the transfer of $1.6 million of loans held-for-investment to held-for-sale in 2012.
Non-performing Assets and Delinquent Loans. Non-performing loans decreased $17.8 million, or 49.9%, to $17.8
million at December 31, 2013 from $35.6 million at December 31, 2012. The following table details non-performing loans at
December 31, 2013 and 2012. At December 31, 2013, the table includes $471,000 of multifamily non-accruing loans held-for-
sale and $634,000 of other real estate owned. At December 31, 2012, the table includes $3.8 million of one-to-four family
non-accruing loans held-for-sale and $823,000 of other real estate owned (in thousands).
55
December 31,
__________
2013
December 31,
__________
2012
Non-accruing loans:
Held-for-investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Held-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
6,649
471
$
10,348
5,325
Non-accruing loans subject to restructuring agreements:
Held-for-investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Held-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total non-accruing loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans 90 days or more past due and still accruing:
Held-for-investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total loans 90 days or more past due and still accruing: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total non-performing loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other real estate owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total non-performing assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans subject to restructuring agreements and still accruing . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accruing loans 30 to 89 days delinquent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,651
—
__________
17,771
__________
19,152
122
__________
34,947
__________
32
__________
32
__________
17,803
634
__________
$
18,437
__________
__________
26,190
$
13,331
$
621
__________
621
__________
35,568
870
__________
$
36,438
__________
__________
25,697
$
14,780
$
The following table details non-performing loans by loan type at December 31, 2013 and 2012. At December 31,
2013, the table includes $471,000 of multifamily non-accruing loans held-for-sale. At December 31, 2012, the table includes
$3.8 million of one-to-four family non-accruing loans held-for-sale:
December 31,
__________
2013
__________
2012
(in thousands)
Non-accrual loans:
Real estate loans:
Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
One- to four-family residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction and land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Home equity and lines of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial and industrial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total non-accrual loans: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
12,450
2,989
108
544
1,239
441
__________
17,771
__________
$
22,425
6,333
2,070
1,169
1,694
1,256
__________
34,947
__________
Loans delinquent 90 days or more and still accruing:
Real estate loans:
Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
One-to four-family residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total loans delinquent 90 days or more and still accruing . . . . . . . . . . . . . . . . . . . . . . . . .
Total non-performing loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
32
__________
32
__________
17,803
$
__________
__________
349
270
2
__________
621
__________
35,568
$
__________
__________
Generally loans, excluding PCI loans, are placed on non-accruing status when they become 90 days or more
delinquent, 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.
The decrease in non-accrual loans was attributable primarily to $6.8 million of loans held-for-sale being sold, $4.7
million of loans returning to accrual status, $3.0 million of pay-offs and principal pay-downs, $968,000 of charge-offs, and
the sale of $5.0 million of loans held-for-investment. The above decreases in non-accruing loans, were partially offset by $3.4
million of loans being placed on non-accrual status during the year ended December 31, 2013.
At December 31, 2013, the Company had $13.3 million of accruing loans that were 30 to 89 days delinquent, as
compared to $14.8 million at December 31, 2012. The following table sets forth the total amounts of delinquencies for
accruing loans that were 30 to 89 days past due by type and by amount at the dates indicated.
56
Real estate loans:
Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
One- to four-family residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction and land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Home equity and lines of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial and industrial loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31,
__________
2013
__________
2012
(in thousands)
$
4,274
5,644
—
2,483
94
815
21
__________
$
13,331
__________
__________
$
4,736
5,584
159
2,731
44
1,467
59
__________
$
14,780
__________
__________
Included in non-accruing loans are loans subject to restructuring agreements totaling $10.6 million and $19.3 million
at December 31, 2013, and December 31, 2012, respectively. At December 31, 2013, $3.2 million, or 29.7% of the $10.6
million of loans subject to restructuring agreements, were performing in accordance with their restructured terms, as
compared to $16.0 million, or 83.0%, at December 31, 2012. One relationship accounts for the entire $7.5 million of loans
not performing in accordance with their restructured terms at December 31, 2013. The relationship is made of up of several
loans totaling $7.5 million collateralized by real estate, with an aggregate appraised value of $9.5 million. The Company also
holds loans subject to restructuring agreements that are on accrual status, which totaled $26.2 million and $25.7 million at
December 31, 2013, and December 31, 2012, respectively. At December 31, 2013, all of these loans were performing in
accordance with their restructured terms. Generally, the types of concessions that we make to troubled borrowers include
reductions to both temporary and permanent interest rates, extensions of payment terms, and to a lesser extent forgiveness of
principal and interest.
The table below sets forth the amounts and categories of the troubled debt restructurings as of December 31, 2013 and
December 31, 2012.
At December 31,
2013
____________________________
___________
__________
Accruing
Non-Accruing
2012
_____________________________
____________
___________
Accruing
Non-Accruing
(in thousands)
Troubled Debt Restructurings:
Real estate loans:
Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
One- to four-family residential . . . . . . . . . . . . . . . . . . . . . . .
Construction and land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Home equity and lines of credit . . . . . . . . . . . . . . . . . . . . . .
Commercial and industrial loans . . . . . . . . . . . . . . . . . . . . . . .
Performing in accordance with restructured terms . . . . . . . . .
$
9,496
607
108
—
—
441
__________
$
10,652
__________
__________
__________
__________
29.65%
$
21,536
1,176
—
2,074
341
1,063
___________
$
26,190
___________
___________
100.00%
___________
___________
$
16,046
612
2,070
—
96
451
___________
$
19,275
___________
___________
___________
___________
82.96%
$
21,785
569
—
2,041
356
946
____________
$
25,697
____________
____________
100.00%
____________
____________
Allowance for loan losses. The allowance for loan losses to non-performing loans (held-for-investment) increased
from 87.73% at December 31, 2012, to 150.23% at December 31, 2013. This increase was primarily attributable to a decrease
in non-performing loans of $17.8 million, from $35.6 million at December 31, 2012, to $17.8 million at December 31, 2013.
At December 31, 2013, 91.5% of the appraisals utilized for our impairment analysis were completed within the last nine
months and 8.5% were completed within the last 18 months. All appraisals older than 12 months were reviewed by
management and appropriate adjustments were made utilizing current market indices. Generally, non-performing loans are
charged down to the appraised value of collateral less costs to sell, which reduces the ratio of the allowance for loan losses to
non-performing loans. Downward adjustments to appraisal values, primarily to reflect “quick sale” discounts, are generally
recorded as specific reserves within the allowance for loan losses.
The allowance for loan losses to originated loans held-for-investment, net, decreased to 1.93% at December 31, 2013,
from 2.48% at December 31, 2012. The decrease in the Company’s allowance for loan losses during the year is primarily
attributable to net charge-offs exceeding the provision recorded for the year ended December 31, 2013. Net charge-offs were
$2.3 million and $3.9 million for the years ended December 31, 2013 and 2012, respectively, compared to a provision of $1.9
million and $3.5 for the years ended December 31, 2013 and 2012, respectively.
57
Specific reserves on impaired loans decreased $983,000, or 27.28%, from $3.6 million, at December 31, 2012, to $2.6
million at December 31, 2013. At December 31, 2013, the Company had 36 loans classified as impaired and recorded a total
of $2.6 million of specific reserves on 12 of the 36 impaired loans. At December 31, 2012, the Company had 47 loans
classified as impaired and recorded a total of $3.6 million of specific reserves on 17 of the 47 impaired loans.
The following table sets forth activity in our allowance for loan losses, by loan type, at December 31, for the years
indicated.
Real estate loans
One-to-
four
Family
Commercial Residential
_________
_________
Construction
and Land Multifamily
___________ ___________
Home
Equity
and Lines
of Credit
_________
Commercial
and
Industrial
___________
Purchase
Insurance
Premium
Credit-
Impaired Unallocated
Loans
__________ ______ __________ _____________
Other
Total
Allowance
for Loan
Losses
___________
(in thousands)
2010 . . . . . . . . . . $
Provision for
12,654
$
570
$
1,855 $
5,137
$
242
$
719
$
111
$ 28
$
— $
503
$ 21,819
loan losses . . .
Recoveries . . . . .
Charge-offs . . . . .
2011 . . . . . . . . . .
Provision for
loan losses . . .
Recoveries . . . . .
Charge-offs . . . . .
2012 . . . . . . . . . .
Provision for
6,809
55
(4,338)
_________
15,180
498
—
(101)
_________
967
2,353
—
(718)
___________ ___________
6,772
27
—
(693)
1,189
238
—
(62)
_________
418
1,931
23
(1,698)
___________
975
1,021
107
(1,828)
_________
14,480
956
—
(1,300)
_________
623
1,034
9
(729)
___________ ___________
7,086
(152)
—
(43)
994
207
—
(2)
_________
623
189
86
(90)
___________
1,160
loan losses . . .
Recoveries . . . . .
Charge-offs . . . . .
2013 . . . . . . . . . . $
(654)
1
(1,208)
_________
12,619
_________
_________
648
18
(414)
_________
$
875
_________
_________
2,945
(1,356)
—
567
(657)
—
___________ ___________
$
9,374
205 $
___________ ___________
___________ ___________
728
—
(491)
_________
$
860
_________
_________
(557)
201
(379)
___________
$
425
___________
___________
606
—
—
__________ ______ __________ _____________
1,109
12
115
30
—
(70) —
40
186
—
—
—
—
92
—
—
__________ ______ __________ _____________
1,201
(3)
18
(198)
3
(44)
25
(3)
18
236
—
—
236
(177)
—
—
__________ ______ __________ _____________
$
1,024
$
__________ ______ __________ _____________
__________ ______ __________ _____________
1
(3)
—
73
— (25)
— $ 67
352
—
—
588
$
12,589
108
(7,680)
___________
26,836
3,536
245
(4,193)
___________
26,424
1,927
860
(3,174)
___________
$ 26,037
___________
___________
During the year ended December 31, 2013, the Company recorded net charge-offs of $2.3 million, a decrease of $1.6
million, or 41.4%, as compared to the year ended December 31, 2012. The decrease in net charge-offs was primarily
attributable to a $514,000 decrease in net charge-offs related to commercial real estate loans, a $610,000 decrease in net
charge-offs related to construction and land loans, a $180,000 decrease in net charge-offs related to insurance premium loans,
and a $904,000 decrease in net charge-offs related to one-to-four family residential real estate loans, offset by a $174,000
increase in net charge-offs related to commercial and industrial loans and a $489,000 increase in net charge-offs related to
home equity loans. 2013 and 2012 net charge-offs include $471,000 related to loans transferred to held-for-sale. As a result of
increases in outstanding balances the allowance for loan losses allocated to multifamily real estate loans was increased by
$2.3 million, or 32.3%, from $7.1 million at December 31, 2012, to $9.4 million at December 31, 2013. In addition, as a
result of reduced non-performing loans and net charge-offs incurred, the Company’s historical and general loss factors have
decreased, thus decreasing the allowance for loan losses allocated to commercial real estate loans, one-to-four family
residential loans, and construction and land loans. Allowance for loan losses allocated to home equity loans and commercial
and industrial loans increased slightly from December 31, 2012, to December 31, 2013. This increase was primarily
attributable to an increase in historical loss factors, coupled with the increased level of non-performing loans.
Management of Market Risk
General. The 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 loans and mortgage-related assets, generally have longer
maturities than our liabilities, which consist primarily of deposits and wholesale funding. As a result, a principal part of our
business strategy involves managing interest rate risk and limiting the exposure of our net interest income to changes in
market interest rates. Accordingly, our board of directors has established a management risk committee, comprised of our
Chief Investment Officer, who chairs this Committee, our Chief Executive Officer, our President/Chief Operating Officer, our
Chief Financial Officer, our Chief Lending Officer, and our Executive Vice President of Operations. This committee is
responsible for, among other things, evaluating the interest rate risk inherent in our assets and liabilities, for recommending to
the risk management committee of our board of directors the level of risk that is appropriate given our business strategy,
operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the guidelines
approved by the board of directors.
58
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:
(cid:127)
(cid:127)
(cid:127)
originating multifamily loans and commercial real estate loans that generally tend to 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 and longer-term Federal Home Loan Bank 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 better match the maturities and interest rates of our assets and
liabilities, 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 table below sets forth, as of December 31, 2013, our calculation of the estimated changes in our NPV, NPV ratio,
and percent change in net interest income that would result from the designated instantaneous and sustained changes in interest
rates. Computations of prospective effects of hypothetical interest rate changes are based on numerous assumptions, including
relative levels of market interest rates, loan prepayments and deposit repricing characteristics including decay rates, and
correlations to movements in interest rates, and should not be relied on as indicative of actual results (dollars in thousands).
NPV
Change in
Interest Rates
__________
(basis points)
+400
+300
+200
+100
0
(100)
(200)
Estimated
Present Value
___________
of Assets
$ 2,317,122
2,389,483
2,474,496
2,569,820
2,674,545
2,771,974
$ 2,865,823
Estimated
Present Value
____________
of Liabilities
$ 1,834,079
1,863,451
1,893,723
1,924,935
1,957,127
1,989,259
$ 2,005,886
Estimated
___________
NPV
$ 483,043
526,032
580,773
644,885
717,418
782,715
$ 859,937
Estimated
Change
_____________
In NPV
$ (234,375)
(191,386)
(136,645)
(72,533)
—
65,297
$ 142,519
Estimated
Change
___________
in NPV %
Estimated
NPV/Present
Value of Assets
_______________
Ratio
Net Interest
Income Percent
_______________
Change
(32.67)%
(26.68)
(19.05)
(10.11)
—
9.10
19.87%
20.85%
22.01
23.47
25.09
26.82
28.24
30.01%
(10.84)%
(7.96)
(5.08)
(2.41)
0.00
(0.65)
(4.43)%
(1) Assumes an instantaneous and sustained uniform change in interest rates at all maturities.
(2) NPV includes non-interest earning assets and liabilities.
59
The table above indicates that at December 31, 2013, in the event of a 200 basis point decrease in interest rates, we
would experience a 19.87% increase in estimated net portfolio value and a 4.43% decrease in net interest income. In the event
of a 400 basis point increase in interest rates, we would experience a 32.67% decrease in net portfolio value and a 10.84%
decrease in net interest income. Our policies provide that, in the event of a 300 basis point increase/decrease or less in interest
rates, our net present value ratio should decrease by no more than 400 basis points and in the event of a 200 basis point
increase/decrease, our projected net interest income should decrease by no more than 20%. Additionally, our policy states that
our net portfolio value should be at least 8.5% of total assets before and after such shock at December 31, 2013. At December
31, 2013, 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.
Liquidity and Capital Resources
Liquidity is the ability to fund assets and meet obligations as they come due. Our primary sources of funds consist of
deposit inflows, loan repayments, borrowings through repurchase agreements and advances from money center banks and the
Federal Home Loan Bank of New York, and repayments, maturities and sales of securities. While maturities and scheduled
amortization of loans and securities are reasonably predictable sources of funds, deposit flows and mortgage prepayments are
greatly influenced by general interest rates, economic conditions, and competition. Our board risk committee is responsible
for establishing and monitoring our liquidity targets and strategies in order to ensure that sufficient liquidity exists for meeting
the borrowing needs and withdrawals of deposits by our customers as well as unanticipated contingencies. We seek to
maintain a ratio of liquid assets (not subject to pledge) as a percentage of deposits and borrowings of 35% or greater. At
December 31, 2013, this ratio was 43.25%. We believe that we had sufficient sources of liquidity to satisfy our short- and
long-term liquidity needs at December 31, 2013.
We regularly adjust our investments in liquid assets based on our assessment of:
(cid:127)
(cid:127)
(cid:127)
(cid:127)
expected loan demand;
expected deposit flows;
yields available on interest-earning deposits and securities; and
the objectives of our asset/liability management program.
Our most liquid assets are cash and cash equivalents, corporate bonds, and unpledged mortgage-related securities
issued or guaranteed by the U.S. Government, Fannie Mae, or Freddie Mac, that we can either borrow against or sell. We also
have the ability to surrender bank owned life insurance contracts. The surrender of these contracts would subject the Company
to income taxes and penalties for increases in the cash surrender values over the original premium payments.
The Company had the following primary sources of liquidity at December 31, 2013 (in thousands):
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unpledged multi-family loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unpledged mortgage-backed securities (Issued or guaranteed by the U.S. Government,
$ 61,239
76,491
308,700
Fannie Mae, or Freddie Mac) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
537,400
60
At December 31, 2013, we had $61.3 million in outstanding loan commitments. In addition, we had $46.1 million in
unused lines of credit to borrowers. Certificates of deposit due within one year of December 31, 2013, totaled $215.7 million,
or 14.4% of total deposits. If these deposits do not remain with us, we will be required to seek other sources of funds,
including loan sales, securities sales, other deposit products, including replacement certificates of deposit, securities sold
under agreements to repurchase (repurchase agreements), and advances from the Federal Home Loan Bank of New York and
other borrowing sources. Depending on market conditions, we may be required to pay higher rates on such deposits or other
borrowings than we currently pay on the certificates of deposit due on December 31, 2013. We believe, based on experience,
that a significant portion of such deposits will remain with us, and we have the ability to attract and retain deposits by
adjusting the interest rates offered.
We have a detailed contingency funding plan that is reviewed and reported to the board risk committee on at least a
quarterly basis. This plan includes monitoring cash on a daily basis to determine the liquidity needs of the Bank. Additionally,
management performs a stress test on the Bank’s retail deposits and wholesale funding sources in several scenarios on a
quarterly basis. The stress scenarios include deposit attrition of up to 50%, and selling our securities available-for-sale
portfolio at a discount of 20% to its current estimated fair value. The Bank continues to maintain significant liquidity under all
stress scenarios.
Northfield Bancorp, Inc. is a separate legal entity from Northfield Bank and must provide for its own liquidity to fund
dividend payments, stock repurchases and other corporate risk factors. The Company’s primary source of liquidity is the
receipt of dividend payments from the Bank in accordance with applicable regulatory requirements and proceeds from the
stock offering. At December 31, 2013, Northfield Bancorp, Inc. (unconsolidated) had liquid assets of $141.5 million.
Northfield Bank is subject to various regulatory capital requirements, including a risk-based capital measure. The risk-
based capital guidelines include both a definition of capital and a framework for calculating risk-weighted assets by assigning
assets and off-balance sheet items to broad risk categories. At December 31, 2013, Northfield Bank exceeded all regulatory
capital requirements and is considered “well capitalized” under regulatory guidelines. See “Supervision and Regulation” and
Note 13 of the Notes to the Consolidated Financial Statements.
The net proceeds from the second-step stock offering completed on January 24, 2013, significantly increased our
liquidity and capital resources. The initial level of liquidity has been reduced as net proceeds from the stock offering have
been used for general corporate purposes, including the funding of loans. Our financial condition and results of operations
have been enhanced by the net proceeds from the stock offering, resulting in increased net interest-earning assets and net
interest income. However, due to the increase in equity resulting from the net proceeds from the stock offering, our return on
equity has been adversely affected.
Off-Balance Sheet Arrangements and Aggregate Contractual Obligations
Commitments. As a financial services provider, we routinely are a party to various financial instruments with off-
balance-sheet risks, such as commitments to extend credit, and unused lines of credit. While these contractual obligations
represent our potential future cash requirements, a significant portion of commitments to extend credit may expire without
being drawn upon. Such commitments are subject to the same credit policies and approval process applicable to loans we
originate. In addition, we routinely enter into commitments to sell mortgage loans; such amounts are not significant to our
operations. For additional information, see Note 12 of the Notes to the Consolidated Financial Statements.
Contractual Obligations. In the ordinary course of our operations we enter into certain contractual obligations. Such
obligations include leases for premises and equipment, agreements with respect to borrowed funds and deposit liabilities, and
agreements with respect to investments.
The following table summarizes our significant fixed and determinable contractual obligations and other funding needs
by payment date at December 31, 2013. The payment amounts represent those amounts due to the recipient and do not
include any unamortized premiums or discounts or other similar carrying amount adjustments.
61
_______________________________
Contractual Obligations
Long-term debt (1) . . . . . . . . . . . . . . .
Floating rate advances . . . . . . . . . . . . .
Operating leases . . . . . . . . . . . . . . . . .
Capitalized leases . . . . . . . . . . . . . . . .
Certificates of deposit . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments to extend credit (2) . . .
Less Than
One Year
One to
Three Years
______________ ____________
Payments Due by Period
More Than
Three to
_____________ _____________ _____________
Five Years
Five Years
(In thousands)
Total
$
99,859 $
2,485
3,928
411
215,692
322,375 $
223,410 $
—
7,840
516
78,571
______________ ____________
$
310,337
______________ ____________
______________ ____________
$
______________ ____________
______________ ____________
107,357 $
144,083 $
—
7,094
516
8,150
159,843 $
467,352
2,485
49,860
1,487
307,902
_____________ _____________ _____________
$
829,086
_____________ _____________ _____________
_____________ _____________ _____________
107,357
_____________ _____________ _____________
_____________ _____________ _____________
— $
—
30,998
44
5,489
36,531 $
— $
— $
— $
(1) Includes repurchase agreements, Federal Home Loan Bank of New York advances, and accrued interest payable at
December 31, 2013.
(2) Includes unused lines of credit which are assumed to be funded within the year.
During 2012, we sold the rights to service Freddie Mac loans to a third-party bank. These one-to-four family
residential mortgage real estate loans were underwritten to Freddie Mac guidelines and to comply with applicable federal,
state, and local laws. At the time of the closing of these loans the Company owned the loans and subsequently sold them to
Freddie Mac providing normal and customary representations and warranties, including representations and warranties related
to compliance with Freddie Mac underwriting standards. At the time of sale, the loans were free from encumbrances except
for the mortgages filed by the Company which, with other underwriting documents, were subsequently assigned and delivered
to Freddie Mac. At the time of sale to the third-party, substantially all of the loans serviced for Freddie Mac were performing
in accordance with their contractual terms and management believes that it has no material repurchase obligations associated
with these loans.
Impact of Recent Accounting Standards and Interpretations
In February 2013, the FASB issued ASU No. 2013-02, “Reporting of Amounts Reclassified Out of Accumulated Other
Comprehensive Income.” This ASU adds new disclosure requirements for items reclassified out of accumulated other
comprehensive income to be in a single location in the financial statements. The Company’s disclosures of the components of
accumulated other comprehensive income are disclosed in its Statements of Comprehensive Income. The new guidance
became effective for all interim and annual periods beginning January 1, 2013, and is to be applied prospectively. The
adoption of this pronouncement resulted in a change to the presentation of the Company’s financial statements but did not
have an impact on the Company’s financial condition or results of operations.
In January, 2014, the FASB issued ASU No. 2014-04, “Receivables – Troubled Debt Restructurings by Creditors
(subtopic 310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure.”
