NFBK 10-Q Quarterly Report Sept. 30, 2018

NORTHFIELD BANCORP, INC.

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10-Q 1 nfbk2018-9x3010xq.htm 10-Q Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


[ X ]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2018


[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For transition period from to



Commission File Number		001-35791

NORTHFIELD BANCORP, INC.

(Exact name of registrant as specified in its charter)



Delaware		80-0882592
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)



581 Main Street, Woodbridge, New Jersey		07095
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (732) 499-7200

Not Applicable

(Former name, former address, and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o .

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for shorter period that the registrant was required to submit such files). Yes ý No o .



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer ý	Accelerated filer o
Non-accelerated filer o	Smaller reporting company o
	Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý .

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.

49,542,865 shares of Common Stock, par value $0.01 per share, were issued and outstanding as of October 31, 2018 .

NORTHFIELD BANCORP, INC.

Form 10-Q Quarterly Report

Table of Contents



		Page
PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	42
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	55
Item 4.	Controls and Procedures	57

PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	58
Item 1A.	Risk Factors	58
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	58
Item 3.	Defaults Upon Senior Securities	58
Item 4.	Mine Safety Disclosures	58
Item 5.	Other Information	58
Item 6.	Exhibits	58
	SIGNATURES	59

Table of Contents

PART I

ITEM 1. FINANCIAL STATEMENTS

NORTHFIELD BANCORP, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited) (In thousands, except share amounts)



	September 30, 2018			December 31, 2017
ASSETS:
Cash and due from banks	$	13,332		$	17,446
Interest-bearing deposits in other financial institutions	45,403			40,393
Total cash and cash equivalents	58,735			57,839
Trading securities	10,670			9,597
Debt securities available-for-sale, at estimated fair value	740,518			513,782
Debt securities held-to-maturity, at amortized cost	9,560			9,931
(estimated fair value of $9,186 at September 30, 2018, and $9,892 at December 31, 2017)
Equity securities	1,183			1,339
Originated loans held-for-investment, net	2,597,816			2,425,275
Loans acquired	588,517			692,803
Purchased credit-impaired (“PCI”) loans held-for-investment	20,535			22,741
Loans held-for-investment, net	3,206,868			3,140,819
Allowance for loan losses	(27,687		)	(26,160		)
Net loans held-for-investment	3,179,181			3,114,659
Accrued interest receivable	11,984			10,713
Bank owned life insurance	153,218			150,604
Federal Home Loan Bank of New York stock, at cost	23,960			25,046
Premises and equipment, net	25,229			25,746
Goodwill	38,411			38,411
Other real estate owned	—			850
Other assets	33,766			32,900
Total assets	$	4,286,415		$	3,991,417

LIABILITIES AND STOCKHOLDERS’ EQUITY:
LIABILITIES:
Deposits	$	3,141,268		$	2,836,979
Borrowed funds	441,191			471,549
Advance payments by borrowers for taxes and insurance	16,999			14,798
Accrued expenses and other liabilities	32,537			29,214
Total liabilities	3,631,995			3,352,540
STOCKHOLDERS’ EQUITY:
Preferred stock, $0.01 par value; 25,000,000 shares authorized, none issued or outstanding	—			—
Common stock, $0.01 par value: 150,000,000 shares authorized, 60,933,707 shares issued at
September 30, 2018 and December 31, 2017, 49,534,744 and 48,803,885 outstanding at September 30, 2018, and December 31, 2017, respectively	609			609
Additional paid-in-capital	545,739			548,864
Unallocated common stock held by employee stock ownership plan	(21,479		)	(22,244		)
Retained earnings	297,289			281,138
Accumulated other comprehensive loss	(13,579		)	(5,451		)
Treasury stock at cost; 11,398,963 and 12,129,822 shares at September 30, 2018, and December 31, 2017, respectively	(154,159		)	(164,039		)
Total stockholders’ equity	654,420			638,877
Total liabilities and stockholders’ equity	$	4,286,415		$	3,991,417

See accompanying notes to unaudited consolidated financial statements.

Table of Contents

NORTHFIELD BANCORP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited) (In thousands, except per share data)



	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Interest income:
Loans	$	32,443	$	30,424	$	94,686	$	89,085
Mortgage-backed securities	3,475		2,175		9,269		6,791
Other securities	1,104		370		2,427		905
Federal Home Loan Bank of New York dividends	428		365		1,240		1,061
Deposits in other financial institutions	277		191		722		412
Total interest income	37,727		33,525		108,344		98,254
Interest expense:
Deposits	7,593		4,168		18,854		11,687
Borrowings	2,210		2,005		6,252		5,629
Total interest expense	9,803		6,173		25,106		17,316
Net interest income	27,924		27,352		83,238		80,938
Provision for loan losses	1,304		488		2,008		1,371
Net interest income after provision for loan losses	26,620		26,864		81,230		79,567
Non-interest income:
Fees and service charges for customer services	1,241		1,238		3,602		3,563
Income on bank owned life insurance	919		970		2,787		4,438
Gains on securities transactions, net	419		337		892		1,001
Other	58		70		205		197
Total non-interest income	2,637		2,615		7,486		9,199
Non-interest expense:
Compensation and employee benefits	9,443		9,593		27,681		29,339
Occupancy	3,015		2,807		9,061		8,460
Furniture and equipment	239		279		747		871
Data processing	1,153		1,155		3,527		3,436
Professional fees	886		569		2,558		2,034
FDIC insurance	241		279		812		795
Other	2,123		2,146		6,880		6,055
Total non-interest expense	17,100		16,828		51,266		50,990
Income before income tax expense	12,157		12,651		37,450		37,776
Income tax expense	3,081		4,525		7,318		11,292
Net income	$	9,076	$	8,126	$	30,132	$	26,484
Net income per common share:
Basic	$	0.19	$	0.18	$	0.65	$	0.59
Diluted	$	0.19	$	0.17	$	0.64	$	0.57







See accompanying notes to unaudited consolidated financial statements.

Table of Contents




NORTHFIELD BANCORP, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - (Continued) (Unaudited) (In thousands)
	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Net Income	$	9,076		$	8,126		$	30,132		$	26,484
Other comprehensive (loss) income:
Unrealized (losses) gains on debt securities:
Net unrealized holding (losses) gains on debt securities	(2,674		)	(4		)	(11,117		)	3,082
Less: reclassification adjustment for net (gains) losses included in net income (included in gains on securities transactions, net)	(7		)	—			(178		)	4
Net unrealized (losses) gains	(2,681		)	(4		)	(11,295		)	3,086
Amortization related to post retirement benefit obligation	—			27			—			81
Other comprehensive (loss) income, before tax	(2,681		)	23			(11,295		)	3,167
Income tax benefit (expense) related to net unrealized holding (losses) gains on debt securities	748			1			3,117			(1,234		)
Income tax benefit (expense) related to reclassification adjustment for (losses) gains included in net income	2			—			50			(2		)
Income tax expense related to post retirement benefit adjustment	—			(11		)	—			(33		)
Other comprehensive (loss) income, net of tax	(1,931		)	13			(8,128		)	1,898
Comprehensive income	$	7,145		$	8,139		$	22,004		$	28,382

See accompanying notes to unaudited consolidated financial statements.

Table of Contents

NORTHFIELD BANCORP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Nine Months Ended September 30, 2018 and 2017

(Unaudited) (In thousands, except share data)





	Common Stock
	Shares Outstanding		Par Value		Additional Paid-in Capital			Unallocated Common Stock Held by the Employee Stock Ownership Plan			Retained Earnings			Accumulated Other Comprehensive Income (loss) Net of tax			Treasury Stock			Total Stockholders' Equity
Balance at December 31, 2016	48,526,658		$	609	$	547,910		$	(23,466	)	$	268,226		$	(4,332	)	$	(167,751	)	$	621,196
Net income											26,484									26,484
Other comprehensive income, net of tax														1,898						1,898
Cumulative effect of change in accounting principle - adoption of ASU No. 2016-09					(2,898		)				2,898									—
ESOP shares allocated or committed to be released					869			771												1,640
Stock compensation expense					4,765															4,765
Net issuance of restricted stock	19,180				(261		)										261			—
Exercise of stock options, net	334,934				(4,430		)										4,530			100
Cash dividends declared and paid ($0.24 per common share)											(11,034		)							(11,034		)
Balance at September 30, 2017	48,880,772		$	609	$	545,955		$	(22,695	)	$	286,574		$	(2,434	)	$	(162,960	)	$	645,049

Balance at December 31, 2017	48,803,885		$	609	$	548,864		$	(22,244	)	$	281,138		$	(5,451	)	$	(164,039	)	$	638,877
Net income											30,132									30,132
Other comprehensive loss, net of tax														(8,128		)				(8,128		)
ESOP shares allocated or committed to be released					755			765												1,520
Stock compensation expense					4,087															4,087
Net issuance of restricted stock	10,040				(133		)										133			—
Exercise of stock options, net	721,145				(7,834		)										9,752			1,918
Cash dividends declared and paid ($0.30 per common share)											(13,981		)							(13,981		)
Repurchase of treasury stock (average cost of $16.85 per share)	(326	)															(5		)	(5		)
Balance at September 30, 2018	49,534,744		$	609	$	545,739		$	(21,479	)	$	297,289		$	(13,579	)	$	(154,159	)	$	654,420

See accompanying notes to unaudited consolidated financial statements.

Table of Contents

NORTHFIELD BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) (In thousands)



	Nine Months Ended September 30,
	2018			2017

Net income	$	30,132		$	26,484
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses	2,008			1,371
ESOP and stock compensation expense	5,607			6,405
Depreciation	2,261			2,449
Amortization of premiums, and deferred loan costs, net of (accretion) of discounts, and deferred loan fees	1,798			1,551
Amortization of intangible assets	247			292
Income on bank owned life insurance	(2,787		)	(4,438		)
Proceeds from sale of loans held-for-sale	—			494
Gains on securities transactions, net	(892		)	(1,001		)
Net purchases of trading securities	(359		)	(363		)
Increase in accrued interest receivable	(1,271		)	(535		)
Decrease in other assets	2,052			3,069
Increase (decrease) in accrued expenses and other liabilities	3,323			(1,352		)
Net cash provided by operating activities	42,119			34,426
Cash flows from investing activities:
Net increase in loans receivable	(29,891		)	(107,567		)
Purchase of loans	(37,593		)	(59,087		)
Purchases of Federal Home Loan Bank of New York stock	(14,956		)	(16,640		)
Redemptions of Federal Home Loan Bank of New York stock	16,042			11,992
Purchases of debt securities available-for-sale	(359,265		)	(67,053		)
Principal payments and maturities on debt securities available-for-sale	88,630			84,882
Principal payments and maturities on debt securities held-to-maturity	352			152
Proceeds from sale of debt securities available-for-sale	32,115			967
Proceeds from bank owned life insurance	173			2,828
Proceeds from sale of other real estate owned	850			—
Purchases and improvements of premises and equipment	(1,744		)	(1,043		)
Net cash used in investing activities	(305,287		)	(150,569		)
Cash flows from financing activities:
Net increase in deposits	304,289			21,815
Dividends paid	(13,981		)	(11,034		)
Exercise of stock options	1,918			100
Purchase of treasury stock	(5		)	—
Increase in advance payments by borrowers for taxes and insurance	2,201			1,934
Repayments under capital lease obligations	(188		)	(166		)
Proceeds from securities sold under agreements to repurchase and other borrowings	397,465			331,653
Repayments related to securities sold under agreements to repurchase and other borrowings	(427,635		)	(221,003		)
Net cash provided by financing activities	264,064			123,299
Net increase in cash and cash equivalents	896			7,156
Cash and cash equivalents at beginning of period	57,839			96,085
Cash and cash equivalents at end of period	$	58,735		$	103,241

See accompanying notes to unaudited consolidated financial statements.

Table of Contents



NORTHFIELD BANCORP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued) (Unaudited) (In thousands)
	Nine Months Ended September 30,
	2018		2017
Supplemental cash flow information:
Cash paid during the period for:
Interest	$	24,699	$	17,052
Income taxes	7,767		5,500
Non-cash transactions:
Loans charge-offs/(recoveries), net	481		(133		)
Transfer of originated loans held-for-investment to loans held-for-sale at fair value	—		2,009

See accompanying notes to unaudited consolidated financial statements.

Table of Contents

NORTHFIELD BANCORP, INC.

Notes to Unaudited Consolidated Financial Statements

Note 1 – Basis of Presentation

The consolidated financial statements are comprised of the accounts of Northfield Bancorp, Inc. (the “ Company ” ) and its wholly owned subsidiaries, Northfield Investments, Inc. and Northfield Bank (the “ Bank ” ), and the Bank’s wholly-owned significant subsidiaries, NSB Services Corp. and NSB Realty Trust. All significant intercompany accounts and transactions have been eliminated in consolidation.

In the opinion of management, all adjustments (consisting solely of normal and recurring adjustments) necessary for the fair presentation of the consolidated financial condition and the consolidated results of operations for the unaudited periods presented have been included. The results of operations and other data presented for the three and nine months ended September 30, 2018 , are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2018 or for any other period. Whenever necessary, certain prior year amounts are reclassified to conform to the current year presentation.

In preparing the unaudited consolidated financial statements in conformity with U.S. generally accepted accounting principles (U.S. GAAP), management has made estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated statements of financial condition and results of operations for the periods indicated. Material estimates that are particularly susceptible to change are: the allowance for loan losses, the evaluation of goodwill and other intangible assets, impairment on investment securities, fair value measurements of assets and liabilities, and income taxes. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the consolidated financial statements in the period they are deemed necessary. While management uses its best judgment, actual amounts or results could differ significantly from those estimates.

Certain information and note disclosures usually included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) for the preparation of interim financial statements. The consolidated financial statements presented should be read in conjunction with the audited consolidated financial statements and notes to consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2017 , of the Company as filed with the SEC.

Note 2 – Debt Securities Available-for-Sale

The following is a comparative summary of mortgage-backed and other debt securities available-for-sale at September 30, 2018 , and December 31, 2017 (in thousands):



	September 30, 2018
			Gross		Gross		Estimated
	Amortized		unrealized		unrealized		fair
	cost		gains		losses		value
Mortgage-backed securities:
Pass-through certificates:
Government sponsored enterprises (GSE)	$	305,272	$	383	$	6,184	$	299,471
Real estate mortgage investment conduits (REMICs):
GSE	269,374		39		12,231		257,182
Non-GSE	61		—		1		60
	574,707		422		18,416		556,713
Other debt securities:
Municipal bonds	276		2		—		278
Corporate bonds	184,219		352		1,044		183,527
	184,495		354		1,044		183,805
Total debt securities available-for-sale	$	759,202	$	776	$	19,460	$	740,518

Table of Contents

NORTHFIELD BANCORP, INC.

