2014
ANNUAL
REPORT
OUR VISION
Be a high performing financial
institution where customers want to
bank, employees want to work, and
stockholders want to invest.
OUR MISSION
Be the financial institution of choice to
individuals and businesses by delivering
innovative financial products and
exceptional customer service.
For the year ended December 31, 2014
DEAR FELLOW
STOCKHOLDER
Our continued focus on exceptional
customer service and commitment to
providing innovative products yielded
another solid performance in 2014.
Diluted earnings per share for the year grew
20.6 percent due in part to strong growth in
the loan portfolio. Through originations, loan
purchases, and retention of existing loans,
total loans grew to $1.94 billion, an increase
of 30.4 percent for the year. Our efforts to
change the Bank’s asset mix have resulted in
loans increasing to over 64 percent of total
assets. While we expect future loan growth
will continue to be driven by multifamily
lending, we expanded our business banking
team by adding lenders with extensive
experience in the commercial and industrial
lending market.
to
We continually seek opportunities
During the year
leverage our capital.
total assets
increased over 11 percent.
Additionally, we repurchased 10.5 million
shares of Northfield Bancorp common stock,
and distributed $0.26 in dividends per share,
all of which helped reduce our overall capital
level to 19.7 percent at year-end, from 26.5
percent at the beginning of the year. At this
level, our capital remains significantly above
the federal regulatory capital requirements
for being “well-capitalized.”
John W. Alexander, Chairman and CEO
increase in transaction accounts. A major
component of our deposit strategy is the
acquisition and retention of commercial, non-
profit, and government clients. Our business
banking team is active in the community and
tirelessly works to develop and strengthen
relationships, while providing our customers
tools such as online cash management,
merchant credit card services, and remote
deposit capture to enhance their banking
experience.
Customers continue to demonstrate a strong
demand for mobile banking technology
as evidenced by a 37.5 percent increase in
the adoption of our mobile apps for smart
phones and tablets and a sharp increase in
the number of customers depositing checks
via their electronic devices. We will continue
to invest in new technology; however, we
also realize that customers still want the
flexibility and often have the need to interact
directly with our bankers. Consequently,
in September 2014, we extended our branch
banking hours to allow customers more time
to bank in-person when it is convenient for
them.
Total deposits increased to $1.62 billion at
December 31, 2014, an 8.6 percent increase
from the prior year, driven by a 8.0 percent
Community
involvement has defined
Northfield since our beginning more than 128
years ago. Northfield Bank and the Northfield
2014 Annual Report | 1
Bank Foundation believe that we are partners
in the community and our support will make
our neighborhoods stronger. Our employees
have embraced our commitment to the
community and generously give of their time
and talents to local non-profit organizations
related to areas such as financial literacy,
health care, the arts, and housing.
Our core values are Trust, Respect, and
Excellence. These words are lived every
day by each of our employees and apply to
everything we do. We thank you for placing
your trust in us as a Northfield stockholder
and for being part of our future.
John W. Alexander
Chairman and CEO
2 | 2014 Annual Report
DILUTED EARNINGS
PER SHARE
DIVIDENDS PER SHARE
(1) Special Dividend
DEPOSIT COMPOSITION
At December 31, 2014
LOANS
2014 Annual Report | 3
A SUCCESSFUL & PROVEN
BUSINESS STRATEGY
4 | 2014 Annual Report
(1) From 12/31/07 - 12/31/14
(2) At December 31, 2014
(3) From 2008 - 2014
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, 2014
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 “large accelerated filer”, “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, 2014 was $670,807,093.
As of February 28, 2015, there were outstanding 47,654,629 shares of the registrant’s common stock.
Certain portions of the registrant’s Definitive Proxy Statement (the “2015 Proxy Statement”) for the 2015 Annual Meeting of the
Stockholders to be held May 27, 2015, will be incorporated by reference in Part III. The 2015 Proxy Statement will be filed within 120
days of December 31, 2014.
DOCUMENTS INCORPORATED BY REFERENCE
NORTHFIELD BANCORP, INC.
ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
Part I.
Page
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
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
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 15
Exhibits, Financial Statement Schedules
Signatures
Part IV.
1
34
43
43
43
43
44
47
49
67
67
124
124
124
125
125
125
125
125
126
128
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)
(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 or credit markets;
changes in laws or government regulations or policies affecting financial institutions, including changes in
regulatory fees and capital requirements;
our ability to manage operations in the current economic conditions;
our ability to enter new markets successfully and capitalize on growth opportunities;
our ability to successfully integrate acquired entities;
changes in consumer spending, borrowing and savings habits;
changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial
Accounting Standards Board, or the Securities and Exchange Commission, or the Public Company Accounting
Oversight Board;
cyber attacks, computer viruses and other technological risks that may breach the security of our websites or other
systems to obtain unauthorized access to confidential information and destroy data or disable our systems;
changes in our organization, compensation, and benefit plans;
changes in the level of government support for housing finance;
significant increases in our loan losses; and
changes in the financial condition, results of operations, or future prospects of issuers of securities that we own.
1
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.
Northfield Bancorp, Inc.
Northfield Bancorp, Inc., a Delaware corporation (the “Company”), was organized in June 2010 and is the single bank
holding company for Northfield Bank. Northfield Bancorp, Inc. uses the support staff and offices of Northfield Bank and
reimburses 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.
Northfield Bancorp, Inc. is subject to comprehensive regulation and examination by the Board of Governors of the
Federal Reserve System.
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 a non-branch 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.
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 127 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, telephone and internet banking capabilities including mobile banking and
remote deposit capture. We consider our competitive products and pricing, branch network, 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 areas both in making loans and attracting deposits. Our market areas have a
concentration of financial institutions, including large money center and regional banks, community banks, and credit unions.
2
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 branch 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,
2014 (the latest date for which information is publicly available), we ranked sixth in deposit market share in Staten Island with
an 8.89% market share. As of that date, we had a 0.54% deposit market share in Brooklyn, New York, and a combined deposit
market share of 0.81% 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014
5.8%
4.7
5.8
6.8
5.6
Unemployment Rate At December 31,
2013
6.9%
5.9
6.6
8.2
6.7
2012
9.2%
7.9
7.9
9.5
7.8
2011
8.8%
7.6
7.9
9.5
8.5
2010
9.2%
7.9
8.0
9.5
9.4
The following table sets forth median household income at December 31, 2014 and 2013, for the communities we
serve, as published by the U.S. Census Bureau.
Median Household Income
At December 31,
2014
2013
Union County, NJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Middlesex County, NJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Richmond County, NY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Kings County, NY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
68,442
75,361
70,814
44,890
63,641
77,925
74,860
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. 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 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,
3
fixed-rate residential real estate loans. We sold $1.2 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, 2014.
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 transactions with the Federal Deposit Insurance Corporation and the merger with Flatbush Federal
Bancorp, Inc. with deteriorated credit quality, herein referred to as purchased credit-impaired (“PCI”) loans, have a carrying
value of $44.8 million at December 31, 2014. 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 2013 and 2012. 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 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.
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 and $1.2 million, at December 31,
2013, 2012, 2011, and 2010, respectively.
4
2014
2013
2012
2011
2010
Amount
Percent
Amount
Percent
Amount
Percent
Amount
Percent
Amount
Percent
(Dollars in thousands)
At December 31,
Real estate loans:
Multifamily . . . . . . $ 1,072,193
55.31% $
870,951
58.61% $
610,129
49.18% $
458,370
42.72% $
283,588
34.30%
Commercial. . . . . .
390,288
20.13
340,174
22.89
315,450
25.43%
327,074
30.48
339,321
41.04
One-to-four family
residential . . . . . . .
Home equity and
lines of credit. . . . .
Construction and
land . . . . . . . . . . . .
Commercial and
industrial loans . . . . .
Insurance premium
finance . . . . . . . . . . .
Other loans . . . . . . . .
PCI loans . . . . . . . . .
Loans acquired:
One-to-four family
residential . . . . . . .
Multifamily . . . . . .
Commercial. . . . . .
Construction and
land . . . . . . . . . . . .
Total loans
acquired . . . . . . .
74,401
3.84
64,753
4.36
64,733
5.22%
72,592
6.77
78,032
9.44
54,533
2.81
46,231
3.11
33,573
2.71%
29,666
2.76
28,125
3.40
21,412
1.10
14,152
0.95
23,243
1.87%
23,460
2.19
35,054
4.24
12,945
0.67
10,162
0.68
14,786
1.19%
12,710
1.18
17,020
2.06
—
2,157
44,816
—
0.12
2.31
234,478
12.10
18,844
11,999
0.97
0.62
—
2,310
59,468
60,262
3,930
13,254
—
0.16
4.00
4.06
0.26
0.89
26
1,804
75,349
78,237
5,763
17,053
—
0.15%
6.07%
6.31
0.46
1.38
364
0.02
371
0.03
380
0.03
265,685
13.71
77,817
5.24
101,433
8.18
59,096
1,496
88,522
5.51
0.14
8.25
—
—
—
—
—
—
—
—
—
—
44,517
1,062
—
—
—
—
—
—
5.39
0.13
—
—
—
—
—
—
Total loans. . . . $ 1,938,430
100.00% $ 1,486,018
100.00% $ 1,240,526
100.00% $ 1,072,986
100.00% $
826,719
100.00%
Other items:
Deferred loan
costs (fees), net . . .
Allowance for loan
losses . . . . . . . . . . .
4,565
(26,292)
Net loans held-
for-investment . . $ 1,916,703
3,458
(26,037)
2,456
(26,424)
1,481
(26,836)
872
(21,819)
$ 1,463,439
$ 1,216,558
$ 1,047,631
$
805,772
At December 31, 2014, PCI loans consisted of approximately 33% commercial real estate loans and 53% commercial
and industrial loans, with the remaining balance in residential and home equity loans. At December 31, 2013, these loans
consisted of approximately 37% commercial real estate loans, 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 loans, 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 loans, 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, 2014. Demand loans (loans having no stated repayment schedule or maturity) and overdraft loans are reported as
being due in the year ending December 31, 2015. Maturities are based on the final contractual payment date and do not reflect
the effect of prepayments, repricing and scheduled principal amortization.
5
Originated Loans
Multifamily
Commercial Real Estate
One-to-Four Family
Residential
Home Equity and Lines
of Credit
Weighted
Average
Rate
Amount
Weighted
Average
Rate
Amount
Amount
Weighted
Average
Rate
Amount
Weighted
Average
Rate
(Dollars in thousands)
Due during the years ending
December 31,
2015. . . . . . . . . . . . . . . . . . . . . . . $
2016. . . . . . . . . . . . . . . . . . . . . . .
2017. . . . . . . . . . . . . . . . . . . . . . .
2018 to 2019 . . . . . . . . . . . . . . . .
2020 to 2024 . . . . . . . . . . . . . . . .
2025 to 2029 . . . . . . . . . . . . . . . .
480
—
—
411
11,941
55,857
1,003,504
2030 and beyond . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . $1,072,193
3.96% $
—
—
5.05
4.57
4.61
3.88
370
411
863
1,756
30,510
48,516
307,862
6.19% $
6.53
6.93
5.85
4.78
4.62
4.73
108
195
817
3,089
3,456
5,123
61,613
6.23% $
5.13
6.76
4.98
5.24
4.79
4.45
25
199
1,049
3,621
8,200
13,528
27,911
4.14%
4.52
3.52
3.30
3.79
3.93
3.05
3.93% $ 390,288
4.73% $
74,401
4.56% $
54,533
3.41%
Construction and Land
Commercial and
Industrial
Other
Weighted
Average
Rate
Amount
Weighted
Average
Rate
Amount
Amount
Weighted
Average
Rate
(Dollars in thousands)
Due during the years ending
December 31,
2015. . . . . . . . . . . . . . . . . . . . . . . $
2016. . . . . . . . . . . . . . . . . . . . . . .
2017. . . . . . . . . . . . . . . . . . . . . . .
2018 to 2019 . . . . . . . . . . . . . . . .
2020 to 2024 . . . . . . . . . . . . . . . .
2025 to 2029 . . . . . . . . . . . . . . . .
6,146
9,658
691
—
—
—
2030 and beyond . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . $
4,917
21,412
5.63% $
4,164
5.05% $
1,846
4.69
4.97
—
—
—
4.16
158
2,043
1,705
3,816
366
693
5.49
4.75
5.28
4.55
4.84
5.27
4.85% $
12,945
4.90% $
4
19
104
—
—
184
2,157
0.06%
12.00%
12.00%
5.52%
—%
—%
4.06%
0.79%
Acquired Loans
One-to-Four Family
Residential
Multifamily
Commercial Real Estate
Construction and Land
Weighted
Average
Rate
Amount
Weighted
Average
Rate
Amount
Amount
Weighted
Average
Rate
Amount
Weighted
Average
Rate
(Dollars in thousands)
Due during the years ending
December 31,
2015. . . . . . . . . . . . . . . . . . . . . . . $
2016. . . . . . . . . . . . . . . . . . . . . . .
2017. . . . . . . . . . . . . . . . . . . . . . .
2018 to 2019 . . . . . . . . . . . . . . . .
2020 to 2024 . . . . . . . . . . . . . . . .
2025 to 2029 . . . . . . . . . . . . . . . .
4
61
343
4,588
3,631
4,269
221,582
2030 and beyond . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . $ 234,478
7.74% $
6.44
5.73
5.06
5.70
4.80
2.92
24
—
—
12,478
1,766
4,576
—
9.52% $
—
—
3.54
5.99
3.77
—
177
1,099
34
5,921
3,984
784
—
6.75% $
6.33
7.78
4.43
5.90
7.17
—
3.04% $
18,844
3.83% $
11,999
5.31% $
—
—
—
—
—
—
364
364
—%
—
—
—
—
—
6.50
6.50%
6
PCI loans(1)
Total Loans
Amount
Weighted
Average Rate
Amount
Weighted
Average Rate
Due during the years ending December 31,
2015. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2016. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 to 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 to 2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025 to 2029 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2030 and beyond . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
3,537
1,654
2,794
4,940
8,590
1,630
21,671
44,816
(1) Represents estimated accretable yield.
11.37% $
8.01
7.51
12.02
10.91
9.75
10.51
16,881
13,439
8,653
38,613
75,894
134,649
1,650,301
10.51% $
1,938,430
6.06%
5.31
5.98
5.24
5.47
4.61
4.01
4.17%
The Company has a total of $1.65 billion in loans due to mature in 2030 and beyond, of which $68.9 million, or
4.17%, are fixed rate loans.
The following table sets forth the scheduled repayments of fixed- and adjustable-rate loans at December 31, 2014, that
are contractually due after December 31, 2015.
Real estate loans:
Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Commercial. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
One-to-four family residential . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction and land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Home equity and lines of credit . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial and industrial loans. . . . . . . . . . . . . . . . . . . . . . . . . .
Other loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PCI loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquired loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed Rate
Due After December 31, 2015
Adjustable Rate
(In thousands)
Total
60,277
$
1,011,436
$
40,814
30,936
2,281
28,364
5,616
311
6,204
58,325
349,104
43,357
12,985
26,144
3,165
—
35,075
207,155
1,071,713
389,918
74,293
15,266
54,508
8,781
311
41,279
265,480
Total loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
233,128
$
1,688,421
$
1,921,549
Multifamily Real Estate Loans. We currently focus on originating multifamily real estate loans. Loans secured by
multifamily properties totaled approximately $1.07 billion, or 55.31% of our total loan portfolio, at December 31, 2014. 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, 2014, we had 791 multifamily real estate loans with an
average loan balance of approximately $1.4 million. At December 31, 2014, our largest multifamily real estate loan had a
principal balance of $19.9 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 and Eastern Pennsylvania.
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.
7
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%, computed after deduction for a
vacancy factor, when applicable, and property expenses we deem appropriate), the age and condition of the collateral, the
financial resources and income of the sponsor, and the sponsor’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 referred to us by third-party loan 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 of the principals on multifamily real estate loans.
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 management’s assessment
of our 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 $7.1 million at December 31, 2014, 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 $390.3
million, or 20.13% of our loan portfolio as of December 31, 2014. At December 31, 2014, our commercial real estate loan
portfolio consisted of 389 loans with an average loan balance of approximately $1.0 million, although there are a large number
of loans with balances substantially greater than this average. At December 31, 2014, our largest commercial real estate loan
had a principal balance of $18.9 million, was secured by an office building, 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, 2014.
Mixed Use. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Office Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retail. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Warehousing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Manufacturing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accommodations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restaurant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recreational . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Schools/Day Care . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
At December 31, 2014
Amount
Percent
(Dollars in thousands)
99,738
82,484
64,901
30,518
27,277
25,735
25,265
14,234
8,314
7,464
4,358
390,288
25.6%
21.1
16.6
7.8
7.0
6.6
6.5
3.7
2.1
1.9
1.1
100.0%
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 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 LIBOR swaps rate as published in the Federal Reserve
8
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 underwriting commercial real estate loans, we generally lend up to the lesser of 75% of either the property’s
appraised value or purchase price. Our policies permit the origination of certain single use property types but at 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 referred to us by third-party loan 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.
Construction and Land Loans. At December 31, 2014, construction and land loans total $21.4 million, or 1.10% of
total loans receivable. At December 31, 2014, the additional un-advanced portion of these construction loans totaled $1.4
million. At December 31, 2014, we had 20 construction and land loans with an average loan balance of approximately $1.1
million. At December 31, 2014, our largest construction and land loan had a principal balance of $2.4 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 . 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 three 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
9
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, 2014, commercial and industrial loans totaled $12.9 million or
0.67% of the total loan portfolio. As of December 31, 2014, we had 128 commercial and industrial loans with an average loan
balance of approximately $101,000, although we originate these types of loans in amounts substantially greater than this
average. At December 31, 2014, our largest commercial and industrial loan had a principal balance of $1.3 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 . 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 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 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. During the fourth quarter of 2014, the Company began assembling a
commercial and industrial lending team to primarily serve the Company's existing market place.
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, 2014, we had 291 originated one-to-four
family residential real estate loans outstanding with an aggregate balance of $74.4 million, or 3.84% of our total loan
portfolio. As of December 31, 2014, the average balance of originated one-to-four family residential real estate loans was
approximately $256,000, although we originate this type of loan in amounts substantially greater than this average. At
December 31, 2014, our largest loan of this type had a principal balance of $3.6 million and was performing in accordance with
its original contractual terms.
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 $1.2 million and $4.0 million during the years ended December 31,
2014 and 2013, 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-
10
burden ratios). However, in the third quarter of 2014, we purchased a portfolio of one-to-four family residential real estate
loans, a substantial amount of which are interest-only mortgage loans. For further details on this purchase see “Acquired
Loans” discussion below.
Home Equity Loans and Lines of Credit. At December 31, 2014, we had 932 home equity loans and lines of credit
with an aggregate outstanding balance of $54.5 million, or 2.81% of our total loan portfolio. Of this total, outstanding home
equity lines of credit totaled $26.4 million, or 1.36% of our total loan portfolio. At December 31, 2014, the average home
equity loan and line of credit balance was approximately $59,000, although we originate these types of loans in amounts
substantially greater than this average. At December 31, 2014, our largest outstanding home equity line of credit was $577,000
and was performing in accordance with its original contractual terms. At December 31, 2014, our largest outstanding home
equity loan was $250,000 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
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 beginning 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.
Insurance premium loans. At December 31, 2014, 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.
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 $44.8 million at December 31, 2014, or 2.31% of our total loan portfolio. PCI
loans consist of approximately 33% commercial real estate loans and 53% commercial and industrial loans, with the remaining
balance in residential and home equity loans. At December 31, 2014, based on contractual principal (not carrying balance),
7.8% of PCI loans were past due 30 to 89 days, and 24.1% 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 a quarterly basis as part of our analysis of the allowance for loan losses. During the third quarter of 2014, we
purchased $186.5 million of one-to-four family residential loans, a substantial amount of which are interest-only mortgage
loans. The following table provides the details of the loans purchased (dollars in thousands):
11
Purchases
Weighted Average
Interest Rate
Weighted Average
Loan-to-Value
Ratio
Weighted Average
Months to Next
Rate Change
Amortization
Term
Amortization Type
$
$
71,782
114,692
186,474
2.47%
2.57%
2.53%
67%
61%
63%
*after an interest-only period for the first 10 years
53
51
30 Years
Fully amortizing
20 Years *
Delayed amortizing
The weighted average coupon of 2.53% is net of the servicing fee. Of the total loans purchased, $114.7 million, or 62% of the
balance, is interest-only for the initial 10 years and will re-price in less than five years at one month LIBOR plus a weighted average
margin of 1.65%. The remainder of the purchase is scheduled to make principal and interest payments and will re-price in less
than five years at one month LIBOR plus a weighted average margin of 1.83%. Additionally, the geographic locations of the loans
are as follows: 46.0% in New York, 30.5% in Massachusetts, and 23.5% in other states.