This ASU clarifies that if an in-substance repossession occurs, and a creditor is considered to have received physical
possession of residential real estate property collateralizing a consumer mortgage loan, upon either the creditor obtaining legal
title to the residential real estate property upon completion of a foreclosure, or the borrower conveying all interest in the
residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or
through a similar legal arrangement. This ASU will require interim and annual disclosure of both, the amount of foreclosed
residential real estate property held by the creditor and the recorded investment in consumer mortgage loans collateralized by
residential real estate property that are in the process of foreclosure according to local requirements of the applicable
jurisdiction. ASU No. 2014-04 is effective for annual and interim periods beginning after December 15, 2014. The Company’s
adoption of this pronouncement is not expected to have a material impact on the Company’s consolidated financial statements.
Impact of Inflation and Changing Prices
Our consolidated financial statements and related notes have been prepared in accordance with GAAP. GAAP
generally requires the measurement of financial position and operating results in terms of historical dollars without
consideration for changes in the relative purchasing power of money over time due to inflation. The effect of inflation is
reflected in the increased cost of our operations. Unlike industrial companies, our assets and liabilities are primarily monetary
in nature. As a result, changes in market interest rates have a greater effect on our performance than inflation.
62
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
For information regarding market risk see Item 7- “Management’s Discussion and Analysis of Financial Conditions
and Results of Operations – Management of Market Risk.”
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
63
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Northfield Bancorp, Inc. and subsidiaries:
We have audited the accompanying consolidated balance sheets of Northfield Bancorp, Inc, and subsidiaries (the
Company) as of December 31, 2013 and 2012, and the related consolidated statements of comprehensive (loss) income,
changes in stockholders’ equity, and cash flows for each of the years in the three year period ended December 31, 2013. These
consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of Northfield Bancorp, Inc. and subsidiaries as of December 31, 2013 and 2012, and the results of their
operations and their cash flows for each of the years in the three year period ended December 31, 2013, in conformity with
U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the Company’s internal control over financial reporting as of December 31, 2013, based on criteria established in
Internal Control – Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO), and our report dated March 17, 2014 expressed an unqualified opinion on the effectiveness of the
Company’s internal control over financial reporting.
Short Hills, New Jersey
March 17, 2014
/s/ KPMG LLP
64
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Northfield Bancorp, Inc. and subsidiaries:
We have audited Northfield Bancorp, Inc. and subsidiaries’ internal control over financial reporting as of December
31, 2013, based on criteria established in Internal Control – Integrated Framework (1992) issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). Northfield Bancorp, Inc. and subsidiaries’ management is
responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over
Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting
based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material respects. Our audit included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that
receipts and expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Northfield Bancorp, Inc. and subsidiaries maintained, in all material respects, effective internal control
over financial reporting as of December 31, 2013, based on criteria established in Internal Control – Integrated Framework
(1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the consolidated balance sheets of Northfield Bancorp, Inc. and subsidiaries as of December 31, 2013 and 2012, and
the related consolidated statements of comprehensive (loss) income, changes in stockholders’ equity, and cash flows for each
of the years in the three-year period ended December 31, 2013, and our report dated March 17, 2014 expressed an unqualified
opinion on those consolidated financial statements.
Short Hills, New Jersey
March 17, 2014
/s/ KPMG LLP
65
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
ASSETS:
Cash and due from banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest-bearing deposits in other financial institutions . . . . . . . . . . . . . . . . . . . . . . . . . .
Total cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trading securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities available-for-sale, at estimated fair value
At December 31,
__________
2013
___________
2012
(In thousands, except share data)
$
15,348
45,891
__________
61,239
__________
5,998
$
25,354
103,407
___________
128,761
___________
4,677
(encumbered $197,896 in 2013 and $254,190 in 2012) . . . . . . . . . . . . . . . . . . . . . . .
937,085
1,275,631
Securities held-to-maturity, at amortized cost (estimated fair value of
$2,309 in 2012) (encumbered $0 in 2012) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans held-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchased credit-impaired (PCI) loans held-for-investment . . . . . . . . . . . . . . . . . . . . . .
Loans acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Originated loans held-for-investment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans held-for-investment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loans held-for-investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bank owned life insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Federal Home Loan Bank of New York stock, at cost . . . . . . . . . . . . . . . . . . . . . . . . . . .
Premises and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other real estate owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LIABILITIES AND STOCKHOLDERS’ EQUITY:
LIABILITIES:
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities sold under agreements to repurchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Advance payments by borrowers for taxes and insurance . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
STOCKHOLDERS’ EQUITY:
Preferred stock, $0.01 par value; 10,000,000 shares authorized, none issued
—
471
59,468
77,817
1,352,191
__________
1,489,476
(26,037)
__________
1,463,439
__________
8,137
125,113
17,516
29,057
16,159
634
37,916
__________
$ 2,702,764
__________
__________
2,220
5,447
75,349
101,433
1,066,200
___________
1,242,982
(26,424)
___________
1,216,558
___________
8,154
93,042
12,550
29,785
16,159
870
19,347
___________
$ 2,813,201
___________
___________
$ 1,492,689
181,000
289,325
6,441
17,201
__________
1,986,656
__________
$ 1,956,860
226,000
193,122
3,488
18,858
___________
2,398,328
___________
or outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
Common stock, $0.01 par value: 150,000,000 shares authorized, 58,226,326
and 46,904,286 shares issued at December 31, 2013 and 2012,
respectively, 57,926,233 and 41,486,819 outstanding at December 31, 2013
and 2012, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in-capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unallocated common stock held by employee stock ownership plan . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock at cost; 300,093 and 5,417,467 shares at December 31, 2013
and 2012, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
582
508,609
(26,985)
242,180
(4,650)
469
230,253
(13,965)
249,892
18,231
(3,628)
__________
716,108
__________
$ 2,702,764
__________
__________
(70,007)
___________
414,873
___________
$ 2,813,201
___________
___________
See accompanying notes to consolidated financial statements.
66
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive (Loss) Income
Interest income:
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage-backed securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Federal Home Loan Bank of New York dividends . . . . . . . . . . . . . . . . . . . . . .
Deposits in other financial institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense:
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net interest income after provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . .
Non-interest income:
Bargain purchase gain, net of taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fees and service charges for customer services . . . . . . . . . . . . . . . . . . . . . . . . .
Income on bank owned life insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on securities transactions, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other-than-temporary impairment losses on securities . . . . . . . . . . . . . . . . . . .
Portion recognized in other comprehensive income (before taxes) . . . . . . . .
Net impairment losses on securities recognized in earnings . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total non-interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-interest expense:
Compensation and employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Occupancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Furniture and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Data processing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Professional fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
FDIC insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total non-interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income per common share:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average shares outstanding - basic . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average shares outstanding - diluted . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive (loss) income:
Unrealized (losses) gains on securities:
Net unrealized holding (losses) gains on securities . . . . . . . . . . . . . . . . . . . .
Less: reclassification adjustment for net gains included in net
income (included in gain on securities transactions, net) . . . . . . . . . . . . .
Net unrealized (losses) gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Post retirement benefits adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reclassification adjustment for OTTI impairment included
in net income (included OTTI losses on securities) . . . . . . . . . . . . . . . . . .
Other comprehensive (loss) income, before tax . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax (benefit) expense related to net unrealized holding
(losses) gains on securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense related to reclassification adjustment for gains
included in net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense related to post retirement benefits adjustment . . . . . . . . . . .
Income tax benefit related to reclassification adjustment for OTTI
impairment included in net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive (loss) income, net of tax . . . . . . . . . . . . . . . . . . . . . . . . .
Comprehensive (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013
Years ended December 31,
2012
(in thousands, except share data)
2011
$
68,472
21,920
1,459
536
83
___________
92,470
___________
6,501
10,447
___________
16,948
___________
75,522
1,927
___________
73,595
___________
—
3,182
3,607
3,217
(434)
—
___________
(434)
___________
589
___________
10,161
___________
27,142
9,709
1,751
4,301
2,885
1,432
6,653
___________
53,873
___________
29,883
10,736
___________
$
19,147
___________
___________
$
0.35
___________
___________
0.34
$
___________
___________
54,637,680
55,560,309
$
61,514
26,791
2,588
591
55
___________
91,539
___________
9,837
12,807
___________
22,644
___________
68,895
3,536
___________
65,359
___________
—
3,005
2,883
2,534
(24)
—
___________
(24)
___________
188
___________
8,586
___________
24,096
8,192
1,463
3,739
3,279
1,628
6,601
___________
48,998
___________
24,947
8,916
___________
$
16,031
___________
___________
$
0.30
___________
___________
0.29
$
___________
___________
54,339,467
55,115,680
$
55,066
32,033
3,314
439
165
____________
91,017
____________
12,251
13,162
____________
25,413
____________
65,604
12,589
____________
53,015
____________
3,560
2,946
2,973
2,603
(1,152)
743
____________
(409)
____________
162
____________
11,835
____________
21,626
6,297
1,204
2,775
2,334
1,629
5,665
____________
41,530
____________
23,320
6,497
____________
$
16,823
____________
____________
$
0.30
____________
____________
0.30
$
____________
____________
56,216,794
56,842,888
$
(37,449)
$
3,418
$
13,267
(2,254)
___________
(39,703)
1,134
(2,150)
___________
1,268
85
(2,754)
____________
10,513
10
434
___________
(38,135)
24
___________
1,377
409
____________
10,932
(14,980)
(902)
454
1,432
(860)
34
5,306
(1,102)
4
174
___________
(22,881)
___________
(3,734)
$
___________
___________
10
___________
761
___________
16,792
$
___________
___________
164
____________
6,560
____________
23,383
$
____________
____________
See accompanying notes to consolidated financial statements.
67
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders’ Equity
For the years ended December 31, 2013, 2012 and 2011
Unallocated
Common Stock
Accumulated
Other
Comprehensive
Income (Loss),
Net of tax
Common Stock
Additional Held by the
Total
Stockholders’
Equity
__________ _____ __________ ___________ _________ ____________ _________ __________
(In thousands, except share data)
Paid-in Employee Stock Retained
Capital Ownership Plan Earnings
Treasury
Stock
Par
Value
Shares
396,717
__________ _____ __________ __________ _________ ____________ _________ __________
16,823
6,560
10,910 $ (27,979) $
16,823
6,560
Balance at December 31, 2010 . . . . . 45,632,611 $ 456 $ 205,863 $ (15,188) $ 222,655 $
618
206
3,047
186
(1)
(3,701)
824
3,047
186
15
(3,701)
16
Net income . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income . . . . . . . .
ESOP shares allocated or committed
to be released . . . . . . . . . . . . . . . . . .
Stock compensation expense . . . . . . . .
Additional tax benefit on
equity awards . . . . . . . . . . . . . . . . . .
Exercise of stock options . . . . . . . . . . .
Cash dividends declared ($0.16 per
common share) . . . . . . . . . . . . . . . . .
Treasury stock (average cost
of $13.52 per share) . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income . . . . . . . .
ESOP shares allocated or
committed to be released . . . . . . . . .
Stock compensation expense . . . . . . . .
Additional tax benefit on
equity awards . . . . . . . . . . . . . . . . . .
Common stock issued to
complete merger . . . . . . . . . . . . . . . .
Exercise of stock options . . . . . . . . . . .
Cash dividends declared ($0.09 per
common share) . . . . . . . . . . . . . . . . .
Treasury stock (average cost of
$13.81 per share) . . . . . . . . . . . . . . .
Balance at December 31, 2011 . . . . . 45,632,611 $ 456 $ 209,302 $ (14,570) $ 235,776 $
(37,821)
__________ _____ __________ __________ _________ ____________ _________ __________
382,650
__________ _____ __________ __________ _________ ____________ _________ __________
__________ _____ __________ __________ _________ ____________ _________ __________
16,031
761
17,470 $ (65,784) $
(37,821)
16,031
761
605
273
3,029
204
1,271,675
13
17,445
878
3,029
204
17,458
(72)
(1,722)
(193)
(1,722)
121
Balance at December 31, 2012 . . . . . 46,904,286 $ 469 $ 230,253 $ (13,965) $ 249,892 $
Net income . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income,
(4,344)
414,873
__________ _____ __________ __________ _________ ____________ _________ __________
__________ _____ __________ __________ _________ ____________ _________ __________
19,147
18,231 $ (70,007) $
(4,344)
19,147
net of tax . . . . . . . . . . . . . . . . . . . . .
ESOP shares allocated or
committed to be released . . . . . . . . .
Stock compensation expense . . . . . . . .
Additional tax benefit on
equity awards . . . . . . . . . . . . . . . . .
Corporate reorganization:
Merger of Northfield Bancorp, MHC . . (24,641,684)
Exchange of common stock . . . . . . . (16,845,135)
Treasury stock retired . . . . . . . . . . . .
(5,417,467)
Proceeds of stock offering,
net of costs . . . . . . . . . . . . . . . . . . 56,777,462
1,422,357
26,507
Purchase of common stock by ESOP . .
Exercise of stock options . . . . . . . . . . .
Cash dividends declared ($0.49
(246)
(169)
(54)
568
14
484
3,349
296
370
169
(69,953)
329,396
14,224
21
per common share) . . . . . . . . . . . . . .
Treasury stock (average cost of
$12.09 per share) . . . . . . . . . . . . . . .
(22,881)
1,204
(14,224)
(26,859)
(22,881)
1,688
3,349
296
124
0
0
329,964
14
21
(26,859)
70,007
Balance at December 31, 2013 . . . . . 58,226,326 $ 582 $ 508,609 $ (26,985) $ 242,180 $
(3,628)
716,108
__________ _____ __________ __________ _________ ____________ _________ __________
__________ _____ __________ __________ _________ ____________ _________ __________
(3,628)
(3,628) $
(4,650) $
See accompanying notes to consolidated financial statements.
68
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
__________
2013
Years ended December 31,
__________
2012
(In thousands)
__________
2011
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ESOP and stock compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of premiums, and deferred loan costs, net of
(accretion) of discounts, and deferred loan fees . . . . . . . . . . . . . . . . . .
Amortization of mortgage servicing rights . . . . . . . . . . . . . . . . . . . . . . . .
Income on bank owned life insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of premises and equipment and other real estate owned . . .
Net (gain) loss on sale of loans held-for-sale . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of loans held-for-sale . . . . . . . . . . . . . . . . . . . . . . . . .
Origination of loans held-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on securities transactions, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bargain purchase gain, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net impairment losses on securities recognized in earnings . . . . . . . . . . .
Net purchases of trading securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decrease in accrued interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decrease (increase) in other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decrease in prepaid FDIC assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Decrease) increase in accrued expenses and other liabilities . . . . . . . . . .
Amortization of core deposit intangible . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . .
Cash flows from investing activities:
Net increase in loans receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Purchase) redemptions of Federal Home Loan Bank of
New York stock, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of securities available-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal payments and maturities on securities available-for-sale . . . . . . . .
Principal payments and maturities on securities held-to-maturity . . . . . . . . .
Proceeds from sale of securities available-for-sale . . . . . . . . . . . . . . . . . . . .
Purchase of bank owned life insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of premises and equipment and other real estate owned . .
Purchases and improvements of premises and equipment . . . . . . . . . . . . . . .
Net cash acquired in business combinations . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used in) investing activities . . . . . . . . . . . . . . . . . .
Cash flows from financing activities:
Net increase (decrease) in deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net proceeds from sale of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . .
Merger of Northfield Bancorp, MHC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of common stock for ESOP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercise of stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional tax benefit on equity awards . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase in advance payments by borrowers for taxes and insurance . . . . . .
Repayments under capital lease obligations . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from securities sold under agreements to repurchase and
other borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayments related to securities sold under agreements to repurchase
and other borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash (used in) provided by financing activities . . . . . . . . . . . . . . . . . .
Net (decrease) increase in cash and cash equivalents . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . .
69
$
19,147
$
16,031
$
16,823
1,927
5,037
3,634
3,536
3,907
2,824
12,589
3,871
2,151
1,949
—
(3,607)
(397)
(60)
12,726
(3,986)
(3,217)
—
434
(358)
17
978
—
(4,033)
(623)
440
__________
30,008
__________
339
57
(2,883)
—
106
17,107
(13,314)
(2,534)
—
24
(147)
899
4,316
1,415
(2,733)
(1,289)
316
__________
27,977
__________
1,653
60
(2,973)
(84)
(20)
11,206
(10,467)
(2,603)
(3,560)
409
(202)
125
(1,659)
1,609
(2,883)
1,196
219
__________
27,460
__________
(253,145)
(96,339)
(169,258)
(4,966)
(289,562)
331,536
—
259,551
(28,464)
519
(2,916)
—
__________
12,553
__________
585
(801,492)
420,271
32,275
207,700
(7,729)
3,240
(8,035)
4,721
__________
(244,803)
__________
(2,628)
(476,918)
403,389
1,442
182,658
—
571
(6,082)
77,449
__________
10,623
__________
(174,617)
(26,859)
54,648
124
(14,224)
21
(3,628)
296
2,953
(289)
352,766
(1,722)
—
—
—
16
(4,344)
204
1,287
(251)
(67,550)
(3,701)
—
—
—
15
(37,821)
186
1,508
(217)
539,250
398,439
584,508
(487,758)
__________
(110,083)
__________
(67,522)
128,761
__________
61,239
$
__________
__________
(466,077)
__________
280,318
__________
63,492
65,269
__________
128,761
$
__________
__________
(493,594)
__________
(16,666)
__________
21,417
43,852
__________
65,269
$
__________
__________
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows – (Continued)
__________
2013
Years ended December 31,
__________
2012
(in thousands)
__________
2011
Supplemental cash flow information:
Cash paid during the period for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
17,177
16,196
$
22,997
7,991
$
25,008
9,483
Non-cash transactions:
Transfers of held-to-maturity securities to available-for-sale securities . . . .
Loans charged-off, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfers of loans to other real estate owned . . . . . . . . . . . . . . . . . . . . . . . . .
Other real estate owned charged-off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Decrease) in due to broker for purchases of securities available-for-sale . .
Transfers of loans to held-for-sale, at fair value . . . . . . . . . . . . . . . . . . . . . .
Deposits utilized to purchase common stock . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition:
Non-cash assets acquired, at fair value:
Securities available-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities held-to-maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Core deposit intangible . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other real estate owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
FHLB NY stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bank owned life insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Premises and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total non-cash assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash liabilities assumed, at fair value:
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total non-cash liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net non-cash assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash and cash equivalents acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock issued in acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,200
2,314
—
124
—
3,704
289,554
—
—
—
—
—
—
—
—
—
—
__________
—
__________
—
—
—
__________
—
__________
—
—
—
—
3,949
306
512
—
5,446
—
—
7,572
2,509
26
(70,747)
7,497
—
—
32,700
81,876
592
823
443
458
4,652
4,586
5,792
__________
131,922
__________
110,568
5,077
3,540
__________
119,185
__________
12,737
4,721
13
21,195
—
91,917
1,160
1,166
862
265
—
—
633
__________
117,198
__________
188,234
—
2,853
__________
191,087
__________
(73,889)
77,449
—
See accompanying notes to consolidated financial statements.
70
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Financial Statements
(1) Summary of Significant Accounting Policies
The following significant accounting and reporting policies of Northfield Bancorp, Inc. and subsidiaries (collectively,
the “Company”), conform to U.S. generally accepted accounting principles (GAAP), and are used in preparing and presenting
these consolidated financial statements.
(a) Plan of Conversion and Reorganization
On June 6, 2012, the Board of Trustees of Northfield Bancorp, MHC (MHC) and the Board of Directors of the
Company adopted a Plan of Conversion and Reorganization (the Plan). Pursuant to the Plan, the MHC converted from the
mutual holding company form of organization to the fully public form on January 24, 2013. The MHC was merged into the
Company, and the MHC no longer exists. The Company merged into a new Delaware corporation named Northfield
Bancorp, Inc. As part of the conversion, the MHC’s ownership interest of the Company was offered for sale in a public
offering. The existing publicly held shares of the Company, which represented the remaining ownership interest in the
Company, were exchanged for new shares of common stock of Northfield Bancorp, Inc., the new Delaware Corporation. The
exchange ratio ensured that immediately after the conversion and public offering, the public shareholders of the Company
owned the same aggregate percentage of Northfield Bancorp., Inc. common stock that they owned immediately prior to that
time (excluding shares purchased in the stock offering and cash received in lieu of fractional shares). When the conversion
and public offering was completed, all of the capital stock of Northfield Bank was owned by Northfield Bancorp, Inc., the
Delaware Corporation.
The Plan provided for the establishment of special “liquidation accounts” for the benefit of certain depositors of
Northfield Bank in an amount equal to the greater of the MHC’s ownership interest in the retained earnings of the Company
as of the date of the latest balance sheet contained in the prospectus or the retained earnings of Northfield Bank at the time it
reorganized into the MHC. Following the completion of the conversion, under the rules of the Board of Governors of the
Federal Reserve System, Northfield Bank is not permitted to pay dividends on its capital stock to Northfield Bancorp., Inc., its
sole shareholder, if Northfield Bank’s shareholder’s equity would be reduced below the amount of the liquidation accounts.
The liquidation accounts will be reduced annually to the extent that eligible account holders have reduced their qualifying
deposits. Subsequent increases in qualifying deposits will not restore an eligible account holder’s interest in the liquidation
accounts.
Direct costs of the conversion and public offering were deferred and reduced the proceeds from the shares sold in the
public offering. Costs of $11.5 million were incurred related to the conversion.
Share and per share amounts have been restated to reflect the completion of our second-step conversion on January 24,
2013 at a conversion ratio of 1.4029 unless noted otherwise.
(b) Basis of Presentation
The consolidated financial statements are comprised of the accounts of Northfield Bancorp, Inc. and its wholly owned
subsidiaries, Northfield Investment, 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 preparing the consolidated financial statements, management is required to make estimates and assumptions that
affect the reported amounts of assets and liabilities as of the date of the balance sheets and revenues and expenses during the
reporting periods. Actual results may differ significantly from those estimates and assumptions. A material estimate that is
particularly susceptible to significant change in the near term is the allowance for loan losses. In connection with the
determination of this allowance, management generally obtains independent appraisals for significant properties. In addition,
judgments related to the amount and timing of expected cash flows from purchased credit-impaired loans, goodwill,
securities valuation and impairment, and deferred income taxes, involve a higher degree of complexity and subjectivity and
require estimates and assumptions about highly uncertain matters. Actual results may differ from the estimates and
assumptions.
Certain prior year balances have been reclassified to conform to the current year presentation.