Notes to Unaudited Consolidated Financial Statements - (Continued)



	December 31, 2017
			Gross		Gross		Estimated
	Amortized		unrealized		unrealized		fair
	cost		gains		losses		value
Mortgage-backed securities:
Pass-through certificates:
GSE	$	179,320	$	1,429	$	2,454	$	178,295
REMICs:
GSE	273,501		287		6,859		266,929
Non-GSE	80		—		1		79
	452,901		1,716		9,314		445,303
Other debt securities:
Municipal bonds	343		6		—		349
Corporate bonds	67,927		401		198		68,130
	68,270		407		198		68,479
Total debt securities available-for-sale	$	521,171	$	2,123	$	9,512	$	513,782

The following is a summary of the expected maturity distribution of debt securities available-for-sale, other than mortgage-backed securities, at September 30, 2018 (in thousands):



Available-for-sale	Amortized cost		Estimated fair value
Due in one year or less	$	24,830	$	24,703
Due after one year through five years	149,773		149,190
Due after five years through ten years	9,892		9,912
	$	184,495	$	183,805

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

Certain securities available-for-sale are pledged or encumbered to secure borrowings under Pledge Agreements and Repurchase Agreements and for other purposes required by law. At September 30, 2018 , the fair value of securities available-for-sale that were pledged to secure borrowings and deposits was $537.1 million .

For the three and nine months ended September 30, 2018 , the Company had gross proceeds of $2.5 million and $32.1 million , respectively, on sales of debt securities available-for-sale, with gross realized gains of $7,000 and $183,000 and gross realized losses of $0 and $5,000 . There were no sales of securities available-for-sale for the three months ended September 30, 2017. For the nine months ended September 30, 2017, the Company had gross proceeds of $967,000 on sales of debt securities available-for-sale, with no gross realized gains and gross realized losses of $4,000 . The Company recognized net gains of $412,000 and $714,000 on its trading securities portfolio during the three and nine months ended September 30, 2018 , respectively. The Company recognized net gains of $337,000 and $1.0 million , on its trading securities portfolio during the three and nine months ended September 30, 2017 , respectively.

Table of Contents

NORTHFIELD BANCORP, INC.

Notes to Unaudited Consolidated Financial Statements - (Continued)

Gross unrealized losses on mortgage-backed and other debt securities available-for-sale, and the estimated fair value of the related securities, aggregated by security category and length of time that individual securities have been in a continuous unrealized loss position, at September 30, 2018 , and December 31, 2017 , were as follows (in thousands):



	September 30, 2018
	Less than 12 months				12 months or more				Total
	Unrealized		Estimated		Unrealized		Estimated		Unrealized		Estimated
	losses		fair value		losses		fair value		losses		fair value
Mortgage-backed securities:
Pass-through certificates:
GSE	$	2,698	$	185,891	$	3,486	$	65,491	$	6,184	$	251,382
REMICs:
GSE	7,667		172,671		4,564		78,771		12,231		251,442
Non-GSE	—		—		1		60		1		60
Other debt securities:
Corporate bonds	688		105,996		356		14,805		1,044		120,801
Total	$	11,053	$	464,558	$	8,407	$	159,127	$	19,460	$	623,685



	December 31, 2017
	Less than 12 months				12 months or more				Total
	Unrealized		Estimated		Unrealized		Estimated		Unrealized		Estimated
	losses		fair value		losses		fair value		losses		fair value
Mortgage-backed securities:
Pass-through certificates:
GSE	$	439	$	48,931	$	2,015	$	76,113	$	2,454	$	125,044
REMICs:
GSE	933		103,644		5,926		139,830		6,859		243,474
Non-GSE	—		—		1		79		1		79
Other debt securities:
Corporate bonds	61		11,006		137		15,084		198		26,090
Total	$	1,433	$	163,581	$	8,079	$	231,106	$	9,512	$	394,687

The Company held 32 pass-through mortgage-backed securities issued or guaranteed by GSEs, 18 REMIC mortgage-backed securities issued or guaranteed by GSEs, one REMIC mortgage-backed security not issued or guaranteed by a GSE, and three corporate bonds that were in a continuous unrealized loss position of twelve months or greater at September 30, 2018 . There were 47 pass-through mortgage-backed securities issued or guaranteed by GSEs, 40 REMIC mortgage-backed securities issued or guaranteed by a GSE, and 15 corporate bonds that were in an unrealized loss position of less than twelve months at September 30, 2018 . All securities referred to above, other than one corporate security with a fair value of $5.0 million and an unrealized loss of $17,000 , were rated investment grade at September 30, 2018 . Management evaluated these securities and concluded that the declines in value relate to the general interest rate environment and are considered temporary. The securities cannot be prepaid in a manner that would result in the Company not receiving substantially all of its amortized cost. The Company neither has an intent to sell, nor is it more likely than not that the Company will be required to sell, the securities before the recovery of their amortized cost basis or, if necessary, maturity.

The fair values of our investment securities could decline in the future if the underlying performance of the collateral for the collateralized mortgage obligations or other securities deteriorates and our credit enhancement levels do not provide sufficient protections to our contractual principal and interest, which may result in other-than-temporary impairment in the future. The Company did no t recognize any other-than-temporary impairment charges during the three and nine months ended September 30, 2018 , or September 30, 2017 .

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NORTHFIELD BANCORP, INC.

Notes to Unaudited Consolidated Financial Statements - (Continued)

Note 3 – Debt Securities Held-to-Maturity

The following is a summary of debt securities held-to-maturity at September 30, 2018 , and December 31, 2017 (in thousands):



	September 30, 2018
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Mortgage-backed securities:
Pass-through certificates:
GSEs	$	9,560	$	—	$	374	$	9,186
Total securities held-to-maturity	$	9,560	$	—	$	374	$	9,186



	December 31, 2017
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Mortgage-backed securities:
Pass-through certificates:
GSEs	$	9,931	$	17	$	56	$	9,892
Total securities held-to-maturity	$	9,931	$	17	$	56	$	9,892

Contractual maturities for mortgage-backed securities are not presented, as expected maturities on mortgage‑backed securities may differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without penalties. There were no sales of held-to-maturity securities for the three and nine months ended September 30, 2018 , or September 30, 2017 .

At September 30, 2018 , debt securities held-to-maturity with a carrying value of $7.0 million were pledged to secure borrowings and deposits.

Gross unrealized losses on mortgage-backed securities held-to-maturity, and the estimated fair value of the related securities, aggregated by security category and length of time that individual securities have been in a continuous unrealized loss position, at September 30, 2018 and December 31, 2017 , were as follows (in thousands):



	September 30, 2018
	Less than 12 months				12 months or more				Total
	Unrealized losses		Estimated fair value		Unrealized losses		Estimated fair value		Unrealized losses		Estimated fair value
Mortgage-backed securities:
Pass-through certificates:
GSEs	$	194	$	5,643	$	180	$	3,543	$	374	$	9,186
Total securities held-to-maturity	$	194	$	5,643	$	180	$	3,543	$	374	$	9,186



	December 31, 2017
	Less than 12 months				12 months or more				Total
	Unrealized losses		Estimated fair value		Unrealized losses		Estimated fair value		Unrealized losses		Estimated fair value
Mortgage-backed securities:
Pass-through certificates:
GSEs	$	7	$	3,922	$	49	$	3,735	$	56	$	7,657
Total securities held-to-maturity	$	7	$	3,922	$	49	$	3,735	$	56	$	7,657

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NORTHFIELD BANCORP, INC.

Notes to Unaudited Consolidated Financial Statements - (Continued)

The Company held two pass-through mortgage-backed securities held-to-maturity, issued or guaranteed by GSEs that were in a continuous unrealized loss position of greater than twelve months at September 30, 2018 , and four pass-through mortgage-backed securities held-to-maturity, issued or guaranteed by GSEs that were in a continuous unrealized loss position of less than twelve months at September 30, 2018 . Management evaluated these securities and concluded that the declines in value relate to the general interest rate environment and are considered temporary. The securities cannot be prepaid in a manner that would result in the Company not receiving substantially all of its amortized cost. The Company neither has an intent to sell, nor is it more likely than not that the Company will be required to sell, the securities before the recovery of their amortized cost basis or, if necessary, maturity.

The fair values of our investment securities could decline in the future if the underlying performance of the collateral for the collateralized mortgage obligations or other securities deteriorates and our credit enhancement levels do not provide sufficient protections to our contractual principal and interest. As a result, there is a risk that significant other-than-temporary impairments may occur in the future given the current economic environment. The Company did no t recognize any other-than-temporary impairment charges in earnings on securities held-to-maturity during the three and nine months ended September 30, 2018 , or September 30, 2017 .

Note 4 – Equity Securities

At September 30, 2018 and December 31, 2017, equity securities totaled $1.2 million and $1.3 million , respectively. Equity securities consist of money market mutual funds, recorded at fair value of $148,000 and $323,000 , at September 30, 2018 and December 31, 2017 , respectively, and an investment in a private Small Business Administration (“SBA”) Loan Fund recorded at net asset value of $1.0 million at both September 30, 2018 , and December 31, 2017 . As the SBA Loan Fund operates as a private fund, its shares are not publicly traded and therefore have no readily determinable market value. The investment in the fund is recorded at net asset value as a practical expedient for reporting fair market value. Upon adoption of Accounting Standards Update (“ASU”) No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities as of January 1, 2018, the Company reclassified its equity securities out of available-for-sale securities to equity securities on the consolidated balance sheets for all periods presented. For further details on ASU No. 2016-01 see Note 12 - “Recently Issued and Adopted Accounting Pronouncements.”

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NORTHFIELD BANCORP, INC.

Notes to Unaudited Consolidated Financial Statements - (Continued)

Note 5 – Loans

Net loans held-for-investment are as follows (in thousands):



	September 30,			December 31,
	2018			2017
Real estate loans:
Multifamily	$	1,847,871		$	1,735,712
Commercial mortgage	502,691			445,225
One-to-four family residential mortgage	92,533			100,942
Home equity and lines of credit	75,719			66,254
Construction and land	27,044			34,545
Total real estate loans	2,545,858			2,382,678
Commercial and industrial loans	43,755			34,828
Other loans	1,374			1,430
Total commercial and industrial and other loans	45,129			36,258
Deferred loan cost, net	6,829			6,339
Originated loans held-for-investment, net	2,597,816			2,425,275
PCI Loans	20,535			22,741
Loans acquired:
One-to-four family residential mortgage	243,586			275,053
Multifamily	153,408			199,149
Commercial mortgage	146,005			163,962
Home equity and lines of credit	18,279			20,455
Construction and land	13,556			17,201
Total acquired real estate loans	574,834			675,820
Commercial and industrial loans	13,668			16,946
Other loans	15			37
Total loans acquired, net	588,517			692,803
Loans held-for-investment, net	3,206,868			3,140,819
Allowance for loan losses	(27,687		)	(26,160		)
Net loans held-for-investment	$	3,179,181		$	3,114,659

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

PCI loans totaled $20.5 million at September 30, 2018 , as compared to $22.7 million at December 31, 2017 . The majority of the PCI loan balance is attributable to those loans acquired as part of a Federal Deposit Insurance Corporation-assisted transaction. The Company accounts for PCI loans utilizing U.S. GAAP applicable to loans acquired with deteriorated credit quality. At September 30, 2018 , PCI loans consist of approximately 28% commercial real estate loans and 49% commercial and industrial loans, with the remaining balance in residential and home equity loans. At December 31, 2017 , PCI loans consist of approximately 27% commercial real estate loans and 50% commercial and industrial loans, with the remaining balance in residential and home equity loans.

The following table details the accretion of interest income for PCI loans for the three and nine months ended September 30, 2018 and September 30, 2017 (in thousands):



	At or for the three months ended September 30,						At or for the nine months ended September 30,
	2018			2017			2018			2017
Balance at the beginning of period	$	22,386		$	21,442		$	24,502		$	24,215
Accretion into interest income	(1,025		)	(1,361		)	(3,141		)	(4,134		)
Balance at end of period	$	21,361		$	20,081		$	21,361		$	20,081

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NORTHFIELD BANCORP, INC.

Notes to Unaudited Consolidated Financial Statements - (Continued)

The following tables set forth activity in our allowance for loan losses, by loan type, as of and for the three and nine months ended September 30, 2018 , and September 30, 2017 (in thousands):



	Three Months Ended September 30, 2018
	Real Estate
	Commercial			One-to-Four Family		Construction and Land		Multifamily			Home Equity and Lines of Credit			Commercial and Industrial			Other			Unallocated		Originated Loans Total			Purchased Credit-Impaired		Acquired Loans			Total
Allowance for loan losses:
Beginning balance	$	5,718		$	384	$	438	$	17,603		$	279		$	1,402		$	107		$	—	$	25,931		$	951	$	—		$	26,882
Charge-offs	(444		)	—		—		—			—			(72		)	(1		)	—		(517		)	—		—			(517		)
Recoveries	12			—		—		—			—			—			—			—		12			—		6			18
Provisions (credit)	1,165			8		28		(323		)	(39		)	482			(11		)	—		1,310			—		(6		)	1,304
Ending balance	$	6,451		$	392	$	466	$	17,280		$	240		$	1,812		$	95		$	—	$	26,736		$	951	$	—		$	27,687



	Three Months Ended September 30, 2017
	Real Estate
	Commercial			One-to-Four Family			Construction and Land		Multifamily			Home Equity and Lines of Credit			Commercial and Industrial			Other			Unallocated		Originated Loans Total			Purchased Credit-Impaired		Acquired Loans			Total
Allowance for loan losses:
Beginning balance	$	5,236		$	550		$	229	$	16,636		$	363		$	1,532		$	97		$	—	$	24,643		$	896	$	66		$	25,605
Charge-offs	—			—			—		(6		)	—			(73		)	—			—		(79		)	—		—			(79		)
Recoveries	18			—			—		—			34			10			—			—		62			—		23			85
Provisions (credit)	(109		)	(85		)	475		507			(292		)	69			(22		)	—		543			—		(55		)	488
Ending balance	$	5,145		$	465		$	704	$	17,137		$	105		$	1,538		$	75		$	—	$	25,169		$	896	$	34		$	26,099

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NORTHFIELD BANCORP, INC.

