NFBK 10-Q Quarterly Report June 30, 2015 | Alphaminr
Northfield Bancorp, Inc.
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NFBK 10-Q Quarter ended June 30, 2015

Balance Sheet
Cash Flow
Income Statement
NORTHFIELD BANCORP, INC.
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10-Q 1 nfbk-2015630x10xq.htm 10-Q NFBK-2015.6.30-10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,  D.C. 20549
FORM 10-Q
[ X ]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2015
or
[   ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For transition period from               to
Commission File Number
001-35791
NORTHFIELD BANCORP, INC.
(Exact name of registrant as specified in its charter)
Delaware
80-0882592
(State or other jurisdiction of incorporation)
(I.R.S. Employer Identification No.)
581 Main Street, Woodbridge, New Jersey
07095
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code: (732) 499-7200
Not Applicable
(Former name, former address, and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ý No o .
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for shorter period that the registrant was required and post such files).  Yes ý No o .
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):
Large accelerated filer o
Accelerated filer ý
Non-accelerated filer o (Do not check if smaller reporting company)
Smaller reporting company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o No ý .
Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.
45,778,594 shares of Common Stock, par value $0.01 per share, were issued and outstanding as of July 31, 2015 .


NORTHFIELD BANCORP, INC.
Form 10-Q Quarterly Report
Table of Contents



PART I
ITEM 1. FINANCIAL STATEMENTS
NORTHFIELD BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
June 30, 2015 (Unaudited)
December 31, 2014
ASSETS:
Cash and due from banks
$
15,539

$
14,967

Interest-bearing deposits in other financial institutions
60,246

61,742

Total cash and cash equivalents
75,785

76,709

Trading securities
6,799

6,422

Securities available-for-sale, at estimated fair value
(encumbered $100,819 at June 30, 2015 and $216,262 at December 31, 2014)
640,212

771,239

Securities held-to-maturity, at amortized cost
(estimated fair value of $3,965 at June 30, 2015, and $3,691 at December 31, 2014) (encumbered of $435 at June 30, 2015, and $2,114 at December 31, 2014)
3,921

3,609

Loans held-for-sale
325

—

Originated loans held-for-investment, net
1,787,363

1,632,494

Loans acquired
378,493

265,685

Purchased credit-impaired (PCI) loans held-for-investment
37,778

44,816

Loans held-for-investment, net
2,203,634

1,942,995

Allowance for loan losses
(25,516
)
(26,292
)
Net loans held-for-investment
2,178,118

1,916,703

Accrued interest receivable
8,087

8,015

Bank owned life insurance
130,897

129,015

Federal Home Loan Bank of New York stock, at cost
25,353

29,219

Premises and equipment, net
25,142

26,226

Goodwill
16,159

16,159

Other real estate owned
423

752

Other assets
36,094

36,801

Total assets
$
3,147,315

$
3,020,869

LIABILITIES AND STOCKHOLDERS’ EQUITY:
LIABILITIES:


Deposits
$
1,980,099

$
1,620,665

Securities sold under agreements to repurchase
94,000

203,200

Federal Home Loan Bank advances and other borrowings
485,078

575,458

Advance payments by borrowers for taxes and insurance
9,696

7,792

Accrued expenses and other liabilities
20,889

19,826

Total liabilities
2,589,762

2,426,941

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 June 30, 2015, and December 31, 2014, 45,937,659 and 48,402,083 outstanding at June 30, 2015, and December 31, 2014, respectively
582

582

Additional paid-in-capital
497,118

499,606

Unallocated common stock held by employee stock ownership plan
(25,257
)
(25,782
)
Retained earnings
251,903

248,908

Accumulated other comprehensive loss
(1,553
)
(765
)
Treasury stock at cost; 12,288,667 and 9,824,243 shares at June 30, 2015, and December 31, 2014, respectively
(165,240
)
(128,621
)
Total stockholders’ equity
557,553

593,928

Total liabilities and stockholders’ equity
$
3,147,315

$
3,020,869


See accompanying notes to consolidated financial statements.

3

NORTHFIELD BANCORP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited) (In thousands, except per share data)
Three Months Ended June 30,
Six Months Ended June 30,
2015
2014
2015
2014
Interest income:
Loans
$
21,291

$
17,466

$
41,957

$
35,262

Mortgage-backed securities
3,325

4,343

6,902

8,932

Other securities
94

157

228

314

Federal Home Loan Bank of New York dividends
297

172

640

382

Deposits in other financial institutions
30

13

63

25

Total interest income
25,037

22,151

49,790

44,915

Interest expense:




Deposits
2,458

1,254

4,532

2,492

Borrowings
2,294

2,377

4,989

4,788

Total interest expense
4,752

3,631

9,521

7,280

Net interest income
20,285

18,520

40,269

37,635

Provision for/(recovery of) loan losses
72

(146
)
272

271

Net interest income after provision for loan losses
20,213

18,666

39,997

37,364

Non-interest income:




Fees and service charges for customer services
976

1,030

1,901

2,059

Income on bank owned life insurance
941

984

1,882

1,968

(Losses)/gains on securities transactions, net
(7
)
319

54

443

Other
96

54

273

89

Total non-interest income
2,006

2,387

4,110

4,559

Non-interest expense:




Compensation and employee benefits
7,684

6,538

15,241

11,773

Occupancy
2,467

2,280

5,081

4,902

Furniture and equipment
369

417

749

836

Data processing
981

996

1,958

1,967

Professional fees
719

680

1,293

1,206

FDIC insurance
397

311

786

620

Other
1,897

1,476

3,706

3,457

Total non-interest expense
14,514

12,698

28,814

24,761

Income before income tax expense
7,705

8,355

15,293

17,162

Income tax expense
3,410

2,915

5,996

6,503

Net income
$
4,295

$
5,440

$
9,297

$
10,659

Net income per common share:
Basic
$
0.10

$
0.11

$
0.22

$
0.21

Diluted
$
0.10

$
0.11

$
0.21

$
0.20

See accompanying notes to consolidated financial statements.

4

NORTHFIELD BANCORP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - (Continued)
(Unaudited) (In thousands)
Three Months Ended June 30,
Six Months Ended June 30,
2015
2014
2015
2014
Net Income
$
4,295

$
5,440

$
9,297

$
10,659

Other comprehensive (loss) income:
Unrealized (losses) gains on securities:
Net unrealized holding (losses) gains on securities
(5,894
)
2,759

(1,275
)
6,099

Less: reclassification adjustment for net gains included in net income (included in (losses) gains on securities transactions, net)
(43
)
(144
)
(43
)
(199
)
Net unrealized (losses) gains
(5,937
)
2,615

(1,318
)
5,900

Post retirement benefit adjustment
—

—

—

(1,141
)
Other comprehensive (loss) income, before tax
(5,937
)
2,615

(1,318
)
4,759

Income tax benefit (expense) related to net unrealized holding (losses) gains on securities
2,359

(1,103
)
513

(2,439
)
Income tax expense related to reclassification adjustment for gains included in net income
17

58

17

80

Income tax expense related to post retirement benefit adjustment
—

—

—

458

Other comprehensive (loss) income, net of tax
(3,561
)
1,570

(788
)
2,858

Comprehensive income
$
734

$
7,010

$
8,509

$
13,517









































See accompanying notes to consolidated financial statements.

5

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

$
582

$
508,609

$
(26,985
)
$
242,180

$
(4,650
)
$
(3,628
)
$
716,108

Net income




10,659



10,659

Other comprehensive income, net of tax





2,858


2,858

ESOP shares allocated or committed to be released


298

525




823

Stock compensation expense


510





510

Additional tax benefit on equity awards


388





388

Issuance of restricted stock
998,200

(12,717
)
12,717

—

Exercise of stock options
66,397



(621
)

799

178

Cash dividends declared ($0.12 per common share)




(6,584
)


(6,584
)
Treasury stock (average cost of $12.80 per share)
(5,951,756
)





(76,112
)
$
(76,112
)
Balance at June 30, 2014
53,039,074

$
582

$
497,088

$
(26,460
)
$
245,634

$
(1,792
)
$
(66,224
)
$
648,828

Balance at December 31, 2014
48,402,083

$
582

$
499,606

$
(25,782
)
$
248,908

$
(765
)
$
(128,621
)
$
593,928

Net income




9,297



9,297

Other comprehensive loss, net of tax





(788
)

(788
)
ESOP shares allocated or committed to be released


413

525




938

Stock compensation expense


2,565





2,565

Additional tax benefit on equity awards


119





119

Net issuance of restricted stock
390,800


(5,218
)



5,218

—

Exercise of stock options
51,765


(367
)

(85
)

581

129

Cash dividends declared ($0.07 per common share)




(6,217
)


(6,217
)
Treasury stock (average cost of $14.57 per share)
(2,906,989
)





(42,418
)
(42,418
)
Balance at June 30, 2015
45,937,659

$
582

$
497,118

$
(25,257
)
$
251,903

$
(1,553
)
$
(165,240
)
$
557,553





See accompanying notes to consolidated financial statements.

6

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

Six Months Ended June 30,
2015
2014
Cash flows from operating activities:
Net income
$
9,297

$
10,659

Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses
272

271

ESOP and stock compensation expense
3,503

1,333

Depreciation
1,731

1,853

Amortization of premiums, and deferred loan costs, net of (accretion) of discounts, and deferred loan fees
928

694

Amortization intangible assets
160

211

Income on bank owned life insurance
(1,882
)
(1,968
)
Net gain on sale of loans held-for-sale
(10
)
(13
)
Proceeds from sale of loans held-for-sale
1,630

822

Origination of loans held-for-sale
(1,620
)
(809
)
Gains on securities transactions, net
(54
)
(443
)
(Gain) loss on sale of other real estate owned, net
(134
)
19

Net purchases of trading securities
(366
)
(98
)
Increase in accrued interest receivable
(72
)
(348
)
Decrease (increase) in other assets
1,141

(3,351
)
(Decrease) increase in accrued expenses and other liabilities
(94
)
691

Net cash provided by operating activities
14,430

9,523

Cash flows from investing activities:
Net increase in loans receivable
(134,959
)
(84,332
)
Purchase of loans
(127,431
)
—

Redemptions (purchases) of Federal Home Loan Bank of New York stock, net
3,866

(1,725
)
Purchases of securities available-for-sale
—

(436
)
Principal payments and maturities on securities available-for-sale
90,025

76,731

Principal payments and maturities on securities held-to-maturity
803

—

Purchases of securities held-to-maturity
—

(4,037
)
Proceeds from sale of securities available-for-sale
39,226

7,270

Proceeds from sale of other real estate owned
392

418

Purchases and improvements of premises and equipment
(647
)
(405
)
Net cash used in investing activities
(128,725
)
(6,516
)
Cash flows from financing activities:
Net increase (decrease) in deposits
359,434

(11,742
)
Dividends paid
(6,217
)
(6,584
)
Exercise of stock options
129

178

Purchase of treasury stock
(42,418
)
(76,112
)
Additional tax benefit on equity awards
119

388

Increase in advance payments by borrowers for taxes and insurance
1,904

1,401

Repayments under capital lease obligations
(88
)
(158
)
Proceeds from securities sold under agreements to repurchase and other borrowings
105,072

159,166

Repayments related to securities sold under agreements to repurchase and other borrowings
(304,564
)
(95,000
)
Net cash provided by (used in) financing activities
113,371

(28,463
)
Net decrease in cash and cash equivalents
(924
)
(25,456
)
Cash and cash equivalents at beginning of period
76,709

61,239

Cash and cash equivalents at end of period
$
75,785

$
35,783


7

NORTHFIELD BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued)
(Unaudited) (In thousands)
Six Months Ended June 30,
2015
2014
Supplemental cash flow information:
Cash paid during the period for:
Interest
$
9,579

$
7,304

Income taxes
5,597

11,585

Non-cash transactions:
Loans charged-off, net
1,048

41

Transfer of originated loans held-for-investment to loans-held-for-sale at fair value
325

—

Other real estate owned write-downs
71

47

Transfers of loans to other real estate owned
—

490

Increase in due to broker for purchases of held-to-maturity securities
1,158

—

Increase in due from broker for sales of securities available-for-sale
—

1,909












































See accompanying notes to consolidated financial statements.