71
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Financial Statements – (Continued)
(c) Business
The Company, through its principal subsidiary, the Bank, provides a full range of banking services primarily to
individuals and corporate customers in Richmond and Kings Counties in New York, and Union and Middlesex Counties in
New Jersey. The Company is subject to competition from other financial institutions and to the regulations of certain federal
and state agencies, and undergoes periodic examinations by those regulatory authorities.
(d) Cash Equivalents
Cash equivalents consist of cash on hand, due from banks, and interest-bearing deposits in other financial institutions
with an original term of three months or less.
(e) Securities
Securities are classified at the time of purchase, based on management’s intention, as securities held- to-maturity,
securities available-for-sale, or trading account securities. Securities held-to-maturity are those that management has the
positive intent and ability to hold until maturity. Securities held-to-maturity are carried at amortized cost, adjusted for
amortization of premiums and accretion of discounts using the level-yield method over the contractual term of the securities,
adjusted for actual prepayments. Securities available-for-sale represents all securities not classified as either held-to-maturity or
trading. Securities available-for-sale are carried at estimated fair value with unrealized holding gains and losses (net of related
tax effects) on such securities excluded from earnings, but included as a separate component of stockholders’ equity, titled
“Accumulated other comprehensive income (loss).” The cost of securities sold is determined using the specific-identification
method. Security transactions are recorded on a trade-date basis. Trading securities are securities that are bought and may be
held for the purpose of selling them in the near term. Trading securities are reported at estimated fair value, with unrealized
holding gains and losses reported as a component of gain (loss) on securities transactions, net in non-interest income.
Our evaluation of other-than-temporary impairment considers the duration and severity of the impairment, our intent
and ability to hold the securities, and our assessments of the reason for the decline in value and the likelihood of a near-term
recovery. If a determination is made that a debt security is other-than-temporarily impaired, the Company will estimate the
amount of the unrealized loss that is attributable to credit and all other non-credit related factors. If we intend to hold
securities in an unrealized loss position until the loss is recovered, which may be at maturity, the credit related component will
be recognized as an other-than-temporary impairment charge in non-interest income. The non-credit related component will
be recorded as an adjustment to accumulated other comprehensive income (loss), net of tax. The estimated fair value of debt
securities, including mortgage-backed securities and corporate debt obligations is furnished by an independent third-party
pricing service. The third-party pricing service primarily utilizes pricing models and methodologies that incorporate
observable market inputs, including among other things, benchmark yields, reported trades, and projected prepayment and
default rates. Management reviews the data and assumptions used in pricing the securities by its third-party provider for
reasonableness.
(f) Loans
During 2012 and 2011, the Company acquired loans with deteriorated credit quality, herein referred to as purchased
credit-impaired (PCI) loans, and transferred certain loans, previously originated and designated by the Company as held-for-
investment, to held-for-sale. The accounting and reporting for these loans differs substantially from those loans originated and
classified by the Company as held-for-investment. For purposes of reporting, discussion and analysis, management has
classified its loan portfolio into four categories: (1) loans originated by the Company and held-for-sale, which are carried at
the lower of aggregate cost or estimated fair value, less costs to sell, and therefore have no associated allowance for loan
losses, (2) PCI loans, which are held-for-investment, and initially valued at estimated fair value on the date of acquisition,
with no initial related allowance for loan losses, and (3) originated loans held-for-investment, which are carried at amortized
cost, less net charge-offs and the allowance for loan losses, and (4) acquired loans with no evidence of credit deterioration,
which are held-for-investment, and initially valued at an estimated fair value on the date of acquisition, with no initial related
allowance for loan losses.
Originated and acquired net loans held-for-investment are stated at unpaid principal balance, adjusted by unamortized
premiums and unearned discounts, deferred origination fees and certain direct origination costs, and the allowance for loan
72
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Financial Statements – (Continued)
losses. Interest income on loans is accrued and credited to income as earned. Net loan origination fees/costs are deferred and
accreted/amortized to interest income over the loan’s contractual life using the level-yield method, adjusted for actual
prepayments. Generally, loans held-for-sale are designated at time of origination and generally consist of newly originated
fixed rate residential loans and are recorded at the lower of aggregate cost or estimated fair value in the aggregate. In 2013
and 2012, the Company transferred from held-for-investment to held-for-sale certain impaired loans. Transfers from held-for-
investment are infrequent and occur at fair value less costs to sell, with any charge-off to allowance for loan losses. Gains are
recognized on a settlement-date basis and are determined by the difference between the net sales proceeds and the carrying
value of the loans, including any net deferred fees or costs.
Originated and acquired net loans held-for-investment are deemed impaired when it is probable, based on current
information, that the Company will not collect all amounts due in accordance with the contractual terms of the loan
agreement. The Company has defined the population of originated and acquired impaired loans to be all originated and
acquired non-accrual loans held-for-investment with an outstanding balance of $500,000 or greater and all loans restructured
in troubled debt restructurings (TDRs). Originated and acquired impaired loans held-for-investment are individually assessed
to determine that the loan’s carrying value is not in excess of the expected future cash flows, discounted at the loans original
effective interest rate, or the underlying collateral (less estimated costs to sell) if the loan is collateral dependent. Impairments,
if any, are recognized through a charge to the provision for loan losses for the amount that the loan’s carrying value exceeds
the discounted cash flow analysis or estimated fair value of collateral (less estimated costs to sell) if the loan is collateral
dependent. Such amounts are charged-off when considered appropriate. Homogeneous loans with balances less than
$500,000, which are not considered TDRs, are collectively evaluated for impairment.
The allowance for loan losses is increased by the provision for loan losses charged against income and is decreased by
charge-offs, net of recoveries. Loan losses are charged-off in the period the loans, or portion thereof, are deemed
uncollectible. Generally, the Company will record a loan charge-off (including a partial charge-off) to reduce a loan to the
estimated fair value of the underlying collateral, less cost to sell, if it is determined that it is probable that recovery will come
primarily from the sale or operation of such collateral. Specific reserves on impaired loans which are not considered collateral
dependent are charged-off when such amounts are not considered to be collectible. The provision for loan losses is based on
management’s evaluation of the adequacy of the allowance which considers, among other things, impaired loans held-for-
investment, deterioration in PCI loans subsequent to acquisition, past loan loss experience, known and inherent risks in the
portfolio, and existing adverse situations that may affect borrowers’ ability to repay. Additionally, management evaluates
changes, if any, in underwriting standards, collection, charge-off and recovery practices, the nature or volume of the portfolio,
lending staff, concentration of loans, as well as current economic conditions, and other relevant factors. Management believes
the allowance for loan losses is adequate to provide for probable and reasonably estimable losses at the date of the
consolidated balance sheets. The Company also maintains an allowance for estimated losses on off-balance sheet credit risks
related to loan commitments and standby letters of credit. Management utilizes a methodology similar to its allowance for
loan loss adequacy methodology to estimate losses on these commitments. The allowance for estimated credit losses on off-
balance sheet commitments is included in other liabilities and any changes to the allowance are recorded as a component of
other non-interest expense.
While management uses available information to recognize probable and reasonably estimable losses on loans, future
additions may be necessary based on changes in conditions, including changes in economic conditions, particularly in
Richmond and Kings Counties in New York, and Union and Middlesex Counties in New Jersey. Accordingly, as with most
financial institutions in the market area, the ultimate collectability of a substantial portion of the Company’s loan portfolio is
susceptible to changes in conditions in the Company’s marketplace. In addition, future changes in laws and regulations could
make it more difficult for the Company to collect all contractual amounts due on its loans and mortgage-backed securities.
In addition, various regulatory agencies, as an integral part of their examination process, periodically review the
Company’s allowance for loan losses. Such agencies may require the Company to recognize additions to the allowance based
on their judgments about information available to them at the time of their examination.
Troubled debt restructured loans are those loans whose terms have been modified because of deterioration in the
financial condition of the borrower. Modifications could include extension of the repayment terms of the loan, reduced
interest rates, and forgiveness of accrued interest and/or principal. Once an obligation has been restructured because of such
credit problems, it continues to be considered restructured until paid in full or, if the obligation yields a market rate (a rate
equal to the rate the Company was willing to accept at the time of the restructuring for a new loan with comparable risk),
73
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Financial Statements – (Continued)
until the year subsequent to the year in which the restructuring takes place, provided the borrower has performed under the
modified terms for a six-month period. The Company records an impairment charge equal to the difference between the
present value of estimated future cash flows under the restructured terms discounted at the original loan’s effective interest
rate, or the underlying collateral value less costs to sell, if the loan is collateral dependent. Changes in present values
attributable to the passage of time are recorded as a component of the provision for loan losses.
A loan is considered past due when it is not paid in accordance with its contractual terms. The accrual of income on
loans, including impaired loans held-for-investment, and other loans in the process of foreclosure, is generally discontinued
when a loan becomes 90 days or more delinquent, or sooner when certain factors indicate that the ultimate collection of
principal and interest is in doubt. Loans on which the accrual of income has been discontinued are designated as non-accrual
loans. All previously accrued interest is reversed against interest income, and income is recognized subsequently only in the
period that cash is received, provided no principal payments are due and the remaining principal balance outstanding is
deemed collectible. A non-accrual loan is not returned to accrual status until both principal and interest payments are brought
current and factors indicating doubtful collection no longer exist, including performance by the borrower under the loan terms
for a six-month period.
The Company accounts for the PCI loans based on expected cash flows. This election is in accordance with FASB
Accounting Standards Codification (ASC) Topic 310-30, “Loans and Debt Securities Acquired with Deteriorated Credit
Quality” (ASC 310-30). In accordance with ASC 310-30, the Company will maintain the integrity of a pool of multiple loans
accounted for as a single asset and evaluate the pools for impairment, and accrual status, based on variances from the
expected cash flows.
(g) Federal Home Loan Bank Stock
The Bank, as a member of the Federal Home Loan Bank of New York (the FHLB), is required to hold shares of capital
stock in the FHLB as a condition to both becoming a member and engaging in certain transactions with the FHLB. The
minimum investment requirement is determined by a “membership” investment component and an “activity-based”
investment component. The membership investment component is the greater of 0.20% of the Bank’s mortgage-related assets,
as defined by the FHLB, or $1,000. The activity-based investment component is equal to 4.5% of the Bank’s outstanding
advances with the FHLB. The activity-based investment component also considers other transactions, including assets
originated for or sold to the FHLB, and delivery commitments issued by the FHLB. The Company currently does not enter
into these other types of transactions with the FHLB.
On a quarterly basis, we perform our other-than-temporary impairment analysis of FHLB stock, we evaluate, among
other things, (i) its earnings performance, including the significance of any decline in net assets of the FHLB as compared to
the regulatory capital amount of the FHLB, (ii) the commitment by the FHLB to continue dividend payments, and (iii) the
liquidity position of the FHLB. We did not consider our investment in FHLB stock to be other-than-temporarily impaired at
December 31, 2013, and 2012.
(h) Premises and Equipment, Net
Premises and equipment, including leasehold improvements, are carried at cost, less accumulated depreciation and
amortization. Depreciation and amortization of premises and equipment, including capital leases, are computed on a straight-
line basis over the estimated useful lives of the related assets. The estimated useful lives of significant classes of assets are
generally as follows: buildings - forty years; furniture and equipment - five to seven years; and purchased computer software -
three years. Leasehold improvements are amortized over the shorter of the term of the related lease or the estimated useful
lives of the improvements. Major improvements are capitalized, while repairs and maintenance costs are charged to operations
as incurred. Upon retirement or sale, any gain or loss is credited or charged to operations.
(i) Bank Owned Life Insurance
The Company has purchased bank owned life insurance contracts to help fund its obligations for certain employee
benefit costs. The Company’s investment in such insurance contracts has been reported in the consolidated balance sheets at
their cash surrender values. Changes in cash surrender values and death benefit proceeds received in excess of the related cash
surrender values are recorded as non-interest income.
74
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Financial Statements – (Continued)
(j) Goodwill
Intangible assets resulting from acquisitions under the purchase method of accounting consist of goodwill and other
intangible assets. Goodwill is not amortized and is subject to an annual assessment for impairment. The goodwill impairment
analysis is generally a two-step test. However, we may, under Accounting Standards Update (ASU) No. 2011-08, “Testing
Goodwill for Impairment,” first assess qualitative factors to determine whether it is necessary to perform the two-step
quantitative goodwill impairment test. Under this new ASU, we are not required to calculate the fair value of a reporting unit
if, based on a qualitative assessment, we determine that it was more likely than not that the unit’s fair value was not less than
its carrying amount. During 2013, we elected to perform step one of the two-step goodwill impairment test for our reporting
unit, but (under the ASU) we may choose to perform the optional qualitative assessment in future periods.
Goodwill is allocated to Northfield’s reporting unit at the date goodwill is actually recorded. If the carrying value of a
reporting unit exceeds its estimated fair value, a second step in the analysis is performed to determine the amount of
impairment, if any. The second step compares the implied fair value of the reporting unit’s goodwill with the carrying amount
of that goodwill. If the carrying value of a reporting unit exceeds the implied fair value of the goodwill, an impairment charge
is recorded equal to the excess amount in the current period earnings.
As of December 31, 2013, the carrying value of goodwill totaled $16.2 million. The Company performed its annual
goodwill impairment test, as of December 31, 2013, and determined that the fair value of the Company’s single reporting unit
to be in excess of its carrying value. The Company will test goodwill for impairment between annual test dates if an event
occurs or circumstances change that would indicate the fair value of the reporting unit is below its carrying amount. No events
have occurred and no circumstances have changed since the annual impairment test date that would indicate the fair value of
the reporting unit is below its carrying amount.
(k) Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized
for the estimated future tax consequences attributable to temporary differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply in the year in which those temporary differences are expected to be recovered or settled.
When applicable, deferred tax assets are reduced by a valuation allowance for any portions determined not likely to be
realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date.
Income tax benefits are recognized and measured based upon a two-step model: 1) a tax position must be more-likely-
than-not to be sustained based solely on its technical merits in order to be recognized, and 2) the benefit is measured as the
largest dollar amount of that position that is more-likely-than-not to be sustained upon settlement. The difference between the
benefit recognized and the tax benefit claimed on a tax return is referred to as an unrecognized tax benefit (UTB). The
Corporation records income tax-related interest and penalties, if applicable, within income tax expense.
(l) Impairment of Long-Lived Assets
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying
amount of the asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the
carrying amount of an asset to future undiscounted (and without interest) net cash flows expected to be generated by the asset.
If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the
carrying amount or fair value less costs to sell.
(m) Securities Sold Under Agreements to Repurchase and Other Borrowings
The Company enters into sales of securities under agreements to repurchase (Repurchase Agreements) and collateral
pledge agreements (Pledge Agreements) with selected dealers and banks. Such agreements are accounted for as secured financing
transactions since the Company maintains effective control over the transferred or pledged securities and the transfer meets the
other accounting and recognition criteria as required by the transfer and servicing topic of the FASB Accounting Standards.
Obligations under these agreements are reflected as a liability in the consolidated balance sheets. Securities underlying the
75
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Financial Statements – (Continued)
agreements are maintained at selected dealers and banks as collateral for each transaction executed and may be sold or pledged by
the counterparty. Collateral underlying Repurchase Agreements which permit the counterparty to sell or pledge the underlying
collateral is disclosed on the consolidated balance sheets as “encumbered.” The Company retains the right under all Repurchase
Agreements and Pledge Agreements to substitute acceptable collateral throughout the terms of the agreement.
(n) Comprehensive (Loss) Income
Comprehensive (loss) income includes net income and the change in unrealized holding gains and losses on securities
available-for-sale, change in actuarial gains and losses on other post retirement benefits, and change in service cost on other
postretirement benefits, net of taxes. Comprehensive (loss) income is presented in the Consolidated Statements of
Comprehensive (Loss) Income.
(o) Employee Benefits
The Company sponsors a defined postretirement benefit plan that provides for medical and life insurance coverage to a
limited number of retirees, as well as life insurance to all qualifying employees of the Company. The estimated cost of
postretirement benefits earned is accrued during an individual’s estimated service period to the Company. The Company
recognizes in its balance sheet the over-funded or under-funded status of a defined benefit postretirement plan measured as the
difference between the fair value of plan assets and the benefit obligation at the end of our calendar year. The actuarial gains
and losses and the prior service costs and credits that arise during the period are recognized as a component of other
comprehensive (loss) income, net of tax.
Funds borrowed by the Employee Stock Ownership Plan (ESOP) from the Company to purchase the Company’s
common stock are being repaid from the Bank’s contributions over a period of up to 30 years. The Company’s common stock
not yet allocated to participants is recorded as a reduction of stockholders’ equity at cost. The Company records compensation
expense related to the ESOP at an amount equal to the shares committed to be released by the ESOP multiplied by the
average fair value of our common stock during the reporting period.
The Company recognizes the grant-date fair value of stock based awards issued to employees as compensation cost in
the consolidated statements of comprehensive (loss) income. The fair value of common stock awards is based on the closing
price of our common stock as reported on the NASDAQ Stock Market on the grant date. The expense related to stock options
is based on the estimated fair value of the options at the date of the grant using the Black-Scholes pricing model. The awards
are fixed in nature and compensation cost related to stock based awards is recognized on a straight-line basis over the
requisite service periods.
The Bank has a 401(k) plan covering substantially all employees. Contributions to the plan are expensed as incurred.
(p) Segment Reporting
As a community-focused financial institution, substantially all of the Company’s operations involve the delivery of
loan and deposit products to customers. Management makes operating decisions and assesses performance based on an
ongoing review of these community banking operations, which constitute the Company’s only operating segment for financial
reporting purposes.
(q) Net Income per Common Share
Net income per common share-basic is computed by dividing the net income available to common stockholders by the
weighted average number of common shares outstanding, excluding unallocated ESOP shares and unearned common stock
award shares. The weighted average common shares outstanding includes the average number of shares of common stock
outstanding, including shares held by Northfield Bancorp, MHC and allocated or committed to be released ESOP shares.
Net income per common share-diluted is computed using the same method as basic earnings per share, but reflects the
potential dilution that could occur if stock options and unvested shares of restricted stock were exercised and converted into
common stock. These potentially dilutive shares are included in the weighted average number of shares outstanding for the
period using the treasury stock method. When applying the treasury stock method, we add: (1) the assumed proceeds from
option exercises; (2) the tax benefit, if any, that would have been credited to additional paid-in capital assuming exercise of
non-qualified stock options and vesting of shares of restricted stock; and (3) the average unamortized compensation costs
76
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Financial Statements – (Continued)
related to unvested shares of restricted stock and stock options. We then divide this sum by our average stock price for the
period to calculate assumed shares repurchased. The excess of the number of shares issuable over the number of shares
assumed to be repurchased is added to basic weighted average common shares to calculate diluted earnings per share. At
December 31, 2013, 2012, and 2011, there were 922,629, 776,213, and 626,094 dilutive shares outstanding, respectively.
(r) Other Real Estate Owned
Assets acquired through loan foreclosure, or deed-in-lieu of, are held for sale and are initially recorded at estimated
fair value less estimated selling costs when acquired, thus establishing a new cost basis. Costs after acquisition are generally
expensed. If the estimated fair value of the asset declines, a write-down is recorded through other non-interest expense.
(2) Business Combinations
On October 14, 2011, the Bank assumed all of the deposits and acquired essentially all of the assets of a failed New
Jersey State-chartered bank, from the Federal Deposit Insurance Corporation (the “FDIC”) as receiver for the failed bank,
pursuant to the terms of the Purchase and Assumption Agreement, dated October 14, 2011, between the Bank and the FDIC.
The Bank assumed approximately $188.6 million in liabilities including approximately $188.3 million in deposits and
acquired approximately $185.0 million in assets, including approximately $132.8 million in loans. The loans acquired by
Northfield Bank principally consisted of commercial loans and commercial real estate loans. Northfield did not purchase $5.6
million in SBA Loans, and $5.9 million in other loans which were retained by the FDIC. The application of the acquisition
method of accounting resulted in a bargain purchase gain of $3.6 million, net of tax, which is included in “non-interest
income” in the Company’s Consolidated Statement of Comprehensive (Loss) Income for the year ended December 31, 2011.
On November 2, 2012, Northfield Bancorp, Inc. completed its acquisition of Flatbush Federal Bancorp, Inc. and its
wholly-owned subsidiary, Flatbush Federal Savings and Loan Association, in an all stock transaction. Stockholders of
Flatbush Federal Bancorp, Inc. received 0.4748 shares of Northfield Bancorp, Inc. common stock for each share of Flatbush
Federal Bancorp, Inc. common stock that they owned as of the close of business November 2, 2012. After the completion of
the merger, Flatbush Federal Bancorp, Inc. stockholders owned approximately 3.1% of the combined Company.
Utilizing the acquisition method, the Northfield Bancorp, Inc. acquired total assets of $136.6 million including $81.9
million in loans (primarily one-to-four family and commercial real estate loans) and $32.7 million in securities, and assumed
total liabilities of $119.2 million including $110.6 million of deposits and equity of $17.5 million.
(3) Securities Available-for-Sale
The following is a comparative summary of mortgage-backed securities and other securities available-for-sale at
December 31, 2013 and 2012 (in thousands):
2013
_________________________________________________________
Estimated
fair
__________
value
Gross
unrealized
__________
losses
Gross
unrealized
__________
gains
Amortized
__________
cost
Mortgage-backed securities:
Pass-through certificates:
Government sponsored enterprises (GSE) . . . . . . . . . . . . . . . . . . . $ 366,884
$
8,573
$
5,113
$ 370,344
Real estate mortgage investment conduits (REMICs):
GSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-GSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
497,575
4,474
__________
868,933
__________
Other securities:
Equity investments-mutual funds . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
510
76,491
__________
77,001
__________
Total securities available-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 945,934
__________
__________
1,699
126
__________
10,398
__________
—
66
__________
66
__________
$ 10,464
__________
__________
14,047
48
__________
19,208
__________
—
105
__________
105
__________
$ 19,313
__________
__________
485,227
4,552
__________
860,123
__________
510
76,452
__________
76,962
__________
$ 937,085
__________
__________
77
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Financial Statements – (Continued)
2012
___________________________________________________________
Estimated
fair
__________
value
Gross
unrealized
__________
losses
Gross
unrealized
__________
gains
Amortized
____________
cost
Mortgage-backed securities:
Pass-through certificates:
GSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 456,441
$ 22,996
$ 99
$ 479,338
Real estate mortgage investment conduits (REMICs):
GSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-GSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
694,087
7,543
____________
1,158,071
____________
Other securities:
Equity investments-mutual funds . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12,998
73,708
____________
86,706
____________
Total securities available-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,244,777
____________
____________
7,092
266
__________
30,354
__________
—
694
__________
694
__________
$ 31,048
__________
__________
62
33
__________
194
__________
701,117
7,776
__________
1,188,231
__________
—
—
__________
—
__________
$ 194
__________
__________
12,998
74,402
__________
87,400
__________
$ 1,275,631
__________
__________
The following is a summary of the expected maturity distribution of debt securities available-for-sale other than
mortgage-backed securities at December 31, 2013 (in thousands):
____________
Available-for-sale
Due in one year or less . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due after one year through five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortized
__________
cost
—
$
76,491
__________
$ 76,491
__________
__________
Estimated
__________
fair value
—
$
76,452
__________
$ 76,452
__________
__________
Expected maturities on mortgage-backed securities will 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 to secure borrowings under Pledge Agreements and Repurchase
Agreements and for other purposes required by law. At December 31, 2013, and December 31, 2012, securities available-for-
sale with a carrying value of $14.4 million and $14.3 million, respectively, were pledged to secure deposits. See Note 8 for
further discussion regarding securities pledged for borrowings.