Notes to Unaudited Consolidated Financial Statements - (Continued)



	Nine Months Ended September 30, 2018
	Real Estate
	Commercial			One-to-Four Family			Construction and Land			Multifamily			Home Equity and Lines of Credit			Commercial and Industrial			Other		Unallocated		Originated Loans Total			Purchased Credit-Impaired		Acquired Loans			Total
Allowance for loan losses:
Beginning balance	$	5,196		$	503		$	610		$	17,374		$	122		$	1,273		$	94	$	—	$	25,172		$	951	$	37		$	26,160
Charge-offs	(447		)	—			—			—			(60		)	(72		)	1		—		(578		)	—		(1		)	(579		)
Recoveries	37			3			—			26			—			20			—		—		86			—		12			98
Provisions/(credit)	1,665			(114		)	(144		)	(120		)	178			591			—		—		2,056			—		(48		)	2,008
Ending balance	$	6,451		$	392		$	466		$	17,280		$	240		$	1,812		$	95	$	—	$	26,736		$	951	$	—		$	27,687



	Nine Months Ended September 30, 2017
	Real Estate
	Commercial			One-to-Four Family			Construction and Land		Multifamily			Home Equity and Lines of Credit			Commercial and Industrial			Other			Unallocated		Originated Loans Total			Purchased Credit-Impaired		Acquired Loans			Total
Allowance for loan losses:
Beginning balance	$	5,432		$	664		$	172	$	14,952		$	588		$	1,720		$	96		$	—	$	23,624		$	896	$	75		$	24,595
Charge-offs	(4		)	—			—		(184		)	(104		)	(73		)	—			—		(365		)	—		(30		)	(395		)
Recoveries	52			—			—		278			97			74			—			—		501			—		27			528
Provisions/(credit)	(335		)	(199		)	532		2,091			(476		)	(183		)	(21		)	—		1,409			—		(38		)	1,371
Ending balance	$	5,145		$	465		$	704	$	17,137		$	105		$	1,538		$	75		$	—	$	25,169		$	896	$	34		$	26,099

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NORTHFIELD BANCORP, INC.

Notes to Unaudited Consolidated Financial Statements - (Continued)

The following tables detail the amount of loans receivable held-for-investment, net of deferred loan fees and costs, that are evaluated individually, and collectively, for impairment, and the related portion of the allowance for loan losses that is allocated to each loan portfolio segment, at September 30, 2018 , and December 31, 2017 (in thousands):



	September 30, 2018
	Real Estate
	Commercial		One-to-Four Family		Construction and Land		Multifamily		Home Equity and Lines of Credit		Commercial and Industrial		Other		Originated Loans Total		Purchased Credit-Impaired		Acquired Loans		Total
Allowance for loan losses:
Ending balance: individually evaluated for impairment	$	501	$	19	$	—	$	—	$	5	$	4	$	—	$	529	$	—	$	—	$	529
Ending balance: collectively evaluated for impairment	$	5,950	$	373	$	466	$	17,280	$	235	$	1,808	$	95	$	26,207	$	951	$	—	$	27,158
Loans, net:
Ending balance	$	503,225	$	93,603	$	27,112	$	1,851,275	$	77,375	$	43,851	$	1,375	$	2,597,816	$	20,535	$	588,517	$	3,206,868
Ending balance: individually evaluated for impairment	$	16,220	$	1,916	$	—	$	1,271	$	63	$	76	$	—	$	19,546	$	—	$	3,787	$	23,333
Ending balance: collectively evaluated for impairment	$	487,005	$	91,687	$	27,112	$	1,850,004	$	77,312	$	43,775	$	1,375	$	2,578,270	$	20,535	$	584,730	$	3,183,535



	December 31, 2017
	Real Estate
	Commercial		One-to-Four Family		Construction and Land		Multifamily		Home Equity and Lines of Credit		Commercial and Industrial		Other		Originated Loans Total		Purchased Credit-Impaired		Acquired Loans		Total
Allowance for loan losses:
Ending balance: individually evaluated for impairment	$	—	$	38	$	—	$	—	$	4	$	3	$	—	$	45	$	—	$	37	$	82
Ending balance: collectively evaluated for impairment	$	5,196	$	465	$	610	$	17,374	$	118	$	1,270	$	94	$	25,127	$	951	$	—	$	26,078
Loans, net:
Ending balance	$	445,781	$	101,650	$	34,620	$	1,739,220	$	67,679	$	34,893	$	1,432	$	2,425,275	$	22,741	$	692,803	$	3,140,819
Ending balance: individually evaluated for impairment	$	16,008	$	1,996	$	—	$	1,310	$	69	$	159	$	—	$	19,542	$	—	$	1,543	$	21,085
Ending balance: collectively evaluated for impairment	$	429,773	$	99,654	$	34,620	$	1,737,910	$	67,610	$	34,734	$	1,432	$	2,405,733	$	22,741	$	691,260	$	3,119,734

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NORTHFIELD BANCORP, INC.

Notes to Unaudited Consolidated Financial Statements - (Continued)

The Company monitors the credit quality of its loan portfolio on a regular basis. Credit quality is monitored by reviewing certain credit quality indicators. Management has determined that loan-to-value ratios (at period end) and internally assigned credit risk ratings by loan type are the key credit quality indicators that best measure the credit quality of the Company’s loan receivables. Loan-to-value ( “LTV” ) ratios used by management in monitoring credit quality are based on current period loan balances and original appraised values at time of origination (unless a current appraisal has been obtained as a result of the loan being deemed impaired). In calculating the provision for loan losses, based on past loan loss experience, management has determined that commercial real estate loans and multifamily loans having loan-to-value ratios, as described above, of less than 35% , and one-to-four family loans having loan-to-value ratios, as described above, of less than 60% , require less of a loss factor than those with higher loan to value ratios.

The Company maintains a credit risk rating system as part of the risk assessment of its loan portfolio. The Company’s lending officers are required to assign a credit risk rating to each loan in their portfolio at origination. This risk rating is reviewed periodically and adjusted if necessary. Monthly, management presents monitored assets to the loan committee. In addition, the Company engages a third-party independent loan reviewer that performs semi-annual reviews of a sample of loans, validating the credit risk ratings assigned to such loans. The credit risk ratings play an important role in the establishment of the loan loss provision and the allowance for loan losses for originated loans held-for-investment. After determining the general reserve loss factor for each originated portfolio segment held-for-investment, the originated portfolio segment held-for-investment balance collectively evaluated for impairment is multiplied by the general reserve loss factor for the respective portfolio segment in order to determine the general reserve.

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


1.	Strong


2.	Good


3.	Acceptable


4.	Adequate


5.	Watch


6.	Special Mention


7.	Substandard


8.	Doubtful


9.	Loss

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

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NORTHFIELD BANCORP, INC.

Notes to Unaudited Consolidated Financial Statements - (Continued)

The following tables detail the recorded investment of originated loans held-for-investment, net of deferred fees and costs, by loan type and credit quality indicator at September 30, 2018 , and December 31, 2017 (in thousands):



	September 30, 2018
	Real Estate
	Multifamily				Commercial				One-to-Four Family				Construction and Land		Home Equity and Lines of Credit		Commercial and Industrial		Other		Total
	< 35% LTV		=> 35% LTV		< 35% LTV		=> 35% LTV		< 60% LTV		=> 60% LTV
Internal Risk Rating
Pass	$	154,512	$	1,694,833	$	70,369	$	420,158	$	55,765	$	35,183	$	27,112	$	77,134	$	43,257	$	1,375	$	2,579,698
Special Mention	—		620		399		1,148		665		—		—		27		493		—		3,352
Substandard	—		1,310		—		11,151		1,422		568		—		214		101		—		14,766
Originated loans held-for-investment, net	$	154,512	$	1,696,763	$	70,768	$	432,457	$	57,852	$	35,751	$	27,112	$	77,375	$	43,851	$	1,375	$	2,597,816



	December 31, 2017
	Real Estate
	Multifamily				Commercial				One-to-Four Family				Construction and Land		Home Equity and Lines of Credit		Commercial and Industrial		Other		Total
	< 35% LTV		=> 35% LTV		< 35% LTV		=> 35% LTV		< 60% LTV		=> 60% LTV
Internal Risk Rating
Pass	$	131,792	$	1,603,947	$	84,620	$	346,857	$	60,400	$	38,504	$	34,620	$	67,426	$	34,141	$	1,432	$	2,403,739
Special Mention	—		1,897		410		2,170		683		—		—		28		571		—		5,759
Substandard	—		1,584		—		11,724		1,470		593		—		225		181		—		15,777
Originated loans held-for-investment, net	$	131,792	$	1,607,428	$	85,030	$	360,751	$	62,553	$	39,097	$	34,620	$	67,679	$	34,893	$	1,432	$	2,425,275

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NORTHFIELD BANCORP, INC.

Notes to Unaudited Consolidated Financial Statements - (Continued)

Included in loans receivable (including loans held-for-sale) are loans for which the accrual of interest income has been discontinued due to deterioration in the financial condition of the borrowers. The recorded investment of these non-accrual loans was $10.0 million and $5.5 million at September 30, 2018 , and December 31, 2017 , respectively. Generally, loans are placed on non-accrual status when they become 90 days or more delinquent, or sooner if considered appropriate by management, and remain on non-accrual status until they are brought current, have six consecutive months of performance under the loan terms, and factors indicating reasonable doubt about the timely collection of payments no longer exist. Therefore, loans may be current in accordance with their loan terms, or may be less than 90 days delinquent and still be on a non-accruing status.

These non-accrual amounts included loans deemed to be impaired of $6.7 million and $3.1 million at September 30, 2018 , and December 31, 2017 , respectively. Loans on non-accrual status with principal balances less than $500,000 , and therefore not meeting the Company’s definition of an impaired loan, amounted to $3.3 million and $2.4 million at September 30, 2018 , and December 31, 2017 , respectively. There were no non-accrual loans held-for-sale at September 30, 2018 and December 31, 2017 . Loans past due 90 days or more and still accruing interest were $33,000 and $28,000 at September 30, 2018 and December 31, 2017 , respectively, and consisted of loans that are considered well-secured and in the process of collection.

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NORTHFIELD BANCORP, INC.

Notes to Unaudited Consolidated Financial Statements - (Continued)

The following tables set forth the detail, and delinquency status, of non-performing loans (non-accrual loans and loans past due 90 days or more and still accruing), net of deferred fees and costs, at September 30, 2018 , and December 31, 2017 , excluding loans held-for-sale and PCI loans which have been segregated into pools. For PCI loans, each loan pool is accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows (in thousands):

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NORTHFIELD BANCORP, INC.

Notes to Unaudited Consolidated Financial Statements - (Continued)



	September 30, 2018
	Total Non-Performing Loans
	Non-Accruing Loans
	0-29 Days Past Due		30-89 Days Past Due		90 Days or More Past Due		Total		90 Days or More Past Due and Accruing		Total Non-Performing Loans
Loans held-for-investment:
Real estate loans:
Commercial
LTV => 35%
Substandard	$	—	$	—	$	3,696	$	3,696	$	—	$	3,696
Total commercial	—		—		3,696		3,696		—		3,696
One-to-four family residential
LTV < 60%
Substandard	—		240		277		517		—		517
Total	—		240		277		517		—		517
LTV => 60%
Substandard	—		33		—		33		—		33
Total one-to-four family residential	—		273		277		550		—		550
Home equity and lines of credit
Substandard	75		—		—		75		—		75
Total home equity and lines of credit	75		—		—		75		—		75
Total non-performing loans held-for-investment, originated	75		273		3,973		4,321		—		4,321
Loans acquired:
Real estate loans:
Commercial
LTV < 35%
Substandard	—		—		289		289		—		289
LTV => 35%
Substandard	518		3,088		537		4,143		—		4,143
Total commercial	518		3,088		826		4,432		—		4,432
One-to-four family residential
LTV < 60%
Substandard	—		200		170		370		6		376
LTV => 60%
Substandard	127		—		93		220		27		247
Total one-to-four family residential	127		200		263		590		33		623
Multifamily
LTV < 35%
Substandard	152		—		—		152		—		152
LTV => 35%
Substandard	—		415		—		415		—		415
Total multifamily	152		415		—		567		—		567
Home equity and lines of credit
Substandard	—		—		77		77		—		77
Total home equity and lines of credit	—		—		77		77		—		77
Total non-performing loans acquired	797		3,703		1,166		5,666		33		5,699
Total non-performing loans	$	872	$	3,976	$	5,139	$	9,987	$	33	$	10,020

Table of Contents

NORTHFIELD BANCORP, INC.

Notes to Unaudited Consolidated Financial Statements - (Continued)



	December 31, 2017
	Total Non-Performing Loans
	Non-Accruing Loans
	0-29 Days Past Due		30-89 Days Past Due		90 Days or More Past Due		Total		90 Days or More Past Due and Accruing		Total Non-Performing Loans
Loans held-for-investment:
Real estate loans:
Commercial
LTV => 35%
Substandard	$	432	$	314	$	2,305	$	3,051	$	—	$	3,051
Total commercial	432		314		2,305		3,051		—		3,051
One-to-four family residential
LTV < 60%
Substandard	—		206		328		534		—		534
LTV => 60%
Substandard	—		—		39		39		—		39
Total one-to-four family residential	—		206		367		573		—		573
Home equity and lines of credit
Substandard	79		—		—		79		—		79
Total home equity and lines of credit	79		—		—		79		—		79
Commercial and industrial loans
Substandard	—		—		72		72		—		72
Total commercial and industrial loans	—		—		72		72		—		72
Total non-performing loans held-for-investment, originated	511		520		2,744		3,775		—		3,775
Loans acquired:
Real estate loans:
Commercial
LTV < 35%
Substandard	—		—		205		205		—		205
LTV => 35%
Substandard	—		773		58		831		—		831
Total commercial	—		773		263		1,036		—		1,036
One-to-four family residential
LTV < 60%
Substandard	—		201		—		201		27		228
Total one-to-four family residential	—		201		—		201		27		228
Multifamily
LTV => 35%
Substandard	—		417		—		417		—		417
Total multifamily	—		417		—		417		—		417
Home equity and lines of credit
Substandard	—		28		49		77		—		77
Total home equity and lines of credit	—		28		49		77		—		77
Commercial and industrial loans
Substandard	—		—		2		2		—		2
Total commercial and industrial loans	—		—		2		2		—		2
Other loans - Pass	—		—		—		—		1		1
Total non-performing loans acquired	—		1,419		314		1,733		28		1,761
Total non-performing loans	$	511	$	1,939	$	3,058	$	5,508	$	28	$	5,536

Table of Contents

NORTHFIELD BANCORP, INC.