8

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

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




Pass-through certificates:




Government sponsored enterprises (GSE)
$
259,523

$
6,710

$
1,417

$
264,816

Real estate mortgage investment conduits (REMICs):




GSE
348,813

1,081

8,378

341,516

Non-GSE
844

—

33

811

609,180

7,791

9,828

607,143

Other securities:
Equity investments-mutual funds
329

—

—

329

Corporate bonds
32,717

25

2

32,740

33,046

25

2

33,069

Total securities available-for-sale
$
642,226

$
7,816

$
9,830

$
640,212



9
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)


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




Pass-through certificates:




GSE
$
292,162

$
8,309

$
1,131

$
299,340

REMICs:




GSE
408,328

1,314

9,192

400,450

Non-GSE
1,060

—

34

1,026

701,550

9,623

10,357

700,816

Other securities:
Equity investments-mutual funds
410

—

—

410

Corporate bonds
69,975

40

2

70,013

70,385

40

2

70,423

Total securities available-for-sale
$
771,935

$
9,663

$
10,359

$
771,239

The following is a summary of the expected maturity distribution of debt securities available-for-sale, other than mortgage-backed securities, at June 30, 2015 (in thousands).
Available-for-sale
Amortized cost
Estimated fair value
Due in one year or less
$
27,627

$
27,639

Due after one year through five years
5,090

5,101

$
32,717

$
32,740

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

For the three and six months ended June 30, 2015 , the Company had gross proceeds of $39.2 million on sales of securities available-for-sale, with gross realized gains of approximately $46,000 and gross realized losses of approximately $3,000 . For the three and six months ended June 30, 2014 , the Company had gross proceeds of $6.4 million and $7.3 million , respectively, on sales of securities available-for-sale, with gross realized gains of approximately $144,000 and $199,000 , respectively, and no gross realized losses for the three and six months ended June 30, 2014 .  The Company recognized net losses of $50,000 , and net gains of $11,000 , on its trading securities portfolio during the three and six months ended June 30, 2015 . The Company recognized $175,000 and $244,000 , respectively, in net gains on its trading securities portfolio during the three and six months ended June 30, 2014 .  The Company did not recognize any other-than-temporary impairment charges during the three and six months ended June 30, 2015 , or June 30, 2014 .


10
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)


Gross unrealized losses on mortgage-backed securities and corporate bonds available-for-sale, and the estimated fair value of the related securities, aggregated by security category and length of time that individual securities have been in a continuous unrealized loss position, at June 30, 2015 , and December 31, 2014 , were as follows (in thousands).
June 30, 2015
Less than 12 months
12 months or more
Total
Unrealized
Estimated
Unrealized
Estimated
Unrealized
Estimated
losses
fair value
losses
fair value
losses
fair value
Mortgage-backed securities:
Pass-through certificates:
GSE
$
84

$
15,157

$
1,333

$
56,575

$
1,417

$
71,732

REMICs:
GSE
18

16,860

8,360

187,705

8,378

204,565

Non-GSE
—

—

33

811

33

811

Other securities:
Corporate bonds
2

11,605

—

—

2

11,605

Total
$
104

$
43,622

$
9,726

$
245,091

$
9,830

$
288,713

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

$
181

$
1,130

$
61,526

$
1,131

$
61,707

REMICs:
GSE
30

3,179

9,162

229,896

9,192

233,075

Non-GSE
—

—

34

1,026

34

1,026

Other Securities:
Corporate Bonds
2

9,996

—

—

2

9,996

Total
$
33

$
13,356

$
10,326

$
292,448

$
10,359

$
305,804

The Company held 11 pass-through mortgage-backed securities issued or guaranteed by GSEs, 12 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 June 30, 2015 .  There were three pass-through mortgage-backed securities issued or guaranteed by GSEs, one REMIC mortgage-backed security issued or guaranteed by a GSE, three corporate bonds that were in an unrealized loss position of less than twelve months at June 30, 2015 . All securities referred to above were rated investment grade at June 30, 2015 .  The declines in value relate to the general interest rate environment and are considered temporary.  The securities cannot be prepaid in a manner that would result in the Company not receiving substantially all of its amortized cost.  The Company neither has an intent to sell, nor is it more likely than not that the Company will be required to sell, the securities before the recovery of their amortized cost basis or, if necessary, maturity.
The fair values of our investment securities could decline in the future if the underlying performance of the collateral for the collateralized mortgage obligations or other securities deteriorates and our credit enhancement levels do not provide sufficient protections to our contractual principal and interest, which may result in other-than-temporary impairment in the future.


11
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)



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




Pass-through certificates:




GSEs
$
3,921

$
44

$
—

$
3,965

Total securities held-to-maturity
$
3,921

$
44

$
—

$
3,965

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




Pass-through certificates:




GSEs
$
3,609

$
82

$
—

$
3,691

Total securities held-to-maturity
$
3,609

$
82

$
—

$
3,691

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

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


12
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)


Note 4 – Loans
Net loans held-for-investment are as follows (in thousands).
June 30,
December 31,
2015
2014
Real estate loans:
Multifamily
$
1,218,702

$
1,072,193

Commercial mortgage
391,235

390,288

One-to-four family residential mortgage
80,557

74,401

Home equity and lines of credit
57,518

54,533

Construction and land
15,903

21,412

Total real estate loans
1,763,915

1,612,827

Commercial and industrial loans
16,693

12,945

Other loans
1,947

2,157

Total commercial and industrial and other loans
18,640

15,102

Deferred loan cost, net
4,808

4,565

Originated loans held-for-investment, net
1,787,363

1,632,494

PCI Loans
37,778

44,816

Loans acquired:
One-to-four family residential mortgage
349,661

234,478

Multifamily
17,431

18,844

Commercial mortgage
11,401

11,999

Construction and land
—

364

Total loans acquired, net
378,493

265,685

Loans held-for-investment, net
2,203,634

1,942,995

Allowance for loan losses
(25,516
)
(26,292
)
Net loans held-for-investment
$
2,178,118

$
1,916,703


Loans held-for-sale amounted to $325,000 and $0 at June 30, 2015 , and December 31, 2014 , respectively.

PCI loans, primarily acquired as part of a Federal Deposit Insurance Corporation-assisted transaction, totaled $37.8 million at June 30, 2015 , as compared to $44.8 million at December 31, 2014 .   The Company accounts for PCI loans utilizing U.S. GAAP applicable to loans acquired with deteriorated credit quality.  At June 30, 2015 , PCI loans consist of approximately 34.0% commercial real estate loans and 49.6% commercial and industrial loans, with the remaining balance in residential and home equity loans.

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

$
32,464

Accretion into interest income
(2,237
)
(2,518
)
Net reclassification from non-accretable difference
—

374

Balance at end of period
$
25,706

$
30,320




13
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)


The following tables set forth activity in our allowance for loan losses, by loan type, as of and for the three and six months ended June 30, 2015 , and June 30, 2014 (in thousands).
Three Months Ended June 30, 2015
Real Estate
Commercial
One-to-Four Family
Construction and Land
Multifamily
Home Equity and Lines of Credit
Commercial and Industrial
Other
Unallocated
Originated Loans Total
Purchased Credit-Impaired
Acquired Loans
Total
Allowance for loan losses:
Beginning balance
$
8,483

$
870

$
218

$
12,698

$
842

$
995

$
103

$
1,228

$
25,437

$
400

$
61

$
25,898

Charge-offs
(186
)
(126
)
—

(113
)
—

(32
)
—

—

(457
)
—

—

(457
)
Recoveries
—

—

—

—

—

—

3

—

3

—

—

3

Provisions/(credit)
(956
)
363

(33
)
623

99

48

23

(93
)
74

—

(2
)
72

Ending balance
$
7,341

$
1,107

$
185

$
13,208

$
941

$
1,011

$
129

$
1,135

$
25,057

$
400

$
59

$
25,516


Three Months Ended June 30, 2014
Real Estate
Commercial
One-to-Four Family
Construction and Land
Multifamily
Home Equity and Lines of Credit
Commercial and Industrial
Other
Unallocated
Originated Loans Total
Purchased Credit-Impaired
Acquired Loans
Total
Allowance for loan losses:
Beginning balance
$
12,359

$
818

$
227

$
9,814

$
958

$
473

$
68

$
1,217

$
25,934

$
588

$
43

$
26,565

Charge-offs
—

(7
)
—

—

(160
)
—

—

—

(167
)
—

—

(167
)
Recoveries
—

—

—

—

—

—

15

—

15

—

—

15

Provisions/(credit)
(477
)
201

(71
)
66

195

58

(18
)
91

45

(188
)
(3
)
(146
)
Ending balance
$
11,882

$
1,012

$
156

$
9,880

$
993

$
531

$
65

$
1,308

$
25,827

$
400

$
40

$
26,267




14
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)


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

$
951

$
266

$
12,219

$
901

$
841

$
134

$
1,209

$
25,830

$
400

$
62

$
26,292

Charge-offs
(829
)
(127
)
—

(113
)
—

(32
)
—

—

(1,101
)
—

—

(1,101
)
Recoveries
1

—

—

—

42

6

4

—

53

—

—

53

Provisions/(credit)
(1,140
)
283

(81
)
1,102

(2
)
196

(9
)
(74
)
275

—

(3
)
272

Ending balance
$
7,341

$
1,107

$
185

$
13,208

$
941

$
1,011

$
129

$
1,135

$
25,057

$
400

$
59

$
25,516



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

$
875

$
205

$
9,374

$
860

$
425

$
67

$
1,024

$
25,449

$
588

$
—

$
26,037

Charge-offs
—

(22
)
(1
)
—

(294
)
—

—

—

(317
)
—

—

(317
)
Recoveries
—

—

246

—

—

—

30

—

276

—

—

276

Provisions/(credit)
(737
)
159

(294
)
506

427

106

(32
)
284

419

(188
)
40

271

Ending balance
$
11,882

$
1,012

$
156

$
9,880

$
993

$
531

$
65

$
1,308

$
25,827

$
400

$
40

$
26,267

















15
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)


The following tables detail the amount of loans receivable held-for-investment, net of deferred loan fees and costs, that are evaluated individually, and collectively, for impairment, and the related portion of the allowance for loan losses that is allocated to each loan portfolio segment, at June 30, 2015 , and December 31, 2014 (in thousands).
June 30, 2015
Real Estate
Commercial
One-to-Four Family
Construction and Land
Multifamily
Home Equity and Lines of Credit
Commercial and Industrial
Other
Unallocated
Originated Loans Total
Purchased Credit-Impaired
Acquired Loans
Total
Allowance for loan losses:
Ending balance: individually evaluated for impairment
$
1,238

$
102

$
—

$
186

$
30

$
—

$
—

$
—

$
1,556

$
—

$
59

$
1,615

Ending balance: collectively evaluated for impairment
6,103

1,005

185

13,022

911

1,011

129

1,135

23,501

400

—

23,901

Loans, net:
Ending balance
391,882

81,177

15,925

1,221,093

58,596

16,743

1,947

—

1,787,363

37,778

378,493

2,203,634

Ending balance: individually evaluated for impairment
26,146

1,615

—

1,940

363

124

—

—

30,188

—

2,710

32,898

Ending balance: collectively evaluated for impairment
365,736

79,562

15,925

1,219,153

58,233

16,619

1,947

—

1,757,175

37,778

375,783

2,170,736


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

$
57

$
—

$
215

$
13

$
109

$
—

$
—

$
2,755

$
—

$
62

$
2,817

Ending balance: collectively evaluated for impairment
6,948

894

266

12,004

888

732

134

1,209

23,075

400

—

23,475

Loans, net:
Ending balance
390,885

74,990

21,445

1,074,539

55,486

12,992

2,157

—

1,632,494

44,816

265,685

1,942,995

Ending balance: individually evaluated for impairment
29,224

1,072

—

1,990

327

806

—

—

33,419

—

855

34,274

Ending balance: collectively evaluated for impairment
361,661

73,918

21,445

1,072,549

55,159

12,186

2,157

—

1,599,075

44,816

264,830

1,908,721


16
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)