For the year ended December 31, 2013, the Company had gross proceeds of $259.6 million on sales of securities
available-for-sale with gross realized gains and gross realized losses of approximately $3.1 million and $128,000, respectively.
For the year ended December 31, 2012, the Company had gross proceeds of $207.7 million on sales of securities available-
for-sale with gross realized gains and gross realized losses of approximately $3.0 million and $490,000, respectively. For the
year ended December 31, 2011, the Company had gross proceeds of $182.7 million on sales of securities available-for-sale
with gross realized gains and gross realized losses of approximately $2.9 million and $177,000, respectively. The Company
routinely sells securities when market pricing presents, in management’s assessment, an economic benefit that outweighs
holding such security, and when smaller balance securities become cost prohibitive to carry.
The Company recognized in earnings other-than-temporary impairment charges of $434,000 during the year ended
December 31, 2013, related to one equity investment in a mutual fund. The Company recognized in earnings other-than-
temporary impairment charges of $24,000 during the year ended December 31, 2012, related to one equity investment in a
mutual fund. The Company recognized other-than-temporary impairment charges of $1.2 million during the year ended
December 31, 2011, related to one equity investment in a mutual fund and two private label mortgage-backed securities. The
Company recognized the credit component of $409,000 in earnings and the non-credit component of $743,000 as a
component of accumulated other comprehensive income, net of tax.
The following is a rollforward of 2013, 2012, and 2011 activity related to the credit component of other-than-
temporary impairment recognized on debt securities in pre-tax earnings, for which a portion of other-than-temporary
impairment was recognized in accumulated other comprehensive income (in thousands):
78
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Financial Statements – (Continued)
______
2012
Balance, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ 578
Additions to the credit component on debt securities in which other-than-temporary
248
impairment was not previously recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reductions due to sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
______
Cumulative pre-tax credit losses, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ — $ 578
______
______
—
(578)
______
______
______
—
—
______
______
______
______
2011
$ 330
______
2013
Gross unrealized losses on mortgage-backed securities, equity securities, agency bonds, and corporate bonds available-
for-sale, and the estimated fair value of the related securities, aggregated by security category and length of time that
individual securities have been in a continuous unrealized loss position, at December 31, 2013 and 2012, were as follows (in
thousands):
December 31, 2013
___________________________________________________________________________
Total
12 months or more
Less than 12 months
_________________________
_________________________
________________________
Unrealized
Estimated
Unrealized
Unrealized
Estimated
Estimated
__________
__________ __________
__________ __________ __________
fair value
losses
fair value
losses
fair value
losses
Mortgage-backed securities:
Pass-through certificates:
GSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
5,087 $ 150,473 $
26
$ 4,482 $
5,113 $ 154,955
REMICs:
GSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-GSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12,923
23
283,419
1,092
1,124
25
44,606
442
14,047
48
328,025
1,534
Other securities:
Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,138 $ 479,747 $
105
—
__________ __________ __________
__________ __________ __________
__________ __________ __________
44,763
__________
1,175 $ 49,530 $ 19,313 $ 529,277
__________
__________
105
__________ __________
__________ __________
__________ __________
44,763
—
December 31, 2012
___________________________________________________________________________
Total
12 months or more
Less than 12 months
_________________________
_________________________
________________________
Estimated
Estimated
Unrealized
Unrealized
Unrealized
Estimated
__________
__________ __________
__________ __________ __________
fair value
losses
fair value
losses
fair value
losses
Mortgage-backed securities:
Pass-through certificates:
GSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
99 $ 14,156 $
— $
— $
99
$ 14,156
REMICs:
GSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-GSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
58
—
4
100,310
33
—
__________ __________ __________
37 $
__________ __________ __________
__________ __________ __________
157 $ 114,466 $
62
33
__________ __________
__________ __________
__________ __________
7,633
604
8,237 $
107,943
604
__________
194 $ 122,703
__________
__________
The Company held 29 pass-through GSE mortgage-backed securities, six REMIC GSE mortgage-backed securities,
and one REMIC non-GSE mortgage-backed security that were in a continuous unrealized loss position of greater than twelve
months, 17 pass-through GSE mortgage-backed securities, 16 REMIC mortgage-backed securities issued or guaranteed by
GSEs, nine corporate securities, and one REMIC non-GSE mortgage-backed security that were in an unrealized loss position
of less than twelve months, and rated investment grade at December 31, 2013. 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.
79
(4) Securities Held-to-Maturity
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Financial Statements – (Continued)
The company had no held-to-maturity securities at December 31 2013, the following is a summary of mortgage-
backed securities held-to-maturity at December 31 2012 (in thousands):
2012
_________________________________________________________
Amortized
__________
Cost
Gross
Unrealized
__________
Gains
Gross
Unrealized
__________
Losses
Estimated
__________
Fair Value
Mortgage-backed securities:
Pass-through certificates:
GSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
465
$
31
$
— $
496
Real estate mortgage investment conduits (REMICs):
GSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total securities held-to-maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,755
__________
2,220
__________
__________
58
__________
$
89
__________
__________
—
__________
$
— $
__________
__________
1,813
__________
2,309
__________
__________
The Company transferred its held-to-maturity securities to available-for-sale during the year ended December 31,
2013, and did not sell any held-to-maturity securities during the years ended December 31, 2012 and 2011.
(5) Loans
Loans held-for-investment, net, consists of the following (in thousands):
December 31,
_______________________________
_____________
_____________
2012
2013
Real estate loans:
Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
One-to-four family residential mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Home equity and lines of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction and land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total real estate loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial and industrial loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total commercial and industrial and other loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred loan cost, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Originated loans held-for-investment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PCI Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans acquired:
Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
One-to-four family residential mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction and land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total loans acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans held for investment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loans held-for-investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
870,951
340,174
64,753
46,231
14,152
_____________
1,336,261
_____________
10,162
2,310
_____________
12,472
_____________
3,458
_____________
1,352,191
59,468
3,930
13,254
60,262
371
_____________
77,817
_____________
1,489,476
(26,037)
_____________
$ 1,463,439
_____________
_____________
$ 610,129
315,450
64,733
33,573
23,243
_____________
1,047,128
_____________
14,786
1,830
_____________
16,616
_____________
2,456
_____________
1,066,200
75,349
5,763
17,053
78,237
380
_____________
101,433
_____________
1,242,982
(26,424)
_____________
$ 1,216,558
_____________
_____________
The Company had $471,000 and $5.4 million in loans held-for-sale at December 31, 2013 and 2012, respectively.
Loans held-for-sale included $471,000 and $5.4 million of non-accrual loans at December 31, 2013 and 2012. At December
31, 2012, $3.8 million of non-accruing loans held-for-sale were associated with the Flatbush Merger (the “Merger”).
PCI loans, primarily acquired as part of a Federal Deposit Insurance Corporation-assisted transaction, totaled $59.5
million at December 31, 2013 as compared to $71.5 million at December 31, 2012. The Company accounts for PCI loans
utilizing generally accepting accounting principles applicable to loans acquired with deteriorated credit quality. PCI loans
80
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Financial Statements – (Continued)
consist of approximately 37% commercial real estate and 47% commercial and industrial loans, with the remaining balance in
residential and home equity loans. The following details the accretable yield (in thousands):
Balance at the beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accretable yield at purchase date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accretion into interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net reclassification from non-accretable difference (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
For The Year Ended
December 31,
_______________________________
_____________
_____________
2012
2013
42,493
$
43,431
—
833
(6,424)
(5,701)
6,529
(5,266)
_____________
_____________
$
32,464
43,431
_____________
_____________
_____________
_____________
(1) Due to re-casting of cash flows for loan pools acquired in the 2011 FDIC-assisted transaction.
At December 31, 2013 and 2012, PCI loans included $3.6 million and $3.1 million, respectively, of loans acquired as
part of the Merger.
The Company does not have any lending programs commonly referred to as subprime lending. Subprime lending
generally targets borrowers with weakened credit histories typically characterized by payment delinquencies, previous charge-
offs, judgments, bankruptcies, or borrowers with questionable repayment capacity as evidenced by low credit scores or high
debt-burden ratios.
During 2012, we sold the servicing rights of loans sold to Freddie Mac to a third-party bank. These one-to-four family
residential mortgage real estate loans were underwritten to Freddie Mac guidelines and to comply with applicable federal, state,
and local laws. At the time of the closing of these loans the Company owned the loans and subsequently sold them to Freddie Mac
providing normal and customary representations and warranties, including representations and warranties related to compliance
with Freddie Mac underwriting standards. At the time of sale, the loans were free from encumbrances except for the mortgages
filed by the Company which, with other underwriting documents, were subsequently assigned and delivered to Freddie Mac. At
the time of sale to the third-party, substantially all of the loans serviced for Freddie Mac were performing in accordance with their
contractual terms and management believes that it has no material repurchase obligations associated with these loans.
We provide for loan losses based on the consistent application of our documented allowance for loan loss
methodology. Loan losses are charged to the allowance for loans losses and recoveries are credited to it. Additions to the
allowance for loan losses are provided by charges against income based on various factors which, in our judgment, deserve
current recognition in estimating probable losses. Loan losses are charged-off in the period the loans, or portion thereof, are
deemed uncollectible. Generally, the Company will record a loan charge-off (including a partial charge-off) to reduce a loan
to the estimated fair value of the underlying collateral, less cost to sell, for collateral dependent loans. We regularly review the
loan portfolio in order to maintain the allowance for loan losses in accordance with U.S. GAAP. At December 31, 2013 and
2012, the allowance for loan losses related to loans held-for-investment (excluding PCI loans) consisted primarily of the
following two components:
(1)
Specific allowances are established for impaired loans (generally defined by the Company as non-accrual loans
with an outstanding balance of $500,000 or greater and all loans restructured in troubled debt restructurings).
The amount of impairment, if any, provided for as a specific reserve determined by the deficiency, if any,
between the present value of expected future cash flows discounted at the original loan’s effective interest rate
or the underlying collateral value (less estimated costs to sell,) if the loan is collateral dependent, and the
carrying value of the loan. Impaired loans that have no impairment losses are not considered for general
allowances described below. Generally, the Company charges down a loan to the estimated fair value of the
underlying collateral, less costs to sell for collateral dependent loans and, if necessary, maintains a specific
reserve in the allowance for loan losses related to cash flow dependent impaired loans where the present value
of the expected future cash flows, discounted at the loan’s original contractual interest rate, is less than the
carrying value of the loan unless management determines that such shortfall should be charged off.
(2) General allowances are established for loan losses on a portfolio basis for loans that do not meet the definition
of impaired. The portfolio is grouped into similar risk characteristics, primarily loan type, loan-to-value, if
collateral dependent, and internal credit risk ratings. We apply an estimated loss rate to each loan group. The
81
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Financial Statements – (Continued)
loss rates applied are based on our cumulative prior two year net loss experience adjusted, as appropriate, for
the environmental factors discussed below. This evaluation is inherently subjective, as it requires material
estimates that may be susceptible to significant revisions based upon changes in economic and real estate
market conditions. Actual loan losses may be significantly more than the allowance for loan losses we have
established, which could have a material negative effect on our financial results. Within general allowances is an
unallocated reserve established to recognize losses related to the inherent subjective nature of the appraisal
process and the internal credit risk rating process.
Additionally, loans acquired with no evidence of credit deterioration are held-for-investment and initially valued at an
estimated fair value on the date of acquisition, with no initial related allowance for loan losses. These loans are evaluated for
impairment on quarterly basis as part of our analysis of the allowance for loan losses.
In underwriting a loan secured by real property, we require an appraisal (or an automated valuation model) of the
property by an independent licensed appraiser approved by the Company’s board of directors. The appraisal is subject to
review by an independent third-party hired by the Company. We review and inspect properties before disbursement of funds
during the term of a construction loan. Generally, management obtains updated appraisals when a loan is deemed impaired.
These appraisals may be more limited than those prepared for the underwriting of a new loan. In addition, when the Company
acquires other real estate owned, it generally obtains a current appraisal to substantiate the net carrying value of the asset.
The adjustments to our loss experience are based on our evaluation of several environmental factors, including:
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
changes in local, regional, national, and international economic and business conditions and developments that
affect the collectability of our portfolio, including the condition of various market segments;
changes in the nature and volume of our portfolio and in the terms of our loans;
changes in the experience, ability, and depth of lending management and other relevant staff;
changes in the volume and severity of past due loans, the volume of nonaccrual loans, and the volume and severity
of adversely classified or graded loans;
changes in the quality of our loan review system;
changes in the value of underlying collateral for collateral-dependent loans;
the existence and effect of any concentrations of credit, and changes in the level of such concentrations; and
the effect of other external factors such as competition and legal and regulatory requirements on the level of
estimated credit losses in our existing portfolio.
In evaluating the estimated loss factors to be utilized for each loan group, management also reviews actual net loss
history over an extended period of time as reported by the FDIC for institutions both in our market area and nationally for
periods that are believed to have experienced similar economic conditions.
We evaluate the allowance for loan losses based on the combined total of the impaired and general components for
originated loans. Generally when the loan portfolio increases, absent other factors, our allowance for loan loss methodology
results in a higher dollar amount of estimated probable losses. Conversely, when the loan portfolio decreases, absent other
factors, our allowance for loan loss methodology results in a lower dollar amount of estimated probable losses.
82
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Financial Statements – (Continued)
Each quarter we evaluate the allowance for loan losses and adjust the allowance as appropriate through a provision for
loan losses. While we use the best information available to make evaluations, future adjustments to the allowance may be
necessary if conditions differ substantially from the information used in making the evaluations. In addition, as an integral
part of their examination process, the OCC will periodically review the allowance for loan losses. The OCC may require us to
adjust the allowance based on their analysis of information available to them at the time of their examination. Our last
examination date was as of September 30, 2013.
A summary of changes in the allowance for loan losses for the years ended December 31, 2013, 2012, and 2011
follows (in thousands):
December 31,
_________________________________________
__________
__________
__________
2011
2012
2013
$ 21,819
$ 26,836
Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 26,424
12,589
3,536
1,927
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
108
245
860
Recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(7,680)
(4,193)
Charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3,174)
__________
__________
__________
$ 26,836
$ 26,424
Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 26,037
__________
__________
__________
__________
__________
__________
83
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NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Financial Statements – (Continued)
The Company monitors the credit quality of its loan receivables 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. When the lender learns
of important financial developments, the risk rating is reviewed accordingly, 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.
Loans that have an internal credit rating of special mention or accruing substandard receive a multiple of the general reserve
loss factors for each 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.
2.
3.
4.
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6.
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8.
9.
Special Mention
Substandard
Doubtful
Loss
Loans rated 1 to 5 are considered pass ratings. An asset is considered 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.
86
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h
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Financial Statements – (Continued)
Included in originated loans receivable (including held-for-sale) are loans for which the accrual of interest income has
been discontinued due to deterioration in the financial condition of the borrowers. The recorded investment of these
nonaccrual loans was $17.7 million and $34.9 million at December 31, 2013, and December 31, 2012, respectively. Generally,
originated loans (both held-for-investment and held-for-sale) are placed on non-accruing status when they become 90 days or
more delinquent, or sooner if considered appropriate by management, and remain on non-accrual status until they are brought
current, have six 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.
Non-accrual amounts included loans deemed to be impaired of $13.5 million and $26.0 million at December 31, 2013,
and December 31, 2012, 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 $3.8 million and $3.5 million at December 31, 2013,
and December 31, 2012, respectively. Non-accrual amounts included in loans held-for-sale were $471,000 million and $5.4
million at December 31, 2013, and December 31, 2012, respectively. Loans past due ninety days or more and still accruing
interest were $32,000 and $621,000 at December 31, 2013, and December 31, 2012, respectively, and consisted of loans that
are well secured and in the process of renewal.
The following table sets forth the detail, and delinquency status, of non-performing loans (non-accrual loans and loans
past due ninety days or more and still accruing), net of deferred fees and costs, at December 31, 2013 and 2012 (in thousands)
excluding PCI loans which have been segregated into pools in accordance with ASC Subtopic 310-30. Each loan pool is
accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows.
At December 31, 2013
Total Non-Performing Loans
Non-Accruing Loans
0-29 Days
_________
Past Due
90 Days or
30-89 Days
___________
_________
Past Due 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%
Special Mention . . . . . . . . . . . . . . . $
Total . . . . . . . . . . . . . . . . . . . . . .
— $
_________
—
— $
_________
—
— $
___________
—
— $
_________
—
— $
____________
—
—
_________
—
LTV => 35%
Special Mention . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . .
Total commercial . . . . . . . . . . . . . . . . . .
One-to-four family residential
LTV < 60%
—
3,606
_________
3,606
_________
3,606
_________
—
421
_________
421
_________
421
_________
335
7,836
___________
8,171
___________
8,171
___________
335
11,863
_________
12,198
_________
12,198
_________
—
—
____________
—
____________
—
____________
335
11,863
_________
12,198
_________
12,198
_________
Special Mention . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . .
—
—
_________
—
16
418
_________
434
114
186
___________
300
130
604
_________
734
—
—
____________
—
130
604
_________
734
LTV => 60%
Substandard . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . .
Total one-to-four family residential . . . .
Construction and land
Substandard . . . . . . . . . . . . . . . . . . . . .
Total construction and land . . . . . . . . . .
Multifamily
LTV => 35%
—
_________
—
_________
—
_________
189
_________
189
_________
623
_________
993
___________
993
___________
1,293
___________
1,182
_________
1,182
_________
1,916
_________
—
____________
—
____________
—
____________
1,182
_________
1,182
_________
1,916
_________
108
_________
108
_________
—
_________
—
_________
—
___________
—
___________
108
_________
108
_________
—
____________
—
____________
108
_________
108
_________
Substandard . . . . . . . . . . . . . . . . . . .
Total multifamily . . . . . . . . . . . . . .
—
_________
—
_________
—
_________
—
_________
—
___________
—
___________
—
_________
—
_________
—
____________
—
____________
—
_________
—
_________
88
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Financial Statements – (Continued)
At December 31, 2013
Total Non-Performing Loans
Non-Accruing Loans
0-29 Days
_________
Past Due
90 Days or
30-89 Days
___________
_________
Past Due More Past Due
_________
Total
90 Days or
More Past Due
____________
and Accruing
Total Non-
Performing
_________
Loans
Multifamily
LTV => 35%
Substandard . . . . . . . . . . . . . . .
Total Multifamily . . . . . . . . . . . . . . . . . . .
Home equity and lines of credit
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special Mention . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . .
Total home equity and lines of credit . . .
Commercial and industrial loans
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special Mention . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . .
Total commercial and industrial loans . . . . .
Other loans
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total other loans . . . . . . . . . . . . . . . . . . . . . .
Total non-performing loans
—
_________
—
_________
—
_________
—
_________
73
___________
73
___________
73
_________
73
_________
—
____________
—
____________
73
_________
73
_________
—
—
—
_________
—
_________
—
—
—
_________
—
_________
—
—
1,239
___________
1,239
___________
—
—
1,239
_________
1,239
_________
—
—
—
____________
—
____________
—
—
1,239
_________
1,239
_________
—
—
—
_________
—
_________
—
—
—
_________
—
_________
—
—
441
___________
441
___________
—
—
441
_________
441
_________
—
—
—
____________
—
____________
—
—
441
_________
441
_________
—
_________
—
_________
—
_________
—
_________
—
___________
—
___________
—
_________
—
_________
32
____________
32
____________
32
_________
32
_________
held-for-investment . . . . . . . . . . . . . . . $
_________
3,714 $
1,044
_________
$
11,217
___________
$ 15,975
_________
$
32
____________
$ 16,007
_________
Loans acquired:
One-to-four family residential
LTV < 60%
Substandard . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . .
—
_________
—
—
_________
—
—
___________
—
—
_________
—
—
____________
—
—
_________
—
LTV => 60%
Substandard . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . .
Total one-to-four family residential . . . . .
Commercial
LTV> 35%
607
_________
607
_________
607
_________
—
_________
—
_________
—
_________
466
___________
466
___________
466
___________
1,073
_________
1,073
_________
1,073
_________
—
____________
—
____________
—
____________
1,073
_________
1,073
_________
1,073
_________
Special Mention . . . . . . . . . . . . . . . . $
Total . . . . . . . . . . . . . . . . . . . . . . .
Total non-performing loans acquired . . . .
Total non-performing loans . . . . . . . . . . . . $
— $
_________
—
_________
607
_________
4,321 $
_________
_________
— $
_________
—
_________
—
_________
1,044
_________
_________
252 $
___________
252
___________
718
___________
$
11,935
___________
___________
252
_________
252
_________
1,325
_________
$ 17,300
_________
_________
$
— $
____________
—
____________
—
____________
$
32
____________
____________
252
_________
252
_________
1,325
_________
$ 17,332
_________
_________
89
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Financial Statements – (Continued)
At December 31, 2012
Total Non-Performing Loans
Non-Accruing Loans
0-29 Days
_________
Past Due
90 Days or
30-89 Days
___________
_________
Past Due 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 . . . . . . . . . . . . . . . . . . . $
Total . . . . . . . . . . . . . . . . . . . . . . .
1,699
_________
1,699
— $
$
_________
—
— $
___________
—
1,699
_________
1,699
— $
$
____________
—
1,699
_________
1,699
LTV => 35%
Substandard . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . .
Total commercial . . . . . . . . . . . . . . . . . . .
One-to-four family residential
LTV < 60%
13,947
_________
13,947
_________
15,646
_________
442
_________
442
_________
442
_________
5,565
___________
5,565
___________
5,565
___________
19,954
_________
19,954
_________
21,653
_________
349
____________
349
____________
349
____________
20,303
_________
20,303
_________
22,002
_________
Special Mention . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . .
—
—
_________
—
19
429
_________
448
229
—
___________
229
248
429
_________
677
119
—
____________
119
367
429
_________
796
LTV => 60%
Substandard . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . .
Total one-to-four family residential . . . . .
Construction and land
Substandard . . . . . . . . . . . . . . . . . . . . .
Total construction and land . . . . . . . . . . .
Multifamily
LTV => 35%
Substandard . . . . . . . . . . . . . . . . . . .
Total multifamily . . . . . . . . . . . . . . . . . . .
Home equity and lines of credit
Substandard . . . . . . . . . . . . . . . . . . . . .
Total home equity and lines of credit . . .
Commercial and industrial loans
Substandard . . . . . . . . . . . . . . . . . . . . . . .
Total commercial and industrial loans . . . . .
Other loans
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total other loans . . . . . . . . . . . . . . . . . . . . .
Total non-performing loans
233
_________
233
_________
233
_________
201
_________
201
_________
649
_________
1,437
___________
1,437
___________
1,666
___________
1,871
_________
1,871
_________
2,548
_________
151
____________
151
____________
270
____________
2,022
_________
2,022
_________
2,818
_________
2,070
_________
2,070
_________
—
_________
—
_________
—
___________
—
___________
2,070
_________
2,070
_________
—
____________
—
____________
2,070
_________
2,070
_________
_________
—
_________
_________
—
_________
279
___________
279
___________
279
_________
279
_________
—
____________
—
____________
279
_________
279
_________
107
_________
107
_________
—
_________
—
_________
1,587
___________
1,587
___________
1,694
_________
1,694
_________
—
____________
—
____________
1,694
_________
1,694
_________
532
_________
532
_________
—
_________
—
_________
724
___________
724
___________
1,256
_________
1,256
_________
—
____________
—
____________
1,256
_________
1,256
_________
—
_________
—
_________
—
_________
—
_________
—
___________
—
___________
—
_________
—
_________
2
____________
2
____________
2
_________
2
_________
held-for-investment . . . . . . . . . . . . . . . $ 18,588
_________
$
1,091
_________
$
9,821
___________
$ 29,500
_________
$
621
____________
$ 30,121
_________
Loans held-for-sale:
Commercial
LTV => 35%
Substandard . . . . . . . . . . . . . . . . . . .
Total commercial . . . . . . . . . . . . . . . . . . .
One-to-four family residential
LTV => 60%
—
_________
—
_________
_________
—
_________
773
___________
773
___________
773
_________
773
_________
—
____________
—
____________
773
_________
773
_________
Substandard . . . . . . . . . . . . . . . . . . .
Total one-to-four family residential . . . . .
122
_________
122
_________
—
_________
—
_________
3,662
___________
3,662
___________
3,784
_________
3,784
_________
—
____________
—
____________
3,784
_________
3,784
_________
90
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Financial Statements – (Continued)
At December 31, 2012
Total Non-Performing Loans
Non-Accruing Loans
0-29 Days
_________
Past Due
90 Days or
30-89 Days
___________
_________
Past Due More Past Due
_________
Total
90 Days or
More Past Due
____________
and Accruing
Total Non-
Performing
_________
Loans
Multifamily
LTV => 35%
Substandard . . . . . . . . . . . . . . . . . . . .
Total multifamily . . . . . . . . . . . . . . . . . . . .
Total non-performing loans held-for-sale .
Total non-performing loans . . . . . . . . . . . . .
—
_________
—
_________
122
_________
18,710
_________
_________
—
_________
—
_________
—
_________
$
1,091
_________
_________
890
___________
890
___________
5,325
___________
$
___________
___________
890
_________
890
_________
5,447
_________
_________
_________
15,146 $ 34,947 $
890
—
_________
____________
890
—
____________
_________
5,447
—
_________
____________
621 $ 35,568
____________
_________
_________
____________
The following table sets forth the detail and delinquency status of originated loans receivable held-for-investment, net
of deferred fees and costs, by performing and non-performing loans at December 31, 2013 and 2012 (in thousands).
December 31, 2013
Performing (Accruing) Loans
30-89 Days
_________
Past Due
0-29 Days
_________
Past Due
__________
Total
Loans held-for-investment:
Real estate loans:
Commercial
LTV < 35%
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Special Mention . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
42,995 $
1,304
1,333
_________
45,632
— $
—
—
_________
—
42,995
1,304
1,333
__________
45,632
Non-Performing
____________
Loans
Total Loans
____________
Receivable, net
$
— $
—
—
____________
—
42,995
1,304
1,333
____________
45,632
LTV > 35%
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special Mention . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total commercial . . . . . . . . . . . . . . . . . . . . . . . . .
One-to-four family residential
LTV < 60%
239,544
10,927
28,949
_________
279,420
_________
325,052
_________
928
1,676
680
_________
3,284
_________
3,284
_________
240,472
12,603
29,629
__________
282,704
__________
328,336
__________
—
335
11,863
____________
12,198
____________
12,198
____________
240,472
12,938
41,492
____________
294,902
____________
340,534
____________
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special Mention . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
28,216
1,746
269
_________
30,231
379
413
515
_________
1,307
28,595
2,159
784
__________
31,538
—
130
604
____________
734
28,595
2,289
1,388
____________
32,272
LTV > 60%
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special Mention . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total one-to-four family residential . . . . . . . . . . .
Construction and land
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special Mention . . . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total construction and land . . . . . . . . . . . . . . . . .
27,575
703
522
_________
28,800
_________
59,031
_________
2,666
—
369
_________
3,035
_________
4,342
_________
30,241
703
891
__________
31,835
__________
63,373
__________
—
—
1,182
____________
1,182
____________
1,916
____________
30,241
703
2,073
____________
33,017
____________
65,289
____________
13,458
595
—
_________
14,053
_________
—
—
—
_________
—
_________
13,458
595
—
__________
14,053
__________
—
—
108
____________
108
____________
13,458
595
108
____________
14,161
____________
91
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Financial Statements – (Continued)
December 31, 2013
Performing (Accruing) Loans
30-89 Days
_________
Past Due
0-29 Days
_________
Past Due
__________
Total
Non-Performing
____________
Loans
Total Loans
____________
Receivable, net
Multifamily
LTV < 35%
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special Mention . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
40,638
94
821
_________
41,553
328
215
—
_________
543
40,966
309
821
__________
42,096
—
—
—
____________
—
40,966
309
821
____________
42,096
LTV > 35%
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special Mention . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total multifamily . . . . . . . . . . . . . . . . . . . . . . . . .
Home equity and lines of credit
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special Mention . . . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total home equity and lines of credit . . . . . . . . . .
Commercial and industrial loans
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special Mention . . . . . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total commercial and industrial loans . . . . . . . . . . .
Other loans
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total other loans . . . . . . . . . . . . . . . . . . . . . . . . . . . .
817,923
6,751
4,118
_________
828,792
_________
870,345
_________
—
1,115
825
_________
1,940
_________
2,483
_________
817,923
7,866
4,943
__________
830,732
__________
872,828
__________
—
—
73
____________
73
____________
73
____________
817,923
7,866
5,016
____________
830,805
____________
872,901
____________
45,116
376
—
_________
45,492
_________
1
93
—
_________
94
_________
45,117
469
—
__________
45,586
__________
—
—
1,239
____________
1,239
____________
45,117
469
1,239
____________
46,825
____________
7,415
962
570
_________
8,947
_________
73
—
741
_________
814
_________
7,488
962
1,311
__________
9,761
__________
—
—
441
____________
441
____________
7,488
962
1,752
____________
10,202
____________
2,226
_________
2,226
_________
_________
_________
21
_________
21
_________
_________
_________
2,247
__________
2,247
__________
11,038 $ 1,336,184
__________
__________
32
____________
32
____________
16,007
$
____________
____________
2,279
____________
2,279
____________
$ 1,352,191
____________
____________
Total loans held-for-investment . . . . . . . . . . . . . . $1,325,146 $
92
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Financial Statements – (Continued)
December 31, 2013
Performing (Accruing) Loans
30-89 Days
_________
Past Due
0-29 Days
_________
Past Due
__________
Total
Non-Performing
____________
Loans
Total Loans
____________
Receivable, net
LTV < 60%
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special Mention . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
43,112
306
136
_________
43,554
_________
1,195
104
4
_________
1,303
_________
44,307
410
140
__________
44,857
__________
—
—
—
____________
—
____________
44,307
410
140
____________
44,857
____________
LTV => 60%
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special Mention . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total one-to-four family residential . . . . . . . . . . .
Commercial
LTV < 35%
13,838
232
262
_________
14,332
_________
57,886
_________
—
—
—
_________
—
_________
1,303
_________
13,838
232
262
__________
14,332
__________
59,189
__________
—
—
1,073
____________
1,073
____________
1,073
____________
13,838
232
1,335
____________
15,405
____________
60,262
____________
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Special Mention . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,143 $
189
937
_________
3,269
—
—
529
_________
529
2,143
189
1,466
__________
3,798
$
— $
—
—
____________
—
2,143
189
1,466
____________
3,798
LTV > 35%
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total commercial . . . . . . . . . . . . . . . . . . . . . . . . .
Construction and land
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total construction and land . . . . . . . . . . . . . . . . . .
Multifamily
LTV < 35%
8,742
—
_________
8,742
_________
12,011
_________
461
—
_________
461
_________
990
_________
9,203
—
__________
9,203
__________
13,001
__________
—
252
____________
252
____________
252
____________
9,203
252
____________
9,455
____________
13,253
____________
372
_________
372
_________
—
_________
—
_________
372
__________
372
__________
—
____________
—
____________
372
____________
372
____________
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
588 $
490
_________
1,078
— $
—
_________
—
588
490
__________
1,078
$
— $
—
____________
—
588
490
____________
1,078
LTV => 35%
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special Mention . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total multifamily . . . . . . . . . . . . . . . . . . . . . . . . .
Total loans acquired . . . . . . . . . . . . . . . . . . . . . . .
2,262
590
_________
2,852
_________
3,930
_________
74,199
_________
$1,399,345
_________
_________
—
—
_________
—
_________
—
_________
2,293
_________
$
_________
_________
2,262
590
__________
2,852
__________
3,930
__________
76,492
__________
13,331 $ 1,412,676
__________
__________
—
—
____________
—
____________
—
____________
1,325
____________
$
17,332
____________
____________
2,262
590
____________
2,852
____________
3,930
____________
77,817
____________
$ 1,430,008
____________
____________
93
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Financial Statements – (Continued)
December 31, 2012
Performing (Accruing) Loans
30-89 Days
_________
Past Due
0-29 Days
_________
Past Due
__________
Total
Loans held-for-investment:
Real estate loans:
Commercial
LTV < 35%
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Special Mention . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
29,424 $
185
—
_________
29,609
860 $
—
—
_________
860
30,284
185
—
__________
30,469
Non-Performing
____________
Loans
Total Loans
____________
Receivable, net
$
— $
—
1,699
____________
1,699
30,284
185
1,699
____________
32,168
LTV > 35%
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special Mention . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total commercial . . . . . . . . . . . . . . . . . . . . . . . . .
One-to-four family residential
LTV < 60%
208,908
22,416
27,932
_________
259,256
_________
288,865
_________
2,771
1,105
—
_________
3,876
_________
4,736
_________
211,679
23,521
27,932
__________
263,132
__________
293,601
__________
—
—
20,303
____________
20,303
____________
22,002
____________
211,679
23,521
48,235
____________
283,435
____________
315,603
____________
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special Mention . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
29,154
1,055
448
_________
30,657
2,966
—
189
_________
3,155
32,120
1,055
637
__________
33,812
—
367
429
____________
796
32,120
1,422
1,066
____________
34,608
LTV > 60%
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special Mention . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total one-to-four family residential . . . . . . . . . . .
Construction and land
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special Mention . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . .
Total construction and land . . . . . . . . . . . . . . . . . .
Multifamily
LTV < 35%
26,963
384
249
_________
27,596
_________
58,253
_________
1,128
—
—
_________
1,128
_________
4,283
_________
28,091
384
249
__________
28,724
__________
62,536
__________
—
—
2,022
____________
2,022
____________
2,818
____________
28,091
384
2,271
____________
30,746
____________
65,354
____________
12,377
5,137
3,512
_________
21,026
_________
159
—
—
_________
159
_________
12,536
5,137
3,512
__________
21,185
__________
—
—
2,070
____________
2,070
____________
12,536
5,137
5,582
____________
23,255
____________
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special Mention . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
19,438
—
510
_________
19,948
—
115
—
_________
115
19,438
115
510
__________
20,063
—
—
—
____________
—
19,438
115
510
____________
20,063
LTV > 35%
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special Mention . . . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total multifamily . . . . . . . . . . . . . . . . . . . . . . . . .
Home equity and lines of credit
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special Mention . . . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total home equity and lines of credit . . . . . . . . . .
574,686
9,134
4,909
_________
588,729
_________
608,677
_________
748
1,310
340
_________
2,398
_________
2,513
_________
575,434
10,444
5,249
__________
591,127
__________
611,190
__________
—
—
279
____________
279
____________
279
____________
575,434
10,444
5,528
____________
591,406
____________
611,469
____________
31,482
659
—
_________
32,141
_________
44
—
—
_________
44
_________
31,526
659
—
__________
32,185
__________
—
—
1,694
____________
1,694
____________
31,526
659
1,694
____________
33,879
____________
94
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Financial Statements – (Continued)
December 31, 2012
Performing (Accruing) Loans
30-89 Days
_________
Past Due
0-29 Days
_________
Past Due
__________
Total
Commercial and industrial loans
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Special Mention . . . . . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total commercial and industrial loans . . . . . . . . . . .
Other loans
10,356 $
753
978
_________
12,087
_________
636 $
—
831
_________
1,467
_________
10,992
753
1,809
__________
13,554
__________
Non-Performing
____________
Loans
Total Loans
____________
Receivable, net
$
— $
—
1,256
____________
1,256
____________
10,992
753
3,065
____________
14,810
____________
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total other loans . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,743
26
_________
1,769
_________
$1,022,818
_________
_________
59
—
_________
59
_________
$
_________
_________
1,802
26
__________
1,828
__________
13,261 $ 1,036,079
__________
__________
2
—
____________
2
____________
$
30,121
____________
____________
1,804
26
____________
1,830
____________
$ 1,066,200
____________
____________
The following table summarizes impaired loans as of December 31, 2013 and 2012 (in thousands):
Recorded
__________
Investment
At December 31, 2013
Unpaid Principal
_____________
Balance
Related
__________
Allowance
With No Allowance Recorded:
Real estate loans:
Commercial
LTV < 35%
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
3,405
—
$
3,542
706
$
LTV => 35%
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
19,689
—
21,382
—
Construction and land
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
One-to-four family residential
LTV < 60%
Special Mention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LTV => 60%
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Multifamily
LTV < 35%
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LTV > 35%
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial and industrial loans
Special Mention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
With a Related Allowance Recorded:
Real estate loans:
Commercial
LTV => 35%
108
507
269
—
593
—
210
853
91
507
269
—
1,064
—
219
1,008
—
—
—
—
—
—
—
—
—
—
—
—
Special Mention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,289
6,810
2,672
6,937
(52)
(2,333)
95
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Financial Statements – (Continued)
Recorded
__________
Investment
At December 31, 2013
Unpaid Principal
_____________
Balance
Related
__________
Allowance
One-to-four family residential
LTV > 60%
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
— $
340
— $
340
LTV < 60%
Special Mention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
Multifamily
LTV => 35%
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Home equity and lines of credit
Special Mention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial and industrial loans
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,481
342
1,000
441
—
(19)
—
(117)
(7)
—
1,481
342
1,395
485
(104)
Total:
Real estate loans
Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
One-to-four family residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction and land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Home equity and lines of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial and industrial loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
32,193
1,116
108
2,074
1,342
1,504
__________
38,337
$
__________
__________
35,240
1,116
91
2,545
1,737
1,712
_____________
42,441
$
_____________
_____________
(2,385)
(19)
—
(117)
(7)
(104)
__________
$ (2,632)
__________
__________
96
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Financial Statements – (Continued)
Recorded
__________
Investment
At December 31, 2012
Unpaid Principal
_____________
Balance
Related
__________
Allowance
With No Allowance Recorded:
Real estate loans:
Commercial
LTV < 35%
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
1,699
$
1,699
$
LTV => 35%
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special Mention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,774
1,037
24,691
Construction and land
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,373
One-to-four family residential
LTV < 60%
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
49
LTV => 60%
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,841
Multifamily
LTV < 35%
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial and industrial loans
Special Mention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
510
38
1,527
2,774
1,045
25,897
3,031
49
4,141
510
38
1,527
—
—
—
—
—
—
—
—
—
—
With a Related Allowance Recorded:
Real estate loans:
Commercial
LTV => 35%
Special Mention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
637
11,645
664
12,045
(57)
(2,696)
One-to-four family residential
LTV < 60%
Special Mention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
520
520
(5)
Multifamily
LTV => 35%
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Home equity and lines of credit
Special Mention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial and industrial loans
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,640
356
1,587
491
2,111
356
1,589
491
(317)
(18)
(105)
(417)
Total:
Real estate loans
Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
One-to-four family residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction and land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Home equity and lines of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial and industrial loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
42,483
3,410
2,373
2,150
1,943
2,056
__________
$
54,415
__________
__________
44,124
4,710
3,031
2,621
1,945
2,056
_____________
$
58,487
_____________
_____________
(2,753)
(5)
—
(317)
(123)
(417)
__________
$ (3,615)
__________
__________
97
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Financial Statements – (Continued)
Included in the table above at December 31, 2013, are loans with carrying balances of $21.8 million that were not
written down by charge-offs or for which there is no specific reserves in our allowance for loan losses. Included in the
impaired loans at December 31, 2012, are loans with carrying balances of $24.9 million that were not written down by
charge-offs or for which there is no specific reserves in our allowance for loan losses. Loans not written down by charge-offs
or specific reserves at December 31, 2013 and 2012, have sufficient collateral values, less costs to sell (including any
discounts to facilitate a sale), or sufficient future cash flows to support the carrying balances of the loans.
The average recorded balance of originated impaired loans (including held-for-investment and held-for-sale) for the
years ended December 31, 2013, 2012, and 2011 was approximately $43.9 million, $54.3 million, and $58.7 million,
respectively. The Company recorded $2.0 million, $2.8 million and $2.8 million of interest income on impaired loans for the
years ended December 31, 2013, 2012, and 2011, respectively.
The following tables summarize loans that were modified in a troubled debt restructuring during the year ended
December 31, 2013 and 2012:
Number of
__________
Relationships
Year Ended December 31, 2013
Pre-Modification
Outstanding Recorded
_________________
Investment
(in thousands)
Post-Modification
Outstanding Recorded
__________________
Investment
Troubled Debt Restructurings
One-to-four Family
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special Mention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Troubled Debt Restructurings . . . . . . . . . . . . . . . . . . . . . .
1
1
2
__________
4
__________
__________
$
70
331
606
_________________
$
1,007
_________________
_________________
$
70
331
606
__________________
$
1,007
__________________
__________________
All four of the relationships in the table above were restructured to receive reduced interest rates.
Troubled Debt Restructurings
Commercial real estate loans
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
One-to-four Family
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Home equity and lines of credit
Number of
__________
Relationships
Year Ended December 31, 2012
Pre-Modification
Outstanding Recorded
_________________
Investment
(in thousands)
Post-Modification
Outstanding Recorded
__________________
Investment
1
2
$
6,251
$
489
6,251
489
Special Mention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Troubled Debt Restructurings . . . . . . . . . . . . . . . . . . . . . .
2
__________
5
__________
__________
356
_________________
$
7,096
_________________
_________________
356
__________________
$
7,096
__________________
__________________
All five of the relationships in the table above were restructured to receive reduced interest rates.
At December 31, 2013 and 2012 we had troubled debt restructurings of it $1 million and $45.0 million, respectively.
Management classifies all troubled debt restructurings 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 a detailed evaluation of each impaired loan and generally obtains updated appraisals as part of the
evaluation. In addition, management adjusts estimated fair values down to appropriately consider recent market conditions,
our willingness to accept a lower sales price to effect a quick sale, and costs to dispose of any supporting collateral.
Determining the estimated fair value of underlying collateral (and related costs to sell) can be difficult in illiquid real estate
markets and is subject to significant assumptions and estimates. Management employs an independent third-party expert in
98
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Financial Statements – (Continued)
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.
There have been 4 loans to one borrower that were restructured during the last twelve months that subsequently
defaulted.
The following table details this loan at December 31, 2013 and 2012:
Commercial & Industrial
Substandard - non-accrual . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CRE
Substandard - non-accrual . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
One-to-four Family
Substandard - non-accrual . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of
__________
Relationships
1
__________
1
__________
3
__________
3
__________
4
__________
__________
Number of
__________
Relationships
1
__________
1
__________
__________
Year Ended December 31, 2013
30-89 Days
_________
Past Due
(in thousands)
90 Days or More
______________
Past Due
—
$
__________
—
__________
—
__________
—
__________
—
$
__________
__________
441
$
______________
441
______________
7,052
______________
7,052
______________
7,493
$
______________
______________
Year Ended December 31, 2012
Pre-Modification
Outstanding Recorded
_________________
Investment
(in thousands)
Post-Modification
Outstanding Recorded
__________________
Investment
$
_________________
$
_________________
_________________
— $
— $
256
__________________
256
__________________
__________________
(6) Premises and Equipment, Net
At December 31, 2013 and 2012, premises and equipment, less accumulated depreciation and amortization, consists of
the following (in thousands):
At cost:
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Furniture, fixtures, and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Premises and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31,
_________
2013
_________
2012
$
2,026
6,647
2,600
18,969
26,126
_________
56,368
(27,311)
_________
$
29,057
_________
_________
$
2,036
5,950
2,600
17,299
25,577
_________
53,462
(23,677)
_________
$ 29,785
_________
_________
Depreciation expense for the years ended December 31, 2013, 2012, and 2011 was $3.6 million, $2.8 million, and
$2.2 million, respectively.
The Company realized a gain of $397,000 from the sale of vacant land adjacent to a branch in 2013, and no sales of
premises and equipment in 2012 or 2011.
99
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Financial Statements – (Continued)
(7) Deposits
Deposit account balances are summarized as follows (dollars in thousands):
December 31,
2013
_______________________________
Weighted Average
_____________
Rate
__________
Amount
2012
_______________________________
Weighted Average
_____________
Rate
__________
Amount
Transaction:
Negotiable orders of withdrawal . . . . . . . . . . . . . . .
Non-interest bearing checking . . . . . . . . . . . . . . . . .
Total transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Savings:
Money market . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Savings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total savings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Certificates of deposit:
Under $100,000 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$100,000 or more . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total certificates of deposit . . . . . . . . . . . . . . . . . . .
Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
129,955
$
235,355
__________
365,310
__________
438,562
380,915
__________
819,477
__________
172,175
135,727
__________
307,902
__________
$ 1,492,689
__________
__________
0.31% $
—
0.11
0.25
0.10
0.18
117,762
209,639
__________
327,401
__________
514,069
622,998
__________
1,137,067
__________
251,387
0.83
241,005
1.39
__________
1.08
492,392
__________
0.35% $ 1,956,860
__________
__________
0.37%
—
0.13
0.46
0.21
0.32
0.96
1.25
1.10
0.49%
The Company had brokered deposits (classified as certificates of deposit in the above table) of $695,000 and
$664,000, at December 31, 2013 and 2012, respectively.
Scheduled maturities of certificates of deposit are summarized as follows (in thousands):
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
_____________
December 31, 2013
215,692
$
55,551
23,020
8,150
4,798
691
_____________
307,902
$
_____________
_____________
Interest expense on deposits is summarized as follows (in thousands):
Negotiable order of withdrawal and money market . . . . . . . . . . . . . . . . . . . . . . . . . .
Savings-passbook and statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Certificates of deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
_________
2013
1,956
$
679
3,866
_________
$
6,501 $
_________
_________
December 31,
_________
2012
3,226
$
910
5,701
_________
9,837
_________
_________
__________
2011
3,624
$
1,027
7,600
__________
$
12,251
__________
__________
100
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Financial Statements – (Continued)
(8) Borrowings
Borrowings consisted of securities sold under agreements to repurchase, FHLB advances, and obligations under capital
leases and are summarized as follows (in thousands):
Repurchase agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other borrowings:
FHLB advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Floating rate advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Obligations under capital leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31,
_________
2013
$ 181,000
_________
2012
$ 226,000
285,661
2,485
1,179
_________
$ 470,325
_________
_________
188,260
3,394
1,468
_________
$ 419,122
_________
_________
FHLB advances are secured by a blanket lien on unencumbered securities and the Company’s FHLB capital stock.
Repurchase agreements and FHLB advances have contractual maturities as follows (in thousands):
December 31, 2013
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
FHLB
___________
Advances
43,168
52,500
53,910
74,003
62,080
___________
285,661
$
___________
___________
Repurchase
___________
Agreements
56,000
$
62,000
55,000
6,000
2,000
___________
181,000
$
___________
___________
At December 31, 2013 repurchase agreements have a weighted average rate of 2.70%, with the exception of one
repurchase agreement that matures late in the first quarter of 2014 at a rate of 2.92%, all maturing in more than 90 days. The
repurchase agreements are secured primarily by mortgage-backed securities with an amortized cost of $192.7 million, and a
fair value of $197.9 million, at December 31, 2013. At December 31, 2012 repurchase agreements had a weighted average
rate of 3.02%, all maturing in more than 90 days. The repurchase agreements were secured primarily by mortgage-backed
securities with an amortized cost of $242.4 million, and a fair value of $254.2 million, at December 31, 2012.
The Company has the ability to obtain additional funding from the FHLB and Federal Reserve Bank discount window
of approximately $797.3 million, utilizing unencumbered securities of $537.4 million and multifamily loans of $308.7 million
at December 31, 2013. The Company expects to have sufficient funds available to meet current commitments in the normal
course of business.
Interest expense on borrowings is summarized as follows (in thousands):
December 31,
_________
2012
8,573
$
4,071
27
136
__________ __________
$
12,807
__________ __________
__________ __________
_________
2013
6,492
$
3,836
10
109
10,447
$
__________
2011
11,207
$
1,776
20
159
__________
$
13,162
__________
__________
Repurchase agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
FHLB advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Over-night borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Obligations under capital leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
101
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Financial Statements – (Continued)
(9) Income Taxes
Income tax expense (benefit) consists of the following (in thousands):
_________
2013
December 31,
_________
2012
__________
2011
Federal tax expense (benefit):
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State and local tax expense (benefit):
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
10,081
(1,876)
__________ __________
8,205
__________ __________
12,493
(2,758)
9,735
1,568
(857)
__________ __________
711
__________ __________
$
8,916
__________ __________
__________ __________
2,276
(1,275)
1,001
10,736
$
$
8,319
(2,257)
__________
6,062
__________
1,061
(626)
__________
435
__________
$
6,497
__________
__________
The Company recorded net deferred tax assets of approximately $1.6 million as a result of the acquisition of Flatbush
Federal Bancorp at December 31, 2012. The Company recorded a deferred tax liability of approximately $2.4 million as a
result of the FDIC-assisted transaction at December 31, 2011.
Reconciliation between the amount of reported total income tax expense and the amount computed by multiplying the
applicable statutory income tax rate for the years ended December 31, 2013, 2012, and 2011 is as follows (dollars in
thousands):
_________
2013
10,459
$
December 31,
_________
2012
8,731
$
462
(1,009)
207
149
231
—
145
__________ __________
$
8,916
__________ __________
__________ __________
651
(1,262)
—
149
448
—
291
10,736
$
__________
2011
8,162
$
283
(1,041)
—
149
—
(1,246)
190
__________
$
6,497
__________
__________
Tax expense at statutory rate of 35% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in taxes resulting from:
State tax, net of federal income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bank owned life insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Merger related costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Incentive stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Uncertain tax position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bargain purchase gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
102
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Financial Statements – (Continued)
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax
liabilities at December 31, 2013 and 2012, are as follows (in thousands):
Deferred tax assets:
Allowance for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capitalized leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued salaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Postretirement benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized actuarial losses on post retirement benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Straight-line leases adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset retirement obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reserve for accrued interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reserve for loan commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employee Stock Ownership Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value adjustments of acquired loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value adjustments of pension benefit obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized losses securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total gross deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities:
Unrealized gains on securities – AFS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized actuarial gains on post retirement benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value adjustments of acquired securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value adjustments of deposit liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred loan fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total gross deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31,
_________
2013
_________
2012
$
10,387
492
2,500
737
539
2,686
—
1,032
102
1,233
180
241
493
1,259
5,381
172
3,556
_________
30,990
_________
—
478
17
45
1,105
_________
1,645
_________
29,345
$
_________
_________
$
11,373
607
2,503
742
519
2,183
197
1,024
102
1,806
144
195
619
582
433
732
—
_________
23,761
_________
12,332
—
754
46
531
_________
13,663
_________
10,098
$
_________
_________
The Company has determined that a valuation allowance should be established for certain state and local tax benefits
related to the Company’s contribution to the Northfield Bank Foundation. The carryforward for state and local benefits
expired during 2012 which resulted in the elimination of the deferred tax asset and corresponding valuation allowance. The
Company has determined that it is not required to establish a valuation reserve for the remaining net deferred tax asset
account since it is “more likely than not” that the net deferred tax assets will be realized through future reversals of existing
taxable temporary differences, future taxable income and tax planning strategies. The conclusion that it is “more likely than
not” that the remaining net deferred tax assets will be realized is based on the history of earnings and the prospects for
continued profitability. Management will continue to review the tax criteria related to the recognition of deferred tax assets.
As a savings institution, the Bank is subject to a special federal tax provision regarding its frozen tax bad debt reserve.
At December 31, 2013, and December 31, 2012, the Bank’s federal tax bad debt base-year reserve was $5.9 million, with a
related net deferred tax liability of $2.8 million, which has not been recognized since the Bank does not expect that this
reserve will become taxable in the foreseeable future. Events that would result in taxation of this reserve include redemptions
of the Bank’s stock or certain excess distributions by the Bank to the Company.
103
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Financial Statements – (Continued)
A reconciliation of the Company’s uncertain tax positions are as follows (in thousands):
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions based on tax positions related to prior years . . . . . . . . . . . . . . . . . . . .
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
_________
2013
$
231
448
_________
679
$
_________
_________
December 31,
_________
2012
$
— $
231
_________
231
$
_________
_________
__________
2011
—
—
__________
—
$
__________
__________
The Company recorded an additional federal tax provision of $448,000 in 2013 to increase its liability for uncertain
tax positions primarily due to denied deductions identified in the federal tax filings from 2009 to 2010 as a result of the on-
going Internal Revenue Service’s audit over the respective tax years, related to the Company’s stock offering in 2010.
The following years are open for examination or under examination:
(cid:127)
(cid:127)
(cid:127)
(cid:127)
Federal tax filings for 2009 through present. The 2009 and 2010 filings are currently under audit.
New York State tax filings 2010 through the present.
New York City tax filings 2007 through the present. Currently the 2007, 2008, and 2009 filings are under
examination.
State of New Jersey 2010 through present.
(10) Retirement Benefits
The Company has a 401(k) plan for its employees, which grants eligible employees (those salaried employees with at
least three months of service) the opportunity to invest from 2% to 15% of their base compensation in certain investment
alternatives. The Company contributes an amount equal to 25% of employee contributions on the first 6% of base
compensation contributed by eligible employees for the first three years of participation. Subsequent years of participation in
excess of three years will increase the Company matching contribution from 25% to 50% of an employee’s contributions, on
the first 6% of base compensation contributed by eligible employees. A member becomes fully vested in the Company’s
contributions upon (a) completion of five years of service, or (b) normal retirement, early retirement, permanent disability, or
death. The Company’s contribution to this plan amounted to approximately $266,000, $226,000, and $218,000 for the years
ended December 31, 2013, 2012, and 2011, respectively.
The Company also maintains a profit-sharing plan in which the Company can contribute to the participant’s 401(k)
account, at its discretion, up to the legal limit of the Internal Revenue Code. The Company did not contribute to the profit
sharing plan during 2013, 2012 and 2011.
The Company maintains the Northfield Bank Employee Stock Ownership Plan (the ESOP). The ESOP is a tax-
qualified plan designed to invest primarily in the Company’s common stock. The ESOP provides employees with the
opportunity to receive a funded retirement benefit from the Bank, based primarily on the value of the Company’s common
stock. The ESOP was authorized to, and did purchase, 2,463,884 shares of the Company’s common stock in the Company’s
initial public offering at a price of $7.13 per share. This purchase was funded with a loan from Northfield Bancorp, Inc. to the
ESOP. The first payment on the loan from the ESOP to the Company was due and paid on December 31, 2007, and the
outstanding balance at December 31, 2013 and 2012, was $13.9 million and $14.5 million, respectively. The shares of the
Company’s common stock purchased in the initial public offering are pledged as collateral for the loan. Shares are released
for allocation to participants as loan payments are made. A total of 81,631 and 84,887 shares were released and allocated to
participants for the ESOP years ended December 31, 2013 and 2012, respectively. ESOP compensation expense for the year
ended December 31, 2013, 2012, and 2011 was $972,000, $856,000, and $790,000, respectively. Cash dividends on
unallocated shares are utilized to satisfy required debt payments. Dividends on allocated shares are utilized to prepay debt
which releases additional shares to participants.
Upon completion of the Company’s second-step conversion, a second ESOP was offered to employees in 2013;
authorized to, and did purchase, 1,422,357 shares of the Company’s common stock at a price of $10.00 per share. The
purchase was funded with a loan from Northfield Bancorp, Inc. to the second ESOP. The first payment on the loan from the
104
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Financial Statements – (Continued)
ESOP to the Company was due and paid on December 31, 2013, and the outstanding balance at December 31, 2013 was
$13.9 million. The shares of the Company’s common stock purchased in the second-step conversion are pledged as collateral
for the loan. Shares are released for allocation to participants as loan payments are made. A total of 47,412 shares were
released and allocated to participants for the second ESOP year ended December 31, 2013. The second ESOP compensation
expense for the year ended December 31, 2013 was $568,000. Cash dividends on unallocated shares are utilized to satisfy
required debt payments. Dividends on allocated shares are utilized to prepay debt which releases additional shares to
participants.
The Company maintains a Supplemental Employee Stock Ownership Plan (the SESOP), a non-qualified plan, that
provides supplemental benefits to certain executives who are prevented from receiving the full benefits contemplated by the
ESOP’s benefit formula due to tax law limits for tax-qualified plans. The supplemental payments for the SESOP consist of
cash payments representing the value of Company shares that cannot be allocated to participants under the ESOP due to legal
limitations imposed on tax-qualified plans. The Company made a contribution to the SESOP plan of $38,000, $25,000, and
$25,000 for the years ended December 31, 2013, 2012, and 2011, respectively.
The Company provides post retirement medical and life insurance to a limited number of retired individuals. The
Company also provides retiree life insurance benefits to all qualified employees, up to certain limits. The following tables set
forth the funded status and components of postretirement benefit costs at December 31 measurement dates (in thousands):
Accumulated postretirement benefit obligation beginning of year . . . . . . . . . . . . . .
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actuarial (gain) loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated postretirement benefit obligation end of year . . . . . . . . . . . . . . . . . . .
Accrued liability (included in accrued expenses and other liabilities) . . . . . . . . . . .
_________
2013
1,778
$
9
56
(455)
(94)
_________
1,294
_________
1,294
$
_________
_________
_________
2012
1,697
$
7
66
115
(107)
_________
1,778
_________
1,778
$
_________
_________
__________
2011
1,668
$
6
80
47
(104)
__________
1,697
__________
1,697
$
__________
__________
The following table sets forth the amounts recognized in accumulated other comprehensive income (loss)
(in thousands):
December 31,
Net (gain) loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transition obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Gain) Loss recognized in accumulated other comprehensive income . . . . . . . . . . . . . . . . . . . . .
_________
2013
$
(116) $
33
74
_________
$
(9) $
_________
_________
_________
2012
376
50
90
_________
516
_________
_________
The estimated net gain, transition obligation, and prior service cost that will be amortized from accumulated other
comprehensive income (loss) into net periodic cost in 2014 are $11,000, $17,000, and $25,000 respectively.
The following table sets forth the components of net periodic postretirement benefit costs for the years ended
December 31, 2013, 2012, and 2011 (in thousands):
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of transition obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of prior service costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of unrecognized loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net postretirement benefit cost included in compensation and employee benefits .
_________
2013
9
$
56
17
16
36
_________
$
134
_________
_________
December 31,
_________
2012
7
$
66
17
15
28
_________
$
133
_________
_________
__________
2011
6
$
80
17
15
25
__________
$
143
__________
__________
The assumed discount rate related to plan obligations reflects the weighted average of published market rates for
high-quality corporate bonds with terms similar to those of the plans expected benefit payments, rounded to the nearest
105
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Financial Statements – (Continued)
quarter percentage point. The Company’s discount rate and rate of compensation increase used in accounting for the plan are
as follows:
Assumptions used to determine benefit obligation at period end:
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rate of increase in compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assumptions used to determine net periodic benefit cost for the year:
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rate of increase in compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.25%
4.00
3.25
4.00
3.25%
4.00
4.00
4.00
4.00%
4.00
5.00
4.00
_________
2013
_________
2012
__________
2011
At December 31, 2013, a medical cost trend rate of 8.75% decreasing 0.50% per year thereafter until an ultimate rate
of 4.75% is reached, was used in the plan’s valuation. The Company’s healthcare cost trend rates are based, among other
things, on the Company’s own experience and third-party analysis of recent and projected healthcare cost trends.
A one percentage-point change in assumed heath care cost trends would have the following effects (in thousands):
Effect on benefits earned and interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect on accumulated postretirement benefit obligation . . . . . . . . . . . . . . . . . . . . . .
One Percentage
Point Increase
______
2013
5
$
89
______
2012
6
$
136
One Percentage
Point Decrease
_______
_______
2012
2013
(5)
$
(122)
(4) $
(80)
A one percentage-point change in assumed heath care cost trends would have the following effects (in thousands):
One Percentage Point Increase
____________________________
______
______
______
2011
2012
2013
One Percentage Point Decrease
____________________________
______
______
______
2011
2012
2013
Aggregate of service and interest
components of net periodic cost (benefit) . . . . . . . . . . . . . . . .
$
5
$
6
$
7
$
(4)
$
(5)
$
(5)
Benefit payments of approximately $94,000, $107,000, and $104,000 were made in 2013, 2012, and 2011,
respectively. The benefits expected to be paid under the postretirement health benefits plan for the next five years are as
follows: $98,000 in 2014; $101,000 in 2015; $103,000 in 2016; $105,000 in 2017 and $105,000 in 2018. The benefit
payments expected to be paid in the aggregate for the years 2019 through 2023 are $505,000. The expected benefits are based
on the same assumptions used to measure the Company’s benefit obligation at December 31, 2013, and include estimated
future employee service.
The Medicare Prescription Drug, Improvement and Modernization Act of 2003, or Medicare Act, introduced both a
Medicare prescription-drug benefit and a federal subsidy to sponsors of retiree health-care plans that provide a benefit at least
“actuarially equivalent” to the Medicare benefit. The Company has evaluated the estimated potential subsidy available under
the Medicare Act and the related costs associated with qualifying for the subsidy. Due to the limited number of participants in
the plan, the Company has concluded that it is not cost beneficial to apply for the subsidy. Therefore, the accumulated
postretirement benefit obligation information and related net periodic postretirement benefit costs do not reflect the effect of
any potential subsidy.
The Company also maintained a defined benefit pension plan (the Plan) covering certain employees and individuals
from the Merger, which was terminated in February 2014 and is further described in Note 17, Subsequent Events.
106
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Financial Statements – (Continued)
The following tables set forth the Plan’s funded status and components of postretirement benefit costs at December 31
measurement dates (in thousands):
Accumulated postretirement benefit obligation beginning of year . . . . . . . . . . . . . . . . . . . . . . . . .
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actuarial (gain) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated postretirement benefit obligation end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plan assets at fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net asset (liability) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
_________
2013
7,646
$
—
225
(1,261)
(247)
—
_________
6,363
_________
6,763
_________
400
$
_________
_________
_________
2012
—
$
—
38
—
(38)
7,646
_________
7,646
_________
7,030
_________
(616)
$
_________
_________
The following table sets forth the amounts recognized in accumulated other comprehensive income (loss)
(in thousands):
Net (gain) recognized in accumulated other comprehensive income . . . . . . . . . . . . . . . . . . . . . . .
December 31,
_________
2013
(1,143) $
$
_________
2012
(109)
The following table sets forth the components of net periodic postretirement benefit costs (in thousands):
December 31,
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected return on assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net postretirement benefit cost included in compensation and employee benefits . . . . . . . . . . . . . .
— $
_________
2013
$
_________
2012
—
38
225
(35)
(207) $
_________
_________
$
$
3
18
_________
_________
_________
_________
The assumed discount rate related to plan obligations reflects the weighted average of published market rates for high-
quality corporate bonds with terms similar to those of the plans expected benefit payments, rounded to the nearest quarter
percentage point. Additionally, the assumed long-term rate-of-return-on-assets reflects historical returns earned on equities
and fixed income securities, adjusted to reflect expectations of future returns as applied to the plan’s target allocation of asset
classes. The Company’s discount rate, long-term rate-of-return on plan assets, and amortization period are as follows:
Assumptions used to determine benefit obligation at period end:
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.75%
3.00%
Assumptions used to determine net periodic benefit cost for the year:
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long term rate of return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.00
3.00
8.09
3.00
3.00
8.09
_________
2013
__________
2012
107
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Financial Statements – (Continued)
The fair values of the Plan’s assets by asset category are as follows:
Fair Value Measurements at Reporting Date Using:
______________
December 31, 2013
Quoted Prices in Active
Markets for Identical
_________________
Assets (Level 1)
Significant Other
Observable Inputs
______________
(Level 2)
(in thousands)
Significant
Unobservable
Inputs
___________
(Level 3)
Assets measured on a recurring basis:
Common / Collective Trusts - Fixed Income
Market Duration Fixed (h) . . . . . . . . . . . . . . . . $
1,166
$
— $
1,166
$
—
Mutual Funds - Fixed Income
Intermediate Duration (k) . . . . . . . . . . . . . . . . .
Cash Equivalents - Money market . . . . . . . . . . . . $
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2,354
3,242
______________
6,762
______________
______________
2,354
3,242
$
_________________
$
5,596
_________________
_________________
—
—
—
— $
$
___________
______________
$
$
—
1,166
___________
______________
___________
______________
Fair Value Measurements at Reporting Date Using:
______________
December 31, 2012
Quoted Prices in Active
Markets for Identical
_________________
Assets (Level 1)
Significant Other
Observable Inputs
______________
(Level 2)
(in thousands)
Significant
Unobservable
Inputs
___________
(Level 3)
Assets measured on a recurring basis:
Mutual Funds - Equity
Large-Cap Value (a) . . . . . . . . . . . . . . . . . . . . . $
Small-Cap Core (b) . . . . . . . . . . . . . . . . . . . . . .
Large-Cap Growth (c) . . . . . . . . . . . . . . . . . . . .
International Core (d) . . . . . . . . . . . . . . . . . . . .
Common / Collective Trusts - Equity
Large-Cap Core (e) . . . . . . . . . . . . . . . . . . . . . .
Large-Cap Value (f) . . . . . . . . . . . . . . . . . . . . . .
Large-Cap Growth (g) . . . . . . . . . . . . . . . . . . . .
Common / Collective Trusts - Fixed Income
$
664
869
490
809
778
389
517
$
$
$
$
664
869
490
809
—
—
—
— $
— $
— $
— $
778
389
517
—
—
—
—
—
—
—
Market Duration Fixed (h) . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2,514
______________
7,030
______________
______________
—
_________________
$
2,832
_________________
_________________
2,514
______________
$
4,198
______________
______________
—
___________
$
—
___________
___________
(a) This category consists of investments whose sector and industry exposures are maintained within a narrow band around
Russell 1000 index. The portfolio holds approximately 150 stocks.
(b) This category contains stocks whose sector weightings are maintained within a narrow band around those of the Russell
2000 index. The portfolio will typically hold more than 150 stocks.
(c) This category consists of a mutual fund that seeks fast growth large-cap companies with sustainable franchises and
positive price momentum. The portfolio holds 60- 90 stocks.
(d) This category has investments in medium to large non-U.S. companies, including high quality, durable growth companies
and companies based in countries with stable economic and political systems.
(e) This fund tracks the performance of the S&P 500 Index by purchasing the securities represented in the Index in
approximately the same weightings as the Index.
(f) This category contains large-cap stocks with above-average yield. The portfolio typically holds between 60 and 70 stocks.
(g) This category consists of a portfolio of between 35 and 55 stocks of fast-growing, predictable and cyclical large cap
growth companies.
(h) This category consists of an index fund that tracks the Barclays Capital U.S. Aggregate Bond Index. The fund invests in
Treasury, agency, corporate, mortgage-backed and asset-backed securities.