At December 31, 2014, acquired loans totaled approximately $265.7 million and consisted of approximately 88% one-to four
family residential loans and 7% multifamily loans, with the remaining balance in commercial real estate and construction and land
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.
PCI loans are subject to the same internal and external 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.
12
We consider our PCI loans to be performing due to the application of the yield accretion method under ASC Subtopic
310-30. ASC Subtopic 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 Subtopic
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, 2014, 2013, 2012, 2011, and 2010, we had
TDRs of $9.5 million, $10.7 million, $19.3 million, $23.3 million and $20.0 million, respectively, which are included in the
appropriate categories within non-accrual loans. Additionally, we had $24.2 million, $26.2 million, $25.7 million, $18.3
million and $11.2 million of TDRs on accrual status at December 31, 2014, 2013, 2012, 2011, and 2010, 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, 2014, 85.0%
of TDRs were commercial real estate loans, 5.9% were multifamily loans, 5.7% were one-to-four family residential loans,
2.4% were commercial and industrial loans and 1.0% were home equity loans. At December 31, 2014, loans totaling $1.6
million, or 6.6%, of the $24.2 million accruing TDRs were not performing in accordance with their restructured terms and the
entire $9.5 million of non-accruing TDRs were not performing in accordance with their restructured terms.
13
At December 31,
2014
2013
2012
2011
2010
(Dollars in thousands)
Non-accrual loans:
Real estate loans:
Commercial. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
11,164
$
12,450
$
22,425
$
34,659
$
46,388
One-to-four family residential . . . . . . . . . . . . . . . . . . . . .
2,205
Construction and land . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Home equity and lines of credit . . . . . . . . . . . . . . . . . . . .
Commercial and industrial loans . . . . . . . . . . . . . . . . . . . . .
Insurance premium loans. . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
98
408
—
2,989
108
544
1,239
441
—
6,333
2,070
1,169
1,694
1,256
—
1,338
2,131
2,175
1,766
1,575
137
1,275
5,122
4,863
181
1,323
129
Total non-accrual loans . . . . . . . . . . . . . . . . . . . . . . . . .
13,875
17,771
34,947
43,781
59,281
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial and industrial loans . . . . . . . . . . . . . . . . . . . . .
Total loans delinquent 90 days or more and still accruing
Total non-performing loans. . . . . . . . . . . . . . . . . . . . . . . .
Other real estate owned . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total non-performing assets . . . . . . . . . . . . . . . . . . . . . . . . $
Ratios:
Non-performing loans to total loans held-for-investment,
net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
708
—
—
—
—
—
708
14,583
752
—
—
—
—
—
32
—
32
17,803
634
349
270
—
—
—
2
—
621
35,568
870
13
—
—
72
—
—
—
85
43,866
3,359
—
1,108
404
—
59
—
38
1,609
60,890
171
15,335
$
18,437
$
36,438
$
47,225
$
61,061
0.75%
1.20%
2.86%
4.08%
7.36%
Non-performing assets to total assets . . . . . . . . . . . . . . . .
0.51
0.68
1.30
1.99
2.72
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,020,869
Loans held-for-investment, net . . . . . . . . . . . . . . . . . . . . . . $ 1,942,995
$ 2,702,764
$ 2,813,201
$ 2,376,918
$ 2,247,167
$ 1,489,476
$ 1,242,982
$ 1,074,467
$
827,591
At December 31, 2014, based on contractual principal, 7.8% of PCI loans were past due 30 to 89 days, and 24.1%
were past due 90 days or more. 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. At December 31, 2011, based on contractual principal,
9.0% of PCI loans were past due 30 to 89 days, and 16.1% 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,
2014.
At December 31, 2014
Amount
Percent
(in thousands)
Manufacturing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Restaurants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mixed Use. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Office Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
6,822
2,314
1,245
432
351
11,164
61.1%
20.7
11.2
3.9
3.1
100.0%
14
Other Real Estate Owned. Real estate acquired by us as a result of foreclosure or by deed in lieu of foreclosure is
classified as other 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 six properties with an aggregate carrying value of approximately $752,000 at December 31, 2014, as
compared to four properties with an aggregate carrying value of approximately $634,000 at December 31, 2013.
Potential Problem Loans and Classification of Assets. 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 for individual potential problem loans, 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 classified substandard if it is inadequately
protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Substandard assets
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 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, 2014, classified assets, excluding loans on nonaccrual status consisted of
substandard assets of $42.2 million and no doubtful or loss assets. At December 31, 2014, we also had $20.8 million of assets
designated as special mention. At December 31, 2013, classified assets, excluding loans on non-accrual status, consisted of
substandard assets of $39.7 million and no doubtful or loss assets. At December 31, 2013, we also had $27.4 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 sample basis, our
classifications on a semi-annual basis.
At December 31, 2014, the Company had $12.3 million of accruing loans that were 30 to 89 days delinquent, as
compared to $13.3 million at December 31, 2013. 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Multifamily. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction and land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Home equity and lines of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial and industrial loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Allowance for Loan Losses
December 31,
2014
2013
(in thousands)
6,493
4,353
1,090
122
135
—
60
12,253
$
$
4,274
5,644
2,483
—
94
815
21
13,331
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
15
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. generally accepted accounting
principles (“U.S. GAAP”). SeeItem 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations - “Critical Accounting Polices - Allowance for Loan Losses” for a description of our allowance methodology
The following table sets forth activity in our allowance for loan losses for the years indicated.
At or For the Years Ended December 31,
2014
2013
2012
2011
2010
(Dollars in thousands)
Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 26,037
$ 26,424
$ 26,836
$ 21,819
$ 15,414
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(103)
(58)
—
(7)
—
(135)
(489)
—
(792)
Recoveries:
72
Commercial real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
One-to-four family residential. . . . . . . . . . . . . . . . . . . . . . . . . . . .
246
Construction and land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
35
Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8
Commercial and industrial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Insurance premium finance loans . . . . . . . . . . . . . . . . . . . . . . . . .
41
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
402
Total recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(390)
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
645
Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 26,292
Ratios:
(1,208)
(414)
—
(657)
—
(379)
(491)
(25)
(3,174)
1
18
567
—
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
Net charge-offs to average loans outstanding . . . . . . . . . . . . . . . .
Allowance for loan losses to non-performing loans held-for-
investment at end of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.02%
0.17%
0.36%
0.78%
0.47%
180.29
150.23
87.73
66.40
35.83
1.61
1.35
1.93
1.75
2.48
2.13
2.72
2.64
2.50
2.64
At December 31, 2014 and 2013, the allowance for loan losses related to PCI loans was $400,000 and $588,000,
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
2014
At December 31,
2013
2012
Allowance for
Loan Losses
Percent of
Loans in Each
Category to
Total Loans
Allowance for
Loan Losses
Percent of
Loans in Each
Category to
Total Loans
Allowance for
Loan Losses
Percent of
Loans in Each
Category to
Total Loans
(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. . . . . . . .
PCI loans . . . . . . . . . . . . . . . . . . . .
Loans Acquired . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . .
Total allocated allowance . . . . . .
Unallocated . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . $
9,309
951
266
12,219
901
841
—
400
62
134
25,083
1,209
26,292
20.13% $
12,619
22.89% $
14,480
25.43%
3.84
1.10
55.31
2.81
0.67
—
2.31
13.71
0.12
100.00%
$
875
205
9,374
860
425
—
588
—
67
25,013
1,024
26,037
4.36
0.95
58.61
3.11
0.68
—
4.00
5.24
0.16
100.00%
$
623
994
7,086
623
1,160
3
236
—
18
25,223
1,201
26,424
5.22
1.87
49.18
2.71
1.19
—
6.07
8.18
0.15
100.00%
At December 31,
2011
2010
Allowance for
Loan Losses
Percent of
Loans in Each
Category to
Total Loans
Allowance for
Loan Losses
Percent of
Loans in Each
Category to
Total Loans
(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 .
PCI loans . . . . . . . . . . . . . . . . . . . .
Loans Acquired . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . .
Total allocated allowance . . . . . .
Unallocated . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . $
15,180
967
1,189
6,772
418
975
186
—
—
40
25,727
1,109
26,836
30.48% $
6.77
2.19
42.72
2.76
1.18
5.51
8.25
—
0.14
100.00%
$
12,654
570
1,855
5,137
242
719
—
111
—
28
21,316
503
21,819
41.04%
9.44
4.24
34.30
3.40
2.06
—
5.39
—
0.13
100.00%
17
Investments
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.
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 GSEs, 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, 2014, 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 derivative instruments such 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, 2014, 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.
18
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, 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, 2014, 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.
19
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, 2014, 2013, and 2012, we also had a trading portfolio with a market value of $6.4 million, $6.0 million and $4.7
million, respectively, consisting of mutual funds quoted in actively traded markets. These securities are utilized to fund non-
qualified deferred compensation obligations.
2014
At December 31,
2013
2012
Amortized
Cost
Estimated Fair
Value
Amortized
Cost
Estimated Fair
Value
Amortized
Cost
Estimated Fair
Value
(In thousands)
Securities available-for-sale:
Mortgage-backed securities:
Pass-through certificates:
GSEs . . . . . . . . . . . . . . . . . . . . $
292,162
$
299,340
$
366,884
$
370,344
$
456,441
$
479,338
REMICs: . . . . . . . . . . . . . . . . . .
GSEs . . . . . . . . . . . . . . . . . . . .
Non-GSEs . . . . . . . . . . . . . . . .
Equity investments (1) . . . . . . . . . .
Corporate bonds. . . . . . . . . . . . . .
Total securities available-for-
sale . . . . . . . . . . . . . . . . . . . . . $
(1) Mutual funds
408,328
1,060
410
69,975
400,450
1,026
410
70,013
497,575
4,474
510
76,491
485,227
4,552
510
76,452
694,087
7,543
12,998
73,708
701,117
7,776
12,998
74,402
771,935
$
771,239
$
945,934
$
937,085
$ 1,244,777
$ 1,275,631
2014
At December 31,
2013
2012
Amortized
Cost
Estimated Fair
Value
Amortized
Cost
Estimated Fair
Value
Amortized
Cost
Estimated Fair
Value
(In thousands)
Securities held-to-maturity:
Mortgage-backed securities:
Pass-through certificates - GSEs $
REMICs - GSEs. . . . . . . . . . . . .
$
3,609
—
$
3,691
—
Total securities held-to-
maturity . . . . . . . . . . . . . . . . . $
3,609
$
3,691
$
— $
—
— $
— $
—
$
465
1,755
496
1,813
— $
2,220
$
1,813
The following table sets forth the amortized cost and estimated fair value of securities as of December 31, 2014, for
issuers that exceeded 10% of our stockholders’ equity as of that date.
Mortgage-backed securities:
Freddie Mac . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
348,055
341,751
$
$
350,213
339,267
At December 31, 2014
Amortized Cost
Estimated Fair Value
(in thousands)
20
Portfolio Maturities and Yields. The composition and maturities of the investment securities portfolio at
December 31, 2014, 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, 2014, were taxable securities.
One Year or Less
More than One Year
through Five Years
More than Five Years
through Ten Years
More than Ten Years
Total
Amortized
Cost
Weighted
Average
Yield
Amortized
Cost
Weighted
Average
Yield
Amortized
Cost
Weighted
Average
Yield
Amortized
Cost
Weighted
Average
Yield
Amortized
Cost
Fair Value
Weighted
Average
Yield
(Dollars in thousands)
Securities
available-for-
sale:
Mortgage-
backed
securities:
Pass-through
certificates:
GSEs. . . . . $
3
1.13% $
19,394
4.46% $ 96,239
2.85% $ 176,526
2.55% $ 292,162
$ 299,340
2.78%
53
—
1.53%
—%
410
0.01%
—
658
—
1.27%
—%
41,750
0.74%
28,225
0.94%
—%
62,160
2.03%
346,115
—
—
—
—%
—%
—%
402
—
—
1.70%
0.55%
408,328
400,450
1,060
1,026
1.75%
1.00%
—%
410
410
0.01%
—%
69,975
70,013
0.82%
42,216
0.74% $
48,277
2.36% $ 158,399
2.53% $ 523,043
1.98% $ 771,935
$ 771,239
2.05%
REMICs: . . .
GSEs. . . . .
Non-GSEs
Equity
investments . . .
Corporate
bonds . . . . . . . .
Total securities
available-for-sale $
Securities held-
to-maturity:
Mortgage-
backed
securities: . . . .
Pass-through
certificates:. .
GSEs. . . . . $
Total securities
held-to-maturity . $
—
—
—% $
—% $
—
—
—% $
—% $
—
—
—% $
3,609
3.73% $
3,609
—% $
3,609
3.73% $
3,609
$
$
3,691
3.73%
3,691
3.73%
Sources of Funds
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, 2014
and 2013, we had brokered deposits totaling $40.9 million and $695,000, 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, 2014, we had a total of $353.1 million in certificates of deposit, of which $203.3 million had
remaining maturities of one year or less.
21
The following tables set forth the distribution of our average total deposit accounts, by account type, for the periods
indicated.
For the Year Ended December 31,
2014
2013
2012
Average
Balance
Percent
Weighted
Average
Rate
Average
Balance
Percent
Weighted
Average
Rate
Average
Balance
Percent
Weighted
Average
Rate
(Dollars in thousands)
Non-interest bearing
demand . . . . . . . . . . . . . $ 236,425
NOW . . . . . . . . . . . . . .
120,680
Money market
accounts . . . . . . . . . . . .
Savings . . . . . . . . . . . . .
Certificates of deposit .
431,406
398,148
306,803
15.83%
8.08%
28.89%
26.66%
20.54%
—% $ 222,832
14.14%
—% $ 173,854
11.06%
—%
0.36%
114,702
7.28
0.31%
0.11%
1.04%
471,220
396,903
370,351
29.90
25.18
23.50
0.39
0.32
0.17
1.04
97,224
6.19
438,151
381,835
480,194
27.89
24.30
30.56
0.65
0.59
0.24
1.17
Total deposits. . . . . . . $ 1,493,462
100.00%
0.36% $ 1,576,008
100.00%
0.41% $ 1,571,258
100.00%
0.63%
As of December 31, 2014, the aggregate amount of our outstanding certificates of deposit in amounts greater than or
equal to $100,000 was $141.6 million. The following table sets forth the maturity of these certificates at December 31, 2014.
At
December 31, 2014
(In thousands)
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
20,943
20,568
30,757
34,450
34,883
141,601
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, 2014, our Federal Home Loan Bank advances totaled $572.5 million, or 23.59% of
total liabilities, repurchase agreements totaled $203.2 million, or 8.4%, of total liabilities, floating rate advances totaled $2.1
million, or 0.08%, of total liabilities and capitalized lease obligations totaled $907,000, or 0.04% of total liabilities. At
December 31, 2014, the Company had the ability to obtain additional funding from the Federal Home Loan Bank of New York
and Federal Reserve Bank discount window of approximately $291.3 million, utilizing unencumbered securities of $90.6
million and multifamily loans of $229.8 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:
2014
At or For the Years Ended December 31,
2013
(Dollars in thousands)
2012
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 . . . . . . . . . . . . . . . . . . . . . . . .
778,658
588,890
830,092
$
$
$
1.42%
1.69%
470,325
429,332
492,181
$
$
$
2.08%
2.43%
419,122
484,687
523,768
2.58%
2.64%
22
Employees
As of December 31, 2014, we had 282 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.
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,
2014, Northfield Bank’s investment in NSB Services Corp. was $656.0 million, and NSB Services Corp. had assets of $656.1
million and liabilities of $107,000 at that date. At December 31, 2014, NSB Services Corp.’s investment in NSB Realty Trust
was $664.5 million, and NSB Realty Trust had $664.5 million in assets, and liabilities of $16,000 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, 2014, 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, 2014.
Expense and Tax Allocation Agreements
Northfield Bank has 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. have an agreement for allocating and reimbursing Northfield Bancorp,
Inc. for Northfield Bank's portion of its consolidated tax liability.
Properties
We operate from our corporate office located at 581 Main Street, Woodbridge, New Jersey and our additional 30
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 $26.2 million at December 31, 2014.
23
General
SUPERVISION AND REGULATION
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.
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 regulate “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 attorney generals 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.
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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.
The Dodd-Frank Act removed federal statutory restrictions on the payment of interest on commercial demand deposit
accounts, effective July 21, 2011.
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.
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
financial instruments and bullion, but generally does not include real estate. As of December 31, 2014, 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,
2014, we maintained 81.6% of our portfolio assets in qualified thrift investments and, therefore, we met the QTL 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
25
also require that in meeting the tangible, leverage, and risk-based capital standards, institutions generally must 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.
In July 2013, the Office of the Comptroller of the Currency and the other federal bank regulatory agencies issued a
final rule that has revised 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), adopts a uniform minimum Tier 1 capital to adjusted total assets ratio of
4%,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 Bank intends to opt-out. 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 was 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, 2014, 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
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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)
(cid:127)
(cid:127)
(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;
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.
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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, 2014, 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.
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, 2014, the annualized Financing Corporation assessment was equal to 0.60 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.
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Federal Home Loan Bank System
Northfield Bank is a member of the Federal Home Loan Bank of New York, and therefore 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 of New York.
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.
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)
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;
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(cid:127)
(cid:127)
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.
As a savings and loan holding company, Northfield Bancorp, Inc.'s 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 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
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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 Bancorp, Inc. 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 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 Bancorp, Inc.'s consolidated federal tax returns are not currently under audit.
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
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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.
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, 2014, 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, 2014, 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
On March 31, 2014, New York State (“NYS”) enacted several reforms (the “Tax Reform Package”) to its tax structure,
including changes to the franchise, sales, estate and personal income taxes. These changes are generally effective on January 1,
2015. The Tax Reform Package is intended to simplify the existing corporate tax code for NYS businesses while remaining
relatively neutral in relation to corporate tax receipts.
Under the Tax Reform Package, the NYS corporate income tax rate drops, effective January 1, 2016, from 7.10% to
6.50%. Effective January 1, 2015, the metropolitan commuter transportation district surcharge (“MTA Tax”) increases from
17.0% to 25.6% of the surcharge tax base. The MTA Tax rate for years beginning on or after January 1, 2016 will be adjusted
based upon future Metropolitan Transit Authority budget projections.
Some of the most significant elements of the Tax Reform Package include the merger of the bank tax into the general
corporate franchise tax, expanded application of economic nexus, adoption of water’s-edge unitary reporting, and
apportionment of source income solely by reference to customer location.
Merger of the Bank Tax into the Corporate Franchise Tax. NYS has historically imposed a franchise tax on general
business corporations, commonly referred to as the “Article 9-A Corporate Franchise Tax,” and a separate franchise tax on
banking corporations, commonly referred to as the “Article 32 Bank Tax.” Under these statutes, NYS financial service
companies and banks are taxed under different regimes, even though the Gramm-Leach-Bliley Act, which became federal law
in 1999, changed the federal regulatory system to permit the cross-ownership of finance and banking firms.
The Tax Reform Package repeals the Article 32 Bank Tax, merging it into the Article 9-A Corporate Franchise Tax. It
also makes several modifications to the Article 9-A Corporate Franchise Tax to accommodate the merger, most notably
providing a choice between two potential financial institution tax deductions: 1) a deduction equal to 32% of modified NYS
taxable income available to all thrifts and banks with assets that do not exceed $8 billion; and 2) a deduction based upon 50% of
the net interest income received from loans secured by real estate located in NYS or business loans made to NYS borrowers
with a principal amount of less than $5 million. Alternatively, for financial institutions with assets that do not exceed $8 billion
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that owned a captive real estate investment trust (“REIT”) as of April 1, 2014, the Tax Reform Package preserves the ability to
exclude a percentage of dividends received from the REIT in determining NYS taxable income and increases this exclusion
from the current level of 60% to 160% for tax years beginning on or after January 1, 2015. Financial institutions that continue
to maintain these grandfathered REITs are prohibited from claiming either of the two financial institution tax deductions
described above.
Consequently, under the revised Article 9-A Corporate Franchise Tax structure, for tax years beginning on or after
January 1, 2015, the Bank will be required to claim the 160% exclusion for dividends received from its captive REIT subsidiary
for any year the REIT remains in existence. If the REIT is liquidated, then the Bank will be entitled to choose on an annual
basis between: 1) the 32% of modified taxable income deduction; or 2) the deduction based upon 50% of the net interest
income received from NYS real estate loans and small commercial loans to NYS customers.
Expansion of the Application of Economic Nexus. The Tax Reform Package requires that all companies availing
themselves of the NYS market, referred to as having an “economic nexus with New York,” will be subject to NYS tax,
regardless of whether they have any other connection with NYS. A corporation could thus become a NYS taxpayer without a
physical presence in NYS.