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

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

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


17
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)


The following tables detail the recorded investment of originated loans held-for-investment, net of deferred fees and costs, by loan type and credit quality indicator at June 30, 2015 , and December 31, 2014 (in thousands).
June 30, 2015
Real Estate
Multifamily
Commercial
One-to-Four Family
Construction and Land
Home Equity and Lines of Credit
Commercial and Industrial
Other
Total
< 35% LTV
=> 35% LTV
< 35% LTV
=> 35% LTV
< 60% LTV
=> 60% LTV
Internal Risk Rating
Pass
$
73,412

$
1,140,810

$
51,925

$
294,063

$
32,330

$
44,548

$
15,925

$
58,072

$
15,916

$
1,947

$
1,728,948

Special Mention
270

3,862

1,068

7,160

542

—

—

78

374

—

13,354

Substandard
789

1,950

1,260

36,406

2,377

1,380

—

446

453

—

45,061

Originated loans held-for-investment, net
$
74,471

$
1,146,622

$
54,253

$
337,629

$
35,249

$
45,928

$
15,925

$
58,596

$
16,743

$
1,947

$
1,787,363


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

$
999,708

$
47,534

$
289,794

$
29,629

$
40,527

$
21,445

$
54,935

$
11,421

$
2,157

$
1,561,842

Special Mention
283

4,342

2,436

9,792

1,143

—

—

360

652

—

19,008

Substandard
801

4,713

—

41,329

2,303

1,388

—

191

919

—

51,644

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

$
1,008,763

$
49,970

$
340,915

$
33,075

$
41,915

$
21,445

$
55,486

$
12,992

$
2,157

$
1,632,494



18
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)


Included in originated and acquired loans receivable (including held-for-sale) are loans for which the accrual of interest income has been discontinued due to deterioration in the financial condition of the borrowers.  The recorded investment of these non-accrual loans was $13.8 million and $13.9 million at June 30, 2015 , and December 31, 2014 , respectively. Generally, loans are placed on non-accruing status when they become 90 days or more delinquent, or sooner if considered appropriate by management, and remain on non-accrual status until they are brought current, have six consecutive months of performance under the loan terms, and factors indicating reasonable doubt about the timely collection of payments no longer exist.  Therefore, loans may be current in accordance with their loan terms, or may be less than 90 days delinquent and still be on a non-accruing status.

These non-accrual amounts included loans deemed to be impaired of $10.3 million and $10.1 million at June 30, 2015 , and December 31, 2014 , respectively.  Loans on non-accrual status with principal balances less than $500,000 , and therefore not meeting the Company’s definition of an impaired loan, amounted to $3.9 million and $3.8 million at June 30, 2015 , and December 31, 2014 , respectively.  Non-accrual amounts included in loans held-for-sale were $325,000 at June 30, 2015 . There were no loans held-for-sale at December 31, 2014 . Loans past due 90 days or more and still accruing interest were $967,000 and $708,000 at June 30, 2015 , and December 31, 2014 , respectively, and consisted of loans that are considered well secured and in the process of collection.

19
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)


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






LTV => 35%






Substandard
6,498

383

3,798

10,679

—

10,679

Total commercial
6,498

383

3,798

10,679

—

10,679

One-to-four family residential






LTV < 60%






Substandard
—

175

683

858

259

1,117

Total
—

175

683

858

259

1,117

LTV => 60%






Substandard
518

138

367

1,023

—

1,023

Total
518

138

367

1,023

—

1,023

Total one-to-four family residential
518

313

1,050

1,881

259

2,140

Multifamily






LTV => 35%






Pass
—

—

—

—

560

560

Total multifamily
—

—

—

—

560

560

Home equity and lines of credit






Substandard
—

—

97

97

—

97

Total home equity and lines of credit
—

—

97

97

—

97

Commercial and industrial loans






Pass
—

—

—

—

15

15

Total commercial and industrial loans
—

—

—

—

15

15

Total non-performing loans held-for-investment
7,016

696

4,945

12,657

834

13,491

Loans acquired:






One-to-four family residential






LTV < 60%






Substandard
—

—

790

790

133

923

Total one-to-four family residential
—

—

790

790

133

923

Total non-performing loans acquired
—

—

790

790

133

923

Total non-performing loans
$
7,016

$
696

$
5,735

$
13,447

$
967

$
14,414


20
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)


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






LTV => 35%






Substandard
$
—

$
395

$
10,769

$
11,164

$
—

$
11,164

Total commercial
—

395

10,769

11,164

—

11,164

One-to-four family residential






LTV < 60%






Substandard
—

190

674

864

286

1,150

Total
—

190

674

864

286

1,150

LTV => 60%






Substandard
—

—

1,028

1,028

—

1,028

Total
—

—

1,028

1,028

—

1,028

Total one-to-four family residential
—

190

1,702

1,892

286

2,178

Home equity and lines of credit






Substandard
—

98

—

98

—

98

Total home equity and lines of credit
—

98

—

98

—

98

Commercial and industrial loans






Substandard
—

—

408

408

—

408

Total commercial and industrial loans
—

—

408

408

—

408

Total non-performing loans held-for-investment
—

683

12,879

13,562

286

13,848

Loans acquired:






One-to-four family residential






LTV < 60%






Pass
—

—

—

—

422

422

Substandard
—

—

313

313

—

313

Total one-to-four family residential
—

—


313


313


422


735

Total non-performing loans acquired:
—

—

313

313

422

735

Total non-performing loans
$
—

$
683

$
13,192

$
13,875

$
708

$
14,583


21
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)


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



LTV < 35%



Pass
$
51,925

$
—

$
51,925

$
—

$
51,925

Special Mention
1,068

—

1,068

—

1,068

Substandard
—

1,260

1,260

—

1,260

Total
52,993

1,260

54,253

—

54,253

LTV => 35%





Pass
292,298

1,765

294,063

—

294,063

Special Mention
7,160

—

7,160

—

7,160

Substandard
18,378

7,349

25,727

10,679

36,406

Total
317,836

9,114

326,950

10,679

337,629

Total commercial
370,829

10,374

381,203

10,679

391,882

One-to-four family residential





LTV < 60%





Pass
31,803

527

32,330

—

32,330

Special Mention
168

374

542

—

542

Substandard
752

508

1,260

1,117

2,377

Total
32,723

1,409

34,132

1,117

35,249

LTV => 60%





Pass
44,286

262

44,548

—

44,548

Substandard
—

357

357

1,023

1,380

Total
44,286

619

44,905

1,023

45,928

Total one-to-four family residential
77,009

2,028

79,037

2,140

81,177

Construction and land





Pass
15,925



15,925



15,925

Total construction and land
15,925

—

15,925

—

15,925

Multifamily





LTV < 35%





Pass
73,267

145

73,412

—

73,412

Special Mention
270

—

270

—

270

Substandard
789

—

789

—

789

Total
74,326

145

74,471

—

74,471

LTV => 35%





Pass
1,140,017

233

1,140,250

560

1,140,810

Special Mention
2,703

1,159

3,862

—

3,862

Substandard
1,950

—

1,950

—

1,950

Total
1,144,670

1,392

1,146,062

560

1,146,622

Total multifamily
1,218,996

1,537

1,220,533

560

1,221,093

Home equity and lines of credit





Pass
57,707

365

58,072

—

58,072

Special Mention
78

—

78

—

78

Substandard
223

126

349

97

446

Total home equity and lines of credit
58,008

491

58,499

97

58,596

Commercial and industrial loans





Pass
15,851

50

15,901

15

15,916

Special Mention
374

—

374

—

374

Substandard
453

—

453

—

453

Total commercial and industrial loans
16,678

50

16,728

15

16,743


22
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)


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





Pass
1,891

56

1,947



1,947

Total other loans
1,891

56

1,947

—

1,947

Total originated loans held-for-investment
$
1,759,336

$
14,536

$
1,773,872

$
13,491

$
1,787,363

Acquired loans:
One-to-four family residential
LTV < 60%
Pass
341,739

52

341,791

—

341,791

Special Mention
575

—

575

—

575

Substandard
731

64

795

923

1,718

Total
343,045

116

343,161

923

344,084

LTV => 60%





Pass
5,287

—

5,287

—

5,287

Substandard
290

—

290

—

290

Total
5,577

—

5,577

—

5,577

Total one-to-four family residential
348,622

116

348,738

923

349,661

Commercial



LTV < 35%



Pass
2,185

—

2,185

—

2,185

Special Mention
—

518

518

—

518

Substandard
—

224

224

—

224

Total
2,185

742

2,927

—

2,927

LTV => 35%
Pass
5,724

—

5,724

—

5,724

Special Mention
899

—

899

—

899

Substandard
1,851

—

1,851

—

1,851

Total
8,474

—

8,474

—

8,474

Total commercial
10,659

742

11,401

—

11,401

Multifamily





LTV < 35%



Pass
4,778

—

4,778

—

4,778

Special Mention
151

—

151

—

151

Total
4,929

—

4,929

—

4,929

LTV => 35%





Pass
12,168

—

12,168

—

12,168

Special Mention
334

—

334

—

334

Total
12,502

—

12,502

—

12,502

Total multifamily
17,431

—

17,431

—

17,431

Total loans acquired
376,712

858

377,570

923

378,493

$
2,136,048

$
15,394

$
2,151,442

$
14,414

$
2,165,856



23
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)


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



LTV < 35%



Pass
$
47,534

$
—

$
47,534

—

$
47,534

Special Mention
2,436

—

2,436

—

2,436

Total
49,970

—

49,970

—

49,970

LTV => 35%





Pass
288,915

878

289,793

—

289,793

Special Mention
9,792

—

9,792

—

9,792

Substandard
25,073

5,093

30,166

11,164

41,330

Total
323,780

5,971

329,751

11,164

340,915

Total commercial
373,750

5,971

379,721

11,164

390,885

One-to-four family residential





LTV < 60%





Pass
29,288

341

29,629

—

29,629

Special Mention
1,143

—

1,143

—

1,143

Substandard
867

286

1,153

1,150

2,303

Total
31,298

627

31,925

1,150

33,075

LTV => 60%





Pass
38,062

2,465

40,527

—

40,527

Substandard
—

360

360

1,028

1,388

Total
38,062

2,825

40,887

1,028

41,915

Total one-to-four family residential
69,360

3,452

72,812

2,178

74,990

Construction and land





Pass
21,445

—

21,445

—

21,445

Total construction and land
21,445

—

21,445

—

21,445

Multifamily





LTV < 35%





Pass
64,692

—

64,692

—

64,692

Special Mention
283

—

283

—

283

Substandard
801

—

801

—

801

Total
65,776

—

65,776

—

65,776

LTV => 35%





Pass
999,469

239

999,708

—

999,708

Special Mention
3,822

520

4,342

—

4,342

Substandard
4,382

331

4,713

—

4,713

Total
1,007,673

1,090

1,008,763

—

1,008,763

Total multifamily
1,073,449

1,090

1,074,539

—

1,074,539

Home equity and lines of credit





Pass
54,800

135

54,935

—

54,935

Special Mention
360

—

360

—

360

Substandard
93

—

93

98

191

Total home equity and lines of credit
55,253

135

55,388

98

55,486

Commercial and industrial loans





Pass
11,331

90

11,421

—

11,421

Special Mention
652

—

652

—

652

Substandard
479

32

511

408

919

Total commercial and industrial loans
12,462

122

12,584

408

12,992


24
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)