Notes to Unaudited Consolidated Financial Statements - (Continued)

The following tables set forth the detail and delinquency status of originated and acquired loans held-for-investment, net of deferred fees and costs, by performing and non-performing loans at September 30, 2018 , and December 31, 2017 (in thousands):



	September 30, 2018
	Performing (Accruing) Loans
	0-29 Days Past Due		30-89 Days Past Due		Total		Non-Performing Loans		Total Loans Receivable, net
Loans held-for-investment:
Real estate loans:
Commercial
LTV < 35%
Pass	$	70,369	$	—	$	70,369	$	—	$	70,369
Special Mention	—		399		399		—		399
Total	70,369		399		70,768		—		70,768
LTV => 35%
Pass	420,158		—		420,158		—		420,158
Special Mention	1,148		—		1,148		—		1,148
Substandard	7,455		—		7,455		3,696		11,151
Total	428,761		—		428,761		3,696		432,457
Total commercial	499,130		399		499,529		3,696		503,225
One-to-four family residential
LTV < 60%
Pass	53,307		2,458		55,765		—		55,765
Special Mention	—		665		665		—		665
Substandard	905		—		905		517		1,422
Total	54,212		3,123		57,335		517		57,852
LTV => 60%
Pass	34,948		235		35,183		—		35,183
Substandard	535		—		535		33		568
Total	35,483		235		35,718		33		35,751
Total one-to-four family residential	89,695		3,358		93,053		550		93,603
Construction and land
Pass	27,112		—		27,112		—		27,112
Total construction and land	27,112		—		27,112		—		27,112
Multifamily
LTV < 35%
Pass	154,512		—		154,512		—		154,512
Total	154,512		—		154,512		—		154,512
LTV => 35%
Pass	1,693,946		887		1,694,833		—		1,694,833
Special Mention	620		—		620		—		620
Substandard	80		1,230		1,310		—		1,310
Total	1,694,646		2,117		1,696,763		—		1,696,763
Total multifamily	1,849,158		2,117		1,851,275		—		1,851,275
Home equity and lines of credit
Pass	77,065		69		77,134		—		77,134
Special Mention	27		—		27		—		27
Substandard	139		—		139		75		214
Total home equity and lines of credit	77,231		69		77,300		75		77,375
Commercial and industrial
Pass	43,058		199		43,257		—		43,257
Special Mention	396		97		493		—		493
Substandard	101		—		101		—		101
Total commercial and industrial	43,555		296		43,851		—		43,851

Table of Contents

NORTHFIELD BANCORP, INC.

Notes to Unaudited Consolidated Financial Statements - (Continued)



	September 30, 2018
	Performing (Accruing) Loans (Continued)
	0-29 Days Past Due		30-89 Days Past Due		Total		Non-Performing Loans		Total Loans Receivable, net
Other loans - Pass	1,375		—		1,375		—		1,375
Total originated loans held-for-investment	2,587,256		6,239		2,593,495		4,321		2,597,816
Acquired loans:
Real estate loans:
One-to-four family residential
LTV < 60%
Pass	219,658		1,991		221,649		—		221,649
Special Mention	422		—		422		—		422
Substandard	71		—		71		376		447
Total	220,151		1,991		222,142		376		222,518
LTV => 60%
Pass	20,547		274		20,821		—		20,821
Substandard	—		—		—		247		247
Total	20,547		274		20,821		247		21,068
Total one-to-four family residential	240,698		2,265		242,963		623		243,586
Commercial
LTV < 35%
Pass	49,160		2,257		51,417		—		51,417
Special Mention	87		69		156		—		156
Substandard	—		83		83		289		372
Total	49,247		2,409		51,656		289		51,945
LTV => 35%
Pass	85,307		457		85,764		—		85,764
Special Mention	—		130		130		—		130
Substandard	3,608		415		4,023		4,143		8,166
Total	88,915		1,002		89,917		4,143		94,060
Total commercial	138,162		3,411		141,573		4,432		146,005
Construction and land
Pass	13,556		—		13,556		—		13,556
Total construction and land	13,556		—		13,556		—		13,556
Multifamily
LTV < 35%
Pass	145,005		—		145,005		—		145,005
Special Mention	55		—		55		—		55
Substandard	—		—		—		152		152
Total	145,060		—		145,060		152		145,212
LTV => 35%
Pass	7,781		—		7,781		—		7,781
Substandard	—		—		—		415		415
Total	7,781		—		7,781		415		8,196
Total multifamily	152,841		—		152,841		567		153,408
Home equity and lines of credit
Pass	18,111		11		18,122		—		18,122
Substandard	80		—		80		77		157
Total home equity and lines of credit	18,191		11		18,202		77		18,279
Commercial and industrial
Pass	13,668		—		13,668		—		13,668
Total commercial and industrial	13,668		—		13,668		—		13,668
Other loans - Pass	15		—		15		—		15
Total loans acquired	577,131		5,687		582,818		5,699		588,517
	$	3,164,387	$	11,926	$	3,176,313	$	10,020	$	3,186,333

Table of Contents

NORTHFIELD BANCORP, INC.

Notes to Unaudited Consolidated Financial Statements - (Continued)



	December 31, 2017
	Performing (Accruing) Loans
	0-29 Days Past Due		30-89 Days Past Due		Total		Non-Performing Loans		Total Loans Receivable, net
Loans held-for-investment:
Real estate loans:
Commercial
LTV < 35%
Pass	$	84,620	$	—	$	84,620	—		$	84,620
Special Mention	—		410		410		—		410
Total	84,620		410		85,030		—		85,030
LTV => 35%
Pass	346,229		628		346,857		—		346,857
Special Mention	832		1,338		2,170		—		2,170
Substandard	7,675		998		8,673		3,051		11,724
Total	354,736		2,964		357,700		3,051		360,751
Total commercial	439,356		3,374		442,730		3,051		445,781
One-to-four family residential
LTV < 60%
Pass	57,907		2,493		60,400		—		60,400
Special Mention	—		683		683		—		683
Substandard	322		614		936		534		1,470
Total	58,229		3,790		62,019		534		62,553
LTV => 60%
Pass	38,504		—		38,504		—		38,504
Substandard	554		—		554		39		593
Total	39,058		—		39,058		39		39,097
Total one-to-four family residential	97,287		3,790		101,077		573		101,650
Construction and land
Pass	34,614		6		34,620		—		34,620
Total construction and land	34,614		6		34,620		—		34,620
Multifamily
LTV < 35%
Pass	131,488		304		131,792		—		131,792
Total	131,488		304		131,792		—		131,792
LTV => 35%
Pass	1,603,714		233		1,603,947		—		1,603,947
Special Mention	638		1,259		1,897		—		1,897
Substandard	83		1,501		1,584		—		1,584
Total	1,604,435		2,993		1,607,428		—		1,607,428
Total multifamily	1,735,923		3,297		1,739,220		—		1,739,220
Home equity and lines of credit
Pass	67,426		—		67,426		—		67,426
Special Mention	28		—		28		—		28
Substandard	146		—		146		79		225
Total home equity and lines of credit	67,600		—		67,600		79		67,679
Commercial and industrial loans
Pass	34,003		138		34,141		—		34,141
Special Mention	547		24		571		—		571
Substandard	109		—		109		72		181
Total commercial and industrial loans	34,659		162		34,821		72		34,893
Other loans - Pass	1,403		29		1,432		—		1,432
Total originated loans held-for-investment	$	2,410,842	$	10,658	$	2,421,500	$	3,775	$	2,425,275

Table of Contents

NORTHFIELD BANCORP, INC.

Notes to Unaudited Consolidated Financial Statements - (Continued)



	December 31, 2017
	Performing (Accruing) Loans
	0-29 Days Past Due		30-89 Days Past Due		Total		Non-Performing Loans		Total Loans Receivable, net
Loans Acquired
Real estate loans:
One-to-four family residential
LTV < 60%
Pass	250,149		224		250,373		—		250,373
Special Mention	455		—		455		—		455
Substandard	417		150		567		228		795
Total	251,021		374		251,395		228		251,623
LTV => 60%
Pass	23,295		—		23,295		—		23,295
Substandard	135		—		135		—		135
Total	23,430		—		23,430		—		23,430
Total one-to-four family residential	274,451		374		274,825		228		275,053
Commercial
LTV < 35%
Pass	50,035		70		50,105		—		50,105
Special Mention	91		—		91		—		91
Substandard	—		181		181		205		386
Total	50,126		251		50,377		205		50,582
LTV => 35%
Pass	108,125		158		108,283		—		108,283
Special Mention	—		133		133		—		133
Substandard	3,703		430		4,133		831		4,964
Total	111,828		721		112,549		831		113,380
Total commercial	161,954		972		162,926		1,036		163,962
Construction and land
Pass	17,201		—		17,201		—		17,201
Total construction and land	17,201		—		17,201		—		17,201
Multifamily
LTV < 35%
Pass	189,551		—		189,551		—		189,551
Special Mention	78		—		78		—		78
Substandard	153		—		153		—		153
Total	189,782		—		189,782		—		189,782
LTV => 35%
Pass	8,950		—		8,950		—		8,950
Substandard	—		—		—		417		417
Total	8,950		—		8,950		417		9,367
Total multifamily	198,732		—		198,732		417		199,149
Home equity and lines of credit
Pass	20,291		—		20,291		—		20,291
Substandard	87		—		87		77		164
Total home equity and lines of credit	20,378		—		20,378		77		20,455
Commercial and industrial loans
Pass	16,904		40		16,944		—		16,944
Substandard	—		—		—		2		2
Total commercial and industrial loans	16,904		40		16,944		2		16,946
Other	36		—		36		1		37
Total loans acquired	689,656		1,386		691,042		1,761		692,803
	$	3,100,498	$	12,044	$	3,112,542	$	5,536	$	3,118,078

Table of Contents

NORTHFIELD BANCORP, INC.

Notes to Unaudited Consolidated Financial Statements - (Continued)

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



	September 30, 2018							December 31, 2017
	Recorded Investment		Unpaid Principal Balance		Related Allowance			Recorded Investment		Unpaid Principal Balance		Related Allowance
With No Allowance Recorded:
Real estate loans:
Commercial
LTV < 35%
Substandard	$	—	$	139	$	—		$	—	$	139	$	—
LTV => 35%
Pass	4,569		5,455		—			6,263		7,150		—
Substandard	11,706		12,522		—			9,745		10,560		—
One-to-four family residential
LTV < 60%
Pass	1,546		1,618		—			1,189		1,254		—
Substandard	246		246		—			251		251		—
LTV => 60%
Pass	131		158		—			136		161		—
Substandard	127		279		—			135		286		—
Multifamily
LTV < 35%
Substandard	152		152		—			153		153		—
LTV => 35%
Pass	41		512		—			1,309		1,780		—
Substandard	1,230		1,230		—			—		—		—
Home equity and lines of credit
Pass	29		29		—			33		33		—
Commercial and industrial loans
Substandard	54		198		—			135		135		—
With a Related Allowance Recorded:
Real estate loans:
Commercial
LTV => 35%
Pass	1,447		1,447		(1		)	—		—		—
Substandard	1,336		2,192		(500		)	—		—		—
One-to-four family residential
LTV < 60%
Pass	—		—		—			411		411		(7		)
Substandard	663		663		(19		)	997		997		(49		)
LTV => 60%
Pass	—		—		—			268		268		(19		)
Home equity and lines of credit
Substandard	34		34		(5		)	36		36		(4		)
Commercial and industrial loans
Special Mention	22		22		(4		)	24		24		(3		)
Total:
Real estate loans
Commercial	19,058		21,755		(501		)	16,008		17,849		—
One-to-four family residential	2,713		2,964		(19		)	3,387		3,628		(75		)
Multifamily	1,423		1,894		—			1,462		1,933		—
Home equity and lines of credit	63		63		(5		)	69		69		(4		)
Commercial and industrial loans	76		220		(4		)	159		159		(3		)
	$	23,333	$	26,896	$	(529	)	$	21,085	$	23,638	$	(82	)

Table of Contents

NORTHFIELD BANCORP, INC.

Notes to Unaudited Consolidated Financial Statements - (Continued)

Included in the above table at September 30, 2018 , are impaired loans with carrying balances of $15.3 million that were not written down by charge-offs or for which there are no specific reserves in our allowance for loan losses. Included in impaired loans at December 31, 2017 , are loans with carrying balances of $14.5 million that were not written down by charge-offs or for which there are no specific reserves in our allowance for loan losses. Loans not written down by charge-offs or specific reserves at September 30, 2018 , and December 31, 2017 , are considered to have sufficient collateral values, less costs to sell, to support the carrying balances of the loans.

The following table summarizes the average recorded investment in originated and acquired impaired loans (excluding PCI loans) and interest recognized on impaired loans as of, and for, the three and nine months ended September 30, 2018 , and September 30, 2017 (in thousands):



	Three Months Ended								Nine Months Ended
	September 30, 2018				September 30, 2017				September 30, 2018				September 30, 2017
	Average Recorded Investment		Interest Income		Average Recorded Investment		Interest Income		Average Recorded Investment		Interest Income		Average Recorded Investment		Interest Income
With No Allowance Recorded:
Real estate loans:
Commercial
LTV < 35%
Substandard	$	—	$	—	$	—	$	18	$	—	$	—	$	—	$	39
LTV => 35%
Pass	4,601		64		5,770		67		5,040		193		5,330		199
Substandard	10,657		184		12,434		151		10,187		334		13,066		406
One-to-four family residential
LTV < 60%
Pass	1,559		13		911		14		1,371		40		770		3
Substandard	243		4		418		4		247		9		402		10
LTV => 60%
Pass	132		1		69		1		200		6		34		42
Special Mention	—		—		—		1		—		—		—		2
Substandard	126		6		206		3		130		9		328		10
Multifamily
LTV < 35%
Substandard	152		4		154		2		152		5		154		5
LTV => 35%
Pass	43		4		692		12		361		12		377		40
Substandard	1,230		22		—		—		926		49		—		—
Home equity and lines of credit
Pass	30		—		36		1		31		1		37		2
Commercial and industrial loans
Substandard	92		—		140		—		113		—		125		—
With a Related Allowance Recorded:
Real estate loans:
Commercial
LTV => 35%
Pass	1,457		19		—		—		1,100		58		—		—
Substandard	668		—		—		—		334		—		505		—
One-to-four family residential
LTV < 60%
Pass	—		2		207		2		205		5		103		5
Substandard	667		4		1,353		5		752		13		1,332		13
LTV => 60%
Pass	—		—		271		4		67		—		272		15
Substandard	—		—		—		—		—		—		190		—
Multifamily
LTV => 35%

Table of Contents

NORTHFIELD BANCORP, INC.