Adoption of a Full Water’s-Edge Unitary Combined Filing. The Tax Reform Package requires all firms meeting an
ownership test of 50% or more be deemed a unitary business and required to file a combined tax return. Substantial
intercompany transactions are eliminated, and a domestic corporation without any assets or customers in NYS, but engaged in a
unitary business with a related New York taxpayer, would become part of the NYS unitary group.
Source Income Solely by Reference to the Location of the Customer. The Tax Reform Package requires business
income to be apportioned to and taxed by NYS using a single receipts factor based on the customer’s location. These provisions
also contain favorable apportionment rules for asset-backed securities that will be beneficial to the Bank.
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 Bancorp, Inc. 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 State tax returns are currently under audit for tax years 2010 and 2011.
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, 2014, $1.46 billion, or 89.6% of our originated total loan portfolio held-for-investment, net,
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 $1.92 billion at December 31, 2014, from $805.8 million at December 31, 2010. 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. These loans may experience higher delinquency or
charge-off levels than our historical loan portfolio experience, which could adversely affect our future performance.
Our business strategy includes the continuation of significant growth plans, and our financial condition and results of
operations could be negatively affected if we fail to grow or fail to manage our growth effectively.
We expect to continue to experience growth in the amount of our assets, the level of our deposits and the scale of our
operations. Achieving our growth targets requires us to attract customers that currently bank at other financial institutions in
our market, thereby increasing our share of the market. Our ability to successfully grow will depend on a variety of factors,
including our ability to attract and retain experienced bankers, 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. Growth
opportunities may not be available or we may not be able to manage our growth successfully. If we do not manage our growth
effectively, our financial condition and operating results could be negatively affected.
The level of our commercial real estate loan portfolio subjects us to additional regulatory scrutiny.
The Federal Deposit Insurance Corporation and the other federal bank regulatory agencies have promulgated joint
guidance on sound risk management practices for financial institutions with concentrations in commercial real estate
lending. Under the guidance, a financial institution that, like us, is actively involved in commercial real estate lending should
perform a risk assessment to identify concentrations. A financial institution may have a concentration in commercial real estate
lending if, among other factors, (i) total reported loans for construction, land acquisition and development, and other land
represent 100% or more of total capital, or (ii) total reported loans secured by multi-family and non-farm residential properties,
loans for construction, land acquisition and development and other land, and loans otherwise sensitive to the general
commercial real estate market, including loans to commercial real estate related entities, represent 300% or more of total
capital. Based on these factors we have a concentration in multi-family and commercial real estate lending, as such loans
represent 271.5% of total bank capital as of December 31, 2014. The particular focus of the guidance is on exposure to
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commercial real estate loans that are dependent on the cash flow from the real estate held as collateral and that are likely to be
at greater risk to conditions in the commercial real estate market (as opposed to real estate collateral held as a secondary source
of repayment or as an abundance of caution). The purpose of the guidance is to guide banks in developing risk management
practices and capital levels commensurate with the level and nature of real estate concentrations. The guidance states that
management should employ heightened risk management practices including board and management oversight and strategic
planning, development of underwriting standards, risk assessment and monitoring through market analysis and stress
testing. While we believe we have implemented policies and procedures with respect to our commercial real estate loan
portfolio consistent with this guidance, bank regulators could require us to implement additional policies and procedures
consistent with their interpretation of the guidance that may result in additional costs to us or that may result in a curtailment of
our multi-family and commercial real estate lending and/or the requirement that we maintain higher levels of regulatory capital,
either of which would adversely affect our loan originations and profitability.
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.
A worsening of economic conditions could reduce demand for our products and services and/or result in increases in our
level of non-performing loans, which could have an adverse effect on our results of operations.
Unlike larger financial institutions that are more geographically diversified, our profitability depends primarily on the
general economic conditions in New York, New Jersey and to a lesser extent Eastern Pennsylvania. Local economic conditions
have a significant impact on our commercial real estate and construction and consumer loans, the ability of the borrowers to
repay these loans and the value of the collateral securing these loans. Almost all of our loans are to borrowers located in or
secured by collateral in the New York metropolitan area.
A deterioration in economic conditions could result in the following consequences, any of which could have a material
adverse effect on our business, financial condition, liquidity and results of operations:
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
demand for our products and services may decline;
loan delinquencies, problem assets and foreclosures may increase;
collateral for loans, especially real estate, may decline in value, in turn reducing customers’ future borrowing
power, and reducing the value of assets and collateral associated with existing loans;
the value of our securities portfolio may decline; and
the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to
us.
Moreover, a significant decline in general economic conditions, caused by inflation, recession, acts of terrorism, an
outbreak of hostilities or other international or domestic calamities, unemployment or other factors beyond our control could
further impact these local economic conditions and could further negatively affect the financial results of our banking
operations. In addition, deflationary pressures, while possibly lowering our operating costs, could have a significant negative
effect on our borrowers, especially our business borrowers, and the values of underlying collateral securing loans, which could
negatively affect our financial performance.
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Strong competition within our market areas may limit our growth and profitability.
We face intense competition in making loans and attracting deposits. Price competition for loans and deposits
sometimes results in us charging lower interest rates on our loans and paying higher interest rates on our deposits and may
reduce our net interest income. Competition also makes it more difficult and costly to attract and retain qualified employees.
Many of the institutions with which we compete have substantially greater resources and lending limits than we have and may
offer services that we do not provide. Our competitors may also aggressively price loan and deposit products when they enter
into new lines of business or new market areas. We expect competition to increase in the future as a result of legislative,
regulatory and technological changes and the continuing trend of consolidation in the financial services industry. If we are not
able to effectively compete in our market area, our profitability may be negatively affected. The greater resources and broader
offering of deposit and loan products of some of our competitors may also limit our ability to increase our interest-earning
assets.
There are potential higher risks stemming from the loans we acquired in our Federal Deposit Insurance Corporation-
assisted transaction.
The credit risks associated with the loans and other real estate owned we acquired in our FDIC-assisted acquisition of
First State Bank in October 2011, was 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 affected
negatively 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.
Increases in interest rates also may 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. This can result in lower appraised values, which can limit the ability of borrowers to refinance existing
debt and may result in higher charge-offs of our non-performing collateral dependent loans.
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
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.
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, 2014, the fair
value of our securities portfolio (excluding Federal Home Loan Bank of New York stock) totaled $781.3 million.
At December 31, 2014, 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 19.55% 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
36
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. 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.
Our funding sources may prove insufficient to replace deposits 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. These additional sources consist primarily of Federal Home Loan Bank advances, proceeds from the sale of
loans, federal funds purchased and brokered certificates of deposit. As we continue to grow, we are likely to become more
dependent on these sources. 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.
Our success depends on hiring and retaining certain key personnel.
Our performance largely depends on the talents and efforts of highly skilled individuals. We rely on key personnel to
manage and operate our business, including major revenue generating functions such as loan and deposit generation. The loss
of key staff may adversely affect our ability to maintain and manage these functions effectively, which could negatively affect
our revenues. In addition, loss of key personnel could result in increased recruiting and hiring expenses, which could cause a
decrease in our net income. Our continued ability to compete effectively depends on our ability to attract new employees and
to retain and motivate our existing employees.
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.
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
estimated 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.
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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.
Our 2014 Equity Incentive Plan will increase our expenses and reduce our income, and may dilute your ownership
interests.
In May 2014, our stockholders approved the Northfield Bancorp, Inc. 2014 Equity Incentive Plan. Stockholders
approved the issuance of 1,422,357 shares of common stock pursuant to restricted stock and the issuance of 3,555,892 shares of
common stock pursuant to stock options. During 2014, we recognized $2.4 million in non-interest expense relating to this
stock benefit plan and we expect to incur similar expenses in the future.
We may fund the 2014 Equity Incentive Plan either through open market purchases or from the issuance of authorized
but unissued shares of common stock. Our ability to repurchase shares of common stock to fund this plan will be subject to
many factors, including, but not limited to, applicable regulatory restrictions on stock repurchases, the availability of stock in
the market, the trading price of the stock, our capital levels, alternative uses for our capital and our financial performance. Our
intention is to fund the plan through open market purchases and we repurchased 10.5 million shares during 2014. However,
stockholders would experience a reduction in ownership interest in the event newly issued shares of our common stock are used
to fund stock options and shares of restricted common stock.
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, 2014, 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.
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
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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.
Risks associated with system failures, interruptions, or breaches of security could affect our earnings negatively.
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. Recently, 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.
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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 their 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 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. 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 subject previously,
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 reduce net income and lower our capital levels.
Our securities portfolio may be affected 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 quarterly 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
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. 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.
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 continue to analyze the impact of the Volcker Rule on our investment portfolio, and whether
any changes are required to our investment strategies that could negatively affect our earnings.
40
We have 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 substantially amended the regulatory risk-based
capital rules applicable to Northfield Bancorp, Inc. and Northfield Bank. 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 were 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 will be phased in beginning in January 2016 at 0.625% of risk-
weighted assets and will 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 as if these new requirements had been in effect as of
December 31, 2014, and we believe that Northfield Bank and the Company meet all of these new requirements, including the
full 2.5% capital conservation buffer.
The application of more stringent capital requirements, among other things, could 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 it 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.”
The value of our deferred tax asset could be reduced if corporate tax rates in the U.S. are decreased or if the City of New
York enacts similar legislation to that of the State of New York.
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. 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.
There have been recent discussions by representatives of the City 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 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.
41
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 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 effect on our financial results and may involve
various other risks commonly associated with acquisitions.
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.
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 also may restrict capital distributions, which include cash dividends, to ensure the institution maintains adequate
capital requirements.
Legal and regulatory proceedings and related matters could adversely affect us or the financial services industry in general.
We, and other participants in the financial services industry upon whom we rely to operate, have been and may in the
future become involved in legal and regulatory proceedings. Most of the proceedings we consider to be in the normal course of
our business or typical for the industry; however, it is inherently difficult to assess the outcome of these matters, and other
participants in the financial services industry or we may not prevail in any proceeding or litigation. Any adverse determination
could negatively affect our business, brand or image, or our financial condition and results of our operations.
We are subject to environmental liability risk associated with lending activities.
A significant portion of our loan portfolio is secured by real estate, and we could become subject to environmental
liabilities with respect to one or more of these properties. During the ordinary course of business, we may foreclose on and take
title to properties securing defaulted loans. In doing so, there is a risk that hazardous or toxic substances could be found on
these properties. If hazardous conditions or toxic substances are found on these properties, we may be liable for remediation
costs, as well as for personal injury and property damage, civil fines and criminal penalties regardless of when the hazardous
conditions or toxic substances first affected any particular property. Environmental laws may require us to incur substantial
expenses to address unknown liabilities and may materially reduce the affected property’s value or limit our ability to use or
sell the affected property. In addition, future laws or more stringent interpretations or enforcement policies with respect to
existing laws may increase our exposure to environmental liability. Although we have policies and procedures to perform an
environmental review before initiating any foreclosure action on nonresidential real property, these reviews may not be
sufficient to detect all potential environmental hazards. The remediation costs and any other financial liabilities associated with
an environmental hazard could have a material adverse effect on us.
42
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
$26.2 million at December 31, 2014.
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, 2014.
ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable.
43
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, 2015, was
5,017. 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, 2014 and 2013. The
following information was provided by the NASDAQ Global Stock Market.
High
Low
Dividends
Quarter ended December 31, 2014 . . . . . . . . . . . . . . . . . . . . . $
Quarter ended September 30, 2014. . . . . . . . . . . . . . . . . . . . . $
Quarter ended June 30, 2014. . . . . . . . . . . . . . . . . . . . . . . . . . $
Quarter ended March 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . $
Quarter ended December 31, 2013 . . . . . . . . . . . . . . . . . . . . . $
Quarter ended September 30, 2013. . . . . . . . . . . . . . . . . . . . . $
Quarter ended June 30, 2013. . . . . . . . . . . . . . . . . . . . . . . . . . $
Quarter ended March 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . $
15.15
13.88
13.52
13.28
13.43
12.50
11.92
11.50
$
$
$
$
$
$
$
$
12.65
12.64
12.40
12.27
12.00
11.46
11.21
10.73
$
$
$
$
$
$
$
$
0.07
0.07
0.06
0.06
0.06
0.06
0.31
0.06
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.”
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, 2009, through December 31, 2014, (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.
44
Index
Northfield Bancorp, Inc. . . . . . . . . . . . . .
NASDAQ Composite Index . . . . . . . . . .
NASDAQ Bank Index . . . . . . . . . . . . . .
SNL U.S. Thrift Index* . . . . . . . . . . . . .
12/31/2009
100.00
100.00
100.00
100.00
12/31/2010
99.96
118.15
114.16
104.49
As of
12/31/2011
108.12
117.22
102.17
87.90
12/31/2012
117.43
138.02
121.26
106.91
12/31/2013
148.65
193.47
171.86
137.20
12/31/2014
170.03
222.16
180.31
147.56
*For 2014, we added the SNL U.S. Thrift Index, which includes companies that we believe operate similar business models, certain of which we
consider to be our peers in the financial institutions industry.
Northfield Bancorp, Inc. had in effect at December 31, 2014, the 2014 Equity Incentive Plan which was approved by
stockholders on May 28, 2014. The 2014 Equity Incentive Plan provides for the issuance of up to 4,978,249 equity awards. As
of December 31, 2014, the Compensation Committee of the Board of Directors had awarded 1,001,200 shares of restricted
stock, and 2,502,600 stock options.
Northfield Bancorp, Inc. had in effect at December 31, 2014, 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, 2014, 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.
45
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, 2014.
Period
Total Number
of Shares
Purchased
Average
Price Paid per
Share
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs (1)
Maximum Number
of Shares that May Yet
Be Purchased Under
Plans or Programs (1)
October 1, 2014, through October 31, 2014 . . . .
November 1, 2014, through November 30, 2014
December 1, 2014, through December 31, 2014 .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,681,850
234,412
337,400
2,253,662
$
$
$
$
13.63
14.11
14.20
13.77
1,681,850
233,700
337,400
2,252,950
1,433,908
1,206,773
2,175,785
(1) On December 17, 2014, the Company's Board of Directors revised its current repurchase program to allow for the
repurchase of up to an additional $20.0 million of the Company's common stock for a total of $170.0 million as of
this date. The repurchase program permits shares to be repurchased in open market or private transactions,
through block trades, and pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the
Securities and Exchange Commission. The number of shares remaining to be purchased at December 31, 2014, is
calculated utilizing the remaining approved repurchase amount of $32.2 million divided by the closing price of
the stock on that day.
46
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,
2014
2013
2012
2011
2010
(In thousands)
Selected Financial Condition Data:
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,020,869
76,709
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . .
6,422
Trading securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
771,239
Securities available-for-sale, at estimated market value. . . .
3,609
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 New York stock, at cost. . . . .
Other real estate owned . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Borrowed funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total stockholders’ equity. . . . . . . . . . . . . . . . . . . . . . . . . . . $
44,816
265,685
1,632,494
1,942,995
(26,292)
1,916,703
129,015
29,219
752
1,620,665
778,658
2,426,941
593,928
$
2,702,764
61,239
5,998
937,085
—
—
471
$ 2,813,201
128,761
4,677
1,275,631
2,220
—
5,447
$ 2,376,918
65,269
4,146
1,098,725
3,617
452
3,448
59,468
77,817
1,352,191
1,489,476
(26,037)
1,463,439
125,113
17,516
634
1,492,689
470,325
1,986,656
716,108
$
75,349
101,433
1,066,200
1,242,982
(26,424)
1,216,558
93,042
12,550
870
1,956,860
419,122
2,398,328
414,873
$
88,522
—
985,945
1,074,467
(26,836)
1,047,631
77,778
12,677
3,359
1,493,526
481,934
1,994,268
382,650
$
2014
2013
2012
2011
Years Ended December 31,
Selected Operating Data:
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Interest expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net interest income before provision for loan losses . . . . .
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net interest income after provision for loan losses . . . . . .
91,701
15,352
76,349
645
75,704
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. . . . . . . . . . . .
—
8,460
52,042
32,122
11,856
20,266
0.41
0.41
49,006,129
50,032,259
$
$
$
$
92,470
16,948
75,522
1,927
73,595
—
10,161
53,873
29,883
10,736
19,147
0.35
0.34
54,637,680
55,560,309
(In thousands)
$
$
$
$
91,539
22,644
68,895
3,536
65,359
—
8,586
48,998
24,947
8,916
16,031
0.30
0.29
54,339,467
55,115,680
$
$
$
$
91,017
25,413
65,604
12,589
53,015
3,560
8,275
41,530
23,320
6,497
16,823
0.30
0.30
56,216,794
56,842,889
$
$
$
$
$
$
2,247,167
43,852
4,095
1,244,313
5,060
1,170
—
—
—
827,591
827,591
(21,819)
805,772
74,805
9,784
171
1,372,842
391,237
1,850,450
396,717
2010
86,495
24,406
62,089
10,084
52,005
—
6,842
38,684
20,163
6,370
13,793
0.24
0.24
58,066,110
58,461,615
Note: Weighted average basic and diluted shares have been restated to reflect the completion of our second-step conversion
on January 24, 2013, at an exchange ratio of 1.4029-to-one.
47
Selected Financial Ratios and Other Data:
Performance Ratios:
Return on assets (ratio of net income to average total
assets) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Return on equity (ratio of net income to average equity) . . .
Interest rate spread(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net interest margin(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividend payout ratio(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Efficiency ratio(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-interest expense to average total assets . . . . . . . . . . . . .
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 originated loans(6) . . . .
Allowance for loan losses to non-performing loans held-
for-investment(7). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for loan losses to total loans held-for-
investment, net(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for loan losses to originated loans held-for-
investment, net(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital Ratios:
Total capital (to risk-weighted assets)(4) . . . . . . . . . . . . . . . .
Tier I capital (to risk-weighted assets)(4) . . . . . . . . . . . . . . . .
Tier I capital (to adjusted assets)(4) . . . . . . . . . . . . . . . . . . . .
Other Data:
Number of full service offices. . . . . . . . . . . . . . . . . . . . . . . .
Full time equivalent employees. . . . . . . . . . . . . . . . . . . . . . .
At or For the Years Ended December 31,
2014
2013
2012
2011
2010
0.73%
0.70%
0.65%
0.72%
0.65%
3.07
2.74
2.97
63.57
61.36
1.88
139.12
23.75
0.51
0.75
0.83
2.70
2.68
2.97
140.28
62.87
1.97
142.73
25.90
0.68
1.19
1.18
4.08
2.76
2.98
10.74
63.24
1.99
122.83
15.94
1.30
2.86
2.98
4.27
2.75
3.01
22.00
53.63
1.79
122.23
16.95
1.99
4.07
4.43
3.46
2.78
3.10
23.98
56.12
1.82
125.52
18.81
2.72
7.36
7.36
180.29
150.23
87.73
66.40
35.83
1.35
1.61
22.95
21.77
16.46
30
302
1.75
1.93
28.94
27.69
19.88
30
306
2.13
2.48
22.30
21.04
12.65
29
306
2.50
2.72
24.71
23.42
13.42
24
277
2.64
2.64
27.39
26.12
13.43
20
243
(1)
(2)
(3)
(4)
The net interest margin represents net interest income as a percent of average interest-earning assets for the period.
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.
The efficiency ratio represents non-interest expense divided by the sum of net interest income and non-interest income.
Capital ratios are presented for Northfield Bank only.
(5) 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 a special dividend of $0.25 per share.
(6)
(7)
(8)
Excludes PCI loans held-for-investment.
Excludes non-performing loans held-for-sale, carried at aggregate lower of cost or estimated fair value, less costs to sell.
Includes PCI loans held-for-investment.
48
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 $20.3 million and $19.1 million for the years ended December 31, 2014 and 2013, respectively.
Significant variances from the prior year are as follows: an $827,000 increase in net interest income, a $1.3 million decrease in
the provision for loan losses, a $1.7 million decrease in non-interest income, a $1.8 million decrease in non-interest expense, and
a $1.1 million increase in income tax expense. Net income in 2014 included the following non-routine transactions: a reduction
of compensation and benefits of $937,000 ($560,000 after-tax) related to the settlement of the former Flatbush Federal Savings
& Loan Association pension plan and a charge of $570,000 related to the write-down of deferred assets as a result of changes in
tax laws enacted in the State of New York during 2014.
Our assets increased by $318.1 million, or 11.8%, to $3.02 billion at December 31, 2014, from $2.70 billion at
December 31, 2013. The increase was primarily attributable to a $453.3 million, or 31.0%, increase in net loans-held-for-
investment, partially offset by a $165.8 million, or 17.7%, decrease in securities available-for sale.
Our liabilities increased by $440.3 million, or 22.2%, to $2.43 billion, at December 31, 2014, from $1.99 billion at
December 31, 2013. The increase was primarily due to increases in borrowings of $286.1 million, deposits of $128.0 million,
and securities sold under agreements to repurchase of $22.2 million.