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





Pass
2,097

60

2,157

—

2,157

Total other loans
2,097

60

2,157

—

2,157

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

$
10,830

$
1,618,646

$
13,848

$
1,632,494

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

526

226,267

422

226,689

Special Mention
597

—

597

—

597

Substandard
424

—

424

313

737

Total
226,762

526

227,288

735

228,023

LTV => 60%
Pass
5,787

375

6,162

—

6,162

Substandard
294

—

294

—

294

Total
6,081

375

6,456

—

6,456

Total one-to-four family residential
232,843

901

233,744

735

234,479

Commercial
LTV < 35%
Pass
2,477

—

2,477

—

2,477

Special Mention
187

521

708

—

708

Total
2,664

521

3,185

—

3,185

LTV => 35%
Pass
5,817

—

5,817

—

5,817

Special Mention
2,997

—

2,997

—

2,997

Total
8,814

—

8,814

—

8,814

Total commercial
11,478

521

11,999

—

11,999

Construction and land
Substandard
363

—

363

—

363

Total construction and land
363

—

363

—

363

Multifamily
LTV < 35%
Pass
4,857

—

4,857

—

4,857

Special Mention
164

—

164

—

164

Total
5,021

—

5,021

—

5,021

LTV => 35%
Pass
13,457

—

13,457

—

13,457

Special Mention
366

—

366

—

366

Total
13,823

—

13,823

—

13,823

Total multifamily
18,844

—

18,844

—

18,844

Total loans acquired
263,528

1,422

264,950

735

265,685

$
1,871,344

$
12,252

$
1,883,596

$
14,583

$
1,898,179


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

25
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)


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



Commercial



LTV < 35%



Substandard
$
—

$
139

$
—

$
—

$
—

$
—

LTV => 35%



Pass
2,443

2,580

—

3,311

3,448

—

Special Mention
—

—

—

—

—

—

Substandard
12,920

14,026

—

12,880

14,339

—

One-to-four family residential



LTV < 60%



Pass
365

365

—

66

66

—

Special Mention
—

—

—

138

138

—

Substandard
47

47

—

262

262

—

LTV => 60%
Substandard
155

168

—

—

—

—

Multifamily



LTV => 35%



Pass
80

551

—

86

557

Substandard
461

461

—

477

477

—

Home equity and lines of credit
Special Mention
47

47

—

49

49

—

Commercial and industrial loans



Special Mention
30

30

—

267

268

—

Substandard
94

94

—

99

99

—

With a Related Allowance Recorded:



Real estate loans:



Commercial



LTV => 35%



Pass
1,678

1,678

(20
)
—

—

—

Substandard
10,957

11,769

(1,218
)
13,033

14,365

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



LTV < 60%
Pass
376

376

(7
)
—

—

—

Special Mention
—

—

—

319

319

(4
)
Substandard
877

877

(99
)
848

848

(95
)
LTV => 60%
Substandard
653

692

(55
)
294

294

(20
)
Multifamily



LTV => 35%
Substandard
1,399

1,399

(186
)
1,427

1,427

(215
)
Home equity and lines of credit



Pass
273

273

(11
)
—

—

—

Special Mention
—

—

—

278

278

(13
)
Substandard
43

43

(19
)
—

—

—

Commercial and industrial loans



Special Mention
—

—

—

32

32

(1
)
Substandard
—

—

—

408

530

(108
)
Total:



Real estate loans



Commercial
27,998

30,192

(1,238
)
29,224

32,152

(2,361
)
One-to-four family residential
2,473

2,525

(161
)
1,927

1,927

(119
)
Construction and land
Multifamily
1,940

2,411

(186
)
1,990

2,461

(215
)
Home equity and lines of credit
363

363

(30
)
327

327

(13
)
Commercial and industrial loans
124

124

—

806

929

(109
)
$
32,898

$
35,615

$
(1,615
)
$
34,274

$
37,796

$
(2,817
)

26
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)


Included in the above table at June 30, 2015 , are loans with carrying balances of $12.2 million that were not written down by either charge-offs or specific reserves in our allowance for loan losses.  Included in the above table at December 31, 2014 , are loans with carrying balances of $13.1 million that were not written down by either charge-offs or specific reserves in our allowance for loan losses.  Loans not written down by charge-offs or specific reserves at June 30, 2015 , and December 31, 2014 , are considered to have sufficient collateral values, less costs to sell, to support the carrying balances of the loans.

The following table summarizes the average recorded investment in originated and acquired impaired loans and interest recognized on impaired loans as of, and for, the three and six months ended June 30, 2015 , and June 30, 2014 (in thousands).

Three Months Ended
Six Months Ended
June 30, 2015
June 30, 2014
June 30, 2015
June 30, 2014
Average Recorded Investment
Interest Income
Average Recorded Investment
Interest Income
Average Recorded Investment
Interest Income
Average Recorded Investment
Interest Income
With No Allowance Recorded:
Real estate loans:


Commercial


LTV < 35%


Pass
$
—

$
—

$
—

$
—

$
—

$
—

$
1,135

$
—

LTV => 35%
Pass
2,452

24

3,370

38

2,738

48

8,809

75

Special Mention
273

156

—

—

182

—

—

—

Substandard
11,766

—

12,285

111

12,137

264

8,190

238

Construction and land
Substandard
—

—

—

—

—

—

36

—

One-to-four family residential
LTV < 60%
Pass
193

5

—

—

150

9

—

1

Special Mention
69

—

141

2

92

—

263

3

Substandard
153

1

267

3

189

1

267

7

LTV => 60%
Substandard
78

—

—

—

52

—

—

—

Multifamily
LTV => 35%
Pass
82

4

46

4

83

9

31

9

Substandard
466

6

1,010

6

470

10

871

12

Home equity and lines of credit
Special Mention
48

1

—

—

48

1

—

—

Substandard
—

—

500

—

—

—

333

—

Commercial and industrial loans
Special Mention
15

—

121

—

99

1

151

1

Substandard
95

—

703

8

96

—

753

18

With a Related Allowance Recorded:
Real estate loans:
Commercial
LTV => 35%
Pass
839

23

—

—

559

45

—

—

Special Mention
—

—

306

—

—

—

967

—

Substandard
11,693

197

14,991

133

12,139

214

12,264

211

One-to-four family residential
LTV < 60%
Pass
221

3

—

—

147

5

—

—

Special Mention
158

—

327

2

212

—

218

4

Substandard
881

3

—

1

870

7

—

2

LTV => 60%
Substandard
472

48

—

2

413

50

113

3

Multifamily
LTV => 35%
Substandard
1,406

13

1,461

14

1,413

26

1,467

27


27
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)


Three Months Ended
Six Months Ended
June 30, 2015
June 30, 2014
June 30, 2015
June 30, 2014
Average Recorded Investment
Interest Income
Average Recorded Investment
Interest Income
Average Recorded Investment
Interest Income
Average Recorded Investment
Interest Income
Home equity and lines of credit
Pass
137

2

—

—

91

4

—

—

Special Mention
138

—

337

2

185

—

338

4

Substandard
22

1

—

—

14

1

333

—

Commercial and industrial loans
Special Mention
—

—

—

—

21

—

—

—

Substandard
16

—

408

—

136

—

419

2

Total:
Real estate loans
Commercial
27,023

400

30,952

282

27,755

571

31,365

524

One-to-four family residential
2,225

60

735

10

2,125

72

861

20

Construction and land
—

—

—

—

—

—

36

—

Multifamily
1,954

23

2,517

24

1,966

45

2,369

48

Home equity and lines of credit
345

4

837

2

338

6

1,004

4

Commercial and industrial loans
126

—

1,232

8

352

1

1,323

21

$
31,673

$
487

$
36,273

$
326

$
32,536

$
695

$
36,958

$
617

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

Three Months Ended
Six Months Ended
June 30, 2015
Number of Relationships
Pre-Modification Outstanding Recorded Investment
Post-Modification Outstanding Recorded Investement
Number of Relationships
Pre-Modification Outstanding Recorded Investment
Post-Modification Outstanding Recorded Investement
(in thousands)
(in thousands)
TDRs
Commercial real estate loans
Substandard
2
$2,203
$2,203
3
$8,457
$8,457
One-to-four family residential
Pass
—
—
—
1
20
20
Substandard
2
518
518
3
561
561
Home Equity
1
43
43
1
43
43
Total TDRs
5
$2,764
$2,764
8
$9,081
$9,081

For the three months ended June 30, 2015, all five loans in the table above were restructured to receive reduced interest rates.

For the six months ended June 30, 2015, one of the commercial real estate relationships in the table above, with a pre-modification outstanding recorded investment of $6.3 million , represents five loans to one borrower that were restructured into one loan during the six months ended June 30, 2015 . These loans were restructured to provide partial forgiveness of debt, after the borrower made a $500,000 principal payment. The remaining relationships in the table above were restructured to receive reduced interest rates.
At June 30, 2015 , and December 31, 2014 , there were TDRs of $31.8 million and $33.8 million , respectively.

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

28
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)


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

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

Note 5 – Deposits

Deposits account balances are summarized as follows (in thousands).
June 30,
December 31,
2015
2014
Non-interest-bearing demand
$
262,115

$
269,466

Interest-bearing negotiable orders of withdrawal (NOW)
159,937

124,961

Savings and money market
982,793

873,094

Certificates of deposit
575,254

353,144

Total deposits
$
1,980,099

$
1,620,665

Interest expense on deposit accounts is summarized for the periods indicated (in thousands).
Three Months Ended
Six Months Ended
June 30,
June 30,
2015
2014
2015
2014
Negotiable orders of withdrawal, savings, and money market
$
1,102

$
508

$
2,056

$
987

Certificates of deposit
1,356

746

2,476

1,505

Total interest expense on deposit accounts
$
2,458

$
1,254

$
4,532

$
2,492


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

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

29
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)


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

$
3.08

$
10.04

7.44

Granted
1,090,000

4.07

14.76

9.92

Forfeited
(60,000
)
3.91

13.13

—

Exercised
(84,624
)
2.30

7.09

—

Outstanding - June 30, 2015
6,083,448

3.29

10.89

6.89

Exercisable - June 30, 2015
3,026,770

2.57

8.06

4.46

Expected future stock option expense related to the non-vested options outstanding as of June 30, 2015 , is $12.0 million over an average period of 4.30 years.
The following is a summary of the status of the Company’s restricted share awards as of June 30, 2015 , and changes therein during the six months then ended.
Number of Shares Awarded
Weighted Average Grant Date Fair Value
Non-vested at December 31, 2014
1,003,074

$
13.11

Granted
419,000

14.76

Vested
(193,232
)
13.11

Forfeited
(28,200
)
13.13

Non-vested at June 30, 2015
1,200,642

13.69

Expected future stock award expense related to the non-vested restricted share awards as of June 30, 2015 , is $16.3 million over an average period of 4.30 years.