Notes to Unaudited Consolidated Financial Statements - (Continued)



	Three Months Ended								Nine Months Ended
	September 30, 2018				September 30, 2017				September 30, 2018				September 30, 2017
	Average Recorded Investment		Interest Income		Average Recorded Investment		Interest Income		Average Recorded Investment		Interest Income		Average Recorded Investment		Interest Income
Pass	—		—		642		—		—		—		972		—
Substandard	—		—		—		—		—		—		225		—
Home equity and lines of credit
Pass	—		—		126		—		—		—		191		4
Substandard	34		1		37		—		35		1		38		1
Commercial and industrial loans
Special Mention	22		—		25		—		23		1		25		1
Total:
Real estate loans
Commercial	17,383		267		18,204		236		16,661		585		18,901		644
One-to-four family residential	2,727		30		3,435		34		2,972		82		3,431		100
Multifamily	1,425		30		1,488		14		1,439		66		1,728		45
Home equity and lines of credit	64		1		199		1		66		2		266		7
Commercial and industrial loans	114		—		165		—		136		1		150		1
	$	21,713	$	328	$	23,491	$	285	$	21,274	$	736	$	24,476	$	797

There was one one-to-four family residential loan modified as a troubled debt restructuring (TDR) during the three and nine months ended September 30, 2018. This loan had a pre- and post-modification balance of $6,400 as of the date of modification, and was restructured to receive a reduced interest rate. There were no loans modified as troubled debt restructurings (TDRs) during the three months ended September 30, 2017. There was one one-to-four family residential loan modified as a TDR during the nine months ended September 30, 2017. This loan had a pre- and post-modification balance of $256,000 as of the date of modification, and was restructured to receive a reduced interest rate.

At September 30, 2018 , and December 31, 2017 , we had TDRs of $17.1 million and $18.3 million , respectively.

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

At September 30, 2018 , there were no TDR loans that were restructured during the preceding twelve months ended September 30, 2018 , that subsequently defaulted.

Note 6 – Deposits

Deposits account balances are summarized as follows (in thousands):



	September 30, 2018		December 31, 2017
Non-interest-bearing demand	$	395,500	$	407,267
Interest-bearing negotiable orders of withdrawal (NOW)	425,722		465,140
Savings and money market	1,265,114		1,225,643
Certificates of deposit	1,054,932		738,929
Total deposits	$	3,141,268	$	2,836,979

Interest expense on deposit accounts is summarized for the periods indicated (in thousands):



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2018		2017		2018		2017
Negotiable orders of withdrawal, savings, and money market	$	2,691	$	2,033	$	7,146	$	6,142
Certificates of deposit	4,902		2,135		11,708		5,545
Total interest expense on deposit accounts	$	7,593	$	4,168	$	18,854	$	11,687

Note 7 – Equity Incentive Plan

The following table is a summary of the Company’s stock options outstanding as of September 30, 2018 , and changes therein during the nine months then ended.



	Number of Stock Options		Weighted Average Grant Date Fair Value		Weighted Average Exercise Price		Weighted Average Contractual Life (years)
Outstanding - December 31, 2017	4,620,687		$	3.51	$	11.82	5.17
Forfeited	(23,378	)	3.18		10.68		—
Exercised	(1,155,774	)	2.52		7.85		—
Outstanding - September 30, 2018	3,441,535		3.84		13.16		5.58
Exercisable - September 30, 2018	2,602,824		3.77		12.80		5.29

Expected future stock option expense related to the non-vested options outstanding as of September 30, 2018 , is $2.1 million over a weighted average period of 1.25 years.

The following is a summary of the status of the Company’s restricted stock awards as of September 30, 2018 , and changes therein during the nine months then ended.



	Number of Shares Awarded		Weighted Average Grant Date Fair Value
Non-vested at December 31, 2017	585,895		$	14.05
Granted	15,000		16.48
Vested	(257,973	)	13.73
Forfeited	(4,960	)	14.18
Non-vested at September 30, 2018	337,962		$	14.39

Expected future stock award expense related to the non-vested restricted share awards as of September 30, 2018 , is $3.2 million over a weighted average period of 1.27 years.

During the three months ended September 30, 2018 and 2017, the Company recorded $1.4 million and $1.6 million , respectively, of stock-based compensation related to the above plans. During the nine months ended September 30, 2018 and 2017, the Company recorded $4.1 million and $4.8 million , respectively, of stock-based compensation related to the above plans.

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NORTHFIELD BANCORP, INC.

Notes to Unaudited Consolidated Financial Statements - (Continued)

Note 8 – Fair Value Measurements

The following tables present the assets reported on the consolidated balance sheets at their estimated fair value as of September 30, 2018 , and December 31, 2017 , by level within the fair value hierarchy as required by the Fair Value Measurements and Disclosures Topic of the Financial Accounting Standards Board ( “ FASB ” ) Accounting Standards Codification ( “ ASC ” ). Financial assets and liabilities are classified in their entirety based on the level of input that is significant to the fair value measurement. The fair value hierarchy is as follows:


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

•

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


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

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

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NORTHFIELD BANCORP, INC.

Notes to Unaudited Consolidated Financial Statements - (Continued)



	Fair Value Measurements at September 30, 2018 Using:
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in thousands)
Measured on a recurring basis:
Assets:
Investment securities:
Debt securities available-for-sale:
Mortgage-backed securities:
Pass-through certificates:
GSE	$	299,471	$	—	$	299,471	$	—
REMICs:
GSE	257,182		—		257,182		—
Non-GSE	60		—		60		—
	556,713		—		556,713		—
Other debt securities
Municipal bonds	278		—		278		—
Corporate bonds	183,527		—		183,527		—
Total debt securities available-for-sale	183,805		—		183,805		—
Trading securities	10,670		10,670		—		—
Equity securities	148		148		—		—
Total	$	751,336	$	10,818	$	740,518	$	—
Measured on a non-recurring basis:
Assets:
Impaired loans:
Real estate loans:
Commercial real estate	$	6,680	$	—	$	—	$	6,680
One-to-four family residential mortgage	771		—		—		771
Multifamily	42		—		—		42
Home equity and lines of credit	28		—		—		28
Total impaired real estate loans	7,521		—		—		7,521
Commercial and industrial loans	17		—		—		17
Total	$	7,538	$	—	$	—	$	7,538

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NORTHFIELD BANCORP, INC.

Notes to Unaudited Consolidated Financial Statements - (Continued)



	Fair Value Measurements at December 31, 2017 Using:
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in thousands)
Measured on a recurring basis:
Assets:
Investment securities:
Debt securities available-for-sale:
Mortgage-backed securities:
Pass-through certificates:
GSE	$	178,295	$	—	$	178,295	$	—
REMICs:
GSE	266,929		—		266,929		—
Non-GSE	79		—		79		—
	445,303		—		445,303		—
Other debt securities
Municipal bonds	349		—		349		—
Corporate bonds	68,130		—		68,130		—
Total debt securities available-for-sale	68,479		—		68,479		—
Trading securities	9,597		9,597		—		—
Equity securities	323		323		—		—
Total	$	523,702	$	9,920	$	513,782	$	—
Measured on a non-recurring basis:
Assets:
Impaired loans:
Real estate loans:
Commercial real estate	$	4,645	$	—	$	—	$	4,645
One-to-four family residential mortgage	1,735		—		—		1,735
Multifamily	51		—		—		51
Home equity and lines of credit	31		—		—		31
Total impaired real estate loans	6,462		—		—		6,462
Commercial and industrial loans	21		—		—		21
Other real estate owned	850		—		—		850
Total	$	7,333	$	—	$	—	$	7,333

The following table presents qualitative information for Level 3 assets measured at fair value on a non-recurring basis at September 30, 2018 , and December 31, 2017 (dollars in thousands):



	Fair Value				Valuation Methodology	Unobservable Inputs	Range of Inputs
	September 30, 2018		December 31, 2017				September 30, 2018	December 31, 2017
Impaired loans	$	7,538	$	6,483	Appraisals	Discount for costs to sell	7.0%	7.0%
						Discount for quick sale	10.0%	10.0%
					Discounted cash flows	Interest rates	3.13% to 6.25%	3.13% to 6.5%
Other real estate owned	$	—	$	850	Appraisals	Discount for costs to sell	7.0%	7.0%

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NORTHFIELD BANCORP, INC.

Notes to Unaudited Consolidated Financial Statements - (Continued)

The valuation techniques described below were used to measure fair value of financial instruments in the tables below on a recurring basis and a non-recurring basis as of September 30, 2018, and December 31, 2017.

Debt Securities Available for Sale: The estimated fair values for mortgage-backed securities, corporate, and other debt securities are obtained from an independent nationally recognized third-party pricing service. The estimated fair values are derived primarily from cash flow models, which include assumptions for interest rates, credit losses, and prepayment speeds. Broker/dealer quotes are utilized as well, when such quotes are available and deemed representative of the market. The significant inputs utilized in the cash flow models are based on market data obtained from sources independent of the Company (Observable Inputs), and are therefore classified as Level 2 within the fair value hierarchy. There were no transfers of securities between Level 1 and Level 2 during the nine months ended September 30, 2018 .

Trading Securities: Fair values are derived from quoted market prices in active markets. The assets consist of publicly traded mutual funds.

Equity Securities: Fair values of equity securities consisting of publicly traded mutual funds are derived from quoted market prices in active markets.

Impaired Loans: At September 30, 2018 , and December 31, 2017 , the Company had impaired loans held-for-investment (excluding PCI loans) with outstanding principal balances of $11.4 million and $8.8 million , respectively, which were recorded at their estimated fair value of $7.5 million and $6.5 million , respectively. The Company recorded a net increase in the specific reserve for impaired loans of $447,000 for the nine months ended September 30, 2018 and a net decrease in the specific reserve for impaired loans of $246,000 for the nine months ended September 30, 2017 , utilizing level 3 inputs. For purposes of estimating the fair value of impaired loans, management utilizes independent appraisals, if the loan is collateral dependent, adjusted downward by management, as necessary, for changes in relevant valuation factors subsequent to the appraisal date, or the present value of expected future cash flows for non-collateral dependent loans and troubled debt restructurings.

Other Real Estate Owned (OREO): At September 30, 2018 , the Company had no assets acquired through foreclosure, or deed in lieu of foreclosure, as compared to $850,000 at December 31, 2017. These assets are recorded at estimated fair value, less estimated selling costs when acquired, establishing a new cost basis. Estimated fair value is generally based on independent appraisals. These appraisals include adjustments to comparable assets based on the appraisers’ market knowledge and experience, and are considered Level 3 inputs. When an asset is acquired, the excess of the loan balance over fair value, less estimated selling costs, is charged to the allowance for loan losses. If the estimated fair value of the asset declines, a write-down is recorded through non-interest expense. The valuation of foreclosed assets is subjective in nature and may be adjusted in the future because of changes in economic conditions.

In addition, the Company may be required, from time to time, to measure the fair value of certain other financial assets on a nonrecurring basis in accordance with U.S. GAAP. The adjustments to fair value usually result from the application of lower-of-cost-or-market accounting or write downs of individual assets.

Fair Value of Financial Instruments

The FASB ASC Topic for Financial Instruments requires disclosure of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring or non-recurring basis. The methodologies for estimating the fair value of financial assets and financial liabilities that are measured at fair value on a recurring or non-recurring basis are discussed above. The following methods and assumptions were used to estimate the fair value of other financial assets and financial liabilities not already discussed above:


(a)	Cash and Cash Equivalents

Cash and cash equivalents are short-term in nature with original maturities of three months or less; the carrying amount approximates fair value. Certificates of deposit having original terms of six-months or less; the carrying value generally approximates fair value. Certificates of deposit with an original maturity of six months or greater; the fair value is derived from discounted cash flows.

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NORTHFIELD BANCORP, INC.

Notes to Unaudited Consolidated Financial Statements - (Continued)


(b)	Debt Securities (Held to Maturity)

The estimated fair values for substantially all of our securities are obtained from an independent nationally recognized pricing service. The independent pricing service utilizes market prices of same or similar securities whenever such prices are available. Prices involving distressed sellers are not utilized in determining fair value. Where necessary, the independent third-party pricing service estimates fair value using models employing techniques such as discounted cash flow analysis. The assumptions used in these models typically include assumptions for interest rates, credit losses, and prepayments, utilizing market observable data where available.


(c)	Investments in Equity Securities at Net Asset Value Per Share

The Company uses net asset value as a practical expedient to record its investment in a private SBA Loan Fund since the shares in the fund are not publicly traded, do not have a readily determinable fair value and the net asset value per share is calculated in a manner consistent with the measurement principles of an investment company.


(d)	Federal Home Loan Bank of New York Stock

The fair value for Federal Home Loan Bank of New York (FHLB) stock is its carrying value, since this is the amount for which it could be redeemed and there is no active market for this stock.


(e)	Loans (Held-for-Investment)

Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type such as originated and purchased, and further segregated by residential mortgage, construction, land, multifamily, commercial and consumer. Each loan category is further segmented into amortizing and non-amortizing and fixed and adjustable rate interest terms and by performing and nonperforming categories. The fair value of loans is estimated using a discounted cash flow analysis. The discount rates used to determine fair value use interest rate spreads that reflect factors such as liquidity, credit, and nonperformance risk of the loans.


(f)	Loans (Held-for-Sale)

Held-for-sale loans are carried at the lower of aggregate cost or estimated fair value, less costs to sell, and therefore fair value is equal to carrying value.