Our stockholders’ equity decreased by $122.2 million, or 17.1%, to $593.9 million at December 31, 2014, from $716.1
million at December 31, 2013. This decrease was primarily attributable to stock repurchases of $138.7 million and dividend
payments of $12.9 million, partially offset by net income of $20.3 million for the year ended December 31, 2014, an increase
in stock compensation activity of $5.2 million and a decrease in accumulated other comprehensive loss of $3.9 million
primarily as a result of the increase in fair value of our securities available-for-sale portfolio in response to the decrease in the
interest rate environment from December 31, 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 U.S. 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.
49
The analysis of the allowance for loan losses has a component for impaired loans held-for-investment, purchased
credit-impaired (“PCI”) loans, and a component for general loan losses, including unallocated reserves. Management has
defined an impaired loan (excluding 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 TDRs 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, trouble-debt restructured, held-for-sale and 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 (using appropriate look-back and loss emergence
periods) 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. The loss emergence
period is the estimated time from the date of the loss event to the actual recognition of the loss (typically via the first charge-
off), and is determined based upon a study of the Company's past loss experience by loan group. 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. 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 and the internal and external credit risk rating
process, including loans that are not subject to an independent third party review, such as loans that are less than $500,000.
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 to a lesser extent
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, or Eastern Pennsylvania. 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
50
recognize adjustments to the allowance based on their judgments about information available to them at the time of their
examination. Our last completed Safety and Soundness regulatory examination was as of June 30, 2014.
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 collectively
evaluated for impairment on a quarterly basis as part of our analysis of the allowance for loan losses.
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 carrying value. 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 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. Goodwill totaling
$16.2 million at December 31, 2014, 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 current accounting guidance,
first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment
test. 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 2014, we elected to perform
step one of the two-step goodwill impairment test for our reporting unit, but could perform the optional quantitative 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.
51
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 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, 2014, and for each quarter end in 2014, all securities were priced by an independent third-party
pricing service, and management made no adjustment to the prices received.
Determining that a decline in a security’s 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.
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 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 director and 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
52
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.
Comparison of Financial Condition at December 31, 2014 and 2013
Total assets increased $318.1 million, or 11.8%, to $3.02 billion at December 31, 2014, from $2.70 billion at
December 31, 2013. The increase was primarily attributable to increases in net loans held-for-investment of $453.3 million,
cash and cash equivalents of $15.5 million and Federal Home Loan Bank of New York (FHLB) stock of $11.7 million, partially
offset by a decrease in securities available-for-sale of $165.8 million.
Cash and cash equivalents increased by $15.5 million, or 25.3%, to $76.7 million at December 31, 2014, from $61.2
million at December 31, 2013. 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 $771.2 million at December 31, 2014, compared to
$937.1 million at December 31, 2013. At December 31, 2014, $699.8 million of the portfolio consisted of residential
mortgage-backed securities issued or guaranteed by Fannie Mae, Freddie Mac, or Ginnie Mae. In addition, the Company held
$70.0 million in corporate bonds, all of which were considered investment grade at December 31, 2014, and also held $410,000
of equity investments in money market mutual funds. The effective duration of the securities portfolio at December 31, 2014
was 3.71 years.
Securities held-to-maturity increased to $3.6 million at December 31, 2014, from $0 at December 31, 2013, primarily
due to purchases of securities, partially offset by principal payments.
Total loans held-for-investment, net, increased $453.5 million to $1.94 billion at December 31, 2014, as compared to
$1.49 billion at December 31, 2013.
Originated loans held-for-investment, net, totaled $1.63 billion at December 31, 2014, as compared to $1.35 billion at
December 31, 2013. The increase was primarily due to an increase in multifamily real estate loans, which increased $201.2
million, or 23.1%, to $1.1 billion at December 31, 2014, from $871.0 million at December 31, 2013. The following table
details our multifamily originations for the year ended December 31, 2014 (dollars in thousands):
$
Originations
293,037
5,710
298,747
Weighted Average
Interest Rate
3.48%
4.57%
3.50%
Weighted Average
Loan-to-Value Ratio
59%
42%
59%
(F)ixed or
(V)ariable
V
F
Weighted Average Months to
Next Rate Change or Maturity
for Fixed Rate Loans
80
172
Amortization
Term
5 to 30 Years
2 to 15 Years
Acquired loans increased by $187.9 million to $265.7 million at December 31, 2014, from $77.8 million at
December 31, 2013, primarily due to the purchase of $186.5 million of one-to-four family residential real estate loans during
the third quarter of 2014. The following table provides the details of the one-to-four family residential real estate loans
purchased during the year ended December 31, 2014 (dollars in thousands):
Purchases
Weighted
Average Interest
Rate
Weighted Average
Loan-to-Value Ratio
Weighted Average
Months to Next Rate
Change
Amortization
Term
Amortization Type
$
$
71,782
114,692
186,474
2.47%
2.57%
2.53%
67%
61%
63%
*After an interest-only period for the first 10 years
53
53
51
30 Years
Fully amortizing
20 Years *
Delayed amortizing
The weighted average coupon of 2.53% is net of the servicing fee. Of the total loans purchased, $114.7 million, or 62%
of the balance, is interest-only for the initial 10 years and will re-price in less than five years at one month LIBOR plus a weighted
average margin of 1.65%. The remainder of the purchase is scheduled to make principal and interest payments and will re-price
in less than five years at one month LIBOR plus a weighted average margin of 1.83%. Additionally, the geographic locations of
the loans are as follows: 46.0% in New York, 30.5% in Massachusetts, and 23.5% in other states.
PCI loans, primarily acquired as part of a transaction with the FDIC, totaled $44.8 million at December 31, 2014, as
compared to $59.5 million at December 31, 2013. The Company recorded accretion of interest income of $4.9 million for the
year ended December 31, 2014, as compared to $5.7 million for the year ended December 31, 2013.
Bank owned life insurance increased $3.9 million, or 3.1%, to $129.0 million at December 31, 2014. The increase
was due to income earned in 2014.
Federal Home Loan Bank of New York stock, at cost, increased $11.7 million, or 66.8%, to $29.2 million at
December 31, 2014, from $17.5 million at December 31, 2013. This increase was attributable to required purchases due to
increases in borrowings outstanding with the Federal Home Loan Bank of New York over the same time period.
Premises and equipment, net, decreased $2.8 million, or 9.7%, to $26.2 million at December 31, 2014, from $29.1
million at December 31, 2013. This decrease was primarily attributable to depreciation expense of $3.6 million, partially offset
by additions to leasehold improvements from the renovation of existing branches.
Other real estate owned increased $118,000 to $752,000 at December 31, 2014, from $634,000 at December 31,
2013. This increase was attributable to acquisitions during the year.
Deposits increased $128.0 million, or 8.6%, to $1.62 billion at December 31, 2014, from $1.49 billion at
December 31, 2013. The increase was attributable to increases of $51.3 million in savings accounts, $45.2 million in
certificates of deposit ($40.2 million of which were brokered deposits), $29.1 million in transaction accounts, and $2.3 million
in money market accounts.
Borrowings, consisting primarily of Federal Home Loan Bank advances and repurchase agreements, increased by
$308.3 million, or 65.6%, to $778.7 million at December 31, 2014, from $470.3 million at December 31, 2013. The increase in
borrowings was primarily to fund the acquisition of the one-to-four family residential real estate loan pool discussed above.
Management utilizes borrowings to mitigate interest rate risk, for short-term liquidity to fund loan growth, and to a lesser extent
as part of leverage strategies.
Accrued expenses and other liabilities increased $2.6 million to $19.8 million at December 31, 2014, from $17.2 million
at December 31, 2013.
Total stockholders’ equity decreased by $122.2 million to $593.9 million at December 31, 2014, from $716.1 million
at December 31, 2013. This decrease was primarily attributable to stock repurchases of $138.7 million and dividend payments
of $12.9 million. These decreases were partially offset by net income of $20.3 million for the year ended December 31, 2014,
a $5.2 million increase in stock compensation activity and a $3.9 million decrease in accumulated other comprehensive loss,
primarily as a result of the increase in fair value of our securities available-for-sale portfolio in response to the decrease in the
interest rate environment from December 31, 2013.
Comparison of Operating Results for the Years Ended December 31, 2014 and 2013
Net Income. Net income was $20.3 million and $19.1 million for the years ended December 31, 2014 and 2013,
respectively. Significant variances from the prior year are as follows: an $827,000 increase in net interest income, a $1.3
million decrease in the provision for loan losses, a $1.7 million decrease in non-interest income, a $1.8 million decrease in non-
interest expense, and a $1.1 million increase in income tax expense.
Interest Income. Interest income decreased by $769,000, or 0.8%, to $91.7 million for the year ended December 31,
2014, as compared to $92.5 million for the year ended December 31, 2013. The decrease was primarily due to a six basis point
decrease in yields earned on interest-earning assets to 3.57% from 3.63% for the prior year, partially offset by an increase in
average interest-earning assets of $23.9 million, or 0.9%, from $2.54 billion at December 31, 2013, to $2.57 billion at
December 31, 2014. The increase in average interest-earning assets was due primarily to an increase in average loans
outstanding of $289.0 million, partially offset by a decrease in mortgage-backed securities of $217.7 million and other
securities of $50.0 million. Generally, rates on all earning assets decreased due to the general decline in market interest rates
54
for these asset types. The year-ended December 31, 2014 included loan prepayment income of $1.2 million compared to $2.2
million for the year ended December 31, 2013.
Interest Expense. Interest expense decreased $1.6 million, or 9.4%, to $15.4 million for the year ended December 31,
2014, from $16.9 million for the year ended December 31, 2013. The decrease was attributable to a decrease in interest
expense on borrowings of $486,000, or 4.7%, and a decrease in interest expense on deposits of $1.1 million, or 17.1%. The
decrease in interest expense on borrowings was attributable to a decrease of 74 basis points in the average cost of borrowings to
1.69% from 2.43% for the prior year, reflecting lower market interest rates for borrowed funds, partially offset by an increase
of $159.6 million, or 37.2%, in average borrowings outstanding. The decrease in interest expense on deposits was attributable
to a decrease in the average cost of interest-bearing deposits of five basis points to 0.43% from 0.48% for the prior year,
reflecting lower market interest rates for short-term deposits, as well as a decrease of $96.1 million, or 7.1%, in average
interest-bearing deposits. The decrease in average deposit balances was attributable to a decrease of $63.5 million in
certificates of deposit and a decrease of $32.6 million in savings, NOW, and money market accounts.
Net Interest Income. Net interest income increased $827,000, or 1.1%, to $76.3 million for the year ended
December 31, 2014, from $75.5 million for the year ended December 31, 2013. The increase was driven by a $23.9 million, or
0.9%, increase in average interest-earning assets and a 12 basis point decline in the cost of interest-bearing liabilities to 0.83%
for the current year as compared to 0.95% for the prior year. Net interest margin remained level at 2.97%. The increase in
average interest-earning assets was due primarily to an increase in average loans outstanding of $289.0 million partially offset
by decreases in average mortgage-backed securities of $217.7 million and other securities of $50.0 million.
Provision for Loan Losses. The provision for loan losses decreased $1.3 million, or 66.5%, to $645,000 for the year
ended December 31, 2014, from $1.9 million for the year ended December 31, 2013. The decrease in the provision for loan
losses was primarily attributable to continued improvement in asset quality indicators, and to a lesser extent, the Company's
PCI portfolio, which had a reversal of a previously recorded impairment, and lower originated loan growth of $280.3 million,
or 20.7%, for the year ended December 31, 2014, compared to $286.0 million, or 26.8%, for the year ended December 31,
2013. Net charge-offs were $390,000 for the year ended December 31, 2014, compared to net charge-offs of $2.3 million for
the year ended December 31, 2013.
Non-interest Income. Non-interest income decreased $1.7 million, or 16.7%, to $8.5 million for the year ended
December 31, 2014, from $10.2 million for the year ended December 31, 2013. This decrease was primarily a result of a $3.0
million decrease in gains on securities, net, and a $331,000 decrease in other non-interest income, primarily related to the sale
in 2013 of vacant land adjacent to a branch, partially offset by increases of $295,000 in income on bank owned life insurance
and $891,000 in fees and service charges for customer services. Additionally, there were no other than temporary impairment
charges in 2014, as compared to $434,000 in 2013. Securities gains, net, in 2014 included losses of $155,000 related to the
Company’s trading portfolio, while 2013 included gains of $963,000 related to the Company’s trading portfolio. The trading
portfolio is utilized to fund the Company’s deferred compensation obligation to certain employees and directors of the
Company's deferred compensation plan (the "Plan"). The participants of this Plan, at their election, defer a portion of their
compensation. Gains and losses on trading securities have no effect on net income since participants benefit from, and bear the
full risk of, changes in the trading securities market values. Therefore, the Company records an equal and offsetting amount in
compensation expense, reflecting the change in the Company’s obligations under the Plan.
Non-interest Expense Non-interest expense decreased $1.8 million, or 3.4%, to $52.0 million for the year ended
December 31, 2014, from $53.9 million for the year ended December 31, 2013. This was due primarily to a $947,000 decrease
in compensation and employee benefits, attributable to the combined effects of a benefit recorded on the settlement of a
pension plan acquired in the Flatbush Federal Bancorp, Inc. and Flatbush Federal Savings & Loan Association merger (the
"Merger") and a decrease in the mark-to-market expense adjustment related to the Company's deferred compensation plan
which is described above, partially offset by increased health benefit costs. Additionally, there were decreases of $621,000 in
data processing costs due to conversion costs related to the Merger, and $427,000 in professional fees, also related primarily to
the Merger. These decreases were partially offset by a $498,000 increase in other expenses, primarily related to higher costs in
respect of one PCI loan, and excise taxes recorded related to the settlement of the Flatbush pension plan noted above.
Income Tax Expense. The Company recorded income tax expense of $11.9 million for the year ended December 31,
2014, compared to $10.7 million for the year ended December 31, 2013. The effective tax rate for the year ended December 31,
2014, was 36.9%, as compared to 35.9% for the year ended December 31, 2013, as a result of higher pre-tax earnings and the
deferred tax asset write-down of $570,000 related to the New York State tax law change enacted in the first quarter of 2014.
55
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.
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. Generally, rates 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 average 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 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
56
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.
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.
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.
2014
2013
2012
For the Years Ended December 31,
Average
Outstanding
Balance
Average
Yield/
Rate
Average
Outstanding
Balance
Interest
Average
Yield/
Rate
Average
Outstanding
Balance
Average
Yield/
Rate
Interest
Interest
(Dollars in thousands)
$ 73,407
4.51 % $ 1,339,348
$ 68,472
5.11 % $ 1,100,632
$ 61,514
5.59 %
Interest-earning assets:
Loans (1) . . . . . . . . . . . . . . . . . . . . . $ 1,628,325
Mortgage-backed securities (2) . . . .
797,146
Other securities(2) . . . . . . . . . . . . . .
Federal Home Loan Bank of New
York stock. . . . . . . . . . . . . . . . . . . .
79,879
21,349
Interest-earning deposits. . . . . . . . .
41,373
16,861
604
772
57
Total interest-earning assets . . . .
2,568,072
91,701
Non-interest-earning assets . . . . . .
207,490
Total assets. . . . . . . . . . . . . . . . . . $ 2,775,562
Interest-bearing liabilities:
Savings, NOW, and money market
accounts . . . . . . . . . . . . . . . . . . . . . $
Certificates of deposit. . . . . . . . . . .
950,234
306,803
Total interest-bearing deposits. . .
1,257,037
Borrowings . . . . . . . . . . . . . . . . . . .
588,890
2,211
3,180
5,391
9,961
Total interest-bearing liabilities. .
1,845,927
15,352
Non-interest-bearing deposits. . . . .
236,425
Accrued expenses and
other liabilities. . . . . . . . . . . . . . . .
33,911
Total liabilities. . . . . . . . . . . . . . .
2,116,263
Stockholders’ equity. . . . . . . . . . . .
659,299
Total liabilities and stockholders’
equity . . . . . . . . . . . . . . . . . . . . . . $ 2,775,562
Net interest income. . . . . . . . . . . . .
Net interest rate spread (3) . . . . . . . .
Net interest-earning assets (4) . . . . . $
Net interest margin (5) . . . . . . . . . . .
Average interest-earning assets to
interest-bearing liabilities . . . . . . . .
2.12
0.76
3.62
0.14
3.57
0.23
1.04
0.43
1.69
0.83
1,014,856
129,908
21,920
1,459
13,905
46,156
536
83
2,544,173
92,470
192,007
$ 2,736,180
$
982,825
370,351
1,353,176
429,332
1,782,508
222,832
22,176
2,027,516
708,664
2,635
3,866
6,501
10,447
16,948
2.58
2.22
4.41
0.13
3.96
0.45
1.19
0.70
2.64
1.20
2.16
1.12
3.85
0.18
3.63
0.27
1.04
0.48
2.43
0.95
1,039,677
116,664
26,791
2,588
13,391
41,462
591
55
2,311,826
91,539
153,827
$ 2,465,653
$
917,210
480,194
1,397,404
484,687
1,882,091
173,854
16,802
2,072,747
392,906
4,136
5,701
9,837
12,807
22,644
$ 2,736,180
$ 2,465,653
$ 76,349
$ 75,522
$ 68,895
722,145
$
761,665
$
429,735
2.74 %
2.68 %
2.97 %
2.97 %
2.76 %
2.98 %
139.12%
142.73%
122.83%
57
(1)
(2)
Includes non-accruing loans.
Securities available-for-sale are reported at amortized cost.
(3) 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.
(4) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.
(5) Net interest margin represents net interest income divided by average total interest-earning assets.
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,
Year Ended December 31,
2014 vs. 2013
2013 vs. 2012
Increase (Decrease) Due to
Total
Increase
Increase (Decrease) Due to
Total
Increase
Volume
Rate
(Decrease)
Volume
Rate
(Decrease)
(In thousands)
Interest-earning assets:
Loans . . . . . . . . . . . . . . . . . . . . . . . . $
Mortgage-backed securities . . . . . . .
Other securities . . . . . . . . . . . . . . . .
Federal Home Loan Bank of New
York stock . . . . . . . . . . . . . . . . . . . .
Interest-earning deposits . . . . . . . . .
Total interest-earning assets. . . . . .
Interest-bearing liabilities:
Savings, NOW and money market
accounts . . . . . . . . . . . . . . . . . . . . . .
Certificates of deposit . . . . . . . . . . .
Total deposits. . . . . . . . . . . . . . . . .
Borrowings. . . . . . . . . . . . . . . . . . . .
Total interest-bearing liabilities. . .
Change in net interest income . . . . . . $
Asset Quality
Purchased Credit Impaired (“PCI”) Loans
$
10,868
(4,613)
(464)
(5,933) $
(446)
(391)
$
4,935
(5,059)
(855)
$
12,554
(623)
268
(5,596) $
(4,248)
(1,397)
6,958
(4,871)
(1,129)
266
(8)
6,049
(30)
(18)
(6,818)
236
(26)
(769)
22
6
12,227
(77)
22
(11,296)
(78)
(686)
(764)
(2,691)
(3,455)
9,504
$
(346)
—
(346)
2,205
1,859
(8,677) $
(424)
(686)
(1,110)
(486)
(1,596)
827
$
293
(1,141)
(848)
(1,069)
(1,917)
14,144
$
(1,794)
(694)
(2,488)
(1,291)
(3,779)
(7,517) $
(55)
28
931
(1,501)
(1,835)
(3,336)
(2,360)
(5,696)
6,627
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 ($44.8
million at December 31, 2014) as accruing, even though they may be contractually past due. At December 31, 2014, based on
contractual principal, 7.8% of PCI loans were past due 30 to 89 days, and 24.1% were past due 90 days or more, as compared
to 6.6% and 14.9%, respectively, at December 31, 2013. The amount and timing of expected cash flows as of December 31,
2014 did not change significantly from our last recast during the second quarter of 2014.
Originated and Acquired Loans
The discussion that follows includes originated and acquired loans, both held-for-investment and held-for-sale.
58
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, 2014, our non-performing loans totaled $14.6 million or 0.75% of total loans held-for-investment. At the
same time, net charge-offs have remained low at 0.02% of average loans outstanding for the year ended December 31, 2014, as
compared to 0.17% for the year ended December 31, 2013, and 0.36% for the year ended December 31, 2012. 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 $3.2 million, or 18.1%, to $14.6
million at December 31, 2014, from $17.8 million at December 31, 2013. The following table details non-performing assets at
December 31, 2014 and 2013 (in thousands).