During the six months ended June 30, 2015 and 2014 , the Company recorded $2.6 million and $510,000 , respectively, of stock-based compensation related to the above plans.
Note 7 – Fair Value Measurements
The following tables present the assets reported on the consolidated balance sheet at their estimated fair value as of June 30, 2015 , and December 31, 2014 , by level within the fair value hierarchy as required by the Fair Value Measurements and Disclosures Topic of the FASB ASC.  Financial assets and liabilities are classified in their entirety based on the level of input that is significant to the fair value measurement.  The fair value hierarchy is as follows:

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

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

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


30
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)


Fair Value Measurements at June 30, 2015 Using:
Carrying Value
Quoted Prices in Active Markets for Identical Assets (Level 1)
Significant Other Observable Inputs (Level 2)
Significant Unobservable Inputs (Level 3)
(in thousands)
Measured on a recurring basis:
Assets:
Investment securities:
Available-for-sale:
Mortgage-backed securities:
GSE
$
606,332

$
—

$
606,332

$
—

Non-GSE
811

—

811

—

Other securities:
Corporate bonds
32,740

—

32,740

—

Equities
329

329

—

—

Total available-for-sale
640,212

329

639,883

—

Trading securities
6,799

6,799

—

—

Total
$
647,011

$
7,128

$
639,883

$
—

Measured on a non-recurring basis:
Assets:
Impaired loans:
Real estate loans:
Commercial real estate
$
15,704

$
—

$
—

$
15,704

One-to-four family residential mortgage
1,745

—

—

1,745

Multifamily
1,294

—

—

1,294

Home equity and lines of credit
287

—

—

287

Total impaired real estate loans
19,030

—

—

19,030

Other real estate owned
423

—

—

423

Total
$
19,453

$
—

$
—

$
19,453


31
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)


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

$
—

$
699,790

$
—

Non-GSE
1,026

—

1,026

—

Other securities:
Corporate bonds
70,013

—

70,013

—

Equities
410

410

—

—

Total available-for-sale
771,239

410

770,829

—

Trading securities
6,422

6,422

—

—

Total
$
777,661

$
6,832

$
770,829

$
—

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

$
—

$
—

$
17,438

One-to-four family residential mortgage
672

—

—

672

Multifamily
1,513

—

—

1,513

Home equity and lines of credit
278

—

—

278

Total impaired real estate loans
19,901

—

—

19,901

Commercial and industrial loans
440

—

—

440

Other real estate owned
752

—

—

752

Total
$
21,093

$
—

$
—

$
21,093


The following table presents qualitative information for Level 3 assets measured at fair value on a non-recurring basis at June 30, 2015 and December 31, 2014 (dollars in thousands).
Fair Value
Valuation Methodology
Unobservable Inputs
Range of Inputs
June 30, 2015
December 31, 2014
June 30, 2015
December 31, 2014
Impaired loans
$
19,030

$
20,341

Appraisals
Discount for costs to sell
7.0%
7.0%
Discount for quick sale
10.0% - 40.0%
10.0% - 40.0%
Discounted cash flows
Interest rates
4.6% to 7.5%
4.6% to 7.5%
Other real estate owned
$
423

$
752

Appraisals
Discount for costs to sell
7.0%
7.0%


32
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)


Available for Sale Securities: The estimated fair values for mortgage-backed and corporate securities are obtained from an independent nationally recognized third-party pricing service.  The estimated fair values are derived primarily from cash flow models, which include assumptions for interest rates, credit losses, and prepayment speeds.  Broker/dealer quotes are utilized as well, when such quotes are available and deemed representative of the market.  The significant inputs utilized in the cash flow models are based on market data obtained from sources independent of the Company (Observable Inputs), and are therefore classified as Level 2 within the fair value hierarchy.  The estimated fair values of equity securities, classified as Level 1, are derived from quoted market prices in active markets.  Equity securities consist of publicly traded mutual funds.  There were no transfers of securities between Level 1 and Level 2 during the six months ended June 30, 2015 .
Trading Securities: Fair values are derived from quoted market prices in active markets.  The assets consist of publicly traded mutual funds.
Impaired Loans: At June 30, 2015 , and December 31, 2014 , the Company had impaired originated loans held-for-investment with outstanding principal balances of $23.2 million and $23.7 million , respectively, that were recorded at their estimated fair value of $19.0 million and $20.3 million , respectively.  The Company recorded net impairment recoveries of $558,000 and $28,000 for the six months ended June 30, 2015 , and June 30, 2014 , 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 TDRs.
Other Real Estate Owned (OREO): At June 30, 2015 , and December 31, 2014 , the Company had assets acquired through foreclosure, or deed in lieu of foreclosure, of $423,000 and $752,000 , respectively.  These assets are recorded at estimated fair value, less estimated selling costs when acquired, establishing a new cost basis.  Estimated fair value is generally based on independent appraisals.  These appraisals include adjustments to comparable assets based on the appraisers’ market knowledge and experience, and are considered Level 3 inputs.  When an asset is acquired, the excess of the loan balance over fair value, less estimated selling costs, is charged to the allowance for loan losses.  If the estimated fair value of the asset declines, a write-down is recorded through non-interest expense.  The valuation of foreclosed assets is subjective in nature and may be adjusted in the future because of changes in economic conditions.
There was a $71,000 subsequent valuation adjustment to one OREO property for the six months ended June 30, 2015 .  Operating costs after acquisition are expensed.

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

33
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)


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

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


34
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)


The estimated fair value of the Company’s significant financial instruments at June 30, 2015 , and December 31, 2014 , is presented in the following tables (in thousands).
June 30, 2015
Estimated Fair Value
Carrying Value
Level 1
Level 2
Level 3
Total
Financial assets:
Cash and cash equivalents
$
75,785

$
75,785

$
—

$
—

$
75,785

Trading securities
6,799

6,799

—

—

6,799

Securities available-for-sale
640,212

329

639,883

—

640,212

Securities held-to-maturity
3,921

—

3,965

—

3,965

Federal Home Loan Bank of New York stock, at cost
25,353

—

25,353

—

25,353

Loans held-for-sale
325

—

—

325

—

Net loans held-for-investment
2,178,118

—

—

2,203,946

2,203,946

Financial liabilities:
Deposits
$
1,980,099

$
—

$
1,984,059

$
—

$
1,984,059

Repurchase agreements, Federal Home Loan Bank advances and and other borrowings
579,078

—

581,642

—

581,642

Advance payments by borrowers
9,696

—

9,696

—

9,696

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

$
76,709

$
—

$
—

$
76,709

Trading securities
6,422

6,422

—

—

6,422

Securities available-for-sale
771,239

410

770,829

—

771,239

Securities held-to-maturity
3,609

—

3,691

—

3,691

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

—

29,219

—

29,219

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

—

—

1,949,511

1,949,511

Financial liabilities:
Deposits
$
1,620,665

$
—

$
1,622,536

$
—

$
1,622,536

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

—

781,196

—

781,196

Advance payments by borrowers
7,792

—

7,792

—

7,792

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

35
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)


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

Diluted earnings per share is computed using the same method as basic earnings per share, but reflects the potential dilution that could occur if stock options and unvested shares of restricted stock were exercised and converted into common stock.  These potentially dilutive shares are included in the weighted average number of shares outstanding for the period using the treasury stock method.  When applying the treasury stock method, we add: (1) the assumed proceeds from option exercises; (2) the tax benefit, if any, that would have been credited to additional paid-in capital assuming exercise of non-qualified stock options and vesting of shares of restricted stock; and (3) the average unamortized compensation costs related to unvested shares of restricted stock and stock options.  We then divide this sum by our average stock price for the period to calculate assumed shares repurchased.  The excess of the number of shares issuable over the number of shares assumed to be repurchased is added to basic weighted average common shares to calculate diluted earnings per share.
The following is a summary of the Company’s earnings per share calculations and reconciliation of basic to diluted earnings per share for the periods indicated (dollars in thousands, except per share data).
Three Months Ended
June 30,
Six Months Ended
June 30,
2015
2014
2015
2014
Net income available to common stockholders
$
4,295

$
5,440

$
9,297

$
10,659

Weighted average shares outstanding-basic
42,461,128

49,956,790

43,102,453

51,759,595

Effect of non-vested restricted stock and stock options outstanding
1,175,220

954,435

1,163,962

1,000,195

Weighted average shares outstanding-diluted
43,636,348

50,911,225

44,266,415

52,759,790

Earnings per share-basic
$
0.10

$
0.11

$
0.22

$
0.21

Earnings per share-diluted
$
0.10

$
0.11

$
0.21

$
0.20

Anti-dilutive shares
3,933,600

802,908

3,195,100

418,554

Note 9 – Recent Accounting Pronouncements

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



36

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

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

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

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

37

Critical Accounting Policies
Note 1 to the Company’s Audited Consolidated Financial Statements for the year ended December 31, 2014 , included in the Company’s Annual Report on Form 10-K, as supplemented by this report, contains a summary of significant accounting policies.  Various elements of these accounting policies, by their nature, are inherently subject to estimation techniques, valuation assumptions and other subjective assessments.  Certain assets are carried in the Consolidated Balance Sheets at estimated fair value or the lower of cost or estimated fair value.  Policies with respect to the methodologies used to determine the allowance for loan losses, estimated cash flows of our PCI loans, and judgments regarding the valuation of intangible assets and securities as well as the valuation allowance against deferred tax assets are the most critical accounting policies because they are important to the presentation of the Company’s financial condition and results of operations, involve a higher degree of complexity, and require management to make difficult and subjective judgments which often require assumptions or estimates about highly uncertain matters. The use of different judgments, assumptions, and estimates could result in material differences in the results of operations or financial condition.  These critical accounting policies and their application are reviewed periodically and, at least annually, with the Audit Committee of the Board of Directors.  For a further discussion of the critical accounting policies of the Company, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 .
Overview
This overview highlights selected information and may not contain all the information that is important to you in understanding our performance during the period.  For a more complete understanding of trends, events, commitments, uncertainties, liquidity, capital resources, and critical accounting estimates, you should read this entire document carefully, as well as our Annual Report on Form 10-K for the year ended December 31, 2014 .
Net income was $9.3 million for the six months ended June 30, 2015 , as compared to $10.7 million for the six months ended June 30, 2014 . Diluted earnings per common share were $0.21 for the six months ended June 30, 2015 , compared to diluted earnings per common share of $0.20 for the six months ended June 30, 2014 . Earnings for the six months ended June 30, 2015 , included a charge of $795,000, or, $0.02 per share, related to the write-down of deferred tax assets as a result of New York City tax reforms enacted in April 2015. By comparison, earnings for the six months ended June 30, 2014, included a charge of $570,000, or $0.01 per share, related to the write-down of deferred assets as a result of New York State tax laws enacted in the first quarter of 2014, as well as a reduction of compensation and benefits of $937,000 ($560,000, after tax), or $0.01 per share, related to the settlement of the former Flatbush Federal Savings & Loan Association pension plan. For the six months ended June 30, 2015 , our return on average assets was 0.61% , as compared to 0.80% for the six months ended June 30, 2014 .  For the six months ended June 30, 2015 , our return on average stockholders’ equity was 3.22% as compared to 3.06% for the six months ended June 30, 2014 .

Comparison of Financial Condition at June 30, 2015 , and December 31, 2014
Total assets increase d $126.4 million , or 4.2% , to $3.15 billion at June 30, 2015 , from $3.02 billion at December 31, 2014 . The increase was primarily attributable to an increase in loans held-for-investment, net, of $260.6 million , partially offset by a decrease in securities available-for-sale of $131.0 million .
The securities available-for-sale portfolio totaled $640.2 million at June 30, 2015 , compared to $771.2 million at December 31, 2014 .  At June 30, 2015 , $606.3 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 $32.7 million in corporate bonds, all of which were rated investment grade at June 30, 2015 , and also held $329,000 of equity investments in money market mutual funds. The effective duration of the securities portfolio at June 30, 2015 was 4.1 years.
Total loans held-for-investment, net, increase d $260.6 million to $2.20 billion at June 30, 2015 , as compared to $1.94 billion at December 31, 2014 . The increase was primarily attributable to increases in originated loans held-for-investment, net, and loans acquired, partially offset by a decrease in purchased credit-impaired (“PCI”) loans held-for-investment.


38

Originated loans held-for-investment, net, totaled $1.79 billion at June 30, 2015 , as compared to $1.63 billion at December 31, 2014 .  The increase was primarily due to an increase in multifamily real estate loans of $146.5 million , or 13.7% , to $1.22 billion at June 30, 2015 , from $1.07 billion at December 31, 2014 . The following table details our multifamily real estate loan originations for the six months ended June 30, 2015 (dollars in thousands).