(g)	Deposits

The fair value of deposits with no stated maturity, such as non-interest bearing demand deposits, savings, NOW and money market accounts, is equal to the amount payable on demand. The fair value of certificates of deposit is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for deposits of similar remaining maturities.


(h)	Commitments to Extend Credit and Standby Letters of Credit

The fair value of commitments to extend credit and standby letters of credit is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair value of off‑balance sheet commitments is insignificant and therefore not included in the following table.

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NORTHFIELD BANCORP, INC.

Notes to Unaudited Consolidated Financial Statements - (Continued)


(i)	Borrowed Funds

The fair value of borrowed funds is estimated by discounting future cash flows based on rates currently available for debt with similar terms and remaining maturity.


(j)	Advance Payments by Borrowers for Taxes and Insurance

Advance payments by borrowers for taxes and insurance have no stated maturity; the fair value is equal to the amount currently payable.

The estimated fair value of the Company’s financial instruments at September 30, 2018 , and December 31, 2017 , is presented in the following tables (in thousands):



	September 30, 2018
			Estimated Fair Value
	Carrying Value		Level 1		Level 2		Level 3		Total
Financial assets:
Cash and cash equivalents	$	58,735	$	58,735	$	—	$	—	$	58,735
Trading securities	10,670		10,670		—		—		10,670
Debt securities available-for-sale	740,518		—		740,518		—		740,518
Debt securities held-to-maturity	9,560		—		9,186		—		9,186
Equity securities ⁽¹⁾	148		148		—		—		148
Federal Home Loan Bank of New York stock, at cost	23,960		—		23,960		—		23,960
Net loans held-for-investment	3,179,181		—		—		3,210,299		3,210,299
Financial liabilities:
Deposits	$	3,141,268	$	—	$	3,143,948	$	—	$	3,143,948
Borrowed funds	441,191		—		432,369		—		432,369
Advance payments by borrowers for taxes and insurance	16,999		—		16,999		—		16,999



	December 31, 2017
			Estimated Fair Value
	Carrying Value		Level 1		Level 2		Level 3		Total
Financial assets:
Cash and cash equivalents	$	57,839	$	57,839	$	—	$	—	$	57,839
Trading securities	9,597		9,597		—		—		9,597
Debt securities available-for-sale	513,782		—		513,782		—		513,782
Debt securities held-to-maturity	9,931		—		9,892		—		9,892
Equity securities ⁽¹⁾	323		323		—				323
Federal Home Loan Bank of New York stock, at cost	25,046		—		25,046		—		25,046
Net loans held-for-investment	3,114,659		—		—		3,157,829		3,157,829
Financial liabilities:
Deposits	$	2,836,979	$	—	$	2,839,666	$	—	$	2,839,666
Borrowed funds	471,549		—		466,625		—		466,625
Advance payments by borrowers for taxes and insurance	14,798		—		14,798		—		14,798

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

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NORTHFIELD BANCORP, INC.

Notes to Unaudited Consolidated Financial Statements - (Continued)

Limitations

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected losses, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Fair value estimates are based on existing on-and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.

Note 9 – Earnings Per Share

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

Diluted earnings per share is computed using the same method as basic earnings per share, but reflects the potential dilution that could occur if stock options and unvested shares of restricted stock were exercised and converted into common stock. These potentially dilutive shares would then be included in the weighted average number of shares outstanding for the period using the treasury stock method. When applying the treasury stock method we added the assumed proceeds from option exercises and the average unamortized compensation costs related to unvested shares of restricted stock and stock options. We then divided this sum by our average stock price for the period to calculate assumed shares repurchased. The excess of the number of shares issuable over the number of shares assumed to be repurchased is added to basic weighted average common shares to calculate diluted earnings per share.

The following is a summary of the Company’s earnings per share calculations and reconciliation of basic to diluted earnings per share for the periods indicated (dollars in thousands, except per share data):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Net income available to common stockholders	$	9,076	$	8,126	$	30,132	$	26,484

Weighted average shares outstanding-basic	46,604,051		45,492,713		46,192,273		45,257,199
Effect of non-vested restricted stock and stock options outstanding	690,594		1,248,510		945,134		1,577,148
Weighted average shares outstanding-diluted	47,294,645		46,741,223		47,137,407		46,834,347
Earnings per share-basic	$	0.19	$	0.18	$	0.65	$	0.59
Earnings per share-diluted	$	0.19	$	0.17	$	0.64	$	0.57
Anti-dilutive shares	190,444		1,091,464		645,011		393,821

Note 10 – Commitments

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

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NORTHFIELD BANCORP, INC.

Notes to Unaudited Consolidated Financial Statements - (Continued)

Note 11 – Revenue Recognition

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

The following table summarizes non-interest income for the periods indicated (in thousands):



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2018		2017		2018		2017
Fees and service charges for customer services:
Service charges	$	862	872		$	2,474	2,512
ATM and card interchange fees	317		304		897		848
Investment fees	62		62		231		203
Total fees and service charges for customer services	1,241		1,238		3,602		3,563
Income on bank owned life insurance	919		970		2,787		4,438
Gains on securities transactions, net	419		337		892		1,001
Other	58		70		205		197
Total non-interest income	$	2,637	$	2,615	$	7,486	$	9,199

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

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

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NORTHFIELD BANCORP, INC.

Notes to Unaudited Consolidated Financial Statements - (Continued)

Note 12 – Recently Issued and Adopted Accounting Pronouncements

Accounting Pronouncements Adopted in 2018

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

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

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

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NORTHFIELD BANCORP, INC.

Notes to Unaudited Consolidated Financial Statements - (Continued)

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

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

Accounting Pronouncements Not Yet Adopted

ASU 2018-14. In August 2018, the FASB issued ASU No. 2018-14, “Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans.” This ASU makes minor changes to the disclosure requirements for employers that sponsor defined benefit pension and/or other postretirement benefit plans. ASU 2018-14 is effective for fiscal years ending after December 15, 2020; early adoption is permitted. As ASU 2018-14 only revises disclosure requirements, it will not have an impact on the Company’s Consolidated Financial Statements.

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

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

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

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NORTHFIELD BANCORP, INC.

Notes to Unaudited Consolidated Financial Statements - (Continued)

ASU No. 2016-13. In June 2016, the FASB issued No. ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments , which requires credit losses on most financial assets measured at amortized cost and certain other instruments to be measured using an expected credit loss model (referred to as the current expected credit loss (“CECL”) model. Under this model, entities will estimate credit losses over the entire contractual term of the instrument from the date of initial recognition of that instrument. Current US GAAP is based on an incurred loss model that delays recognition of credit losses until it is probable the loss has been incurred. Accordingly, it is anticipated that credit losses will be recognized earlier under the CECL model than under the incurred loss model. ASU No. 2016-13 is effective for interim and annual reporting periods beginning after December 15, 2019; early adoption is permitted for interim and annual reporting periods beginning after December 15, 2018. The Company continues to evaluate the potential effect of adoption of this pronouncement on its consolidated financial statements by identifying key interpretive issues, assessing its processes, portfolio segmentation, model development, and identifying the data and system requirements against the guidance to determine what modifications may be required. As part of the evaluation process, the Company has established a CECL cross-function working group that includes individuals from various functional areas to assess processes and has contracted with a third-party vendor to implement enhanced modeling techniques that incorporate the loss measurement requirements in these amendments as part of adopting the ASU. The adoption of ASU No. 2016-13 may result in an increase in the allowance for loan losses as a result of changing from an incurred loss model, which encompasses allowances for current known and inherent losses within the portfolio, to an expected losses model, which encompasses allowances for losses expected to be incurred over the life of the portfolio. The extent of the effect is indeterminable at this time as it will depend upon the nature and characteristics of the Company's loan portfolio at the adoption date, as well as economic conditions and forecasts at that date.

ASU No. 2016-02. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) , which is intended to increase transparency and comparability of accounting for lease transactions. The ASU will require all leases to be recognized on the balance sheet as lease assets and lease liabilities and will require both quantitative and qualitative disclosures regarding key information about leasing arrangements. Lessor accounting is largely unchanged. Subsequent to the issuance of this Update, the FASB issued three additional ASUs that provide codification improvements and certain transition elections, including ASU No. 2018-11, which permits an additional transition method whereby an entity may elect to record a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Consequently, the entity’s reporting for the comparative periods presented in the financial statements in which the entity adopts the new lease requirements would continue to be in accordance with current GAAP (Topic 840), including disclosures. The Company plans to elect this transition method. The new guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within that reporting period. The Company is currently evaluating the potential effect of adoption of this pronouncement on its consolidated financial statements. The Company has several lease agreements, such as branch locations, which are currently considered operating leases, and therefore, not recognized on the Company’s consolidated balance sheets. The new guidance will require these lease agreements to be recognized on the consolidated balance sheets as a right-of-use asset and a corresponding lease liability. Therefore, the Company expects to record a gross-up of its consolidated balance sheets as a result of recognizing right of use assets and lease liabilities upon adoption. The impact upon the Company’s consolidated financial statements will be based on the present value of future minimum lease payments as adjusted for lease incentives for the population of leases on the date of adoption and interest rates on the date of adoption. As such, the amount is not yet known. The Company does not expect material changes to its consolidated results of operations as a result of the application of this guidance. The Company has contracted with a third-party leasing software vendor to aid in the transition to the new leasing guidance implementation and has begun preliminary testing of the functionality of the software.

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ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Statement Regarding Forward-Looking Statements

This Quarterly Report contains certain “forward-looking statements,” which can be identified by the use of such words as “estimate,” “project,” “believe,” “intend,” “anticipate,” “plan,” “seek,” “expect,” “annualized,” “could,” “may,” “should,” “will,” and words of similar meaning. These forward-looking statements include, but are not limited to:


•	statements of our goals, intentions, and expectations;


•	statements regarding our business plans, prospects, growth and operating strategies;


•	statements regarding the quality of our loan and investment portfolios; and


•	estimates of our risks and future costs and benefits.

These forward-looking statements are based on the current beliefs and expectations of our management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change.

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:


•	general economic conditions, either nationally or in our market areas, including employment prospects, real estate values and conditions, that are worse than expected;


•	competition among depository and other financial institutions;


•	inflation and changes in the interest rate environment that reduce our margins and yields or reduce the fair value of financial instruments;


•	adverse changes in the securities, credit markets or real estate values;


•	changes in laws, tax policies, or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements;


•	our ability to manage operations in the current economic conditions;


•	our ability to enter new markets successfully and capitalize on growth opportunities;


•	our ability to successfully integrate acquired entities;


•	changes in consumer demand, spending, borrowing and savings habits;


•	changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, or the Securities and Exchange Commission, or the Public Company Accounting Oversight Board;


•	cyber attacks, computer viruses and other technological risks that may breach the security of our websites or other systems to obtain unauthorized access to confidential information and destroy data or disable our systems;


•	technological changes that may be more difficult or expensive than expected;


•	changes in our organization, compensation, and benefit plans;


•	changes in the level of government support for housing finance;


•	changes in monetary or fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board (“FRB”)


•	the ability of third-party providers to perform their obligations to us;


•	the ability of the U.S. Government to manage federal debt limits;


•	significant increases in our loan losses, including increases that may result from the new authoritative accounting guidance known as the current expected credit loss (“CECL”) model which may increase the required level of our allowance for loan losses after adoption effective January 1, 2020;


•	changes in our income tax expense resulting from the impact of recently enacted state and federal corporate tax reform; and


•	changes in the financial condition, results of operations, or future prospects of issuers of securities that we own.

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Because of these and other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements. Accordingly, you should not place undue reliance on such statements.

Except as required by law, we disclaim any intention or obligation to update or revise any forward-looking statements after the date of this Quarterly Report on Form 10-Q, whether as a result of new information, future events or otherwise.

Critical Accounting Policies

Note 1 to the Company’s Audited Consolidated Financial Statements for the year ended December 31, 2017 , included in the Company’s Annual Report on Form 10-K, as supplemented by this report, contains a summary of significant accounting policies. Various elements of these accounting policies, by their nature, are inherently subject to estimation techniques, valuation assumptions and other subjective assessments. Certain assets are carried in the Consolidated Balance Sheets at estimated fair value or the lower of cost or estimated fair value. Policies with respect to the methodologies used to determine the allowance for loan losses, estimated cash flows of our purchased credit-impaired (“PCI”) loans, and judgments regarding the valuation of intangible assets and securities as well as the valuation allowance against deferred tax assets are the most critical accounting policies because they are important to the presentation of the Company’s financial condition and results of operations, involve a higher degree of complexity, and require management to make difficult and subjective judgments which often require assumptions or estimates about highly uncertain matters. The use of different judgments, assumptions, and estimates could result in material differences in the results of operations or financial condition. These critical accounting policies and their application are reviewed periodically and, at least annually, with the Audit Committee of the Board of Directors. For a further discussion of the critical accounting policies of the Company, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 .

Overview

This overview highlights selected information and may not contain all the information that is important to you in understanding our performance during the period. For a more complete understanding of trends, events, commitments, uncertainties, liquidity, capital resources, and critical accounting estimates, you should read this entire document carefully, as well as our Annual Report on Form 10-K for the year ended December 31, 2017 .

Net income was $30.1 million for the nine months ended September 30, 2018 , as compared to $26.5 million for the nine months ended September 30, 2017 . Basic and diluted earnings per common share were $0.65 and $0.64 , respectively, for the nine months ended September 30, 2018 , compared to basic and diluted earnings per common share of $0.59 and $0.57 , respectively, for the nine months ended September 30, 2017 . Earnings for the nine months ended September 30, 2018 benefited from a lower effective tax rate due to the enactment of the Tax Cuts and Jobs Act in the fourth quarter of 2017 (the “Tax Reform Act”), which reduced the federal statutory corporate tax rate to 21% from 35%. Earnings for the nine months ended September 30, 2018 , also benefited from excess tax benefits of $2.2 million, or $0.05 per diluted share, related to the exercise or vesting of equity awards. Earnings for the nine months ended September 30, 2017 , benefited from excess tax benefits of $2.3 million, or $0.05 per diluted share, related to the exercise or vesting of equity awards, as well as $1.5 million, or $0.03, per diluted share of tax-exempt income from bank-owned life insurance proceeds in excess of the cash surrender value of the policies. For the nine months ended September 30, 2018 , our return on average assets was 0.97% , as compared to 0.91% for the nine months ended September 30, 2017 . For the nine months ended September 30, 2018 , our return on average stockholders’ equity was 6.22% as compared to 5.57% for the nine months ended September 30, 2017 .