108
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Financial Statements – (Continued)
The Company maintains a nonqualified plan to provide for the elective deferral of all or a portion of director fees by
members of the participating board of directors, deferral of all or a portion of the compensation and/or annual incentive
compensation payable to eligible employees of the Company, and to provide to certain officers of the Company benefits in
excess of those permitted to be paid by the Company’s savings plan, ESOP, and profit-sharing plan under the applicable
Internal Revenue Code. The plan obligation was approximately $6.0 million and $4.7 million at December 31, 2013 and
2012, respectively, and is included in accrued expenses and other liabilities on the consolidated balance sheets. Expense under
this plan was $963,000, $384,000, and $151,000 for the years ended December 31, 2013, 2012, and 2011, respectively. The
Company invests to fund this future obligation, in various mutual funds designated as trading securities. The securities are
marked-to-market through current period earnings as a component of non-interest income. Accrued obligations under this plan
are credited or charged with the return on the trading securities portfolio as a component of compensation and benefits
expense.
The Company entered into a supplemental retirement agreement with its former president and director in 2006. The
agreement provides for 120 monthly payments of $17,450. The present value of the obligation, of approximately $1,625,000,
was recorded in compensation and benefits expense in 2006. The present value of the obligation as of December 31, 2013 and
2012, was approximately $536,000 and $712,000, respectively.
(11) Equity Incentive Plan
The Company maintains the Northfield Bancorp, Inc. 2008 Equity Incentive Plan to grant common stock or options to
purchase common stock at specific prices to directors and employees of the Company. The Plan provides for the issuance or
delivery of up to 4,311,796 shares of Northfield Bancorp, Inc. common stock subject to certain Plan limitations. 211,530
shares of stock remain available for issuance under the Plan as of December 31, 2013. All stock options and restricted stock
granted to date vests in equal installments over a five year period beginning one year from the date of grant. The vesting of
options and restricted stock awards may accelerate in accordance with terms of the plan. Stock options were granted at an
exercise price equal to the fair value of the Company’s common stock on the grant date based on quoted market prices and all
have an expiration period of ten years. The fair value of stock options granted on January 30, 2009, was estimated utilizing
the Black-Scholes option pricing model using the following assumptions: an expected life of 6.5 years utilizing the simplified
method, risk-free rate of return of 2.17%, volatility of 35.33% and a dividend yield of 1.61%. The fair value of stock options
granted on May 29, 2009, was estimated utilizing the Black-Scholes option pricing model using the following assumptions:
an expected life of 6.5 years utilizing the simplified method, risk-free rate of return of 2.88%, volatility of 38.39% and a
dividend yield of 1.50%. The fair value of stock options granted on January 30, 2010, was estimated utilizing the Black-
Scholes option pricing model using the following assumptions: an expected life of 6.5 years utilizing the simplified method,
risk-free rate of return of 2.90%, volatility of 38.29% and a dividend yield of 1.81%. The fair value of stock options granted
on July 26, 2013, was estimated utilizing the Black-Scholes option pricing model using the following assumptions: an
expected life of 6.5 years utilizing the simplified method, risk-free rate of return of 1.39%, volatility of 35.33% and a
dividend yield of 1.98%. The Company is expensing the grant date fair value of all employee and director share-based
compensation over the requisite service periods on a straight-line basis.
During the years ended December 31, 2013, 2012, and 2011, the Company recorded, $3.2 million, $3.0 million and
$3.0 million of stock-based compensation.
The following table is a summary of the Company’s non-vested stock options as of December 31, 2013, and changes
therein during the year then ended:
Outstanding- December 31, 2011 . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . .
Outstanding- December 31, 2012 . . . .
Granted . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . .
Outstanding- December 31, 2013 . . . .
Exercisable- December 31, 2013 . . . .
Number of Stock Options
_______________________
2,885,288
(19,500)
(59,876)
_______________________
2,805,912
20,900
(26,507)
_______________________
2,800,305
2,285,445
_______________________
_______________________
_______________________
_______________________
109
Weighted Average
Grant Date Fair
Value
________________
2.30
$
2.30
2.30
2.30
3.06
2.30
2.30
2.30
$
$
Weighted
Average Exercise
Price
________________
$
Weighted Average
Contractual Life (years)
_______________________
7.02
—
—
6.07
9.58
—
5.16
5.16
7.09
7.09
7.09
7.09
11.97
7.09
7.13
7.09
$
$
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Financial Statements – (Continued)
Expected future stock option expense related to the non-vested options outstanding as of December 31, 2013, is
$170,000 over an average period of 1.7 years.
The following is a summary of the status of the Company’s restricted shares as of December 31, 2013, and changes
therein during the year then ended:
Non-vested at December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-vested at December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-vested at December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of
Shares
Awarded
________________
685,780
(228,182)
(2,694)
________________
454,904
13,300
(225,595)
(2,526)
________________
240,083
________________
________________
Weighted
Average
Grant Date
Fair Value
________________
7.11
$
7.10
7.09
7.11
11.97
7.10
7.09
7.29
$
Expected future stock award expense related to the non-vested restricted awards as of December 31, 2013, is $294,000
over an average period of 2.4 years.
Upon the exercise of stock options, management expects to utilize treasury stock as the source of issuance for these shares.
(12) Commitments and Contingencies
The Company, in the normal course of business, is party to commitments that involve, to varying degrees, elements of
risk in excess of the amounts recognized in the consolidated financial statements. These commitments include unused lines of
credit and commitments to extend credit.
At December 31, 2013 and 2012, the following commitment and contingent liabilities existed that are not reflected in
the accompanying consolidated financial statements (in thousands):
Commitments to extend credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unused lines of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Standby letters of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31,
________________________________
2012
2013
_______________
________________
34,450
61,277
$
$
28,955
46,080
550
604
$
$
The Company’s maximum exposure to credit losses in the event of nonperformance by the other party to these
commitments is represented by the contractual amount. The Company uses the same credit policies in granting commitments
and conditional obligations as it does for amounts recorded in the consolidated balance sheets. These commitments and
obligations do not necessarily represent future cash flow requirements. The Company evaluates each customer’s
creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary, is based on management’s
assessment of risk. Standby letters of credit are conditional commitments issued by the Company to guarantee the
performance of a customer to a third-party. The guarantees generally extend for a term of up to one year and are fully
collateralized. For each guarantee issued, if the customer defaults on a payment to the third-party, the Company would have to
perform under the guarantee. The unamortized fee on standby letters of credit approximates their fair value; such fees were
insignificant at December 31, 2013 and at December 31, 2012. The Company maintains an allowance for estimated losses on
commitments to extend credit in other liabilities. At December 31, 2013 and 2012, the allowance was $430,000 and $350,000,
respectively, changes to the allowance are recorded as a component of other non-interest expense.
At December 31, 2013, the Company was obligated under non-cancelable operating leases and capitalized leases on
property used for banking purposes. Most leases contain escalation clauses and renewal options which provide for increased
rentals as well as for increases in certain property costs including real estate taxes, common area maintenance, and insurance.
110
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Financial Statements – (Continued)
The projected minimum annual rental payments and receipts under the capitalized leases and operating leases, are as
follows (in thousands):
Year ending December 31:
Rental Payments
Capitalized Leases
_________________
Rental Payments
Operating Leases
_________________
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total minimum lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
411
269
247
254
262
44
_________________
$
1,487
_________________
_________________
$
3,928
3,980
3,860
3,738
3,356
30,998
_________________
$
49,860
_________________
_________________
Net rental expense included in occupancy expense was approximately $4.2 million, $3.9 million, and $2.9 million for
the years ended December 31, 2013, 2012, and 2011, respectively.
In the normal course of business, the Company may be a party to various outstanding legal proceedings and claims. In
the opinion of management, the consolidated financial statements will not be materially affected by the outcome of such legal
proceedings and claims.
During 2013 the Federal Reserve Bank abolished the cash balance on deposit requirement. Previously the Bank was
required by regulation to maintain a certain level of cash balances on hand and/or on deposit with the Federal Reserve Bank
of New York. As of December 31, 2012, the Bank was required to maintain balances of $1.0 million.
The Bank has entered into employment agreements with its Chief Executive Officer and the other executive officers of
the Bank to ensure the continuity of executive leadership, to clarify the roles and responsibilities of executives, and to make
explicit the terms and conditions of executive employment. These agreements are for a term of three-years subject to review
and annual renewal, and provide for certain levels of base annual salary and in the event of a change in control, as defined, or
in the event of termination, as defined, certain levels of base salary, bonus payments, and benefits for a period of up to three
years.
(13) Regulatory Requirements
The OCC requires savings institutions to maintain a minimum tangible capital ratio to tangible assets of 1.5%, a
minimum core capital ratio to total adjusted assets of 4.0%, and a minimum ratio of total risk-adjusted total assets of 8.0%.
Under prompt corrective action regulations, the OCC is required to take certain supervisory actions (and may take
additional discretionary actions) with respect to an undercapitalized institution. Such actions could have a direct material
effect on the institution’s financial statements. The regulations establish a framework for the classification of savings
institutions into five categories: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and
critically undercapitalized. Generally, an institution is considered well capitalized if it has a core capital ratio of at least 5%, a
Tier 1 risk-based capital ratio of at least 6%, and a total risk-based capital ratio of at least 10%.
The foregoing capital ratios are based in part on specific quantitative measures of assets, liabilities, and certain off-
balance-sheet items as calculated under regulatory accounting practices. Capital amounts and classifications also are subject to
qualitative judgments by the regulators about capital components, risk weighting, and other factors.
Management believes that as of December 31, 2013 and December 31, 2012, the Bank met all capital adequacy
requirements to which it is subject. Further, the most recent OCC notification categorized the Bank as a well-capitalized
institution under the prompt corrective action regulations. There have been no conditions or events since that notification that
management believes have changed the Bank’s capital classification.
Northfield Bancorp, Inc. is regulated, supervised, and examined by the FRB as a savings and loan holding company
and, as such, is not subject to regulatory capital requirements. The Dodd-Frank Act will require the federal banking agencies
to establish consolidated risk-based and leverage capital requirements for insured depository institutions, depository institution
holding companies and systemically important nonbank financial companies. These requirements must be no less than those
111
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Financial Statements – (Continued)
to which insured depository institutions are currently subject. As a result, on the fifth anniversary of the effective date of the
Dodd-Frank Act, we will become subject to consolidated capital requirements which we have not been subject to previously.
The following is a summary of the Bank’s regulatory capital amounts and ratios compared to the regulatory
requirements as of December 31, 2013 and 2012, for classification as a well-capitalized institution and minimum capital
(dollars in thousands):
OCC Requirements
__________________________________________________________________________
Actual
________________________
___________ ___________
Amount
Ratio
For Capital
Adequacy
Purposes
________________________
___________ ___________
Amount
Ratio
For Well
Capitalized
Under Prompt Corrective
Action Provisions
________________________
Ratio
___________ ___________
Amount
As of December 31, 2013:
Tangible capital to tangible assets . . . . . . . . . . . . . $ 535,007
535,007
Tier I capital (core) (to adjusted total assets) . . . .
559,187
Total capital (to risk-weighted assets) . . . . . . . . . .
19.88% $ 40,363
107,635
19.88
154,570
28.94
1.50% $
4.00
8.00
NA
134,544
193,213
As of December 31, 2012:
Tangible capital to tangible assets . . . . . . . . . . . . . $ 350,562
350,562
Tier I capital (core) (to adjusted total assets) . . . .
371,461
Total capital (to risk-weighted assets) . . . . . . . . . .
12.65% $ 41,563
110,836
12.65
133,281
22.30
1.50% $
4.00
8.00
NA
138,545
166,601
NA%
5.00
10.00
NA%
5.00
10.00
(14) Fair Value of Measurement
The following table presents the assets reported on the consolidated balance sheet at their estimated fair value as of
December 31, 2013 and 2012, by level within the Fair Value Measurements and Disclosures Topic of the FASB Accounting
Standards Codification. 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:
(cid:127)
(cid:127)
(cid:127)
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.
112
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Financial Statements – (Continued)
The following tables summarize financial assets and financial liabilities measured at fair value on a recurring basis as
of December 31, 2013 and 2012, segregated by the level of the valuation inputs within the fair value hierarchy utilized to
measure fair value (in thousands):
Fair Value Measurements at Reporting Date Using:
____________________________________________________________________________
December 31, 2013
__________________
Measured on a recurring basis:
Assets:
Investment securities:
Available-for-sale:
Mortgage-backed securities
Significant Other
Quoted Prices in Active
Markets for Identical Observable Inputs
_____________________ _________________
(in thousands)
Assets (Level 1)
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
________________
GSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-GSE . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
855,571
4,552
$
— $
—
855,571
4,552
$
—
—
Other securities
Corporate bonds . . . . . . . . . . . . . . . . . . . . . . .
Equities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total available-for-sale . . . . . . . . . . . . . . . . .
Trading securities . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Measured on a non-recurring basis:
Assets:
Impaired loans:
Real estate loans:
Commercial real estate . . . . . . . . . . . . . . . . . . .
One-to-four family residential mortgage . . . . .
Construction and land . . . . . . . . . . . . . . . . . . . .
Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Home equity and lines of credit . . . . . . . . . . . .
Total impaired real estate loans . . . . . . . . . . .
Commercial and industrial loans . . . . . . . . . . . .
Other real estate owned . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
76,452
510
__________________
937,085
__________________
5,998
__________________
$
943,083
__________________
__________________
76,452
—
—
510
_____________________ _________________
936,575
510
_____________________ _________________
—
5,998
_____________________ _________________
$
936,575
6,508 $
_____________________ _________________
_____________________ _________________
—
—
________________
—
________________
—
________________
$
—
________________
________________
$
— $
— $
—
—
—
—
—
—
—
—
_____________________ _________________
—
—
_____________________ _________________
—
—
—
—
_____________________ _________________
$
— $
— $
_____________________ _________________
_____________________ _________________
23,572
340
109
1,579
1,342
________________
26,942
________________
616
634
________________
28,192
________________
________________
$
23,572
340
109
1,579
1,342
__________________
26,942
__________________
616
634
__________________
$
28,192
__________________
__________________
113
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Financial Statements – (Continued)
Fair Value Measurements at Reporting Date Using:
____________________________________________________________________________
December 31, 2012
__________________
Measured on a recurring basis:
Assets:
Investment securities:
Available-for-sale:
Mortgage-backed securities
Quoted Prices in Active
Significant Other
Markets for Identical Observable Inputs
_____________________ _________________
(in thousands)
Assets (Level 1)
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
________________
GSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Non-GSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other securities
1,180,455
7,776
$
— $
—
1,180,455
7,776
$
—
—
Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . .
Equities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total available-for-sale . . . . . . . . . . . . . . . . . .
Trading securities . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Measured on a non-recurring basis:
Assets:
Impaired loans:
Real estate loans:
Commercial real estate . . . . . . . . . . . . . . . . . . . . $
One-to-four family residential mortgage . . . . . .
Construction and land . . . . . . . . . . . . . . . . . . . . .
Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Home equity and lines of credit . . . . . . . . . . . . .
Total impaired real estate loans . . . . . . . . . . . .
Commercial and industrial loans . . . . . . . . . . . . . .
Other real estate owned . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
74,402
12,998
__________________
1,275,631
__________________
4,677
__________________
1,280,308
__________________
__________________
29,109
1,827
2,070
1,530
1,943
__________________
36,479
__________________
452
870
__________________
37,801
__________________
__________________
—
74,402
12,998
—
_____________________ _________________
12,998
1,262,633
_____________________ _________________
—
4,677
_____________________ _________________
$
1,262,633
17,675 $
_____________________ _________________
_____________________ _________________
—
—
________________
—
________________
—
________________
$
—
________________
________________
$
— $
— $
—
—
—
—
—
—
—
—
_____________________ _________________
—
—
_____________________ _________________
—
—
—
—
_____________________ _________________
$
— $
— $
_____________________ _________________
_____________________ _________________
29,109
1,827
2,070
1,530
1,943
________________
36,479
________________
452
870
________________
37,801
________________
________________
114
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Financial Statements – (Continued)
The following table presents qualitative information for Level 3 assets measured at fair value on a non-recurring basis
at December 31, 2013:
Fair Value
______________________
(in thousands)
Valuation Methodology
______________________
Unobservable Inputs
___________________________
Range of Inputs
______________________
Impaired loans . . . . . . . . . $
27,558
Appraisals
Other real estate owned . . $
634
Discounted cash flows
Appraisals
Discount for costs to sell
Discount for quick sale
Interest rates
Discount for costs to sell
7.0%
10.0% - 25.0%
1.1% - 7.5%
7.0%
Available -for- Sale Securities: The estimated fair values for mortgage-backed securities, GSE bonds, and corporate
securities are obtained from a nationally recognized third-party pricing service. The estimated fair values are derived primarily
from cash flow models, which include assumptions for interest rates, credit losses, and prepayment speeds. Broker/dealer
quotes are utilized as well when such quotes are available and deemed representative of the market. The significant inputs
utilized in the cash flow models are based on market data obtained from sources independent of the Company (observable
inputs,) and are therefore classified as Level 2 within the fair value hierarchy. The estimated fair value of equity securities
classified as Level 1, are derived from quoted market prices in active markets. Equity securities consist primarily of money
market mutual funds. There were no transfers of securities between Level 1 and Level 2 during the year ended December 31,
2013.
Trading Securities: Fair values are derived from quoted market prices in active markets. The assets consist of
publicly traded mutual funds.
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. generally accepted accounting principles. The adjustments to fair value
usually result from the application of lower-of-cost-or-market accounting or write downs of individual assets.
Impaired Loans: At December 31, 2013, and December 31, 2012, the Company had originated impaired loans held-
for-investment and held-for-sale with outstanding principal balances of $31.7 million and $43.7 million that were recorded at
their estimated fair value of $27.6 million and $36.9 million, respectively. The Company recorded impairment charges of $2.5
million and $3.6 million for the years ended December 31, 2013 and 2012, respectively, and net charge-offs of $2.3 million
and $3.9 million for the years ended December 31, 2013 and 2012, respectively, utilizing Level 3 inputs. For purposes of
estimating fair value of impaired loans, management utilizes independent appraisals, if the loan is collateral dependent,
adjusted downward by management, as necessary, for changes in relevant valuation factors subsequent to the appraisal date, or
the present value of expected future cash flows for non-collateral dependent loans and troubled debt restructurings.
Other Real Estate Owned: At December 31, 2013 and 2012, the Company had assets acquired through foreclosure
of $634,000 and $870,000, respectively, recorded at estimated fair value, less estimated selling costs when acquired, thus
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 the
economic conditions.
115
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Financial Statements – (Continued)
Fair Value of Financial Instruments
The FASB Accounting Standards Topic for Financial Instruments requires disclosure of the fair value of financial
assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at
fair value on a recurring or non-recurring basis. The methodologies for estimating the fair value of financial assets and
financial liabilities that are measured at fair value on a recurring or non-recurring basis are discussed above. The following
methods and assumptions were used to estimate the fair value of other financial assets and financial liabilities not already
discussed above:
(a) Cash, Cash Equivalents, and Certificates of Deposit
Cash and cash equivalents are short-term in nature with original maturities of three months or less; the carrying
amount approximates fair value. Certificates of deposits having original terms of six-months or less; carrying value generally
approximates fair value. Certificate of deposits with an original maturity of six months or greater the fair value is derived
from discounted cash flows.
(b) Securities (Held-to-Maturity)
The estimated fair values for substantially all of our securities are obtained from an independent nationally recognized
pricing service. The independent pricing service utilizes market prices of same or similar securities whenever such prices are
available. Prices involving distressed sellers are not utilized in determining fair value. Where necessary, the independent third-
party pricing service estimates fair value using models employing techniques such as discounted cash flow analyses. The
assumptions used in these models typically include assumptions for interest rates, credit losses, and prepayments, utilizing
market observable data where available.
(c) Federal Home Loan Bank of New York Stock
The fair value for Federal Home Loan Bank of New York stock is its carrying value, since this is the amount for which
it could be redeemed and there is no active market for this stock.
(d) Loans (Held-for-Investment)
Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type
such as originated and purchased, and further segregated by residential mortgage, construction, land, multifamily, commercial
and consumer. Each loan category is further segmented into amortizing and non-amortizing and fixed and adjustable rate
interest terms and by performing and non-performing categories. The fair value of loans is estimated by discounting the future
cash flows using current prepayment assumptions and current rates at which similar loans would be made to borrowers with
similar credit ratings and for the same remaining maturities. This method of estimating fair value does not incorporate the exit
price concept of fair value prescribed by the FASB ASC Topic for Fair Value Measurements and Disclosures.
(e) Loans (Held-for-Sale)
Held-for-sale loans are carried at the lower of aggregate cost or estimated fair value, less costs to sell, and therefore
fair value is equal to carrying value.
(f) Deposits
The fair value of deposits with no stated maturity, such as non-interest-bearing demand deposits, savings, NOW and
money market accounts, is equal to the amount payable on demand. The fair value of certificates of deposit is based on the
discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for deposits of
similar remaining maturities.
(g) Commitments to Extend Credit and Standby Letters of Credit
The fair value of commitments to extend credit and standby letters of credit are 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
116
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Financial Statements – (Continued)
current levels of interest rates and the committed rates. The fair value of off-balance-sheet commitments is insignificant and
therefore not included in the following table.
(h) Borrowings
The fair value of borrowings is estimated by discounting future cash flows based on rates currently available for debt
with similar terms and remaining maturity.
(i) Advance Payments by Borrowers
Advance payments by borrowers for taxes and insurance have no stated maturity; the fair value is equal to the amount
currently payable.
The estimated fair values of the Company’s significant financial instruments at December 31, 2013, and 2012, are
presented in the following table (in thousands):
December 31, 2013
________________________________________________________________________
Estimated Fair Value
_________________________________________________________
Total
_____________
Carrying Value
______________ _____________
Level 3
_____________
Level 2
_____________
Level 1
Financial assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . $
Trading securities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities available-for-sale . . . . . . . . . . . . . . . . . . . .
Federal Home Loan Bank of New York stock, at cost . .
Loans held-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loans held-for-investment . . . . . . . . . . . . . . . . . . .
Financial liabilities:
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,492,689
470,325
Repurchase agreements and other borrowings . . . . . .
6,441
Advance payments by borrowers . . . . . . . . . . . . . . . .
61,239
5,998
937,085
17,516
471
1,489,476
$
$
61,239
5,998
510
—
—
—
$
— $
— $
—
—
936,575
—
17,516
—
471
—
— 1,472,096
61,239
5,998
937,085
17,516
471
1,472,096
— $ 1,495,810
476,893
—
6,441
—
$
— $1,495,810
476,893
—
6,441
—
117
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Financial Statements – (Continued)
December 31, 2012
________________________________________________________________________
Estimated Fair Value
_________________________________________________________
Total
_____________
Carrying Value
______________ _____________
Level 3
_____________
Level 2
_____________
Level 1
Financial assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . $ 128,761
4,677
Trading securities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,275,631
Securities available-for-sale . . . . . . . . . . . . . . . . . . . .