Originations
Weighted Average Interest Rate
Weighted Average Loan-to-Value Ratio
Weighted Average Months to Next Rate Change or Maturity for Fixed Rate Loans
(F)ixed or (V)ariable
Amortization Term
$
214,618

3.37%
67%
82
V
15 - 30 Years
2,079

4.33%
31%
180
F
15 Years
$
216,697

3.38%
66%
Acquired loans increased by $112.8 million to $378.5 million at June 30, 2015 , from $265.7 million at December 31, 2014 , primarily due to the purchase of $127.4 million of one-to-four family residential real estate loans during the quarter ended June 30, 2015 , partially offset by paydowns during the period. The following table provides the details of the loans purchased during the quarter ended June 30, 2015 (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
$
49,345

2.49%
62%
44
30 Years
Fully amortizing
78,086

2.38%
59%
35
20 Years*
Delayed amortizing
$
127,431

2.42%
60%
* After an interest-only period for the first 10 years
The weighted average coupon of 2.42% is net of the servicing fee retained by the originating bank.  Of the total loans purchased, $78.1 million, or 61%, are interest-only for the first 10 years and will re-price in less than five years at one month LIBOR plus a weighted average margin of 1.6%; a floor rate is also included in the terms.  The remainder of the loans are 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 1.9%, also with a floor rate included in the terms.  The geographic locations of the loans are as follows: 62.5% in New York, 22.2% in Massachusetts, and 15.3% in other states.

PCI loans, primarily acquired as part of a transaction with the Federal Deposit Insurance Corporation, totaled $37.8 million at June 30, 2015 , as compared to $44.8 million at December 31, 2014 .  The Company accreted interest income of $2.2 million for the six months ended June 30, 2015 , compared to $2.5 million for the six months ended June 30, 2014 .
Total liabilities increase d $162.8 million , or 6.7% , to $2.59 billion at June 30, 2015 , from $2.43 billion at December 31, 2014 .  The increase was primarily attributable to an increase in deposits of $359.4 million , partially offset by decrease s in securities sold under agreements to repurchase of $109.2 million and Federal Home Loan Bank advances and other borrowings of $90.4 million .
Deposits increase d $359.4 million , or 22.2% , to $1.98 billion at June 30, 2015 , from $1.62 billion at December 31, 2014 . The increase was attributable to increase s of $222.1 million in certificate of deposit accounts ($195.9 million of which were brokered deposits), $75.5 million in savings accounts, $34.2 million in money market accounts, and $27.6 million in transaction accounts.
Borrowings and securities sold under agreements to repurchase decrease d by $199.6 million , or 25.6% , to $579.1 million at June 30, 2015 , from $778.7 million at December 31, 2014 .  Management utilizes borrowings to mitigate interest rate risk, for short-term liquidity, and to a lesser extent as part of leverage strategies.  The following is a table of term borrowing maturities (excluding capitalized leases and overnight borrowings) and the weighted average rate by year (dollars in thousands) at June 30, 2015 .

39

Year
Amount
Weighted Average Rate
2015
$101,000
0.86%
2016
108,910
2.18%
2017
165,003
1.22%
2018
142,715
1.66%
2019
33,502
1.88%
2020
20,000
1.58%
$571,130
1.50%
Total stockholders’ equity decrease d by $36.4 million to $557.6 million at June 30, 2015 , from $593.9 million at December 31, 2014 .  This decrease was primarily attributable to stock repurchases of $42.4 million and dividend payments of $6.2 million , partially offset by net income of $9.3 million for the six months ended June 30, 2015 , and a $3.7 million increase related to stock compensation activity.

Comparison of Operating Results for the Six Months Ended June 30, 2015 and 2014
Net Income. Net income was $9.3 million and $10.7 million for the six months ended June 30, 2015 , and June 30, 2014 , respectively. Significant variances from the comparable prior year period are as follows: a $2.6 million increase in net interest income, a $449,000 decrease in non-interest income, a $4.1 million increase in non-interest expense, and a $ 507,000 decrease in income tax expense.

Interest Income . Interest income increase d $4.9 million , or 10.9% , to $49.8 million for the six months ended June 30, 2015 , from $44.9 million for the six months ended June 30, 2014 , primarily due to an increase in average interest-earing assets of $348.9 million , or 14.0% , partially offset by a 10 basis point decline in yields earned on interest-earning assets. Interest income on loans increased by $6.7 million , primarily attributable to an increase in the average loan balances of $515.8 million , which was partially offset by a decrease of 53 basis points in the yield earned. The Company accreted interest income related to its PCI loans of $2.2 million for the six months ended June 30, 2015 , as compared to $2.5 million for the comparable prior year period. Interest income on loans for the six months ended June 30, 2015 , reflected loan prepayment income of $1.2 million compared to $734,000 for the six months ended June 30, 2014 . The six months ended June 30, 2014 , also included a recovery of $246,000 of interest income that was previously charged-off related to a loan payoff. Interest income on mortgage-backed securities decreased by $2.0 million primarily due to a decrease in the average balances of $184.5 million , or 21.8% , and a three basis point decrease in the yield earned.

Interest Expense . Interest expense increase d $2.2 million , or 30.8% , to $9.5 million for the six months ended June 30, 2015 , from $7.3 million for the six months ended June 30, 2014 . The increase was comprised of an increase of $2.0 million in interest expense on deposits and $201,000 in interest expense on borrowings.  The increase in interest expense on deposits was due to an increase in the average balance of interest bearing deposits of $266.2 million , or 21.3% , to $1.52 billion for the six months ended June 30, 2015 , from $1.25 billion for the six months ended June 30, 2014 , as well as a 20 basis point increase in the cost of interest bearing deposits to 0.60% from 0.40%, due to higher rates offered on our deposit products to remain competitive. The increase in interest expense on borrowings was attributed to an increase in the average balances of borrowings of $175.7 million , or 35.9% , to $665.0 million for the six months ended June 30, 2015 , from $489.3 million for the six months ended June 30, 2014 , partially offset by a 46 basis point decrease in the cost of borrowings to 1.51% , from 1.97% for the six months ended June 30, 2014 .
Net Interest Income . Net interest income for the six months ended June 30, 2015 , increase d $2.6 million , or 7.0% , primarily due to a $348.9 million , or 14.0% , increase in our average interest-earning assets, partially offset by a 19 basis point decrease in our net interest margin to 2.85% . The increase in average interest-earning assets was primarily attributable to an increase in average loans outstanding of $515.8 million and an increase in interest-earning deposits in financial institutions of $31.9 million , partially offset by a decrease in average mortgage-backed securities of $184.5 million .  Yields earned on interest-earning assets decreased 10 basis points to 3.53% for the six months ended June 30, 2015 , from 3.63% for the comparable prior year period. Net interest income for the six months ended June 30, 2015 also was affected by an increase in interest expense, driven by a $441.8 million , or 25.4% , increase in our average interest-bearing liabilities. The cost of interest-bearing liabilities increased four basis points to 0.88% for the current six months as compared to 0.84% for the comparable prior year period, driven by an increase in the cost of interest-bearing deposits, partially offset by lower rates on borrowed funds.
Provision for Loan Losses . The provision for loan losses increase d slightly by $1,000 to $ 272,000 for the six months ended June 30, 2015 , from $271,000 for the six months ended June 30, 2014 . The increase in the provision for loan losses was

40

due to loan growth, partially offset by continued improvements in asset quality indicators as well as a general improvement in economic and business conditions. Net charge-offs were $1.0 million for the six months ended June 30, 2015 , compared to $41,000 for the six months ended June 30, 2014 . The increased level of charge-offs is primarily related to five previously impaired loans to one borrower that were restructured during the six months ended June 30, 2015 , after the borrower made a $500,000 principal payment. The loans had existing specific reserves associated with them that adequately covered the charge-offs, resulting in no material effect to the provision for loan losses for the current period.  At June 30, 2015, the outstanding balance of the restructured loan was $6.1 million, with a related specific reserve of $827,000.

Non-interest Income. Non-interest income decrease d $449,000 , or 9.8% , to $4.1 million for the six months ended June 30, 2015 , from $4.6 million for the six months ended June 30, 2014 , due to a decrease in fees and service charges for customer services of $158,000 , a decrease in gains on securities transactions, net, of $389,000 , and a decrease in income on bank owned life insurance of $86,000 . These decreases were partially offset by an increase in other non-interest income of $184,000 , primarily related to a $129,000 realized gain on the sale of an other real estate owned property during the six months ended June 30, 2015.
Non-interest Expense. Non-interest expense increase d $4.1 million , or 16.4% , to $28.8 million for the six months ended June 30, 2015 , from $24.8 million for the six months ended June 30, 2014 . This was primarily due to a $3.5 million increase in compensation and employee benefits, primarily attributable to increased salary expense, health benefit costs, and stock compensation expense, related to stock awards issued in 2014, a $179,000 increase in occupancy costs, a $166,000 increase in FDIC insurance costs, and a $249,000 increase in other expenses, primarily attributable to an increase in Directors' stock awards. By comparison, non-interest expense for the six months ended June 30, 2014, was favorably affected by a pre-tax gain of $937,000 related to the settlement of the former Flatbush Federal Savings & Loan Association pension plan.

Income Tax Expense. The Company recorded income tax expense of $6.0 million for the six months ended June 30, 2015 , compared to $6.5 million for the six months ended June 30, 2014 . The effective tax rate for the six months ended June 30, 2015 , was 39.2% compared to 37.9% for the six months ended June 30, 2014 . Income tax expense for the six months ended June 30, 2015 included a deferred tax asset write-down of $795,000 related to New York City tax reforms enacted in April 2015, whereas the comparable prior year period included a deferred tax asset write-down of $570,000 related to New York State tax law reforms enacted in March 2014.

41

ANALYSIS OF NET INTEREST INCOME
(Dollars in thousands)
For the Six Months Ended
June 30, 2015
June 30, 2014
Average Outstanding Balance
Interest
Average Yield/ Rate (1)
Average Outstanding Balance
Interest
Average Yield/ Rate (1)
Interest-earning assets:
Loans (2)
$
2,027,345

$
41,957

4.17
%
$
1,511,512

$
35,262

4.70
%
Mortgage-backed securities (3)
662,439

6,902

2.10

846,954

8,932

2.13

Other securities (3)
59,105

228

0.78

83,067

314

0.76

Federal Home Loan Bank of New York stock
27,657

640

4.67

18,000

382

4.28

Interest-earning deposits in financial institutions
69,615

63

0.18

37,763

25

0.13

Total interest-earning assets
2,846,161

49,790

3.53

2,497,296

44,915

3.63

Non-interest-earning assets
218,925

204,760

Total assets
$
3,065,086

$
2,702,056

Interest-bearing liabilities:
Savings, NOW, and money market accounts
$
1,063,372

$
2,056

0.40
%
$
947,876

$
987

0.21
%
Certificates of deposit
453,706

2,476

1.10

303,028

1,505

1.00

Total interest-bearing deposits
1,517,078

4,532

0.60

1,250,904

2,492

0.40

Borrowed funds
664,968

4,989

1.51

489,314

4,788

1.97

Total interest-bearing liabilities
2,182,046

9,521

0.88

1,740,218

7,280

0.84

Non-interest bearing deposit accounts
265,003

223,281

Accrued expenses and other liabilities
36,500

36,965

Total liabilities
2,483,549

2,000,464

Stockholders' equity
581,537

701,592

Total liabilities and stockholders' equity
$
3,065,086

$
2,702,056

Net interest income
$
40,269

$
37,635

Net interest rate spread (4)
2.65
%
2.78
%
Net interest-earning assets (5)
$
664,115

$
757,078

Net interest margin (6)
2.85
%
3.04
%
Average interest-earning assets to interest-bearing liabilities
130.44
%
143.50
%
(1)
Average yields and rates are annualized.
(2)
Includes non-accruing loans.
(3)
Securities available-for-sale are reported at amortized cost.
(4)
Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.
(5)
Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.
(6)
Net interest margin represents net interest income divided by average total interest-earning assets.