December 31,
2014
2013
Non-accruing loans:
Held-for-investment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Held-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
4,332
—
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 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
9,543
—
13,875
708
14,583
752
15,335
24,213
12,253
$
$
$
6,649
471
10,651
—
17,771
32
17,803
634
18,437
26,190
13,331
The following table details non-performing loans by loan type at December 31, 2014 and 2013. At December 31,
2014, there were no loans held-for-sale. At December 31, 2013, the table includes $471,000 of multi-family non-accruing loans
held-for-sale.
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:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans delinquent 90 days or more and still accruing:
Real estate loans:
One-to-four family residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total loans delinquent 90 days or more and still accruing . . . . . . . . . . . . . . . . .
Total non-performing loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
59
December 31,
2014
2013
(in thousands)
$
11,164
2,205
—
—
98
408
13,875
708
—
708
14,583
$
12,450
2,989
108
544
1,239
441
17,771
—
32
32
17,803
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 the sale of $2.9 million of loans held-for-investment
and $2.0 million of loans returning to accrual status. These decreases were partially offset by $1.6 million of loans being
placed on non-accrual status during the year ended December 31, 2014.
At December 31, 2014, the Company had $12.3 million of accruing loans that were 30 to 89 days delinquent, as
compared to $13.3 million at December 31, 2013. 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Home equity and lines of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial and industrial loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
December 31,
2014
2013
(in thousands)
6,492
4,353
1,090
135
122
60
12,252
$
$
4,274
5,644
2,483
94
815
21
13,331
Included in non-accruing loans are loans subject to restructuring agreements totaling $9.5 and $10.7 million at
December 31, 2014, and December 31, 2013, respectively. At December 31, 2014, the entire $9.5 million of loans subject to
restructuring agreements were not performing in accordance with their restructured terms, as compared to $7.5 million, or
70.4%, at December 31, 2013. Three separate relationships account for the loans not performing in accordance with their
restructured terms at December 31, 2014, of which one relationship is made up of several loans totaling $7.2 million primarily
collateralized by real estate, with an aggregate appraised value of $9.5 million based on an appraisal performed within the last
18 months. The Company also holds loans subject to restructuring agreements that are on accrual status, which totaled $24.2
million and $26.2 million at December 31, 2014, and December 31, 2013, respectively. At December 31, 2014, loans totaling
$1.6 million, or 6.6%, of the $24.2 million were not performing in accordance with their restructured terms as compared to $3.6
million, or 13.7% of the $26.2 million at December 31, 2013. These loans were less than 90 days delinquent at December 31,
2014. 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 TDRs as of December 31, 2014, and December 31, 2013.
60
At December 31,
2014
2013
Non-Accruing
Accruing
Non-Accruing
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 . . . . . . . . . . . . . . . . . . .
9,135
$
19,570
$
9,495
$
21,536
—
—
—
—
408
1,927
—
1,990
327
399
607
108
—
—
441
1,176
—
2,074
341
1,063
$
9,543
$
24,213
$
10,651
$
26,190
Allowance for loan losses. The allowance for loan losses to non-performing loans (held-for-investment) increased
from 150.23% at December 31, 2013, to 180.29% at December 31, 2014. This increase was primarily attributable to a decrease
in non-performing loans of $3.2 million, from $17.8 million at December 31, 2013, to $14.6 million at December 31, 2014. At
December 31, 2014, 72.1% of the appraisals utilized for our impairment analysis were completed within the last 12 months and
27.9% 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 1.61% at December 31, 2014,
from 1.93% at December 31, 2013. The decrease in the provision for loan losses was primarily attributable to continued
improvement in asset quality indicators, and to a lesser extent, the Company's PCI portfolio, which had a reversal of a
previously recorded impairment, and lower originated loan growth in 2014 as compared to 2013. Net charge-offs were
$390,000 and $2.3 million for the years ended December 31, 2014 and 2013, respectively, compared to a provision of $645,000
and $1.9 million for the years ended December 31, 2014 and 2013, respectively.
Specific reserves on impaired loans increased $123,000, or 4.7%, from $2.6 million, at December 31, 2013, to $2.8
million at December 31, 2014. At December 31, 2014, the Company had 32 loans classified as impaired and recorded a total of
$2.8 million of specific reserves on 15 of the 32 impaired loans. 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.
61
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
Residential
Commercial
Construction
and Land
Multifamily
Home
Equity
and Lines
of Credit
Commercial
and
Industrial
Insurance
Premium
Loans
(in thousands)
Other
PCI
Acquired
Unallocated
Total
Allowance
for Loan
Losses
2011 . . . . . . $
15,180
$
967
$
1,189
$
6,772
$
418
$
975
$
186
$ 40
$ — $ — $
1,109
$
26,836
Provision
for loan
losses . . . . .
Recoveries .
1,021
107
956
—
Charge-offs.
(1,828)
(1,300)
2012 . . . . . .
14,480
623
Provision
for loan
losses . . . . .
Recoveries .
Charge-offs.
2013 . . . . . .
Provision
for loan
losses . . . . .
Recoveries .
Charge-offs.
(654)
1
(1,208)
12,619
(3,279)
72
(103)
648
18
(414)
875
134
—
(58)
(152)
—
(43)
994
(1,356)
567
—
205
1,034
9
(729)
7,086
2,945
—
(657)
9,374
(185)
2,817
246
—
35
(7)
207
—
(2)
623
728
—
(491)
860
530
—
189
86
(90)
1,160
(557)
201
(379)
425
543
8
(489)
(135)
(3)
18
(198)
3
(3)
—
—
—
—
—
—
(44)
25
(3)
18
1
73
(25)
67
26
41
—
236
—
—
236
352
—
—
588
(188)
—
—
—
—
—
—
—
—
—
—
62
92
—
—
1,201
(177)
—
—
1,024
185
—
—
3,536
245
(4,193)
26,424
1,927
860
(3,174)
26,037
645
402
(792)
2014 . . . . . . $
9,309
$
951
$
266
$
12,219
$
901
$
841
$ — $ 134
$
400
$
62
$
1,209
$
26,292
During the year ended December 31, 2014, the Company recorded net charge-offs of $390,000, a decrease of $1.9
million, or 83.1%, as compared to net charge-offs of $2.3 million for the year ended December 31, 2013. The decrease in net
charge-offs was primarily attributable to a $1.2 million decrease in net charge-offs related to commercial real estate loans, a
$338,000 decrease in net charge-offs related to one-to-four family residential real estate loans and a $685,000 decrease in net
charge-offs related to multifamily loans, partially offset by a $321,000 decrease in net recoveries related to construction and
land loans. 2013 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 increased by $2.8 million, or
30.3%, from $9.4 million at December 31, 2013, to $12.2 million at December 31, 2014. 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. Allowance for loan losses allocated to one-
to-four family residential, construction and land, home equity and lines of credit, and commercial and industrial loans increased
from December 31, 2013, to December 31, 2014. This increase was primarily attributable to growth in the portfolios.
62
Management of Market Risk
General. A majority of our assets and liabilities are monetary in nature. Consequently, our most significant form of
market risk is interest rate risk. Our assets, consisting primarily of mortgage-related assets and loans, generally have longer
maturities than our liabilities, which consist primarily of deposits and wholesale borrowings. As a result, a principal part of our
business strategy involves managing interest rate risk and limiting the exposure of our net interest income to changes in market
interest rates. Accordingly, our board of directors has established a management risk committee, comprised of our Chief
Investment Officer, who chairs this Committee, our Chief Executive Officer, our President/Chief Operating Officer, our Chief
Financial Officer, our Chief Lending Officer, and our Executive Vice President of Operations. This committee is responsible
for, among other things, evaluating the interest rate risk inherent in our assets and liabilities, for recommending to the risk
management committee of our board of directors the level of risk that is appropriate given our business strategy, operating
environment, capital, liquidity and performance objectives, and for managing this risk consistent with the guidelines approved
by the board of directors.
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, 2014, our calculation of the estimated changes in our NPV, NPV ratio,
and percent change in net interest income that would result from the designated instantaneous and sustained changes in interest
rates. Computations of prospective effects of hypothetical interest rate changes are based on numerous assumptions, including
relative levels of market interest rates, loan prepayments and deposit 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).
63
NPV at December 31, 2014
Change in
Interest Rates
(basis points)
Estimated
Present Value of
Assets
Estimated
Present Value of
Liabilities
Estimated
NPV
Estimated
Change In
NPV
Estimated
Change in
NPV %
Estimated
NPV/Present
Value of Assets
Ratio
Net Interest
Income Percent
Change
400
300
200
100
—
(100)
(200)
.
$
2,666,893
$
2,236,062
$ 430,831
2,750,724
2,844,970
2,943,080
3,054,570
3,180,875
3,325,206
2,272,781
2,310,727
2,349,959
2,390,537
2,431,040
2,456,489
477,943
534,243
593,121
664,033
749,835
868,717
$ (233,202)
(186,090)
(129,790)
(70,912)
—
85,802
204,684
(35.12)%
16.15%
(28.02)
(19.55)
(10.68)
—
12.92
30.82
17.38
18.78
20.15
21.74
23.57
26.13
(16.56)%
(12.29)
(7.96)
(3.88)
—
0.18
(1.83)
(1) Assumes an instantaneous and sustained uniform change in interest rates at all maturities.
(2) NPV includes non-interest earning assets and liabilities.
The table above indicates that at December 31, 2014, in the event of a 200 basis point decrease in interest rates, we
would experience a 30.8% increase in estimated net portfolio value and a 1.8% decrease in net interest income. In the event of
a 400 basis point increase in interest rates, we would experience a 35.1% decrease in net portfolio value and a 16.6% decrease
in net interest income. Our policies provide that, in the event of a 300 basis point increase/decrease or less in interest rates, our
net present value ratio should decrease by no more than 800 basis points and in the event of a 200 basis point increase, our
projected net interest income should decrease by no more than 21% and in the event of a 200 basis point decrease, our
projected net interest income should decrease by no more than 15%. Additionally, our policy states that our net portfolio value
should be between 8% and 10% of total assets before and after such shock, However, when the federal funds rate is low and
negative rate shocks do not produce meaningful results, management may temporarily suspend use of guidelines for negative
rate shocks. At December 31, 2014, we were in compliance with all board approved policies with respect to interest rate risk
management.
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 at December 31, 2013
Change in
Interest Rates
(basis points)
Estimated
Present Value of
Assets
Estimated
Present Value of
Liabilities
400
300
200
100
—
(100)
(200)
.
$
$
2,317,122
2,389,483
2,474,496
2,569,820
2,674,545
2,771,974
2,865,823
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
Estimated
Change in
NPV %
Estimated
NPV/Present
Value of Assets
Ratio
Net Interest
Income Percent
Change
$ (234,375)
(191,386)
(136,645)
(72,533)
—
65,297
142,519
(32.67)
(26.68)
(19.55)
(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)
—
(0.65)
(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.
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
64
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 or encumbered) as a percentage of deposits and borrowings of 35% or greater. At
December 31, 2014, this ratio was 36.12%. We believe that we had sufficient sources of liquidity to satisfy our short- and long-
term liquidity needs at December 31, 2014.
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, 2014 (in thousands):
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unpledged multi-family loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unpledged mortgage-backed securities (Issued or guaranteed by the U.S. Government, Fannie Mae, or
Freddie Mac) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
76,709
70,013
229,843
90,563
At December 31, 2014, we had $72.4 million in outstanding loan commitments. In addition, we had $60.6 million in
unused lines of credit to borrowers. Certificates of deposit due within one year of December 31, 2014, totaled $203.3 million,
or 12.5% 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, 2014. 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
65
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, 2014, Northfield Bancorp, Inc. (unconsolidated) had liquid assets of $56.3 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, 2014, 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.
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, 2014. 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.
Contractual Obligations
Less
Than One
Year
One to Three
Years
Payments Due by Period
Three to Five
Years
(In thousands)
More Than
Five Years
Total
Borrowings (1) . . . . . . . . . . . . . . . . . . . $
Floating rate advances . . . . . . . . . . . .
Operating leases . . . . . . . . . . . . . . . . .
Capitalized leases . . . . . . . . . . . . . . . .
Certificates of deposit. . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . $
Commitments to extend credit (2) . . . . $
357,037
2,058
3,992
269
203,288
566,644
133,036
$
$
$
243,913
—
7,648
501
80,348
332,410
$
$
176,217
—
6,437
306
69,400
252,360
$
— $
$
— $
— $
—
27,985
—
108
28,093
$
— $
777,167
2,058
46,062
1,076
353,144
1,179,507
133,036
(1)
(2)
Includes repurchase agreements, Federal Home Loan Bank of New York advances, and accrued interest payable at December 31, 2014.
Includes unused lines of credit which are assumed to be funded within the year.
Impact of Recent Accounting Standards and Interpretations
In January 2014, the FASB issued ASU No. 2014-04, “
.”
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
66
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.
In May 2014, the FASB issued ASU No. 2014-09, “.” This ASU supersedes the
revenue recognition requirements in ASC Topic 605, , and most industry-specific guidance throughout the
industry topics of the codification. This update will be effective for interim and annual periods beginning after December 15,
2016. The Company is still assessing the impact of this pronouncement, but does not expect the guidance 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 U.S. GAAP. U.S.
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.
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
67
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, 2014 and 2013, and the related consolidated statements of comprehensive income (loss), changes
in stockholders’ equity, and cash flows for each of the years in the three year period ended December 31, 2014. 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, 2014 and 2013, and the results of their operations and
their cash flows for each of the years in the three year period ended December 31, 2014, 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, 2014, 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 16, 2015, expressed an unqualified opinion on the effectiveness of the Company’s internal
control over financial reporting.
Short Hills, New Jersey
March 16, 2015
/s/ KPMG LLP
68
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,
2014, 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, 2014, 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, 2014 and 2013, and the
related consolidated statements of comprehensive income (loss), changes in stockholders’ equity, and cash flows for each of the
years in the three-year period ended December 31, 2014, and our report dated March 16, 2015, expressed an unqualified opinion
on those consolidated financial statements.
Short Hills, New Jersey
March 16, 2015
/s/ KPMG LLP
69
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
(encumbered $216,262 at December 31, 2014 and $197,896 at December 31, 2013) . . . . . . . . . . . . . . .
Securities held-to-maturity,
(estimated fair value of $3,691 at December 31, 2014) (encumbered $2,114 at December 31, 2014). . .
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
At December 31,
2014
2013
(In thousands, except share data)
$
14,967
61,742
76,709
6,422
15,348
45,891
61,239
5,998
771,239
937,085
3,609
—
44,816
265,685
1,632,494
1,942,995
(26,292)
1,916,703
8,015
129,015
29,219
26,226
16,159
752
36,801
3,020,869
1,620,665
203,200
575,458
7,792
19,826
2,426,941
$
$
—
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
1,492,689
181,000
289,325
6,441
17,201
1,986,656
STOCKHOLDERS’ EQUITY:
Preferred stock, $0.01 par value; 10,000,000 shares authorized, none issued or outstanding . . . . . . . . . .
Common stock, $0.01 par value: 150,000,000 shares authorized, 58,226,326 shares issued at
December 31, 2014 and 2013, respectively, 48,402,083 and 57,926,233 outstanding at December 31,
2014 and 2013, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in-capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unallocated common stock held by employee stock ownership plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock at cost; 9,824,243 and 300,093 shares at December 31, 2014 and 2013, respectively. . . .
Total stockholders’ equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities and stockholders’ equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
—
—
582
499,606
(25,782)
248,908
(765)
(128,621)
593,928
3,020,869
$
582
508,609
(26,985)
242,180
(4,650)
(3,628)
716,108
2,702,764
See accompanying notes to consolidated financial statements.
70
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income (Loss)
Years ended December 31,
2014
2013
2012
(in thousands, except share data)
Interest income:
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
73,407
$
68,472
$
Mortgage-backed securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16,861
Other securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Federal Home Loan Bank of New York dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits in other financial institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
604
772
57
21,920
1,459
536
83
61,514
26,791
2,588
591
55
Total interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
91,701
92,470
91,539
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:
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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,391
9,961
15,352
76,349
645
75,704
4,073
3,902
227
—
258
6,501
10,447
16,948
75,522
1,927
73,595
3,182
3,607
3,217
(434)
589
Total non-interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,460
10,161
Non-interest expense:
9,837
12,807
22,644
68,895
3,536
65,359
3,005
2,883
2,534
(24)
188
8,586
Compensation and employee benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
26,195
27,142
24,096
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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
9,616
1,636
3,680
2,458
1,306
7,151
52,042
32,122
11,856
20,266
0.41
0.41
$
$
$
9,709
1,751
4,301
2,885
1,432
6,653
53,873
29,883
10,736
19,147
0.35
0.34
$
$
$
8,192
1,463
3,739
3,279
1,628
6,601
48,998
24,947
8,916
16,031
0.30
0.29
Weighted average shares outstanding - basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
49,006,129
54,637,680
54,339,467
Weighted average shares outstanding - diluted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
50,032,259
55,560,309
55,115,680
See accompanying notes to consolidated financial statements.
71
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income (Loss) - (Continued)
Years ended December 31,
2014
2013
2012
(in thousands, except share data)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
20,266
$
19,147
$
16,031
Other comprehensive income (loss):
Unrealized gains (losses) on securities:
Net unrealized holding gains (losses) on securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
8,535
$
(37,449) $
3,418
Less: reclassification adjustment for net gains included in net income (included in gains on
securities transactions, net). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Post retirement benefits adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reclassification adjustment for OTTI impairment included in net income (included OTTI
losses on securities) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss), before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense (benefit) related to net unrealized holding gains (losses) on securities . . . .
Income tax expense related to reclassification adjustment for gains included in net income . . . .
Income tax (benefit) expense related to post retirement benefits adjustment . . . . . . . . . . . . . . . .
Income tax benefit related to reclassification adjustment for OTTI impairment included in net
income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss), net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(382)
8,153
(1,689)
—
6,464
3,408
(153)
(676)
—
3,885
(2,254)
(39,703)
1,134
434
(38,135)
(14,980)
(902)
454
174
(22,881)
(2,150)
1,268
85
24
1,377
1,432
(860)
34
10
761
Comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
24,151
$
(3,734) $
16,792
See accompanying notes to consolidated financial statements.
72
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NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
2014
Years Ended December 31,
2013
(In thousands)
2012
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Adjustments to reconcile net income to net cash provided by operating activities:
20,266
$
19,147
$
16,031
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net impairment losses on securities recognized in earnings . . . . . . . . . . . . . . . . . . . . . . . . . .
Net purchases of trading securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decrease in accrued interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Increase) decrease in other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decrease in prepaid FDIC assessment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) 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 of loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(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 . . . . . . . . . . . . . . . . . . . . . . .
Purchases of 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 (used in) provided by 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 provided by (used in) by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
645
4,653
3,640
1,695
—
(3,902)
—
(79)
1,707
(1,157)
(227)
—
(579)
122
(2,948)
—
(1,167)
2,625
416
25,710
(267,912)
(186,475)
(11,703)
(436)
161,650
442
(4,066)
11,975
—
418
(809)
—
(296,916)
127,976
(12,884)
—
—
—
212
(138,702)
390
1,351
(272)
821,373
(512,768)
286,676
15,470
61,239
76,709
$
1,927
5,037
3,634
1,949
—
(3,607)
(397)
(60)
12,726
(3,986)
(3,217)
434
(358)
17
978
—
(4,033)
(623)
440
30,008
(253,145)
—
(4,966)
(289,562)
331,536
—
—
259,551
(28,464)
519
(2,916)
—
12,553
(174,617)
(26,859)
54,648
124
(14,224)
21
(3,628)
296
2,953
(289)
539,250
(487,758)
(110,083)
(67,522)
128,761
61,239
$
3,536
3,907
2,824
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
(96,339)
—
585
(801,492)
420,271
32,275
—
207,700
(7,729)
3,240
(8,035)
4,721
(244,803)
352,766
(1,722)
—
—
—
16
(4,344)
204
1,287
(251)
398,439
(466,077)
280,318
63,492
65,269
128,761
See accompanying notes to consolidated financial statements.
74
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows - (Continued)
Supplemental cash flow information:
Cash paid during the period for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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 write-downs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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 held-to-maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Core deposit intangible . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other real estate owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Federal Home Loan Bank of New York 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014
Years Ended December 31,
2013
(In thousands)
2012
15,002
16,696
$
17,177
16,196
$
22,997
7,991
—
390
860
305
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2,200
2,314
—
124
3,704
289,554
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
3,949
306
512
5,446
—
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
See accompanying notes to consolidated financial statements.
75
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated 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 (“U.S. 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 PCI 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.
76
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated 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 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
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
77
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
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 and to a lesser extent Eastern
Pennsylvania. 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.
TDRs 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), 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.
78
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
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. In accordance with current accounting guidance,
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, 2014, and 2013.
(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.
(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 current accounting guidance, first assess qualitative factors to
determine whether it is necessary to perform the two-step quantitative goodwill impairment test. Under current accounting
guidance, 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 2014, we elected to
perform step one of the two-step goodwill impairment test for our reporting unit, but we may choose to perform the optional
quantitative assessment in future periods.