2,220
Securities held-to-maturity . . . . . . . . . . . . . . . . . . . . .
12,550
Federal Home Loan Bank of New York stock, at cost . .
5,447
Loans held-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,216,558
Net loans held-for-investment . . . . . . . . . . . . . . . . . . .
$
128,761
4,677
12,998
—
—
—
—
$
— $
— $ 128,761
—
4,677
—
1,262,633
— 1,275,631
2,309
—
2,309
12,550
12,550
—
5,447
5,447
—
1,289,599
— 1,289,599
Financial liabilities:
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,956,860
419,122
Repurchase agreements and other borrowings . . . . . .
3,488
Advance payments by borrowers . . . . . . . . . . . . . . . .
$
— $ 1,962,053
432,719
—
3,488
—
$
— $1,962,053
432,719
—
3,488
—
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 loss experience,
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 a
high degree of 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.
(15) Stock Repurchase Program
On July 31, 2013, Northfield Bancorp, Inc.’s (the “Company”) Board of Directors authorized the repurchase of up to
300,093 shares of common stock to fund grants of restricted stock under its 2008 Equity Incentive Plan. The Company has
received a non-objection letter from the Federal Reserve Board with respect to these repurchases, and anticipates conducting
such repurchases in accordance with a Rule 10b5-1 trading plan. Federal Reserve Board regulations permit a company to
repurchase shares of common stock within one year of a mutual-to-stock conversion to fund an existing restricted stock plan.
As of December 31, 2012, the Company had repurchased a total of 5,417,467 shares of its common stock under its
prior repurchase plans at an average price of $12.91 per share. The above shares have not been restated for the second step
conversion completed on January 24, 2013, because they were retired as part of the conversion.
118
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Financial Statements – (Continued)
(16) 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 (in thousands, except share data):
Net income available to common stockholders . . . . . . . . . . . . . . . . . . $
Weighted average shares outstanding-basic . . . . . . . . . . . . . . . . . . . .
Effect of non-vested restricted stock and stock options outstanding . . .
Weighted average shares outstanding-diluted . . . . . . . . . . . . . . . . . . .
Earnings per share-basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Earnings per share-diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
December 31,
__________________________________________________________
2011
2012
2013
_________________
_________________
__________________
16,823
16,031
19,147
$
$
56,216,794
54,339,467
54,637,680
626,094
776,213
922,629
_________________
_________________
__________________
56,842,888
55,115,680
55,560,309
0.30
0.30
0.35
0.30
0.29
0.34
$
$
$
$
(17) Subsequent Events
On February 10, 2014, the Company terminated the Flatbush Federal Savings and Loan Association Pension Plan
which resulted in the reclassification of approximately $1.0 million in gains ($600,000, net of tax) from other comprehensive
income into net income.
In February of 2014, we commenced a share repurchase program. Under the program, management is authorized to
repurchase up to 2,896,975 in shares in the open market or through privately negotiated transactions. We have repurchased
approximately $28.6 million of common stock, representing 2,258,973 shares, under the program through March 14, 2014.
119
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Financial Statements – (Continued)
(18) Parent-only Financial Information
The following condensed parent company only financial information reflects Northfield Bancorp, Inc.’s investment in
its wholly-owned consolidated subsidiary, Northfield Bank, using the equity method of accounting.
Northfield Bancorp, Inc.
Condensed Balance Sheets
Assets
Cash in Northfield Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest-earning deposits in other financial institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment in Northfield Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities available-for-sale (corporate bonds) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ESOP loan receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities and Stockholders’ Equity
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Northfield Bancorp, Inc.
Condensed Statements of Comprehensive (Loss) Income
December 31,
________________________________
2012
2013
_______________
________________
(in thousands)
$
141,331
224
547,216
—
27,799
—
80
________________
$
716,650
________________
________________
$
7,541
—
386,324
5,173
14,525
94
2,015
_______________
$
415,672
_______________
_______________
$
542
716,108
________________
$
716,650
________________
________________
$
799
414,873
_______________
$
415,672
_______________
_______________
$
$
Years Ended
December 31,
__________________________________________________
2012
2011
2013
_______________
_______________
_______________
(in thousands)
490
$
18
—
157
—
16,360
_______________
17,025
_______________
1,249
(255)
_______________
994
_______________
$
16,031
_______________
_______________
904
286
—
13
—
19,157
_______________
20,360
_______________
1,188
25
_______________
1,213
_______________
$
19,147
_______________
_______________
500
78
3
688
227
16,503
_______________
17,999
_______________
952
224
_______________
1,176
_______________
$
16,823
_______________
_______________
$
$
19,147
(22,881)
_______________
$
(3,734) $
_______________
_______________
16,031
761
_______________
16,792
_______________
_______________
$
16,823
6,560
_______________
$
23,383
_______________
_______________
Interest on ESOP loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest income on deposit in Northfield Bank . . . . . . . . . . . . . . . . . . . . . . . .
Interest income on deposits in other financial institutions . . . . . . . . . . . . . . . .
Interest income on corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on securities transactions, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Undistributed earnings of Northfield Bank . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax (benefit) expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Comprehensive (loss) income
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive (loss) income, net of tax . . . . . . . . . . . . . . . . . . . . . . . .
Comprehensive (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
120
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Financial Statements – (Continued)
Northfield Bancorp, Inc.
Condensed Statements of Cash Flows
December 31,
__________________________________________________
2012
2011
2013
_______________
_______________
_______________
(in thousands)
Cash flows from operating activities
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income to net cash provided by operating activities:
$
19,147
$
16,031
$
16,823
Decrease in accrued interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Decrease) increase in due to Northfield Bank . . . . . . . . . . . . . . . . . . . . . .
Decrease (increase) in other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of premium on corporate bond . . . . . . . . . . . . . . . . . . . . . . . .
Gain on securities transactions, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Decrease) Increase in other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Undistributed earnings of Northfield Bank . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . .
94
(541)
1,271
—
—
(556)
(19,157)
_______________
258
_______________
1
(704)
1,394
68
—
510
(16,360)
_______________
940
_______________
410
(478)
57
521
(227)
54
(16,503)
_______________
657
_______________
Cash flows from investing activities
Additional investment in Northfield Bank . . . . . . . . . . . . . . . . . . . . . . . . . .
Maturities of corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loan to ESOP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash (used in) provided by investing activities . . . . . . . . . . . . . . . . . .
(172,299)
5,173
(14,224)
—
_______________
(181,350)
_______________
—
—
—
—
_______________
—
_______________
—
—
—
31,068
_______________
31,068
_______________
Cash flows from financing activities
Proceeds from sale of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal payments on ESOP loan receivable . . . . . . . . . . . . . . . . . . . . . . .
Purchase of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Merger of Northfield Bancorp, MHC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercise of stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional tax benefit on stock awards . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used in) financing activities . . . . . . . . . . . . . . . . . .
Net (decrease) increase in cash and cash equivalents . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
344,202
950
(3,628)
(26,859)
124
21
296
_______________
315,106
_______________
134,014
7,541
_______________
$
141,555
_______________
_______________
—
430
(4,344)
(1,722)
—
—
—
_______________
(5,636)
_______________
(4,696)
12,237
_______________
$
7,541
_______________
_______________
—
437
(37,811)
(3,701)
—
—
—
_______________
(41,075)
_______________
(9,350)
21,587
_______________
$
12,237
_______________
_______________
121
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Financial Statements – (Continued)
Selected Quarterly Financial Data (Unaudited)
The following tables are a summary of certain quarterly financial data for the years ended December 31, 2013 and 2012:
_______________________________________________________
September 30 December 31
March 31
_____________ _____________ _____________
_____________
2013 Quarter Ended
June 30
(Dollars in thousands, except per share data)
23,516 $ 22,954
4,199
4,751
_____________
18,755
18,765
417
277
_____________
18,338
18,488
1,698
3,256
14,366
13,209
_____________
6,827
7,378
2,528
2,586
_____________
4,299
4,792 $
$ 23,380 $ 22,620
3,938
_____________ _____________ _____________
18,682
416
_____________ _____________ _____________
18,266
2,619
12,989
_____________ _____________ _____________
7,896
2,940
_____________ _____________ _____________
4,956
_____________ _____________ _____________
_____________ _____________ _____________
0.09
0.08
4,060
19,320
817
18,503
2,588
13,309
7,782
2,682
5,100 $
0.09 $
0.09 $
0.09 $
0.09 $
_____________
_____________
0.08
0.08
$
$
$
Selected Operating Data:
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net interest income after provision for loan losses . . . . . . . . . . . . . . . . .
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net income per common share- basic . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net income per common share- diluted . . . . . . . . . . . . . . . . . . . . . . . . . $
122
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Financial Statements – (Continued)
_______________________________________________________
September 30 December 31
March 31
_____________ _____________ _____________
_____________
2012 Quarter Ended
June 30
(Dollars in thousands, except per share data)
22,739 $ 22,760
5,814
5,747
_____________
17,013
16,925
544
615
_____________
16,469
16,310
1,430
3,975
11,801
12,642
_____________
6,098
7,643
2,150
2,695
_____________
3,948
4,948 $
$ 22,690 $ 23,350
5,392
_____________ _____________ _____________
17,958
1,875
_____________ _____________ _____________
16,083
1,471
12,527
_____________ _____________ _____________
5,027
1,786
_____________ _____________ _____________
3,241
_____________ _____________ _____________
_____________ _____________ _____________
0.06
0.06
5,691
16,999
502
16,497
1,710
12,028
6,179
2,285
3,894 $
0.10 $
0.09 $
0.07 $
0.07 $
_____________
_____________
0.07
0.07
$
$
$
Selected Operating Data:
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net interest income after provision for loan losses . . . . . . . . . . . . . . . . .
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net income per common share- basic . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net income per common share- diluted . . . . . . . . . . . . . . . . . . . . . . . . . $
123
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
John W. Alexander, our Chief Executive Officer, and William R. Jacobs, our Chief Financial Officer, conducted an
evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under
the Securities Exchange Act of 1934, as amended) the “Exchange Act” as of December 31, 2013. Based upon their evaluation,
they each found that our disclosure controls and procedures were effective.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the fourth quarter of 2013
that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting and we
identified no material weaknesses requiring corrective action with respect to those controls.
Management Report on Internal Control Over Financial Reporting
Management of the Company is responsible for establishing and maintaining effective internal control over financial
reporting as such term is defined in Rule 13a-15(f) in the Exchange Act. The Company’s internal control system is a process
designed to provide reasonable assurance to the Company’s management and board of directors regarding the preparation and
fair presentation of published financial statements.
Our internal control over financial reporting includes policies and procedures that pertain to the maintenance of
records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; provide reasonable
assurances that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S.
generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with
authorizations of management and the directors of the Company; and provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on
our financial statements.
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems
determined to be effective can provide only reasonable assurance with respect to financial statement preparation and
presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as
of December 31, 2013. In making this assessment, we used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission in Internal Control-Integrated Framework (1992). Based on our assessment we
believe that, as of December 31, 2013, the Company’s internal control over financial reporting is effective based on those
criteria.
The Company’s independent registered public accounting firm that audited the consolidated financial statements has
issued an audit report on the effectiveness of the Company’s internal control over financial reporting as of December 31,
2013, and it is included in Item 8, under Part II of this Annual Report on Form 10-K. This report appears on page 65 of the
document.
ITEM 9B. OTHER INFORMATION
None
124
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The sections of the Company’s definitive proxy statement for the Company’s 2014 Annual Meeting of the
Stockholders (the “2014 Proxy Statement”) entitled “Proposal I-Election of Directors,” “Other Information-Section 16(a)
Beneficial Ownership Reporting Compliance,” “Corporate Governance and Board Matters -Codes of Conduct and Ethics,”
“Stockholder Communications,” and “Board of Directors, Leadership Structure, Role in Risk Oversight, Meetings and
Standing Committees-Audit Committee” are incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The sections of the Company’s 2014 Proxy Statement entitled “Corporate Governance and Board Matters-Director
Compensation,” and “Executive Compensation” are incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The sections of the Company’s 2014 Proxy Statement entitled “Voting Securities and Principal Holders Thereof”,
“Corporate Governance and Board Matters – Equity Compensation Plans Approved by Stockholders” and “Proposal I-
Election of Directors” are incorporated herein by reference.
Set forth below is information as of December 31, 2013, with respect to compensation plans (other than our employee
stock ownership plan) under which equity securities of the Company are authorized for issuance.
Equity Compensation Plan Information
_______________________________________________________________
Equity compensation plans approved by security holders . . . . . .
Equity compensation plans not approved by security holders . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of
Securities to
be Issued Upon
Exercise of
Outstanding Options,
Warrants and Rights
____________________
3,040,388
N/A
____________________
3,040,388
____________________
Weighted-Average
Exercise Price
of Outstanding
Options, Warrants
and Rights(1)
____________________
7.14
$
N/A
7.14
$
Number of
Securities
Remaining
Available for
Future Issuance
Under Stock-Based
Compensation
Plans (Excluding
Securities Reflected
in First Column)
____________________
211,530
N/A
211,530
____________________
____________________
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The section of the Company’s 2014 Proxy Statement entitled “Corporate Governance and Board Matters-Transactions
with Certain Related Persons” is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The sections of the Company’s 2014 Proxy Statement entitled “Audit-Related Matters-Policy for Approval of Audit
and Permitted Non-audit Services” and “Auditor Fees and Services” are incorporated herein by reference.
125
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)(1) Financial Statements
The following documents are filed as part of this Form 10-K.
(A)
(B)
(C)
(D)
(E)
(F)
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets - at December 31, 2013, and 2012
Consolidated Statements of Comprehensive (Loss) Income - Years ended December 31, 2013, 2012, and 2011
Consolidated Statements of Changes in Stockholders’ Equity - Years ended December 31, 2013, 2012, and 2011
Consolidated Statements of Cash Flows - Years ended December 31, 2013, 2012, and 2011
Notes to Consolidated Financial Statements.
(a)(2) Exhibits
3.1
3.2
4
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
21
23
31.1
31.2
32
101
Certificate of Incorporation of Northfield Bancorp, Inc. ***
Bylaws of Northfield Bancorp, Inc. ***
Form of Common Stock Certificate of Northfield Bancorp, Inc. ***
Amended Employment Agreement with Kenneth J. Doherty (10) †
Amended Employment Agreement with Steven M. Klein (10) †
Supplemental Executive Retirement Agreement with Albert J. Regen (1) †
Northfield Bank 2014 Management Cash Incentive Compensation Plan (4) †
Short Term Disability and Long Term Disability for Senior Management (1) †
Northfield Bank Non-Qualified Deferred Compensation Plan (3) †
Northfield Bank Non Qualified Supplemental Employee Stock Ownership Plan (3) †
Amended Employment Agreement with John W. Alexander (2) †
Amended Employment Agreement with Michael J. Widmer (2) †
Amendment to Northfield Bank Non-Qualified Deferred Compensation Plan (6) †
Amendment to Northfield Bank Non-Qualified Supplemental Employee Stock Ownership Plan (6) †
Northfield Bancorp, Inc. 2008 Equity Incentive Plan (5) †
Form of Director Non-Statutory Stock Option Award Agreement under the 2008 Equity Incentive Plan (6) †
Form of Director Restricted Stock Award Agreement under the 2008 Equity Incentive Plan (6) †
Form of Employee Non-Statutory Stock Option Award Agreement under the 2008 Equity Incentive Plan (6) †
Form of Employee Incentive Stock Option Award Agreement under the 2008 Equity Incentive Plan (6) †
Form of Employee Restricted Stock Award Agreement under the 2008 Equity Incentive Plan (6) †
Northfield Bancorp, Inc. Management Cash Incentive Plan (7) †
Group Term Replacement Plan (9) †
Agreement and General Release with Madeline G. Frank dated March 15, 2012 (11) †
Addendum to Employment Agreement with Steven M. Klein (12) †
Subsidiaries of Registrant (1)
Consent of KPMG LLP *
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
The following materials from the Company’s Annual Report on Form 10-K for the year ended December 31, 2013,
formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Statements of Financial
Condition, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Changes in
Stockholders’ Equity, (iv) the Consolidated Statements of Cash Flows and (v) the Notes to Consolidated Financial
Statements. **
† Management contract or compensation plan or arrangement.
*
**
*** Previously filed
Filed herewith.
Furnished, not filed
126
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
Incorporated by reference to the Registration Statement on Form S-1 of Northfield Bancorp, Inc. (File No. 333-
143643), originally filed with the Securities and Exchange Commission on June 11, 2007.
Incorporated by reference to Northfield Bancorp Inc.’s Current Report on Form 8-K, dated December 18, 2013,
filed with the Securities and Exchange Commission on December 23, 2013 (File Number 001-33732).
Incorporated by reference to Northfield Bancorp Inc.’s Annual Report on Form 10-K, dated December 31, 2007,
filed with the Securities and Exchange Commission on March 31, 2008 (File Number 001-33732).
Incorporated by reference to Northfield Bancorp Inc.’s Current Report on Form 8-K, dated January 29, 2014, filed
with the Securities and Exchange Commission on January 31, 2014 (File Number 001-35791).
Incorporated by reference to Northfield Bancorp Inc.’s Proxy Statement Pursuant to Section 14(a) filed with the
Securities and Exchange Commission on November 12, 2008 (File Number 001-33732).
Incorporated by reference to Northfield Bancorp Inc.’s Annual Report on Form 10-K, dated December 31, 2008,
filed with the Securities and Exchange Commission on March 16, 2009 (File Number 001-33732).
Incorporated by reference to Appendix A of Northfield Bancorp Inc.’s Definitive Proxy Statement for the 2009
Annual Meeting of Stockholders (File No. 001-33732) as filed with the Securities and Exchange Commission on
April 23, 2009).
Incorporated by reference to Northfield Bancorp Inc.’s Current Report on Form 8-K, dated March 25, 2009, filed
with the Securities and Exchange Commission on March 27, 2009 (File Number 001-33732).
Incorporated by reference to Northfield Bancorp Inc.’s Current Report on Form 8-K, dated April 28, 2010, filed
with the Securities and Exchange Commission on April 29, 2010 (File Number 001-33732).
Incorporated by reference to Northfield Bancorp Inc.’s Current Report on Form 8-K, dated June 26, 2013, filed
with the Securities and Exchange Commission on July 2, 2013 (File Number 001-33732).
Incorporated by reference to Northfield Bancorp Inc.’s Current Report on Form 8-K, dated March 15, 2012, filed
with the Securities and Exchange Commission on March 15, 2012 (File Number 001-33732).
Incorporated by reference to Northfield Bancorp Inc.’s Current Report on Form 8-K, dated January 28, 2013, filed
with the Securities and Exchange Commission on January 30, 2013 (File Number 001-35791).
127
Pursuant to the requirements of Section 13 or 15(d) 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.
SIGNATURES
NORTHFIELD BANCORP, INC.
Date: March 17, 2014
By:
/s/ John W. Alexander
John W. Alexander
Chairman and Chief Executive Officer
(Duly Authorized Representative)
128
Pursuant to the requirements of the Securities Exchange of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on the dates indicated.
Date
March 17, 2014
March 17, 2014
March 17, 2014
March 17, 2014
March 17, 2014
March 17, 2014
March 17, 2014
March 17, 2014
March 17, 2014
March 17, 2014
March 17, 2014
March 17, 2014
March 17, 2014
Signatures
Title
/s/ John W. Alexander
John W. Alexander
/s/ William R. Jacobs
William R. Jacobs
/s/ John R. Bowen
John R. Bowen
/s/ Annette Catino
Annette Catino
/s/ Gil Chapman
Gil Chapman
/s/ John P. Connors, Jr
John P. Connors, Jr.
/s/ John J. DePierro
John J. DePierro
/s/ Timothy C. Harrison
Timothy C. Harrison
/s/ Karen J. Kessler
Karen J. Kessler
/s/ Steven M. Klein
Steven M. Klein
/s/ Susan Lamberti
Susan Lamberti
/s/ Frank P. Patafio
Frank P. Patafio
/s/ Patrick E. Scura, Jr.
Patrick E. Scura, Jr.
Chairman and Chief Executive Officer
(Principal Executive Officer)
Chief Financial Officer
(Principal Financial and Accounting Officer)
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
129
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STOCKHOLDER INFORMATION
Corporate Headquarters
Northfield Bancorp, Inc.
581 Main Street
Woodbridge, New Jersey 07095
(732) 499-7200
www.eNorthfield.com
Persons may obtain a copy, free of
charge, of the Northfield Bancorp, Inc.
2013 Annual Report and Form 10-K
(excluding exhibits) as filed with the
Securities and Exchange Commission
by contacting:
Annual Meeting of Stockholders
The 2014 Annual Meeting of
Stockholders of Northfield Bancorp,
Inc. has been set for 10:00 a.m., local
time, on May 28, 2014. The 2014
Annual Meeting of Stockholders will be
held at the Hilton Garden Inn, located
at 1100 South Avenue, Staten Island,
New York 10314. The voting record
date was April 15, 2014.
M. Eileen Bergin
Corporate Secretary
(732) 499-7200 x2515
ebergin@eNorthfield.com
or by going to
www.eNorthfield.com/proxy
Stockholder Inquiries
For information regarding your shares
of common stock of Northfield
Bancorp, Inc., please contact:
M. Eileen Bergin
Corporate Secretary
(732) 499-7200 x2515
ebergin@eNorthfield.com
OUR LOCATIONS
Stock Listing
Northfield Bancorp, Inc. common
stock is traded on the NASDAQ Global
Select Market under the symbol NFBK.
Registrar and Transfer Agent
Registrar and Transfer Company
10 Commerce Drive
Cranford, New Jersey 07016
(800) 368-5948
www.rtco.com
Independent Registered
Public Accounting Firm
KPMG LLP
150 JFK Parkway
Short Hills, New Jersey 07078
STATEN ISLAND, NEW YORK
Bay Street • Bulls Head • Castleton Corners • Eltingville • Forest Avenue Plaza • Grasmere • Greenridge • New Dorp • Pathmark Shopping Mall
Pleasant Plains • Prince’s Bay • West Brighton
BROOKLYN, NEW YORK
Bay Ridge • Bensonhurst • Boro Park • Brighton Beach • Dyker Heights • Gravesend • Flatbush • Kings Highway East • Kings Highway West
NEW JERSEY
Avenel • East Brunswick • Linden • Milltown • Monroe Township • Rahway • Union • Westfield • Woodbridge
NFBK_AR2013.indd 7
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Standing Strong Since 1887
www.eNorthfield.com
NFBK_AR2013.indd 8
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