42

Comparison of Operating Results for the Three Months Ended June 30, 2015 and 2014
Net Income. Net income was $4.3 million and $5.4 million for the quarters ended June 30, 2015 and 2014, respectively.  Significant variances from the comparable prior year period are as follows: a $1.8 million increase in net interest income, a $218,000 increase in the provision for loan losses, a $381,000 decrease in non-interest income, a $1.8 million increase in non-interest expense, and a $495,000 increase in income tax expense.
Interest Income . Interest income increase d $2.9 million , or 13.0% , to $25.0 million for the quarter ended June 30, 2015 , from $22.2 million for the quarter ended June 30, 2014 , primarily due to an increase in average interest-earing assets of $356.2 million , or 14.3% , partially offset by a four basis point decline in yields earned on interest-earning assets. Interest income on loans increased by $3.8 million , primarily attributable to an increase in the average loan balances of $562.4 million , which was partially offset by a decrease of 51 basis points in the yield earned. The Company accreted interest income related to its PCI loans of $1.1 million for the quarter ended June 30, 2015 , as compared to $1.2 million for the quarter ended June 30, 2014 . Interest income on loans for the quarter ended June 30, 2015 reflected prepayment loan income of $653,000 compared to $199,000 for the quarter ended June 30, 2014 . Interest income on mortgage-backed securities decreased by $1.0 million primarily due to a decrease in the average balances of $201.1 million , or 24.0% .
Interest Expense . Interest expense increase d $1.1 million , or 30.9% , to $4.8 million for the quarter ended June 30, 2015 , from $3.6 million for the quarter ended June 30, 2014 . The increase was primarily attributable to an increase in interest expense on deposits. The increase in interest expense on deposits was due to an increase in the average balance of interest bearing deposits of $356.0 million , or 28.5% , to $1.61 billion for the quarter ended June 30, 2015 , from $1.25 billion for the quarter ended June 30, 2014, and a 21 basis point increase in the cost of interest bearing deposits to 0.61% from 0.40% , due to higher rates offered on our deposit products to remain competitive. The increase in interest expense on borrowings was attributed to an increase in the average balances of borrowings of $94.3 million , or 18.9% , to $592.9 million for the quarter ended June 30, 2015 , from $498.6 million for the quarter ended June 30, 2014 , partially offset by a 36 basis point decrease in the cost of borrowings to 1.55% , from 1.91% for the quarter ended June 30, 2014 .
Net Interest Income . Net interest income for the quarter ended June 30, 2015 , increase d $1.8 million , or 9.5% , due primarily to an increase in average interest-earning assets of $356.2 million partially offset by a 13 basis point decrease in our net interest margin to 2.85% .   The increase in average interest-earning assets was primarily attributable to an increase in average loans outstanding of $562.4 million , partially offset by a decrease in average mortgage-backed securities of $201.1 million .  Yields earned on interest-earning assets decreased four basis points to 3.52% for the quarter ended June 30, 2015 , from 3.56% for the comparable prior year period. Net interest income for the quarter was also affected by an increase in interest expense, driven by a $450.3 million , or 25.8% , increase in our average interest-bearing liabilities. The cost of interest-bearing liabilities increased four basis points to 0.87% for the current quarter as compared to 0.83% for the comparable prior year period, driven by an increase in the cost of interest-bearing deposits, partially offset by lower rates on borrowed funds.

Provision for Loan Losses . The provision for loan losses increase d $218,000 to $72,000 for the quarter ended June 30, 2015 , from a recovery of $146,000 for the quarter ended June 30, 2014 .  The increase in the provision for loan losses was due to loan growth, whereas the prior year quarter included the reversal of previously recorded impairments in the Company's PCI portfolio. Originated loans grew approximately $83.3 million for the quarter ended June 30, 2015 , compared to $63.3 million for the quarter ended June 30, 2014. Net charge-offs were $454,000 for the quarter ended June 30, 2015 , compared to net charge-offs of $158,000 for the quarter ended June 30, 2014 .

Non-interest Income . Non-interest income decrease d $381,000 , or 16.0% , to $2.0 million for the quarter ended June 30, 2015 , from $2.4 million for the quarter ended June 30, 2014 .  This decrease was primarily a result of a $326,000 decrease in gains on securities transactions, net, and a decrease in fees and service charges for customer services of $54,000 . Securities losses, net, in the second quarter of 2015 included losses of $50,000 related to the Company’s trading portfolio, while the second quarter of 2014 included gains of $175,000 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 increase d $1.8 million , or 14.3% , to $14.5 million for the quarter ended June 30, 2015 , from $12.7 million for the quarter ended June 30, 2014 . This increase was primarily due to a $1.1 million increase in compensation and employee benefits, largely attributable to increased stock compensation expense, related

43

to stock awards issued in June 2014, a $187,000 increase in occupancy costs, and a $421,000 increase in other non-interest expenses, attributable to Directors' stock awards issued in June 2014.

Income Tax Expense . The Company recorded income tax expense of $3.4 million for the quarter ended June 30, 2015 , compared to $2.9 million for the quarter ended June 30, 2014.  The effective tax rate for the quarter ended June 30, 2015 , was 44.3% as a result of the deferred tax asset write-down of $795,000 related to New York City tax law reforms enacted in April 2015, as compared to 34.9% for the quarter ended June 30, 2014.

ANALYSIS OF NET INTEREST INCOME
(Dollars in thousands)

For the Three Months Ended
June 30, 2015
June 30, 2014
Average Outstanding Balance
Interest
Average Yield/ Rate (1)
Average Outstanding Balance
Interest
Average Yield/ Rate (1)
Interest-earning assets:
Loans (2)
$
2,080,188

$
21,291

4.11
%
$
1,517,788

$
17,466

4.62
%
Mortgage-backed securities (3)
637,368

3,325

2.09

838,444

4,343

2.08

Other securities (3)
47,261

94

0.80

83,334

157

0.76

Federal Home Loan Bank of New York stock
26,011

297

4.58

18,177

172

3.80

Interest-earning deposits in financial institutions
59,935

30

0.20

36,862

13

0.14

Total interest-earning assets
2,850,763

25,037

3.52

2,494,605

22,151

3.56

Non-interest-earning assets
220,910

205,486

Total assets
$
3,071,673

$
2,700,091

Interest-bearing liabilities:
Savings, NOW, and money market accounts
$
1,095,720

$
1,102

0.40
%
$
949,311

$
508

0.21
%
Certificates of deposit
510,277

1,356

1.07

300,640

746

0.99

Total interest-bearing deposits
1,605,997

2,458

0.61

1,249,951

1,254

0.40

Borrowed funds
592,868

2,294

1.55

498,611

2,377

1.91

Total interest-bearing liabilities
2,198,865

4,752

0.87

1,748,562

3,631

0.83

Non-interest bearing deposit accounts
266,800

223,094

Accrued expenses and other liabilities
33,119

37,104

Total liabilities
2,498,784

2,008,760

Stockholders' equity
572,889

691,331

Total liabilities and stockholders' equity
$
3,071,673

$
2,700,091

Net interest income
$
20,285

$
18,520

Net interest rate spread (4)
2.66
%
2.73
%
Net interest-earning assets (5)
$
651,898

$
746,043

Net interest margin (6)
2.85
%
2.98
%
Average interest-earning assets to interest-bearing liabilities
129.65
%
142.67
%
(1)
Average yields and rates are annualized.
(2)
Includes non-accruing loans.
(3)
Securities available-for-sale are reported at amortized cost.
(4)
Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.
(5)
Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.
(6)
Net interest margin represents net interest income divided by average total interest-earning assets.


44

Asset Quality
PCI Loans
At June 30, 2015 , based on contractual principal, 4.1% of PCI loans were past due 30 to 89 days, and 24.3% were past due 90 days or more, as compared to 7.8% and 24.1%, respectively, at December 31, 2014 .
Originated and Acquired Loans
The discussion that follows includes originated and acquired loans (excluding PCI), both held-for-investment and held-for-sale.
The following table shows total non-performing assets for the current and previous four quarters, and also shows, for the same dates, non-performing originated loans to total loans, troubled debt restructurings ("TDRs") on which interest is accruing, and accruing loans delinquent 30 to 89 days (dollars in thousands).
June 30, 2015
March 31, 2015
December 31, 2014
September 30, 2014
June 30, 2014
Non-accruing loans:
Held-for-investment
$
4,118

$
5,233

$
4,332

$
4,350

$
4,932

Held-for-sale
325

—

—

—

471

Non-accruing loans subject to restructuring agreements:
Held-for-investment
9,329

8,567

9,543

9,608

10,382

Total non-accruing loans
13,772

13,800

13,875

13,958

15,785

Loans 90 days or more past due and still accruing:


Held-for-investment
967

282

708

418

605

Total non-performing loans
14,739

14,082

14,583

14,376

16,390

Other real estate owned
423

532

752

491

640

Total non-performing assets
$
15,162

$
14,614

$
15,335

$
14,867

$
17,030

Non-performing loans to total loans
0.67
%
0.70
%
0.75
%
0.79
%
1.04
%
Non-performing assets to total assets
0.48
%
0.48
%
0.51
%
0.51
%
0.63
%
Loans subject to restructuring agreements and still accruing
$
22,516

$
20,810

$
24,213

$
24,643

$
24,292

Accruing loans 30 to 89 days delinquent
$
15,394

$
15,319

$
12,252

$
16,202

$
13,307

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

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

Additions
1,657

Charge-offs
(583
)
Pay-offs and principal pay-downs
(533
)
Returned to accrual status
(331
)
Sales
(313
)
Balance at end of period
$
13,772



45

Loans Subject to TDR Agreements
Included in non-accruing loans are loans subject to TDR agreements totaling $9.3 million and $9.5 million at June 30, 2015 , and December 31, 2014 , respectively.  At June 30, 2015 , $2.3 million, or 24.8%, of the $9.3 million were not performing in accordance with their restructured terms, as compared to the entire $9.5 million at December 31, 2014. Two separate relationships account for the loans not performing in accordance with their restructured terms at June 30, 2015 . These loans are primarily collateralized by real estate with an aggregate appraised value of $2.6 million.

The Company also holds loans subject to restructuring agreements that are on accrual status, totaling $22.5 million and $24.2 million at June 30, 2015 , and December 31, 2014 , respectively.  At June 30, 2015 , loans totaling $1.5 million, or 6.8%, of the $22.5 million were not performing in accordance with the restructured terms, as compared to $1.6 million, or 6.6%, of the $24.2 million at December 31, 2014.  These loans were less than 90 days delinquent at June 30, 2015 . Generally, the types of concessions that we make to troubled borrowers include reductions to both temporary and permanent interest rates, extensions of payment terms, and to a lesser extent forgiveness of principal and interest.