79
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
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, 2014, the carrying value of goodwill totaled $16.2 million. The Company performed its annual
goodwill impairment test, as of December 31, 2014, 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 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 Income (Loss)
Comprehensive income (loss) 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 income (loss) is presented in the Consolidated Statements of
Comprehensive Income (Loss).
80
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
(o) 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 income (loss), 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 participants' as compensation cost
in the consolidated statements of comprehensive income (loss). 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
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, 2014, 2013, and 2012, there were 1,026,130, 922,629 and 776,213 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.
81
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
(2)
Business Combinations
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, 2014 and 2013 (in thousands):
2014
Amortized
cost
Gross
unrealized
gains
Gross
unrealized
losses
Estimated
fair
value
Mortgage-backed securities:
Pass-through certificates:
Government sponsored enterprises (GSE). . . . . . . . . . . . $
292,162
$
8,309
$
1,131
$
299,340
Real estate mortgage investment conduits (REMICs): . . .
GSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-GSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other securities:
Equity investments-mutual funds. . . . . . . . . . . . . . . . . . . .
Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total securities available-for-sale. . . . . . . . . . . . . . . . . . . . . $
408,328
1,060
701,550
410
69,975
70,385
771,935
$
9,192
34
10,357
—
2
2
10,359
$
400,450
1,026
700,816
410
70,013
70,423
771,239
1,314
—
9,623
—
40
40
9,663
$
2013
Amortized
cost
Gross
unrealized
gains
Gross
unrealized
losses
Estimated
fair
value
Mortgage-backed securities:
Pass-through certificates:
GSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
366,884
$
8,573
$
5,113
$
370,344
Real estate mortgage investment conduits (REMICs):
GSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-GSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other securities:
Equity investments-mutual funds. . . . . . . . . . . . . . . . . . . .
Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total securities available-for-sale. . . . . . . . . . . . . . . . . . . . . $
497,575
4,474
868,933
510
76,491
77,001
945,934
1,699
126
10,398
—
66
14,047
48
19,208
—
105
66
10,464
$
105
19,313
$
$
485,227
4,552
860,123
510
76,452
76,962
937,085
82
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
The following is a summary of the expected maturity distribution of debt securities available-for-sale other than
mortgage-backed securities at December 31, 2014 (in thousands):
Available-for-sale
Due in one year or less. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due after one year through five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortized cost
Estimated fair value
$
$
41,750
28,225
69,975
$
$
41,768
28,245
70,013
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 or encumbered to secure borrowings under Pledge Agreements and
Repurchase Agreements and for other purposes required by law. At December 31, 2014, and December 31, 2013, securities
available-for-sale with a carrying value of $13.8 million and $14.4 million, respectively, were pledged to secure deposits. See
Note 8 for further discussion regarding securities pledged or encumbered for borrowings.
For the year ended December 31, 2014, the Company had gross proceeds of $12.0 million on sales of securities
available-for-sale with gross realized gains of approximately $382,000 and no gross realized losses. 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. 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 did not recognize any other-than-temporary impairment charges in earnings during the year ended
December 31, 2014. 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 following is a roll forward of 2014, 2013, and 2012 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):
Balance, beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Additions to the credit component on debt securities in which other-than-temporary
impairment was not previously recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reductions due to sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cumulative pre-tax credit losses, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2014
2013
2012
— $
— $
578
—
—
— $
—
—
— $
—
(578)
—
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, 2014 and 2013, were as follows (in thousands):
83
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
Less than 12 months
December 31, 2014
12 months or more
Total
Unrealized
Estimated
Unrealized
Estimated
Unrealized
Estimated
losses
fair value
losses
fair value
losses
fair value
Mortgage-backed securities:
Pass-through certificates:
GSE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1
$
181
$
1,130
$ 61,526
$
1,131
$
61,707
REMICs:
GSE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-GSE. . . . . . . . . . . . . . . . . . . . . . . . . . .
Other securities:
Corporate bonds . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
30
—
2
33
3,179
—
9,996
9,162
229,896
9,192
233,075
34
—
1,026
—
34
2
1,026
9,996
$
13,356
$
10,326
$ 292,448
$
10,359
$ 305,804
Less than 12 months
December 31, 2013
12 months or more
Total
Unrealized
losses
Estimated
fair value
Unrealized
losses
Estimated
fair value
Unrealized
losses
Estimated
fair value
Mortgage-backed securities:
Pass-through certificates:
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
105
18,138
44,763
$ 479,747
$
—
1,175
$
—
49,530
$
105
19,313
44,763
$ 529,277
The Company held 13 pass-through mortgage-backed securities issued or guaranteed by GSEs, 14 REMIC mortgage-
backed securities issued or guaranteed by GSEs, and two REMIC mortgage-backed securities not issued or guaranteed by GSEs
that were in a continuous unrealized loss position of greater than twelve months at December 31, 2014. There were four pass-
through mortgage-backed securities issued or guaranteed by GSEs, one REMIC mortgage-backed security issued or guaranteed
by GSEs, and one corporate security that were in an unrealized loss position of less than twelve months, and rated investment
grade at December 31, 2014. 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 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.
84
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
(4)
Securities Held-to-Maturity
The following is a summary of mortgage-backed securities held-to-maturity at December 31, 2014 (in thousands):
2014
Amortized Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated Fair
Value
Mortgage-backed securities:
Pass-through certificates:
GSEs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total securities held-to-maturity. . . . . . . . . . . . . . . . . . . . . . . . . $
3,609
3,609
$
82
82
$
$
—
— $
3,691
3,691
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. The Company had no held-to-maturity securities at December 31,
2014 that were in an unrealized loss position. The Company had no held-to-maturity securities at December 31, 2013.
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.
(5)
Loans
Loans held-for-investment, net, consists of the following (in thousands):
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:
One-to-four family residential mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial mortgage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction and land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total loans acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans held for investment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loans held-for-investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
December 31,
2014
2013
$
1,072,193
390,288
74,401
54,533
21,412
1,612,827
12,945
2,157
15,102
4,565
1,632,494
44,816
234,478
18,844
11,999
364
265,685
1,942,995
(26,292)
1,916,703
$
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
60,262
3,930
13,254
371
77,817
1,489,476
(26,037)
1,463,439
The Company had no loans held-for-sale at December 31, 2014, and $471,000 in loans held-for-sale at December 31,
2013. Loans held-for-sale included $471,000 of non-accrual loans at December 31, 2013.
85
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
PCI loans, primarily acquired as part of a Federal Deposit Insurance Corporation-assisted transaction, totaled $44.8
million at December 31, 2014, as compared to $59.5 million at December 31, 2013. The Company accounts for PCI loans
utilizing generally accepting accounting principles applicable to loans acquired with deteriorated credit quality. At
December 31, 2014, PCI loans consist of approximately 33% commercial real estate loans and 53% commercial and industrial
loans, with the remaining balance in residential and home equity loans. At December 31, 2013, PCI loans consist of
approximately 37% commercial real estate loans and 47% commercial and industrial loans, with the remaining balance in
residential and home equity loans. The following details the accretable yield (in thousands):
For The Year Ended December 31,
2014
2013
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
32,464
$
—
(4,895)
374
27,943
$
43,431
—
(5,701)
(5,266)
32,464
(1) Due to re-casting of cash flows for loan pools acquired in the 2011 FDIC-assisted transaction.
At December 31, 2014 and 2013, PCI loans included $2.8 million and $3.6 million, respectively, of loans acquired as
part of the acquisition of Flatbush Federal Bancorp, Inc. and its wholly-owned subsidiary, Flatbush Federal Savings and Loan
Association.
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 significant 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, 2014 and
2013, 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,
86
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
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 loss rates
applied are based on our loss experience (using appropriate look-back and loss emergence periods) 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. The
loss emergence period is the estimated time from the date of the loss event to the actual recognition of the loss
(typically via the first charge-off), and is determined based upon a study of the Company's past loss experience by
loan group 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, and incorporates matters
that are not fully captured in the loss experience. 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. We also
maintain an unallocated component related to the general loss allocation. 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 and the internal and external credit risk rating process, including loans
that are not subject to an independent third party review, such as loans that are less than $500,000.
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, or
sooner if management deems it appropriate. 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)
(cid:127)
changes in lending policies and procedures
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.
87
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
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.
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 Office of the Comptroller of the Currency (“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 June 30, 2014.
A summary of changes in the allowance for loan losses for the years ended December 31, 2014, 2013, and 2012
follows (in thousands):
Balance at beginning of year . . . . . . . . . . . . . . . . . . . . $
Provision for loan losses. . . . . . . . . . . . . . . . . . . . . . . .
Recoveries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at end of year. . . . . . . . . . . . . . . . . . . . . . . . . . $
2014
December 31,
2013
2012
26,037
645
402
(792)
26,292
$
$
26,424
1,927
860
(3,174)
26,037
$
$
26,836
3,536
245
(4,193)
26,424
88
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E
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
The Company monitors the credit quality of its loan portfolio on a regular basis. Credit quality is monitored by
reviewing certain credit quality indicators. Management has determined that loan-to-value ratios (at period end) and internally
assigned credit risk ratings by loan type are the key credit quality indicators that best measure the credit quality of the
Company’s loan receivables. Loan-to-value (LTV) ratios used by management in monitoring credit quality are based on
current period loan balances and original appraised values at time of origination (unless a current appraisal has been obtained as
a result of the loan being deemed impaired). In calculating the provision for loan losses, based on past loan loss experience,
management has determined that commercial real estate loans and multifamily loans having loan-to-value ratios, as described
above, of less than 35%, and one-to-four family loans having loan-to-value ratios, as described above, of less than 60%,
require less of a loss factor than those with higher loan to value ratios.
The Company maintains a credit risk rating system as part of the risk assessment of its loan portfolio. The Company’s
lending officers are required to assign a credit risk rating to each loan in their portfolio at origination. 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.
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Loans rated 1 to 5 are considered pass ratings. An asset is classified substandard if it is inadequately protected by the
current net worth and paying capacity of the obligor or of the collateral pledged, if any. Substandard assets have well defined
weaknesses based on objective evidence, and are characterized by the distinct possibility that the Company will sustain some
loss if the deficiencies are not corrected. Assets classified as doubtful have all of the weaknesses inherent in those classified
substandard with the added characteristic that the weaknesses present make collection or liquidation in full highly questionable
and improbable based on current circumstances. Assets classified as loss are those considered uncollectible and of such little
value that their continuance as assets is not warranted. Assets which do not currently expose the Company to sufficient risk to
warrant classification in one of the aforementioned categories, but possess weaknesses, are required to be designated special
mention.
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9
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
Included in 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 $13.9 million and $17.8 million at December 31, 2014, and December 31, 2013, 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 include loans deemed to be impaired of $10.1 million and $13.5 million at December 31, 2014,
and December 31, 2013, 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 at both December 31, 2014, and
December 31, 2013. Non-accrual amounts included in loans held-for-sale were $0 and $471,000 at December 31, 2014, and
December 31, 2013, respectively. Loans past due ninety days or more and still accruing interest were $708,000 and $32,000 at
December 31, 2014, and December 31, 2013, respectively, and consisted of loans that are well secured and in the process of
collection.
92
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
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, 2014 and 2013 (in thousands),
excluding PCI loans which have been segregated into pools. For PCI loans, each loan pool is accounted for as a single asset
with a single composite interest rate and an aggregate expectation of cash flows.
At December 31, 2014
Total Non-Performing Loans
Non-Accruing Loans
0-29 Days
Past Due
30-89 Days
Past Due
90 Days or
More Past
Due
Total
90 Days or
More Past
Due and
Accruing
Total Non-
Performing
Loans
Loans held-for-investment:
Real estate loans:
Commercial
LTV => 35%
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . .
Total commercial. . . . . . . . . . . . . . . . . . . . . . . . .
One-to-four family residential
LTV < 60%
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LTV => 60%
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total one-to-four family residential . . . . . . . . . .
Home equity and lines of credit
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total home equity and lines of credit . . . . . . . . .
Commercial and industrial loans
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total commercial and industrial loans. . . . . . . . . .
Total non-performing loans held-for-investment
Loans acquired:
One-to-four family residential
LTV < 60%
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . .
Total one-to-four family residential . . . . . .
Total non-performing loans acquired . . . . . . . . .
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
395
395
190
190
—
—
190
98
98
—
—
683
—
—
—
—
10,769
10,769
11,164
11,164
674
674
1,028
1,028
1,702
—
—
408
408
864
864
1,028
1,028
1,892
98
98
408
408
12,879
13,562
—
313
313
313
—
313
313
313
Total non-performing loans. . . . . . . . . . . . . . . . . $
— $
683
$
13,192
$
13,875
$
—
—
286
286
—
—
286
—
—
—
—
286
422
—
422
422
708
11,164
11,164
1,150
1,150
1,028
1,028
2,178
98
98
408
408
13,848
422
313
735
735
$
14,583
93
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
At December 31, 2013
Total Non-Performing Loans
Non-Accruing Loans
0-29 Days
Past Due
30-89 Days
Past Due
90 Days or
More Past
Due
Total
90 Days or
More Past
Due and
Accruing
Total Non-
Performing
Loans
Loans held-for-investment:
Real estate loans:
Commercial
LTV => 35%
Special Mention . . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . .
Total commercial . . . . . . . . . . . . . . . . . . . . . . . . .
One-to-four family residential
—
3,606
3,606
—
—
—
—
—
—
108
108
—
—
—
—
—
—
LTV < 60%
Special Mention . . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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 held-for-investment. $
Loans acquired:
One-to-four family residential
LTV => 60%
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . .
Total one-to-four family residential. . . . . . . . . . .
Commercial and industrial loans
LTV => 35%
—
421
421
16
418
434
189
189
623
—
—
—
—
—
—
—
—
335
7,836
8,171
114
186
300
993
993
1,293
—
—
73
73
1,239
1,239
441
441
335
11,863
12,198
130
604
734
1,182
1,182
1,916
108
108
73
73
1,239
1,239
441
441
—
—
3,714
$
—
—
1,044
$
—
—
11,217
$
—
—
15,975
$
607
607
—
—
466
466
1,073
1,073
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
32
32
32
—
—
—
—
—
32
$
$
335
11,863
12,198
130
604
734
1,182
1,182
1,916
108
108
73
73
1,239
1,239
441
441
32
32
16,007
1,073
1,073
252
252
1,325
17,332
Special Mention . . . . . . . . . . . . . . . . . . . . . . .
Total commercial and industrial loans. . . . . . . . .
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
$
The following table sets forth the detail and delinquency status of originated loans receivable held-for-investment and
acquired loans, net of deferred fees and costs, by performing and non-performing loans at December 31, 2014 and 2013 (in
thousands).
94
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
December 31, 2014
Performing (Accruing) Loans
0-29 Days Past
Due
30-89 Days Past
Due
Total
Non-
Performing
Loans
Total Loans
Receivable, net
Loans held-for-investment:
Real estate loans:
Commercial
LTV < 35%
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Special Mention. . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
47,534
2,436
49,970
— $
—
—
$
47,534
2,436
49,970
— $
—
—
LTV => 35%
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special Mention. . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total commercial . . . . . . . . . . . . . . . . . . . . . . . .
One-to-four family residential
LTV < 60%
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special Mention. . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LTV => 60%
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special Mention. . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total one-to-four family residential . . . . . . . . . .
Construction and land
Pass. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total construction and land. . . . . . . . . . . . . . . . .
Multifamily
LTV < 35%
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special Mention. . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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
288,915
9,792
25,073
323,780
373,750
29,288
1,143
867
31,298
38,062
—
—
38,062
69,360
21,445
21,445
64,692
283
801
65,776
999,469
3,822
4,382
1,007,673
1,073,449
54,800
360
93
55,253
Pass. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11,331
Special Mention . . . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . .
652
479
Total commercial and industrial loans . . . . . . . .
12,462
95
878
—
5,093
5,971
5,971
341
—
286
627
2,465
—
360
2,825
3,452
—
—
—
—
—
—
239
520
331
1,090
1,090
135
—
—
135
90
—
32
122
289,793
9,792
30,166
329,751
379,721
29,629
1,143
1,153
31,925
40,527
—
360
40,887
72,812
21,445
21,445
64,692
283
801
65,776
999,708
4,342
4,713
1,008,763
1,074,539
54,935
360
93
55,388
11,421
652
511
12,584
—
—
11,164
11,164
11,164
—
—
1,150
1,150
—
—
1,028
1,028
2,178
—
—
—
—
—
—
—
—
—
—
—
—
—
98
98
—
—
408
408
47,534
2,436
49,970
289,793
9,792
41,330
340,915
390,885
29,629
1,143
2,303
33,075
40,527
—
1,388
41,915
74,990
21,445
21,445
64,692
283
801
65,776
999,708
4,342
4,713
1,008,763
1,074,539
54,935
360
191
55,486
11,421
652
919
12,992
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
December 31, 2014
Performing (Accruing) Loans
0-29 Days Past
Due
30-89 Days Past
Due
Total
Non-
Performing
Loans
Total Loans
Receivable, net
Other loans
Pass. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total other loans. . . . . . . . . . . . . . . . . . . . . . . . .
2,097
2,097
60
60
2,157
2,157
—
—
2,157
2,157
Total originated loans held-for-investment . . . . . .
1,607,816
10,830
1,618,646
13,848
1,632,494
Acquired loans:
One-to-four family residential
LTV < 60%
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
225,741
Special Mention. . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . .
597
424
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
226,762
LTV => 60%
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,787
294
6,081
Total one-to-four family residential . . . . . . . . . .
232,843
Commercial
LTV < 35%
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special Mention. . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LTV => 35%
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total commercial . . . . . . . . . . . . . . . . . . . . . . . .
Construction and land
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total construction and land. . . . . . . . . . . . . . . . .
Multifamily
LTV < 35%
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special Mention. . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LTV => 35%
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special Mention. . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total multifamily . . . . . . . . . . . . . . . . . . . . . . . .
2,477
187
2,664
5,817
2,997
8,814
11,478
363
363
4,857
164
5,021
13,457
366
13,823
18,844
526
—
—
526
375
—
375
901
—
521
521
—
—
—
521
—
—
—
—
—
—
—
—
—
226,267
597
424
227,288
6,162
294
6,456
233,744
2,477
708
3,185
5,817
2,997
8,814
11,999
363
363
4,857
164
5,021
13,457
366
13,823
18,844
422
—
313
735
—
—
—
735
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
226,689
597
737
228,023
6,162
294
6,456
234,479
2,477
708
3,185
5,817
2,997
8,814
11,999
363
363
4,857
164
5,021
13,457
366
13,823
18,844
Total loans acquired . . . . . . . . . . . . . . . . . . . . . .
263,528
1,422
264,950
735
265,685
$
1,871,344
$
12,252
$
1,883,596
$
14,583
$
1,898,179
96
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
December 31, 2013
Performing (Accruing) Loans
0-29 Days Past
Due
30-89 Days Past
Due
Total
Non-
Performing
Loans
Total Loans
Receivable, net
Loans held-for-investment:
Real estate loans:
Commercial
LTV < 35%
Pass. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Special Mention . . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
42,995
1,304
1,333
45,632
— $
—
—
—
$
42,995
1,304
1,333
45,632
— $
—
—
—
LTV => 35%
Pass. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special Mention . . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total commercial . . . . . . . . . . . . . . . . . . . . . . . . .
One-to-four family residential
LTV < 60%
Pass. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special Mention . . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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%
Pass. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special Mention . . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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. . . . . . . . . .
239,544
10,927
28,949
279,420
325,052
28,216
1,746
269
30,231
27,575
703
522
28,800
59,031
13,458
595
—
14,053
40,638
94
821
41,553
817,923
6,751
4,118
828,792
870,345
45,116
376
—
45,492
7,415
962
570
8,947
97
928
1,676
680
3,284
3,284
379
413
515
1,307
2,666
—
369
3,035
4,342
—
—
—
—
328
215
—
543
—
1,115
825
1,940
2,483
1
93
—
94
73
—
741
814
240,472
12,603
29,629
282,704
328,336
28,595
2,159
784
31,538
30,241
703
891
31,835
63,373
13,458
595
—
14,053
40,966
309
821
42,096
817,923
7,866
4,943
830,732
872,828
45,117
469
—
45,586
7,488
962
1,311
9,761
—
335
11,863
12,198
12,198
—
130
604
734
—
—
1,182
1,182
1,916
—
—
108
108
—
—
—
—
—
—
73
73
73
—
—
1,239
1,239
—
—
441
441
42,995
1,304
1,333
45,632
240,472
12,938
41,492
294,902
340,534
28,595
2,289
1,388
32,272
30,241
703
2,073
33,017
65,289
13,458
595
108
14,161
40,966
309
821
42,096
817,923
7,866
5,016
830,805
872,901
45,117
469
1,239
46,825
7,488
962
1,752
10,202
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
December 31, 2013
Performing (Accruing) Loans
0-29 Days Past
Due
30-89 Days Past
Due
Total
Non-
Performing
Loans
Total Loans
Receivable, net
Other loans
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total other loans. . . . . . . . . . . . . . . . . . . . . . . . . . .