On July 1, 2018, the State of New Jersey enacted legislation that created a temporary surtax effective for tax years 2018 through 2021 and will require companies to file combined tax returns beginning in 2019. The legislation did not result in a material change to our net deferred tax asset or state tax expense in the September 30, 2018 quarter. Management continues to evaluate the effect of this legislation, including the issuance of regulations by the New Jersey Division of Taxation, on our net deferred tax asset and future tax expense.

Comparison of Financial Condition at September 30, 2018 , and December 31, 2017

Total assets increase d $295.0 million , or 7.4% , to $4.29 billion at September 30, 2018 , from $3.99 billion at December 31, 2017 . The increase was primarily due to an increase in our available-for sale debt securities portfolio of $226.7 million and an increase in loans held-for-investment, net, of $66.0 million .

The Company’s available-for-sale debt securities portfolio increased by $226.7 million , or 44.1% , to $740.5 million at September 30, 2018 , from $513.8 million at December 31, 2017 . The increase was primarily attributable to purchases of mortgage-backed and corporate securities, utilizing excess cash from deposit growth to invest in high quality shorter-term

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securities, partially offset by paydowns and sales. At September 30, 2018 , $556.7 million of the portfolio consisted of residential mortgage-backed securities issued or guaranteed by Fannie Mae, Freddie Mac, or Ginnie Mae. In addition, the Company held $183.5 million in corporate bonds, the majority of which were considered investment grade at September 30, 2018 , and $278,000 in municipal bonds. The effective duration of the securities portfolio at September 30, 2018 was 3.00 years.

As of September 30, 2018 , our commercial real estate concentration (as defined by regulatory guidance issued in 2006) to total risk-based capital was 406%. Management believes that Northfield Bank (the "Bank") has implemented appropriate risk management practices including risk assessments, board approved underwriting policies and related procedures, which include monitoring bank portfolio performance, performing market analysis (economic and real estate), and stressing of the Bank’s commercial real estate portfolio under severe adverse economic conditions. Although management believes the Bank has implemented appropriate policies and procedures to manage our commercial real estate concentration risk, the Bank’s regulators could require us to implement additional policies and procedures or could require us to maintain higher levels of regulatory capital, which might adversely affect our loan originations, ability to pay dividends, and profitability.

Loans held-for-investment, net, increase d $66.0 million to $3.21 billion at September 30, 2018 , from $3.14 billion at December 31, 2017 . Originated loans held-for-investment, net, totaled $2.60 billion at September 30, 2018 , as compared to $2.43 billion at December 31, 2017 . The increase was primarily due to an increase in multifamily real estate loans of $112.2 million , or 6.5% , to $1.85 billion at September 30, 2018 , from $1.74 billion at December 31, 2017 , and an increase in commercial real estate loans of $57.5 million , or 12.9% , to $502.7 million at September 30, 2018 , from $445.2 million at December 31, 2017 , partially offset by decreases in acquired loans and purchased credit-impaired ( “ PCI ” ) loans.

The following tables detail our multifamily real estate originations for the nine months ended September 30, 2018 and 2017 (dollars in thousands):



For the Nine Months Ended September 30, 2018
Multifamily Originations		Weighted Average Interest Rate	Weighted Average Loan-to-Value Ratio	Weighted Average Months to Next Rate Change or Maturity for Fixed Rate Loans	(F)ixed or (V)ariable	Amortization Term
$	256,442	3.88%	64%	78	V	25 to 30 Years
12,365		4.17%	39%	181	F	15 Years
$	268,807	3.89%	63%

For the Nine Months Ended September 30, 2017
Multifamily Originations		Weighted Average Interest Rate	Weighted Average Loan-to-Value Ratio	Weighted Average Months to Next Rate Change or Maturity for Fixed Rate Loans	(F)ixed or (V)ariable	Amortization Term
$	247,421	3.61%	60%	80	V	15 to 30 Years
750		5.07%	48%	1	V	25 Years
16,640		3.95%	44%	180	F	15 Years
$	264,811	3.63%	59%

Acquired loans decrease d by $104.3 million to $588.5 million at September 30, 2018 , from $692.8 million at December 31, 2017 , primarily due to paydowns of one-to-four family residential and multifamily loans with weighted average interest rates (net of the servicing fee retained by the originating bank) ranging from 2.45% to 3.05%, partially offset by purchases of one-to-four family residential loan pools during the first quarter of 2018, totaling $37.5 million.

The following table provides the details of the loan pools purchased during the nine months ended September 30, 2018 (dollars in thousands):

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Principal Amounts Purchased		Loan Type	Weighted Average Interest Rate ⁽¹⁾	Weighted Average Loan-to-Value Ratio	Weighted Average Months to Next Rate Change or Maturity for Fixed Rate Loans	(F)ixed or (V)ariable	Original Amortization Term
$	29,963	Residential	2.30%	55%	1	V	30 Years
4,368		Residential	3.67%	58%	346	F	15 - 30 Years
3,178		Residential	3.68%	60%	330	F	15 - 30 Years
$	37,509		2.58%	56%

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

The geographic locations of the properties collateralizing the loans purchased are as follows: 32.7% in New York, 29.9% in California, and 27.1% in Massachusetts, with the majority of the remaining balance in New Jersey.

The following table provides the details of the loans pools purchased during the nine months ended September 30, 2017 (dollars in thousands):



Purchase Amount		Loan Type	Weighted Average Interest Rate ⁽¹⁾	Weighted Average Loan-to-Value Ratio	Weighted Average Months to Next Rate Change or Maturity for Fixed Rate Loans	(F)ixed or (V)ariable	Original Amortization Term
$	29,286	Residential	2.89%	57%	1	V	30 Years
18,774		Multifamily	3.35%	55%	53	V	30 Years
3,399		Multifamily	3.40%	58%	46	F	30 Years
7,280		Multifamily	3.35%	51%	58	V	30 Years
$	58,739		3.12%	56%

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

The geographic locations of the properties collateralizing the loans are as follows: 63.9% in New York, 10.0% in California, and 26.1% in other states.

PCI loans totaled $20.5 million at September 30, 2018 , as compared to $22.7 million at December 31, 2017 . The majority of the PCI loan balance consists of loans acquired as part of a Federal Deposit Insurance Corporation-assisted transaction.

Other real estate owned decreased $850,000 to $0 at September 30, 2018 , from December 31, 2017 , due to the sale of the Company's single remaining property during the third quarter of 2018.

Total liabilities increase d $279.5 million , or 8.3% , to $3.63 billion at September 30, 2018 , from $3.35 billion at December 31, 2017 . The increase was primarily attributable to an increase in deposits of $304.3 million , partially offset by a decrease in borrowings of $30.4 million .

Deposits increase d $304.3 million , or 10.7% , to $3.14 billion at September 30, 2018 , as compared to $2.84 billion at December 31, 2017 . The increase was attributable to increase s of $266.7 million in certificates of deposit, $49.3 million in brokered deposits, and $88.4 million in savings accounts, partially offset by decreases of $51.2 million in transaction accounts, and $49.0 million in money market accounts.

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Borrowings and securities sold under agreements to repurchase decrease d by $30.4 million , or 6.4% , to $441.2 million at September 30, 2018 , from $471.5 million at December 31, 2017 . Management utilizes borrowings to mitigate interest rate risk, for short-term liquidity, and to a lesser extent as part of leverage strategies. The following is a table of term borrowing maturities (excluding capitalized leases and overnight borrowings) and the weighted average rate by year at September 30, 2018 (dollars in thousands):



Year	Amount	Weighted Average Rate
2018	$32,080	1.67%
2019	123,502	1.48%
2020	90,000	1.65%
2021	70,000	1.80%
2022	20,000	1.97%
Thereafter	100,000	2.91%
	$435,582	1.93%

Total stockholders’ equity increase d by $15.5 million to $654.4 million at September 30, 2018 , from $638.9 million at December 31, 2017 . The increase was primarily attributable to net income of $30.1 million for the nine months ended September 30, 2018 , and a $7.5 million increase related to ESOP and equity award activity. These increases were partially offset by dividend payments of $14.0 million and an $8.1 million increase in unrealized losses on our debt securities available-for-sale portfolio as a result of the increased interest rate environment.

Comparison of Operating Results for the Nine Months Ended September 30, 2018 and 2017

Net Income. Net income was $30.1 million and $26.5 million for the nine months ended September 30, 2018 , and September 30, 2017 , respectively. Significant variances from the comparable prior year period are as follows: a $2.3 million increase in net interest income, a $637,000 increase in the provision for loan losses, a $1.7 million decrease in non-interest income, and a $ 4.0 million decrease in income tax expense.

Interest Income . Interest income increased $10.1 million , or 10.3% , to $108.3 million for the nine months ended September 30, 2018 , from $98.3 million for the nine months ended September 30, 2017 , due to an increase in the average balance of interest-earning assets of $301.1 million , or 8.3% , and a seven basis point increase in the yields earned on average interest-earning assets. Interest income on loans increased by $5.6 million , primarily attributable to an increase in the average loan balances of $142.3 million and a six basis point increase in the average yield on loans. The Company accreted interest income related to its PCI loans of $3.1 million for the nine months ended September 30, 2018 , as compared to $4.1 million for the nine months ended September 30, 2017 . Interest income on loans for the nine months ended September 30, 2018 , reflected loan prepayment income of $1.5 million compared to $886,000 for the nine months ended September 30, 2017 . Interest income on securities increased by $4.0 million, attributable to an increase in the average securities balances of $154.7 million as well as a 33 basis point increase in interest rates on securities.

Interest Expense . Interest expense increased $7.8 million , or 45.0% , to $25.1 million for the nine months ended September 30, 2018 , as compared to $17.3 million for nine months ended September 30, 2017 , due to a $7.2 million increase in interest expense on deposits and a $623,000 increase in interest expense on borrowings. The increase in interest expense on deposits was attributed to a 30 basis point increase in the cost of interest-bearing deposits to 0.98% for the nine months ended September 30, 2018 , as compared to 0.68% for the comparable prior year period and an increase in the average balance of interest-bearing deposit accounts of $270.3 million , or 11.7% , due in large part to higher rates offered on savings and certificates of deposit accounts to remain competitive in the rising interest rate environment. The increase in interest expense on borrowed funds was attributed to a 26 basis point increase in the cost of borrowed funds to 1.77% for the nine months ended September 30, 2018 , as compared to 1.51% for the comparable prior year period, partially offset by a decrease in the average balance of borrowed funds of $27.1 million .

Net Interest Income . Net interest income for the nine months ended September 30, 2018 , increase d $2.3 million , or 2.8% , to $83.2 million , from $80.9 million for the nine months ended September 30, 2017 , primarily due to a $301.1 million , or 8.3% , increase in our average interest-earning assets, partially offset by a 15 basis point decrease in our net interest margin to 2.84% from 2.99% for the nine months ended September 30, 2017 . The increase in average interest-earning assets was due to increases in average loans outstanding of $142.3 million , average mortgage-backed securities of $93.7 million , average other securities of $61.0 million , and average interest-earning deposits in financial institutions of $5.4 million , partially offset by a decrease in average Federal Home Loan Bank of New York ( “FHLBNY”) stock of $1.2 million . The increase in average loans

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was primarily due to originated loan growth as well as loan pool purchases during the first quarter of 2018. Yields earned on interest-earning assets increased seven basis points to 3.70% for the nine months ended September 30, 2018 , from 3.63% for the nine months ended September 30, 2017 , driven by higher yields on all asset classes. The cost of interest-bearing liabilities increased 28 basis points to 1.10% for the current period as compared to 0.82% for the comparable prior year period, due to higher rates on interest-bearing deposits and borrowed funds.

Provision for Loan Losses . The provision for loan losses increase d by $637,000 to $2.0 million for the nine months ended September 30, 2018 , from $1.4 million for the nine months ended September 30, 2017 , primarily due to an increase in historical loss rates, driven by the increase in net charge-offs, and a specific reserve recorded on an impaired loan, partially offset by less loan growth for the nine months ended September 30, 2018 , as compared to the comparable prior year period. Net charge-offs for the nine months ended September 30, 2018 , were $481,000, as compared to net recoveries of $133,000 for the nine months ended September 30, 2017 . The increase in net charge-offs was primarily due to a $428,000 charge-off on an impaired commercial real estate loan in the current quarter.

Non-interest Income . Non-interest income decrease d $1.7 million , or 18.6% , to $7.5 million for the nine months ended September 30, 2018 , from $9.2 million for the nine months ended September 30, 2017 , primarily due to a decrease in income on bank owned life insurance, attributable to $1.5 million of insurance proceeds in excess of the related cash surrender value of the policies received in the first quarter of 2017, and a decrease of $109,000 in gains on securities transactions, net. Securities gains, net, during the nine months ended September 30, 2018 , included gains of $714,000 related to the Company’s trading portfolio, compared to gains of $1.0 million in the comparative prior year period. The trading portfolio is utilized to fund the Company’s deferred compensation obligation to certain employees and directors of the Company's deferred compensation plan (the "Plan"). The participants of 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 remained relatively stable at $51.3 million for the nine months ended September 30, 2018 , compared to $51.0 million for the nine months ended September 30, 2017 .

Income Tax Expense . The Company recorded income tax expense of $7.3 million for the nine months ended September 30, 2018 , compared to $11.3 million for the nine months ended September 30, 2017 . The effective tax rate for the nine months ended September 30, 2018 , was 19.5% compared to 29.9% for the nine months ended September 30, 2017 , reflecting the reduction of the federal statutory corporate tax rate to 21% from 35% by the Tax Reform Act, partially offset by lower excess tax benefits. Excess tax benefits were $2.2 million for the current period as compared to $2.3 million for the comparative prior year period. Excess tax benefits will fluctuate throughout the year based on the Company's stock price and timing of employee stock option exercises and vesting of other share-based awards. The Company has approximately 319,000 options outstanding at September 30, 2018, from its 2009 grants which expire on January 30, 2019, at a weighted average price of $7.09 per share and a weighted average grant date fair value of $2.30 per share. To the extent these options are exercised during the remainder of 2018, this will result in additional tax benefits which will have a positive effect on our effective tax rate. The effective tax rate for the nine months ended September 30, 2017, benefited from $1.5 million of tax-exempt income from bank owned life insurance proceeds in excess of the cash surrender value of the policies.