The following table details the amounts and categories of the loans subject to restructuring agreements by loan type as of June 30, 2015 , and December 31, 2014 (dollars in thousands).
June 30, 2015
December 31, 2014
Non-Accruing
Accruing
Non-Accruing
Accruing
TDRs:
Real estate loans:
Commercial
$
8,811

$
18,134

$
9,135

$
19,570

One-to-four family residential
518

1,955

—

1,927

Multifamily
—

1,940

—

1,990

Home equity and lines of credit
—

363

—

327

Commercial and industrial loans
—

124

408

399

$
9,329

$
22,516

$
9,543

$
24,213

Accruing Loans 30 to 89 Days Delinquent
Loans 30 to 89 days delinquent and on accrual status at June 30, 2015 , and December 31, 2014 totaled $15.4 million and $12.3 million , respectively. The following tables set forth delinquencies for accruing loans by type and by amount at June 30, 2015 , and December 31, 2014 (dollars in thousands).
June 30, 2015
December 31, 2014
Real estate loans:
Commercial
$
11,116

$
6,492

One-to-four family residential
2,144

4,353

Multifamily
1,537

1,090

Home equity and lines of credit
491

135

Commercial and industrial loans
50

122

Other loans
56

60

Total delinquent accruing loans
$
15,394

$
12,252


Liquidity and Capital Resources
Liquidity .  The overall objective of our liquidity management is to ensure the availability of sufficient funds to meet financial commitments and to take advantage of lending and investment opportunities.  Northfield Bank manages liquidity in order to meet deposit withdrawals on demand or at contractual maturity, to repay borrowings as they mature, and to fund new loans and investments as opportunities arise.
Northfield Bank's primary sources of funds are deposits, principal and interest payments on loans and securities, borrowed funds, the proceeds from maturing securities and short-term investments, and to a lesser extent the proceeds from the sales of loans and securities and wholesale borrowings.  The scheduled amortization of loans and securities, as well as proceeds

46

from borrowed funds, are predictable sources of funds.  Other funding sources, however, such as deposit inflows and loan prepayments are greatly influenced by market interest rates, economic conditions, and competition.  Northfield Bank is a member of the FHLB, which provides an additional source of short-term and long-term funding.  Northfield Bank also has short-term borrowing capabilities with the Federal Reserve Bank.  Northfield Bank’s borrowed funds, excluding capitalized lease obligations and floating rate advances, were $571.1 million at June 30, 2015 , and had a weighted average interest rate of 1.50% .  A total of $152.0 million of these borrowings will mature in less than one year.  Borrowed funds, excluding capitalized lease obligations and floating rate advances, were $775.7 million at December 31, 2014 .  Northfield Bank has the ability to obtain additional funding from the FHLB and Federal Reserve Bank discount window of approximately $711.2 million utilizing unencumbered securities of $148.4 million and multifamily loans of $562.8 million at June 30, 2015 .  Northfield Bank expects to have sufficient funds available to meet current commitments in the normal course of business.
Northfield Bancorp, Inc. (stand alone) is a separate legal entity from Northfield Bank and must provide its own liquidity to pay dividends, repurchase its stock, and for other corporate purposes. Northfield Bancorp, Inc.'s primary source of liquidity is dividend payments from Northfield Bank and proceeds from its 2013 stock offering. At June 30, 2015 , Northfield Bancorp, Inc. (stand alone) had liquid assets of approximately $9.1 million.
Capital Resources .  At June 30, 2015 , and December 31, 2014 , as set forth in the following table, Northfield Bank exceeded all of the regulatory capital requirements to which it was subject at such dates.
Actual
For Capital Adequacy Purposes
For Well Capitalized Under Prompt Corrective Action Provisions
As of June 30, 2015:
Common equity Tier 1 capital (to risk-weighted assets)
21.53
%
4.50
%
6.50
%
Tier 1 leverage
16.62
%
4.00
%
5.00
%
Tier I capital (to risk-weighted assets)
21.53
%
6.00
%
8.00
%
Total capital (to risk-weighted assets)
22.64
%
8.00
%
10.00
%
As of December 31, 2014:
Tangible capital to tangible assets
16.46
%
1.50
%
NA

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

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

47

Actual
For Capital Adequacy Purposes
For Well Capitalized Under Prompt Corrective Action Provisions
Common equity Tier 1 capital (to risk-weighted assets)
23.01
%
4.50%
6.50%
Tier 1 leverage
17.77
%
4.00%
5.00%
Tier I capital (to risk-weighted assets)
23.01
%
6.00%
8.00%
Total capital (to risk-weighted assets)
24.12
%
8.00%
10.00%

Off-Balance Sheet Arrangements and Contractual Obligations
In the normal course of operations, the Company engages in a variety of financial transactions that, in accordance with U.S. GAAP, are not recorded in the financial statements.  These transactions primarily relate to lending commitments. These arrangements are not expected to have a material impact on the Company's results of operations or financial condition.
The following table shows the contractual obligations of the Company by expected payment period as of June 30, 2015 (dollars in thousands).
Contractual Obligation
Total
Less than One Year
One to less than Three Years
Three to less than Five Years
Five Years and greater
Debt obligations (excluding capitalized leases)
$
571,130

$
152,000

$
268,548

$
150,582

$
—

Commitments to originate loans
66,038

66,038

—

—

—

Commitments to fund unused lines of credit
65,541

65,541

—

—

—


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

48

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
A majority of our assets and liabilities are monetary in nature.  Consequently, our most significant form of market risk is interest rate risk.  Our assets, consisting primarily of mortgage-related assets and loans, generally have longer maturities than our liabilities, which consist primarily of deposits and wholesale borrowings.  As a result, a principal part of our business strategy involves managing interest rate risk and limiting the exposure of our net interest income to changes in market interest rates.  Accordingly, our board of directors has established a management risk committee, comprised of our Chief Investment Officer, who chairs this committee, our Chief Executive Officer, our President/Chief Operating Officer, our Chief Financial Officer, our Chief Lending Officer, and our Executive Vice President of Operations.  This committee is responsible for, among other things, evaluating the interest rate risk inherent in our assets and liabilities, for recommending to the risk management committee of our board of directors the level of risk that is appropriate given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the guidelines approved by the board of directors.
The management risk committee aims to manage interest rate risk by structuring the balance sheet to maximize net interest income while maintaining an acceptable level of risk exposure to changes in market interest rates.  Liquidity, interest rate risk, and profitability are all considered to reach such a goal.  Various asset/liability strategies are used to manage and control the interest rate sensitivity of our assets and liabilities.  These strategies include pricing of loans and deposit products, adjusting the terms of loans and borrowings, and managing the deployment of our securities and short-term assets to manage mismatches in interest rate re-pricing.
Net Portfolio Value Analysis . We compute amounts by which the net present value of our assets and liabilities (net portfolio value or “NPV”) would change in the event market interest rates change over an assumed range of rates.  Our simulation model uses a discounted cash flow analysis to measure the interest rate sensitivity of NPV.  Depending on current market interest rates, we estimate the economic value of these assets and liabilities under the assumption that interest rates experience an instantaneous and sustained increase of 100, 200, 300, or 400 basis points, or a decrease of 100 and 200 basis points, which is based on the current interest rate environment.  A basis point equals one-hundredth of one percent, and 100 basis points equals one percent.  An increase in interest rates from 3% to 4% would mean, for example, a 100 basis point increase in the “Change in Interest Rates” column below.
Net Interest Income Analysis. In addition to NPV calculations, we analyze our sensitivity to changes in interest rates through our net interest income model.  Net interest income is the difference between the interest income we earn on our interest-earning assets, such as loans and securities, and the interest we pay on our interest-bearing liabilities, such as deposits and borrowings.  In our model, we estimate what our net interest income would be for a twelve-month period.  Depending on current market interest rates we then calculate what the net interest income would be for the same period under the assumption that interest rates experience an instantaneous and sustained increase of 100, 200, 300, or 400 basis points, or a decrease of 100 or 200 basis points, which is based on the current interest rate environment.
The tables below sets forth, as of June 30, 2015 and December 31, 2014, our calculation of the estimated changes in our NPV, NPV ratio, and percent change in net interest income that would result from the designated instantaneous and sustained changes in interest rates.  Computations of prospective effects of hypothetical interest rate changes are based on numerous assumptions, including relative levels of market interest rates, loan prepayments and deposit decay, and should not be relied on as indicative of actual results (dollars in thousands).
NPV at June 30, 2015
Change in Interest Rates (basis points)
Estimated Present Value of Assets
Estimated Present Value of Liabilities
Estimated NPV
Estimated Change in NPV
Estimated Change in NPV %
Estimated NPV/Present Value of Assets Ratio
Net Interest Income Percent Change
+400
$
2,765,286

$
2,387,795

$
377,491

$
(234,215
)
(38.29
)%
13.65
%
(18.52
)%
+300
2,851,832

2,426,854

424,978

(186,728
)
(30.53
)
14.90

(13.77
)
+200
2,948,444

2,467,213

481,231

(130,475
)
(21.33
)
16.32

(8.95
)
+100
3,049,405

2,508,929

540,476

(71,230
)
(11.64
)
17.72

(4.37
)
—
3,163,773

2,552,067

611,706

—

—

19.33

—

(100)
3,305,744

2,597,583

708,161

96,455

15.77

21.42

0.99

(200)
3,472,737

2,622,711

850,026

238,320

38.96

24.48

(0.52
)

49

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

$
2,236,062

$
430,831

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

2,272,781

477,943

(186,090
)
(28.02
)
17.38

(12.29
)
+200
2,844,970

2,310,727

534,243

(129,790
)
(19.55
)
18.78

(7.96
)
+100
2,943,080

2,349,959

593,121

(70,912
)
(10.68
)
20.15

(3.88
)
—
3,054,570

2,390,537

664,033

—

—

21.74

—

(100)
3,180,875

2,431,040

749,835

85,802

12.92

23.57

0.18

(200)
3,325,206

2,456,489

868,717

204,684

30.82

26.13

(1.83
)

The table above indicates that at June 30, 2015 , in the event of a 200 basis point decrease in interest rates, we would experience a 38.96% increase in estimated net portfolio value and a 0.52% decrease in net interest income. In the event of a 400 basis point increase in interest rates, we would experience a 38.29% decrease in estimated net portfolio value and a 18.52% 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 June 30, 2015 , we were in compliance with all board approved policies with respect to interest rate risk management.

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

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

50

PART II

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

ITEM 1A.  RISK FACTORS
During the six months ended June 30, 2015 , there have been no material changes to the risk factors as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2014 , as filed with the SEC.
ITEM 2.     UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
(a)
Unregistered Sale of Equity Securities .  There were no sales of unregistered securities during the period covered by this report.
(b)
Use of Proceeds .  Not applicable.
(c)
Repurchases of Our Equity Securities .
The following table shows the Company’s repurchase of its common stock for the three months ended June 30, 2015 .
Period
(a) Total Number of Shares Purchased
(b) Average Price Paid per Share
(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)
(d) Maximum Number of Shares that May Yet Be Purchased Under Plans or Programs (1)
April 1, 2015 through April 30, 2015
332,000

$
14.75

332,000

1,224,519

May 1, 2015 through May 31, 2015
549,400

$
14.65

549,400

1,165,640

June 1, 2015 through June 30, 2015
819,387

$
14.64

768,349

385,453

Total
1,700,787

$
14.67

1,649,749

(1) On May 27, 2015, the Company’s Board of Directors authorized an increase to its current stock repurchase plan in the amount of up to $15 million. 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 June 30, 2015 , is calculated utilizing the remaining approved repurchase amount of $5.8 million divided by the closing price of the stock on that day.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.

ITEM 4.     MINE SAFETY DISCLOSURES
Not applicable.

ITEM 5. OTHER INFORMATION
None.

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

51

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
NORTHFIELD BANCORP, INC.
(Registrant)
Date: August 10, 2015
/s/   John W. Alexander
John W. Alexander
Chairman and Chief Executive Officer
/s/   William R. Jacobs
William R. Jacobs
Chief Financial Officer
(Principal Financial and Accounting Officer)

52

INDEX TO EXHIBITS
Exhibit
Number
Description
10.1

Form of Director Restricted Stock Award Agreement under the 2014 Equity Incentive Plan
10.2

Form of Employee Restricted Stock Award Agreement under the 2014 Equity Incentive Plan with the exception of John W. Alexander and Steven M. Klein
10.3

Form of Employee Restricted Stock Award Agreement under the 2014 Equity Incentive Plan with John W. Alexander and Steven M. Klein
10.4

Form of Director Non-Statutory Stock Option Award Agreement under the 2014 Equity Incentive Plan
10.5

Form of Employee Stock Option Award Agreement under the 2014 Equity Incentive Plan with the Exception of John W. Alexander and Steven M. Klein
10.6

Form of Employee Stock Option Award Agreement under the 2014 Equity Incentive Plan with John W. Alexander and Steven M. Klein
31.1

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

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

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

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


53
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