Total originated loans held-for-investment . . . . . $
2,226
2,226
1,325,146
$
21
21
11,038
$
2,247
2,247
1,336,184
$
32
32
16,007
$
2,279
2,279
1,352,191
1,195
104
4
1,303
—
—
—
—
1,303
—
—
529
529
461
—
461
990
—
—
—
—
—
44,307
410
140
44,857
13,838
232
262
14,332
59,189
2,143
189
1,466
3,798
9,203
—
9,203
13,001
372
372
$
$
588
490
1,078
—
—
—
—
—
—
1,073
1,073
1,073
—
—
—
—
—
252
252
252
—
—
—
—
—
44,307
410
140
44,857
13,838
232
1,335
15,405
60,262
2,143
189
1,466
3,798
9,203
252
9,455
13,253
372
372
588
490
1,078
—
—
—
—
2,293
13,331
$
2,262
590
2,852
3,930
76,492
1,412,676
$
—
—
—
—
1,325
17,332
$
2,262
590
2,852
3,930
77,817
1,430,008
Loans acquired:
One-to-four family residential
LTV < 60%
Pass. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special Mention . . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LTV => 60%
Pass. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special Mention . . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total one-to-four family residential. . . . . . . . . . .
Commercial
LTV < 35%
Pass. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Special Mention . . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LTV => 35%
Pass. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total commercial . . . . . . . . . . . . . . . . . . . . . . . . .
Construction and land
Substandard. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total construction and land . . . . . . . . . . . . . . . . .
Multifamily
LTV < 35%
Pass. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LTV => 35%
Pass. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special Mention . . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total multifamily . . . . . . . . . . . . . . . . . . . . . . . . .
Total loans acquired. . . . . . . . . . . . . . . . . . . . . . .
43,112
306
136
43,554
13,838
232
262
14,332
57,886
2,143
189
937
3,269
8,742
—
8,742
12,011
372
372
$
$
588
490
1,078
2,262
590
2,852
3,930
74,199
1,399,345
$
$
98
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
The following table summarizes impaired loans as of December 31, 2014 and 2013 (in thousands):
At December 31, 2014
Recorded
Investment
Unpaid Principal
Balance
Related Allowance
With No Allowance Recorded:
Real estate loans:
Commercial
LTV => 35%
Pass. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,311
12,880
3,448
14,339
One-to-four family residential
LTV < 60%
Special Mention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Multifamily
LTV => 35%
Pass. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Home Equity
Special Mention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial and industrial loans
Special Mention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
With a Related Allowance Recorded:
Real estate loans:
Commercial
LTV => 35%
138
262
86
477
49
267
99
138
262
557
477
49
268
99
—
—
—
—
—
—
—
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13,033
14,365
(2,361)
One-to-four family residential
LTV => 60%
Special Mention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
319
353
319
353
Multifamily
LTV => 35%
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,427
1,427
Home equity and lines of credit
Special Mention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial and industrial loans
Special Mention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total:
Real estate loans
Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
One-to-four family residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Home equity and lines of credit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial and industrial loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
99
278
32
408
29,224
1,072
1,990
327
806
33,419
$
$
278
32
530
32,152
1,072
2,461
327
929
36,941
$
(4)
(53)
(215)
(13)
(1)
(108)
(2,361)
(57)
(215)
(13)
(109)
(2,755)
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
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
707
LTV => 35%
Pass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
19,689
21,382
Construction and land
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
One-to-four family residential
LTV < 60%
Special Mention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Multifamily
LTV < 35%
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial and industrial loans
Special Mention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Substandard. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
With a Related Allowance Recorded:
Real estate loans:
Commercial
LTV => 35%
Special Mention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
One-to-four family residential
LTV => 60%
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Multifamily
LTV => 35%
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Home equity and lines of credit
Special Mention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial and industrial loans
Substandard. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total:
Real estate loans
108
507
269
593
210
853
2,289
6,810
340
1,481
342
1,000
441
91
507
269
1,064
219
1,008
2,672
6,937
340
1,481
342
1,395
485
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
$
—
—
—
—
—
—
—
—
—
(52)
(2,333)
(19)
(117)
(7)
—
(104)
(2,385)
(19)
—
(117)
(7)
(104)
(2,632)
Included in the table above at December 31, 2014, are impaired loans with carrying balances of $13.1 million that
were not written down by charge-offs or for which there are no specific reserves in our allowance for loan losses. Included in
the impaired loans 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 are no specific reserves in our allowance for loan losses. Loans not written down by charge-offs
or specific reserves at December 31, 2014 and 2013, 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.
100
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
The average recorded balance of originated impaired loans (including held-for-investment and held-for-sale) for the
years ended December 31, 2014, 2013, and 2012 was approximately $34.3 million, $43.9 million, and $54.3 million,
respectively. The Company recorded $2.7 million, $2.0 million, and $2.8 million of interest income on impaired loans for the
years ended December 31, 2014, 2013, and 2012, respectively.
The following tables summarize loans that were modified in a troubled debt restructuring during the years ended
December 31, 2014 and 2013:
Year Ended December 31, 2014
Pre-Modification
Post-Modification
Number of
Outstanding Recorded
Outstanding Recorded
Relationships
Investment
Investment
(in thousands)
One-to-four Family
Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Troubled Debt Restructurings. . . . . . . . . . . . . . . . . .
2
2
$
$
556
556
$
$
556
556
Both of the relationships in the table above were restructured to receive reduced interest rates.
Year Ended December 31, 2013
Pre-Modification
Post-Modification
Number of
Outstanding Recorded
Outstanding Recorded
Relationships
Investment
Investment
(in thousands)
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.
At December 31, 2014 and 2013, we had troubled debt restructurings of $33.8 million and $36.8 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 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 were no loans that were restructured during the twelve months ended December 31, 2014, that subsequently
defaulted.
101
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
There were four loans to one borrower that were restructured during the twelve months ended December 31, 2013, that
subsequently defaulted. The following table details these loans at December 31, 2013:
Number of
Relationships
Year Ended December 31, 2013
30-89 Days
Past Due
(in thousands)
90 Days or More
Past Due
Commercial & Industrial
Substandard - non-accrual. . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CRE
Substandard - non-accrual. . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1
1
3
3
4
$
$
(6)
Premises and Equipment, Net
— $
—
—
—
— $
441
441
7,052
7,052
7,493
At December 31, 2014 and 2013, 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,
2014
2013
2,026
6,691
2,600
19,658
26,202
57,177
(30,951)
26,226
$
$
2,026
6,647
2,600
18,969
26,126
56,368
(27,311)
29,057
Depreciation expense for the years ended December 31, 2014, 2013, and 2012, was $3.6 million, $3.6 million, and
$2.8 million, respectively.
There were no sales of premises and equipment in 2014 or 2012. The Company realized a gain of $397,000 from the
sale of vacant land adjacent to a branch in 2013.
102
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
(7)
Deposits
Deposit account balances are summarized as follows (dollars in thousands):
December 31,
2014
2013
Amount
Weighted Average
Rate
Amount
Weighted Average
Rate
Transaction:
Negotiable orders of withdrawal . . . . . . . . . . $
Non-interest bearing checking. . . . . . . . . . . .
Total transaction . . . . . . . . . . . . . . . . . . . . . .
Savings:
Money market . . . . . . . . . . . . . . . . . . . . . . . .
Savings . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total savings . . . . . . . . . . . . . . . . . . . . . . . . .
Certificates of deposit:
124,961
269,466
394,427
440,887
432,207
873,094
Under $100,000 . . . . . . . . . . . . . . . . . . . . . . .
$100,000 or more. . . . . . . . . . . . . . . . . . . . . .
Total certificates of deposit . . . . . . . . . . . . . .
Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . $
211,543
141,601
353,144
1,620,665
0.34% $
—
0.11
0.38
0.31
0.35
129,955
235,355
365,310
438,562
380,915
819,477
0.92
1.40
1.11
0.46% $
172,175
135,727
307,902
1,492,689
0.31%
—
0.11
0.25
0.10
0.18
0.83
1.39
1.08
0.35%
The Company had brokered deposits (included in certificates of deposit in the above table) of $40.9 million and
$695,000, at December 31, 2014 and 2013, respectively.
Scheduled maturities of certificates of deposit are summarized as follows (in thousands):
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
December 31, 2014
203,288
43,439
36,909
5,116
64,284
108
353,144
Interest expense on deposits is summarized as follows (in thousands):
Negotiable order of withdrawal and money market . . . . . . . . . . . . . . . . $
Savings-passbook and statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Certificates of deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,766
445
3,180
5,391
$
$
1,956
679
3,866
6,501
$
$
3,226
910
5,701
9,837
2014
December 31,
2013
2012
103
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated 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:
December 31,
2014
203,200
$
2013
181,000
FHLB advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Floating rate advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Obligations under capital leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
572,493
2,058
907
778,658
$
285,661
2,485
1,179
470,325
$
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):
2015. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2016. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
December 31, 2014
FHLB
Advances
Repurchase
Agreements
215,363
53,910
129,003
140,715
33,502
572,493
$
$
140,200
55,000
6,000
2,000
—
203,200
At December 31, 2014, repurchase agreements have a weighted average rate of 1.69%, with $109.2 million maturing
in the in the first quarter of 2015 and $94.0 million maturing in more than 90 days. The repurchase agreements are secured
primarily by mortgage-backed securities with an amortized cost of $213.9 million, and a fair value of $218.3 million, at
December 31, 2014. At December 31, 2013, repurchase agreements had a weighted average rate of 2.70%, with the exception
of one repurchase agreement that matured late in the first quarter of 2014 at a rate of 2.92%, all maturing in more than 90 days.
The repurchase agreements were 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.
The Company has the ability to obtain additional funding from the FHLB and Federal Reserve Bank discount window
of approximately $291.3 million, utilizing unencumbered and unpledged securities of $90.6 million and multifamily loans of
$229.8 million at December 31, 2014. 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):
Repurchase agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
FHLB advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Floating rate advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Obligations under capital leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
2014
December 31,
2013
2012
4,161
5,717
3
80
9,961
$
$
6,492
3,836
10
109
10,447
$
$
8,573
4,071
27
136
12,807
104
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
(9)
Income Taxes
Income tax expense (benefit) consists of the following (in thousands):
Federal tax expense (benefit):
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State and local tax expense (benefit):
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2014
December 31,
2013
2012
$
11,195
(1,675)
9,520
1,828
508
2,336
11,856
$
$
12,493
(2,758)
9,735
2,276
(1,275)
1,001
10,736
$
10,081
(1,876)
8,205
1,568
(857)
711
8,916
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.
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, 2014, 2013, and 2012, is as follows (dollars in
thousands):
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2014
December 31,
2013
2012
11,242
$
10,459
$
8,731
1,519
(1,366)
—
134
131
196
11,856
$
651
(1,262)
—
149
448
291
10,736
$
462
(1,009)
207
149
231
145
8,916
105
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated 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, 2014 and 2013, 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:
Employee Stock Ownership Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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,
2014
2013
10,302
369
2,577
950
523
2,930
226
1,083
100
1,220
184
308
398
1,616
6,247
306
291
29,630
—
—
13
27
1,639
1,679
27,951
$
$
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
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, 2014, and December 31, 2013, 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.
A reconciliation of the Company’s uncertain tax positions are as follows (in thousands):
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Settlements based on tax positions related to prior years . . . . . . . . . . . . .
Additions based on tax positions related to prior years. . . . . . . . . . . . . . .
Ending balance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
December 31,
2014
2013
2012
679
(580)
131
230
$
$
231
—
448
679
$
$
—
—
231
231
106
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
The Company recognizes interest and penalties on income taxes in income tax expense.
The following years are open for examination or under examination:
(cid:127)
(cid:127)
(cid:127)
(cid:127)
Federal tax filings for 2011 through present.
New York State tax filings 2010 through present. The 2010 and 2011 filings are currently under examination.
New York City tax filings 2010 through present. The 2010 and 2011 filings are currently 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 $292,000, $266,000, and $226,000 for the years
ended December 31, 2014, 2013, and 2012, 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 2014, 2013, and 2012.
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 outstanding balance at December 31, 2014 and 2013, was $13.3 million and $13.9 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 80,728 and 81,631 shares were released and
allocated to participants for the ESOP years ended December 31, 2014 and 2013, 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; the
second ESOP was 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 outstanding balance at
December 31, 2014 and 2013, was $13.6 million and $13.9 million, respectively. 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 each of the second ESOP
years ended December 31, 2014 and 2013. 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.
ESOP compensation expense for both plans for the years ended December 31, 2014, 2013, and 2012 was $1.7 million,
$1.5 million, and $856,000, respectively.
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's required contributions to the SESOP plan were $7,000, $38,000,
and $25,000 for the years ended December 31, 2014, 2013, and 2012, respectively.
107
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
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 loss (gain) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated postretirement benefit obligation end of year . . . . . . . . . . . . . . . . . . .
Accrued liability (included in accrued expenses and other liabilities). . . . . . . . . . . . $
2014
2013
2012
1,294
$
1,778
$
1,697
6
53
578
(85)
1,846
9
56
(455)
(94)
1,294
1,846
$
1,294
$
7
66
115
(107)
1,778
1,778
The following table sets forth the amounts recognized in accumulated other comprehensive income (loss) (in
thousands):
December 31,
2014
2013
Net loss (gain) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Transition obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss (gain) recognized in accumulated other comprehensive income . . . . . . . . . . . . . . . . . . . . . . $
473
17
50
540
$
$
(116)
33
74
(9)
The estimated net loss, transition obligation, and prior service cost that will be amortized from accumulated other
comprehensive income (loss) into net periodic cost in 2015, are $44,000, $17,000, and $38,000 respectively.
The following table sets forth the components of net periodic postretirement benefit costs for the years ended
December 31, 2014, 2013, and 2012 (in thousands):
December 31,
2014
2013
2012
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of transition obligation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of prior service costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of unrecognized (gain) loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net postretirement benefit cost included in compensation and employee benefits . $
6
53
17
24
(11)
89
$
$
9
56
17
16
36
134
$
$
7
66
17
15
28
133
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. 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014
2013
2012
3.50%
4.00%
4.25%
4.00%
4.25%
4.00%
3.25%
4.00%
3.25%
4.00%
4.00%
4.00%
108
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
At December 31, 2014, 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 . . . . . .
4
$
153
$
5
89
(3) $
(135)
(4)
(80)
One Percentage Point Increase
One Percentage Point Decrease
2014
2013
2014
2013
A one percentage-point change in assumed heath care cost trends would have the following effects (in thousands):
Aggregate of service and interest
components of net periodic cost (benefit) . . . . . . . . . . . . . $
4
$
5
$
6
$
(3) $
(4) $
(5)
One Percentage Point Increase
One Percentage Point Decrease
2014
2013
2012
2014
2013
2012
Benefit payments of approximately $85,000, $94,000, and $107,000 were made in 2014, 2013, and 2012, respectively.
The benefits expected to be paid under the postretirement health benefits plan for the next five years are as follows: $112,000
in 2015; $116,000 in 2016; $120,000 in 2017; $122,000 in 2018; and $125,000 in 2019. The benefit payments expected to be
paid in the aggregate for the years 2020 through 2024 are $638,000. The expected benefits are based on the same assumptions
used to measure the Company’s benefit obligation at December 31, 2014, and include estimated future employee service.
The Company also maintained a defined benefit pension plan covering certain employees and individuals from the
Merger, which was terminated in February 2014, and resulted in the Company recognizing a pre-tax gain of $937,000.
The following tables set forth the defined benefit pension plan's funded status and components of postretirement
benefit costs at December 31, 2013, measurement dates (in thousands):
Accumulated postretirement benefit obligation beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Interest cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actuarial gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated postretirement benefit obligation end of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plan assets at fair value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2013
7,646
225
(1,261)
(247)
6,363
6,763
400
The following table sets forth the amounts recognized in accumulated other comprehensive income (loss) (in
thousands):
Net gain recognized in accumulated other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(1,143)
2013
The following table sets forth the components of net periodic postretirement benefit costs (in thousands):
Interest cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected return on assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net postretirement benefit cost included in compensation and employee benefits . . . . . . . . . . . . . . . . . . . . $
2013
225
(207)
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
109
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assumptions used to determine net periodic benefit cost for the year:
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long term rate of return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The fair values of the defined benefit pension plan’s assets by asset category are as follows:
2013
3.75%
3.00%
3.00%
8.09
Fair Value Measurements at December 31, 2013 Using:
Carrying Value
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable
Inputs (Level 2)
Significant
Unobservable
Inputs (Level 3)
(in thousands)
Assets measured on a recurring basis:
Common / Collective Trusts - Fixed Income
Market Duration Fixed (a) . . . . . . . . . . . . . . . . $
1,167
$
— $
1,167
$
Mutual Funds - Fixed Income . . . . . . . . . . . . . . .
Intermediate Duration (b) . . . . . . . . . . . . . . . . .
Cash Equivalents - Money market . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2,354
3,242
6,763
$
2,354
3,242
5,596
$
—
— $
$
1,167
—
—
—
—
(a)
(b)
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.
This category consists of two funds, one containing a diversified portfolio of high-quality bonds and other fixed income
securities, including U.S. Government obligations, mortgage-related and asset-backed securities, corporate and municipal
bonds, CMO's, and other securities rated Baa or better. The second fund emphasizes a more globally diversified portfolio
of higher-quality, intermediate-term bonds.
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 $6.5 million and $6.0 million at December 31, 2014 and 2013, respectively, and is
included in accrued expenses and other liabilities on the consolidated balance sheets. Income under this plan was $153,000 for
the year ended December 31, 2014. Expense under this plan was $963,000, and $384,000 for the years ended December 31, 2013
and 2012, 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, 2014 and
2013, was approximately $350,000 and $536,000, respectively.
110
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
(11)
Equity Incentive Plan
In 2014, the Company granted to directors and employees a total of 1,001,200 restricted shares, and 2,502,600 stock
options to purchase Company stock. These shares and options were issued out of the 2014 Equity Incentive Plan ("2014 EIP"),
which allows the Company to grant common stock or options to purchase common stock at specific prices to directors and
employees of the Company. The 2014 EIP provides for the issuance or delivery of up to 4,978,249 shares (1,422,357 restricted
shares and 3,555,892 stock options) of Northfield Bancorp, Inc. common stock subject to certain plan limitations.
All stock options and restricted stock granted to date vest in equal installments over a five-year period beginning one
year from the date of grant. The vesting of options and restricted stock awards may accelerate in accordance with terms of the
2014 EIP. 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
June 11, 2014, was estimated utilizing the Black-Scholes option pricing model using the following assumptions: an expected
life of 6.5 years, risk-free rate of return of 1.92%, volatility of 33.83% and a dividend yield of 1.83%. The fair value of stock
options granted on December 8, 2014, was estimated utilizing the Black-Scholes option pricing model using the following
assumptions: an expected life of 6.5 years, risk-free rate of return of 1.81%, volatility of 32.92% and a dividend yield of 1.68%.
The Company also maintains the Northfield Bancorp, Inc. 2008 Equity Incentive Plan ("2008 EIP") to grant common
stock or options to purchase common stock at specific prices to directors and employees of the Company. The 2008 EIP
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 2008 EIP as of December 31, 2014. All stock
options and restricted stock granted to date vest in equal installments over a five-year period beginning one year from the date
of grant. The vesting of options and restricted stock awards may accelerate in accordance with terms of the 2008 EIP. 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, 2014, 2013, and 2012, the Company recorded, $2.8 million, $3.2 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, 2014, and changes
therein during the year then ended:
Number of Stock
Options
Weighted Average
Grant Date Fair
Value
Weighted
Average Exercise
Price
Weighted Average
Contractual Life
(years)
Outstanding- December 31, 2012 . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding- December 31, 2013 . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding- December 31, 2014 . . . . . . . . .
Exercisable- December 31, 2014 . . . . . . . . .
$
2,805,912
20,900
(26,507)
2,800,305
2,502,600
(18,000)
(146,833)
5,138,072
2,635,910
$
2.30
3.06
2.30
2.30
3.91
3.91
2.30
3.08
2.30
$
$
7.09
11.97
7.09
7.13
13.13
13.13
7.11
10.04
7.13
6.07
9.58
—
5.16
9.45
—
—
7.44
4.12
Expected future stock option expense related to the non-vested options outstanding as of December 31, 2014, is $8.7
million over an average period of 4.4 years.
111
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
The following is a summary of the status of the Company’s restricted shares as of December 31, 2014, and changes
therein during the year then ended:
Non-vested at December 31, 2012
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-vested at December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-vested at December 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of Shares Awarded
Weighted Average Grant Date
Fair Value
454,904
$
13,300
(225,595)
(2,526)
240,083
1,001,200
(228,209)
(10,000)
1,003,074
$
7.11
11.97
7.10
7.09
7.29
13.13
7.16
13.13
13.11
Expected future stock award expense related to the non-vested restricted awards as of December 31, 2014, is $11.7
million over an average period of 4.5 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, 2014 and 2013, the following commitment and contingent liabilities existed that are not reflected in
the accompanying consolidated financial statements (in thousands):
December 31,
2014
2013
Commitments to extend credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Unused lines of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Standby letters of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
72,438
60,598
420
61,277
46,080
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 o f 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, 2014, and at December 31, 2013. The Company maintains an allowance for estimated losses on commitments to
extend credit in other liabilities. At December 31, 2014 and 2013, the allowance was $472,000 and $430,000, respectively,
changes to the allowance are recorded as a component of other non-interest expense.
At December 31, 2014, 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.
112
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated 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:
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total minimum lease payments. . . . . . . . . . . . . . . . $
Rental Payments Capitalized Leases
Rental Payments Operating Leases
269
247
254
262
44
—
1,076
$
$
3,992
3,885
3,763
3,381
3,056
27,985
46,062
Net rental expense included in occupancy expense was approximately $4.3 million, $4.2 million, and $3.9 million for
the years ended December 31, 2014, 2013, and 2012, 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.
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 unde r re gulatory a ccount ing practic es. Capital amounts a n d class ifications also are
subject to qualitative judgments by the regulators about capital components, risk weighting, and other factors.
Management believes that as of December 31, 2014, and December 31, 2013, 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.
In July 2013, the federal banking agencies approved a new rule that substantially amended the regulatory risk-based
capital rules applicable to the Bank. The final rule implements the “Basel III” regulatory capital reforms and changes required
by the Dodd-Frank Act. The rule includes new minimum risk-based capital and leverage ratios, which were effective January 1,
2015, and refines the definition of what constitutes “capital” for purposes of calculating these ratios. The new minimum capital
requirements are: (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 will be phased in beginning in January 2016 at 0.625% of risk-
weighted assets and will increase each year until fully implemented in January 2019.
113
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
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 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, 2014 and 2013, for classification as a well-capitalized institution and minimum capital
(dollars in thousands):
OCC Requirements
For Capital
Adequacy
Purposes
For Well
Capitalized
Under Prompt Corrective
Action Provisions
Actual
Amount
Ratio
Amount
Ratio
Amount
Ratio
As of December 31, 2014:
Tangible capital to tangible assets
Tier I capital (core) (to adjusted total assets)
Total capital (to risk-weighted assets)
As of December 31, 2013:
Tangible capital to tangible assets
Tier I capital (core) (to adjusted total assets)
Total capital (to risk-weighted assets)
$
$
494,131
494,131
520,875
535,007
535,007
559,187
(14)
Fair Value of Measurement
16.46% $
16.46
22.95
19.88% $
19.88
28.94
45,036
120,096
181,585
40,363
107,635
154,570
1.50%
4.00
8.00
1.50%
4.00
8.00
NA
150,119
226,982
NA
134,544
193,213
NA
5.00
10.00
NA
5.00
10.00
The following table presents the assets reported on the consolidated balance sheet at their estimated fair value as of
December 31, 2014 and 2013, 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) 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.
(cid:127) 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.
(cid:127) Level 3 Inputs – Significant unobservable inputs that reflect the Company’s own assumptions that market participants
would use in pricing the assets or liabilities.
114
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
The following tables summarize financial assets and financial liabilities measured at fair value as of December 31,
2014 and 2013, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value (in
thousands):
Fair Value Measurements at December 31, 2014 Using:
Carrying Value
Quoted Prices in Active
Markets for Identical
Assets (Level 1)
Significant Other
Observable
Inputs (Level 2)
(in thousands)
Significant
Unobservable
Inputs
(Level 3)
Measured on a recurring basis:
Assets:
Investment securities:
Available-for-sale:
Mortgage-backed securities
GSE . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Non-GSE . . . . . . . . . . . . . . . . . . . . . . .
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
Multifamily. . . . . . . . . . . . . . . . . . . . . . .
Home equity and lines of credit . . . . . . .
Total impaired real estate loans . . . . . .
Commercial and industrial loans . . . . . . .
Other real estate owned. . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
— $
—
—
410
410
6,422
6,832
$
— $
—
—
—
—
—
—
— $
699,790
1,026
$
70,013
—
770,829
—
770,829
$
—
—
—
—
—
—
—
— $
—
—
—
—
—
—
— $
17,438
672
1,513
278
19,901
440
752
21,093
699,790
1,026
$
70,013
410
771,239
6,422
777,661
17,438
672
1,513
278
19,901
440
752
21,093
$
$
$
115
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
Fair Value Measurements at December 31, 2013 Using:
Carrying Value
Quoted Prices in Active
Markets for Identical
Assets (Level 1)
Significant Other
Observable
Inputs (Level 2)
(in thousands)
Significant
Unobservable
Inputs
(Level 3)
Measured on a recurring basis:
Assets:
Investment securities:
Available-for-sale:
Mortgage-backed securities
GSE . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Non-GSE . . . . . . . . . . . . . . . . . . . . . . .
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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
855,571
4,552
$
76,452
510
937,085
5,998
943,083
23,572
340
109
1,579
1,342
26,942
616
634
28,192
$
$
$
— $
—
—
510
510
5,998
6,508
$
— $
—
—
—
—
—
—
—
— $
855,571
4,552
$
76,452
—
936,575
—
936,575
$
—
—
—
—
—
—
—
— $
—
—
—
—
—
—
—
— $
23,572
340
109
1,579
1,342
26,942
616
634
28,192
The following table presents qualitative information for Level 3 assets measured at fair value on a non-recurring basis at
December 31, 2014:
Fair Value
(in thousands)
Valuation Methodology
Unobservable Inputs
Range of Inputs
Impaired loans . . . . . . . . . . $
20,341 Appraisals
Other real estate owned . . . $
Discounted cash
flows
752 Appraisals
Discount for costs to sell
Discount for quick sale
Interest rates
Discount for costs to sell
7.0%
10.0% - 40.0%
4.6% - 7.5%
7.0%
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
Valuation Methodology
Unobservable Inputs
Range of Inputs
Impaired loans . . . . . . . . . . $
27,558 Appraisals
(in thousands)
Other real estate owned . . . $
Discounted cash
flows
634 Appraisals
Discount for costs to sell
Discount for quick sale
Interest rates
Discount for costs to sell
7.0%
10.0% - 25.0%
4.6% - 7.5%
7.0%
116
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
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,
2014.
Trading Securities: Fair values are derived from quoted market prices in active markets. The assets consist of
publicly traded mutual funds.
Impaired Loans: At December 31, 2014, and December 31, 2013, the Company had originated impaired loans held-
for-investment and held-for-sale with outstanding principal balances of $23.7 million and $31.7 million that were recorded at
their estimated fair value of $20.3 million and $27.6 million, respectively. The Company recorded impairment charges of
$123,000 and $2.5 million for the years ended December 31, 2014 and 2013, respectively, and net charge-offs of $390,000 and
$2.3 million for the years ended December 31, 2014 and 2013, 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, 2014 and 2013, the Company had assets acquired through foreclosure
of $752,000 and $634,000, 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.
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.
Fair Value of Financial Instruments
The FASB Accounting Standards Topic for Financial Instrumentsrequires 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.
117
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
(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, which would also
consider adjustments for other factors such as liquidity and credit quality. The fair value would be affected significantly by
these other factors.
(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
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.
118
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
The estimated fair values of the Company’s significant financial instruments at December 31, 2014 and 2013, are
presented in the following table (in thousands):
December 31, 2014
Estimated Fair Value
Carrying
Value
Level 1
Level 2
Level 3
Total
Financial assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . $
Trading securities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities available-for-sale . . . . . . . . . . . . . . . . . . . .
Securities held-to-maturity . . . . . . . . . . . . . . . . . . . . .
Federal Home Loan Bank of New York stock, at cost
Net loans held-for-investment . . . . . . . . . . . . . . . . . . .
76,709
$
76,709
$
6,422
771,239
3,609
29,219
1,942,995
6,422
410
—
—
— $
—
770,829
3,691
29,219
— $
76,709
—
—
—
6,422
771,239
3,691
29,219
— 1,949,511
1,949,511
Financial liabilities:
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,620,665
778,658
Repurchase agreements and other borrowings . . . . . .
7,792
Advance payments by borrowers . . . . . . . . . . . . . . . .
$
$
— $ 1,622,536
781,196
—
7,792
—
— $ 1,622,536
781,196
—
7,792
—
December 31, 2013
Estimated Fair Value
Carrying
Value
Level 1
Level 2
Level 3
Total
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 . . . . . . . . . . . . . . . . . . .
61,239
5,998
937,085
17,516
471
1,489,476
Financial liabilities:
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,492,689
470,325
Repurchase agreements and other borrowings . . . . . .
6,441
Advance payments by borrowers . . . . . . . . . . . . . . . .
$
$
$
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
—
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.
119
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
(15)
Stock Repurchase Program
All of the Company's share repurchase programs, noted below, permit shares to be repurchased in open
market or private transactions, through block trades, and pursuant to any trading plan that may be adopted in accordance with
Rule 10b5-1 of the Securities and Exchange Commission.
During 2014, the Company's Board of Directors authorized the repurchase of up to $170.0 million of the Company's
common stock. The number of shares remaining to be purchased at December 31, 2014, is calculated utilizing the remaining
approved repurchase amount of $32.2 million divided by the closing price of the stock on that day.
On July 31, 2013, the Company'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.
(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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Anti-dilutive shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(17)
Parent-only Financial Information
2014
20,266
49,006,129
1,026,130
50,032,259
0.41
0.41
1,471,303
December 31,
2013
$
$
$
19,147
54,637,680
922,629
55,560,309
0.35
0.34
—
$
$
$
2012
16,031
54,339,467
776,213
55,115,680
0.30
0.29
—
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ESOP loan receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Liabilities and Stockholders' Equity
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities and stockholders' equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
December 31,
2014
2013
(in thousands)
53,681
2,636
509,809
26,934
1,048
594,108
180
593,928
594,108
$
$
$
$
141,331
224
547,216
27,799
80
716,650
542
716,108
716,650
120
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
Northfield Bancorp, Inc.
Condensed Statements of Comprehensive Income (Loss)
Interest on ESOP loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Interest income on deposit in Northfield Bank . . . . . . . . . . . . . . . . . . . . . . . .
Interest income on corporate bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on securities transactions, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Undistributed earnings of Northfield Bank . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense (benefit). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Comprehensive income (loss):
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other comprehensive income (loss), net of tax . . . . . . . . . . . . . . . . . . . . . . . .
Comprehensive income (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Years Ended
December 31,
2014
2013
2012
903
251
—
(2)
20,331
21,483
956
261
1,217
20,266
20,266
3,885
24,151
$
$
$
$
(in thousands)
904
286
13
—
19,157
20,360
1,188
25
1,213
19,147
$
$
$
19,147
(22,881)
(3,734) $
490
18
157
—
16,360
17,025
1,249
(255)
994
16,031
16,031
761
16,792
121
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
Northfield Bancorp, Inc.
Condensed Statements of Cash Flows
December 31,
2014
2013
2012
(in thousands)
20,266
$
19,147 $
16,031
94
(541)
1,271
—
(556)
(19,157)
258
(172,299)
—
5,173
(14,224)
(181,350)
344,202
950
(3,628)
(26,859)
124
21
296
315,106
134,014
7,541
141,555 $
$
1
(704)
1,394
68
510
(16,360)
940
—
—
—
—
—
—
430
(4,344)
(1,722)
—
—
—
(5,636)
(4,696)
12,237
7,541
Cash flows from operating activities
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Adjustments to reconcile net income to net cash provided by operating activities: .
Decrease in accrued interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decrease in due to Northfield Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Increase) decrease in other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of premium on corporate bond . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Decrease) increase in other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Undistributed earnings of Northfield Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash (used in) provided by operating activities . . . . . . . . . . . . . . . . . . . . . . .
Cash flows from investing activities
Additional investment in Northfield Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends from Northfield Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maturities of corporate bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loan to ESOP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used in) investing activities . . . . . . . . . . . . . . . . . . . . . . .
Cash flows from financing activities
—
—
(969)
—
(362)
(20,329)
(1,394)
—
66,274
—
—
66,274
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 (used in) provided by 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
—
865
(138,702)
(12,884)
—
212
390
(150,119)
(85,239)
141,555
56,316
122
NORTHFIELD BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated 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, 2014 and
2013:
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 . . . . . . . . . . . $
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 . . . . . . . . . . . $
2014 Quarter Ended
March 31
June 30
September 30
December 31
(Dollars in thousands, except per share data)
22,764
$
22,151
$
3,649
19,115
417
18,698
2,172
12,063
8,807
3,588
5,219
0.10
0.10
$
$
$
3,631
18,520
(146)
18,666
2,387
12,698
8,355
2,915
5,440
0.11
0.11
$
$
$
22,707
3,737
18,970
317
18,653
1,840
13,268
7,225
2,496
4,729
0.10
0.10
$
$
$
24,079
4,335
19,744
57
19,687
2,061
14,013
7,735
2,857
4,878
0.11
0.11
2013 Quarter Ended
March 31
June 30
September 30
December 31
(Dollars in thousands, except per share data)
23,516
4,751
18,765
277
18,488
3,256
14,366
7,378
2,586
4,792
0.09
0.09
$
$
$
$
22,954
4,199
18,755
417
18,338
1,698
13,209
6,827
2,528
4,299
0.08
0.08
$
$
$
$
23,380
4,060
19,320
817
18,503
2,588
13,309
7,782
2,682
5,100
0.09
0.09
$
$
$
$
22,620
3,938
18,682
416
18,266
2,619
12,989
7,896
2,940
4,956
0.09
0.09
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 Chairman and 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, 2014. 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 2014
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) of 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, 2014. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations
of the Treadway Commission in (1992). Based on our assessment we believe that, as
of December 31, 2014, 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, 2014,
and it is included in Item 8, under Part II of this Annual Report on Form 10-K. This report appears on page 69 of this
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 2015 Annual Meeting of the
Stockholders (the “2015 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 2015 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 2015 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, 2014, 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
Number of Securities to
be Issued Upon Exercise
of Outstanding Options,
Warrants and Rights
Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights(1)
Number of Securities
Remaining Available for
Future Issuance Under
Stock-Based
Compensation Plans
(Excluding Securities
Reflected in First Column)
Equity compensation plans approved by security
holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity compensation plans not approved by security
holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,138,072
$
N/A
5,138,072
$
10.04
N/A
10.04
1,713,979
N/A
1,713,979
(1) Represents the weighted average exercise price of outstanding options at December 31, 2014.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE
The section of the Company’s 2015 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 2015 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
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
PART IV
(a)(1) Financial Statements
The following documents are filed as part of this Form 10-K.
(A) Report of Independent Registered Public Accounting Firm
(B) Consolidated Balance Sheets - at December 31, 2014, and 2013
(C) Consolidated Statements of Comprehensive (Income) Loss - Years ended December 31, 2014, 2013, and 2012
(D) Consolidated Statements of Changes in Stockholders’ Equity - Years ended December 31, 2014, 2013, and 2012
(E) Consolidated Statements of Cash Flows - Years ended December 31, 2014, 2013, and 2012
(F) 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
10.22
10.23
10.24
10.25
10.26
Certificate of Incorporation of Northfield Bancorp, Inc. (4)
Bylaws of Northfield Bancorp, Inc. (4)
Form of Common Stock Certificate of Northfield Bancorp, Inc.(4)
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 2015 Management Cash Incentive Compensation Plan (10) †
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) †
Amended Employment Agreement with William R. Jacobs (10) †
Northfield Bancorp, Inc. 2014 Equity Incentive Plan (12) †
Form of Employee Stock Option Award Agreement under the 2014 Equity Incentive Plan with the Exception of
John W. Alexander and Steven M. Klein (13) †
Form of Employee Stock Option Award Agreement under the 2014 Equity Incentive Plan with John W.
Alexander and Steven M. Klein (13) †
Form of Director Non-Statutory Stock Option Award Agreement under the 2014 Equity Incentive Plan (13) †
Form of Employee Restricted Stock Award Agreement under the 2014 Equity Incentive Plan with the exception
of John W. Alexander and Steven M. Klein (13) †
126
10.27
10.28
10.29
21
23
31.1
31.2
32
101
Form of Employee Restricted Stock Award Agreement under the 2014 Equity Incentive Plan with John W.
Alexander and Steven M. Klein (13) †
Form of Director Restricted Stock Award Agreement under the 2014 Equity Incentive Plan (13) †
Form of amendment to restricted stock award and stock option agreements to participants of the 2014 Equity
Incentive Plan (2) †
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,
2014, 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.
* Filed herewith.
(1)
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.
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
Incorporated by reference to Northfield Bancorp Inc.’s Current Report on Form 8-K, dated December 17, 2014, filed
with the Securities and Exchange Commission on December 23, 2014 (File Number 001-35791).
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 the Registration Statement on Form S-1 of Northfield Bancorp, Inc. (File No. 333-181995),
originally filed with the Securities and Exchange Commission on June 8, 2012.
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 B of Northfield Bancorp Inc.’s Definitive Proxy Statement for the 2014 Annual
Meeting of Stockholders (File No. 001-35791) as filed with the Securities and Exchange Commission on April 25, 2014.
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 January 28, 2015, filed with
the Securities and Exchange Commission on February 2, 2015 (File Number 001-35791).
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).
(12) Incorporated by reference to Appendix A of Northfield Bancorp Inc.’s Definitive Proxy Statement for the 2014 Annual
Meeting of Stockholders (File No. 001-35791) as filed with the Securities and Exchange Commission on April 25, 2014.
(13)
Incorporated by reference to Northfield Bancorp’s Quarterly Report on Form 10-Q, dated June 30, 2014, filed with the
Securities and Exchange Commission on August 11, 2014 (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 16, 2015
By:
/s/ John W. Alexander
John W. Alexander
Chairman and Chief Executive Officer
(Duly Authorized Representative)
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.
Signatures
/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.
Title
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
128
Date
March 16, 2015
March 16, 2015
March 16, 2015
March 16, 2015
March 16, 2015
March 16, 2015
March 16, 2015
March 16, 2015
March 16, 2015
March 16, 2015
March 16, 2015
March 16, 2015
March 16, 2015
(This page intentionally left blank)
(This page intentionally left blank)
STOCKHOLDER
INFORMATION
Corporate Headquarters
Northfield Bancorp, Inc.
581 Main Street, Suite 810
Woodbridge, New Jersey 07095
(732) 499-7200
www.eNorthfield.com
Annual Meeting of Stockholders
The 2015 Annual Meeting of Stockholders
of Northfield Bancorp, Inc. has been set for
10:00 a.m., local time, on May 27, 2015. The
Annual Meeting will be held at the Hilton
Garden Inn, located at 1100 South Avenue,
Staten Island, New York 10314. The voting
record date was April 2, 2015.
Persons may obtain a copy, free of charge,
of the Northfield Bancorp, Inc. 2014 Annual
Report and Form 10-K (excluding exhibits)
as filed with the Securities and Exchange
Commission by contacting:
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
Stock Listing
Northfield Bancorp, Inc. common stock
is traded on the NASDAQ Global Select
Market under the symbol NFBK.
Registrar and Transfer Agent
Computershare
250 Royall Street
Canton, MA 02021
(800) 368-5948
Independent Registered
Public Accounting Firm
KPMG LLP
51 John F. Kennedy Parkway
Short Hills, New Jersey 07078
BOARD OF DIRECTORS
John W. Alexander
Chairman and CEO
Northfield Bancorp
John P. Connors, Jr.
Managing Partner
Connors & Connors, P.C.
Steven M. Klein
President & COO
Northfield Bancorp
John R. Bowen
Retired Chairman,
President and CEO
Liberty Bancorp, Inc.
Annette Catino
CEO
QualCare Alliance
Networks, Inc.
Gil Chapman
Retired
Auto Executive
John J. DePierro
Retired Consultant
Health Care Industry
Timothy C. Harrison
Principal
TCH Realty &
Development Co., LLC
Susan Lamberti
Retired Educator
New York City
Board of Education
Frank P. Patafio
Senior Executive VP
RXR Realty
Karen J. Kessler
Principal
Evergreen Partners, Inc.
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
Corporate Secretary
OUR LOCATIONS
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
Standing Strong Since 1887
www.eNorthfield.com