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The following table sets forth average balances, average yields and costs, and certain other information for the periods indicated.



	ANALYSIS OF NET INTEREST INCOME (Dollars in thousands)
	For the Nine Months Ended
	September 30, 2018						September 30, 2017
	Average Outstanding Balance		Interest		Average Yield/ Rate ⁽¹⁾		Average Outstanding Balance		Interest		Average Yield/ Rate ⁽¹⁾
Interest-earning assets:
Loans ⁽²⁾	$	3,169,780	$	94,686	3.99	%	$	3,027,517	$	89,085	3.93	%
Mortgage-backed securities ⁽³⁾	524,904		9,269		2.36		431,186		6,791		2.11
Other securities ⁽³⁾	126,578		2,427		2.56		65,603		905		1.84
Federal Home Loan Bank of New York stock	25,271		1,240		6.56		26,458		1,061		5.36
Interest-earning deposits in financial institutions	69,528		722		1.39		64,164		412		0.86
Total interest-earning assets	3,916,061		108,344		3.70		3,614,928		98,254		3.63
Non-interest-earning assets	241,828						277,263
Total assets	$	4,157,889					$	3,892,191

Interest-bearing liabilities:
Savings, NOW, and money market accounts	$	1,652,683	$	7,146	0.58	%	$	1,717,916	$	6,142	0.48	%
Certificates of deposit	929,654		11,708		1.68		594,100		5,545		1.25
Total interest-bearing deposits	2,582,337		18,854		0.98		2,312,016		11,687		0.68
Borrowed funds	471,567		6,252		1.77		498,640		5,629		1.51
Total interest-bearing liabilities	3,053,904		25,106		1.10		2,810,656		17,316		0.82
Non-interest bearing deposits	408,116						381,173
Accrued expenses and other liabilities	48,596						64,858
Total liabilities	3,510,616						3,256,688
Stockholders' equity	647,273						635,503
Total liabilities and stockholders' equity	$	4,157,889					$	3,892,191

Net interest income			$	83,238					$	80,938
Net interest rate spread ⁽⁴⁾					2.60	%					2.81	%
Net interest-earning assets ⁽⁵⁾	$	862,157					$	804,272
Net interest margin ⁽⁶⁾					2.84	%					2.99	%
Average interest-earning assets to interest-bearing liabilities					128.23	%					128.62	%




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

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Comparison of Operating Results for the Three Months Ended September 30, 2018 and 2017

Net Income. Net income was $9.1 million and $8.1 million for the quarters ended September 30, 2018 , and September 30, 2017 , respectively. Significant variances from the comparable prior year quarter are as follows: a $ 572,000 increase in net interest income, an $816,000 increase in the provision for loan losses, a $272,000 increase in non-interest expense, and a $1.4 million decrease in income tax expense.

Interest Income . Interest income increased $4.2 million , or 12.5% , to $37.7 million for the quarter ended September 30, 2018 , from $33.5 million for the quarter September 30, 2017 , due to an increase in the average balance of interest-earning assets of $370.1 million , or 10.1% , and an eight basis point increase in the yield earned on interest-earning assets. Interest income on loans increased by $2.0 million , primarily attributable to an increase in the average loan balances of $137.4 million , and an eight basis point increase in the average yield on loans. The increase in average loans was primarily due to originated loan growth. The Company accreted interest income related to its PCI loans of $1.0 million for the quarter ended September 30, 2018 , as compared to $1.4 million for the quarter ended September 30, 2017 . Interest income on loans for the quarter ended September 30, 2018 , included loan prepayment income of $367,000, as compared to $366,000 for the quarter ended September 30, 2017 . Interest income on securities increased by $2.0 million, attributable to an increase in the average securities balances of $235.9 million as well as a 44 basis point increase in interest rates on securities.

Interest Expense . Interest expense increased $3.6 million , or 58.8% , to $9.8 million for the quarter ended September 30, 2018 , from $6.2 million for the quarter ended September 30, 2017 . The increase was primarily due to an increase of $3.4 million in interest expense on deposits. The increase in interest expense on deposits was attributed to an increase in the average balance of interest-bearing deposits of $344.4 million , or 14.7% , to $2.68 billion for the quarter ended September 30, 2018 , from $2.34 billion for the quarter ended September 30, 2017 , and a 41 basis point increase in the cost of interest-bearing deposits to 1.12% for the quarter ended September 30, 2018 , as compared to 0.71% for the comparable prior year quarter, due in large part to higher rates offered on savings and certificates of deposit accounts to remain competitive in the rising rate environment.

Net Interest Income . Net interest income for the quarter ended September 30, 2018 , increase d $572,000 , or 2.1% , primarily due to a $370.1 million , or 10.1% , increase in our average interest-earning assets, partially offset by a 22 basis point decrease in our net interest margin to 2.75% from 2.97% for the quarter ended September 30, 2017 . The increase in average interest-earning assets was due to increases in average loans outstanding of $137.4 million , average mortgage-backed securities of $152.2 million , and average other securities of $83.7 million , partially offset by decreases of $2.3 million in average interest-earning deposits in financial institutions and $923,000 in average FHLBNY stock. Yields earned on interest-earning assets increased eight basis points to 3.72% for the quarter ended September 30, 2018 , from 3.64% for the quarter ended September 30, 2017 , driven by higher yields on all asset classes. The cost of interest-bearing liabilities increased 37 basis points to 1.23% for the current quarter as compared to 0.86% for the comparable prior year quarter due to higher rates across all interest-bearing deposits and borrowed funds.

Provision for Loan Losses . The provision for loan losses increase d by $816,000 to $ 1.3 million for the quarter ended September 30, 2018 , from $488,000 for the quarter ended September 30, 2017 , primarily due to an increase in historical loss rates, driven by the increase in net charge-offs, and a specific reserve recorded on an impaired loan, partially offset by less loan growth in the current quarter as compared to the comparable prior year quarter. Net charge-offs were $499,000 for the quarter ended September 30, 2018 , compared to net recoveries of $6,000 for the quarter ended September 30, 2017 . The increase in net charge-offs was primarily due to a charge-off of $428,000 on an impaired commercial real estate loan in the current quarter.

Non-interest Income . Non-interest income remained level at $2.6 million for both quarters ended September 30, 2018 and September 30, 2017.

Non-interest Expense . Non-interest expense increase d $272,000 , or 1.6% , to $17.1 million for the quarter ended September 30, 2018 , from $16.8 million for the quarter ended September 30, 2017 . The increase was due primarily to increases of $208,000 in occupancy costs, attributed in large part to higher rent expense associated with a new branch office and expanded space in our corporate offices, and $317,000 in professional fees, partially offset by a decrease of $150,000 in employee compensation and benefits.

Income Tax Expense . The Company recorded income tax expense of $3.1 million for the quarter ended September 30, 2018 , compared to $4.5 million for the quarter ended September 30, 2017 . The effective tax rate for the quarter ended September 30, 2018 , was 25.3% compared to 35.8% for the quarter ended September 30, 2017 , reflecting the reduction of the federal statutory corporate tax rate to 21% from 35%.

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The following table sets forth average balances, average yields and costs, and certain other information for the periods indicated.



	ANALYSIS OF NET INTEREST INCOME (Dollars in thousands)
	For the Three Months Ended
	September 30, 2018						September 30, 2017
	Average Outstanding Balance		Interest		Average Yield/ Rate ⁽¹⁾		Average Outstanding Balance		Interest		Average Yield/ Rate ⁽¹⁾
Interest-earning assets:
Loans ⁽²⁾	$	3,202,616	$	32,443	4.02	%	$	3,065,206	$	30,424	3.94	%
Mortgage-backed securities ⁽³⁾	565,783		3,475		2.44		413,627		2,175		2.09
Other securities ⁽³⁾	160,877		1,104		2.72		77,170		370		1.90
Federal Home Loan Bank of New York stock	25,499		428		6.66		26,422		365		5.48
Interest-earning deposits in financial institutions	69,327		277		1.59		71,606		191		1.06
Total interest-earning assets	4,024,102		37,727		3.72		3,654,031		33,525		3.64
Non-interest-earning assets	244,191						265,652
Total assets	$	4,268,293					$	3,919,683

Interest-bearing liabilities:
Savings, NOW, and money market accounts	$	1,620,562	$	2,691	0.66	%	$	1,686,677	$	2,033	0.48	%
Certificates of deposit	1,064,005		4,902		1.83		653,512		2,135		1.30
Total interest-bearing deposits	2,684,567		7,593		1.12		2,340,189		4,168		0.71
Borrowed funds	474,773		2,210		1.85		503,240		2,005		1.58
Total interest-bearing liabilities	3,159,340		9,803		1.23		2,843,429		6,173		0.86
Non-interest bearing deposits	404,570						378,191
Accrued expenses and other liabilities	50,527						54,278
Total liabilities	3,614,437						3,275,898
Stockholders' equity	653,856						643,785
Total liabilities and stockholders' equity	$	4,268,293					$	3,919,683

Net interest income			$	27,924					$	27,352
Net interest rate spread ⁽⁴⁾					2.49	%					2.78	%
Net interest-earning assets ⁽⁵⁾	$	864,762					$	810,602
Net interest margin ⁽⁶⁾					2.75	%					2.97	%
Average interest-earning assets to interest-bearing liabilities					127.37	%					128.51	%




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

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Asset Quality

Purchased Credit Impaired Loans

PCI loans are recorded at estimated fair value using discounted expected future cash flows deemed to be collectible on the date acquired. Based on its detailed review of PCI loans and experience in loan workouts, management believes it has a reasonable expectation about the amount and timing of future cash flows and accordingly has classified PCI loans ( $20.5 million at September 30, 2018 and $22.7 million at December 31, 2017 ) as accruing, even though they may be contractually past due. At September 30, 2018 , 11.7% of PCI loans were past due 30 to 89 days, and 23.9% were past due 90 days or more, as compared to 10.8% and 17.1%, respectively, at December 31, 2017 .

Originated and Acquired loans

The following table details total originated and acquired (including held-for-sale, but excluding PCI) non-accruing loans, non-performing loans, non-performing assets, troubled debt restructurings (TDRs) on which interest is accruing, and accruing loans 30 to 89 days delinquent at September 30, 2018 , and December 31, 2017 (dollars in thousands):



	September 30, 2018			December 31, 2017
Non-accrual loans:
Held-for-investment
Real estate loans:
Commercial	$	8,128		$	4,087
One-to-four family residential	1,140			774
Multifamily	567			417
Home equity and lines of credit	152			156
Commercial and industrial	—			74
Total non-accrual loans	9,987			5,508
Loans delinquent 90 days or more and still accruing:
Held-for-investment
Real estate loans:
One-to-four family residential	33			27
Other	—			1
Total loans delinquent 90 days or more and still accruing	33			28
Total non-performing loans	10,020			5,536
Other real estate owned	—			850
Total non-performing assets	$	10,020		$	6,386
Non-performing loans to total loans	0.31		%	0.18		%
Non-performing assets to total assets	0.23		%	0.16		%
Loans subject to restructuring agreements and still accruing	$	16,575		$	18,003
Accruing loans 30 to 89 days delinquent	$	11,926		$	12,044

The increase in non-accrual loans was primarily attributable to two commercial real estate loans totaling approximately $4.0 million (one originated loan with a balance of $1.1 million and one acquired loan with a balance of $2.9 million) being placed on non-accrual status during the third quarter of 2018. The originated loan collateral consists of a funeral home located in New Jersey and the acquired loan collateral consists of a religious school and administrative offices located in New Jersey. The loans have been individually evaluated for impairment and no specific reserve was deemed necessary as the loans are adequately secured by collateral with an aggregate fair value of approximately $5.2 million (originated loan collateral of $1.5 million and acquired loan collateral of $3.7 million).

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Accruing Loans 30 to 89 Days Delinquent

Loans 30 to 89 days delinquent and on accrual status totaled $11.9 million and $12.0 million at September 30, 2018 and December 31, 2017 , respectively. The following table sets forth delinquencies for accruing loans by type and by amount at September 30, 2018 and December 31, 2017 (in thousands):



	September 30, 2018		December 31, 2017
Held-for-investment
Real estate loans:
Commercial	$	3,810	$	4,347
One-to-four family residential	5,623		4,162
Multifamily	2,117		3,298
Construction and land	—		6
Home equity and lines of credit	80		—
Commercial and industrial loans	296		202
Other loans	—		29
Total delinquent accruing loans	$	11,926	$	12,044

Loans Subject to TDR Agreements

Included in non-accruing loans are loans subject to TDR agreements totaling $519,000 and $251,000 at September 30, 2018 and December 31, 2017 , respectively. At September 30, 2018 , all of the non-accruing TDRs were performing in accordance with their restructured terms. At December 31, 2017, there was one non-accruing TDR that was not performing in accordance with its restructured terms; a one one-to-four family residential loan which was over 90 days delinquent and collateralized by real estate with a recent appraised value of $629,000.

The Company also holds loans subject to restructuring agreements that are on accrual status totaling $16.6 million and $18.0 million at September 30, 2018 and December 31, 2017 , respectively. At September 30, 2018 and December 31, 2017 , all of the accruing TDR loans were performing in accordance with their restructured terms. Generally, types of concessions that we make to troubled borrowers include both temporary and permanent reductions to interest rates, extension of payment terms, and, to a lesser extent, forgiveness of principal and interest.

The following table details the amounts and categories of the loans subject to restructuring agreements by loan type as of September 30, 2018 and December 31, 2017 (in thousands):



	September 30, 2018				December 31, 2017
	Non-Accruing		Accruing		Non-Accruing		Accruing
TDRs:
Real estate loans:
Commercial	$	—	$	12,819	$	—	$	13,272
One-to-four family residential	367		2,346		251		3,135
Multifamily	152		1,271		—		1,440
Home equity and lines of credit	—		63		—		69
Commercial and industrial loans	—		76		—		87
	$	519	$	16,575	$	251	$	18,003

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Liquidity and Capital Resources

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

The Bank's primary sources of funds are deposits, principal and interest payments on loans and securities, borrowed funds, the proceeds from maturing securities and short-term investments, and to a lesser extent, proceeds from the sales of loans and securities and wholesale borrowings. The scheduled amortization of loans and securities, as well as proceeds from borrowed funds, are predictable sources of funds. Other funding sources, however, such as deposit inflows and loan prepayments are greatly influenced by market interest rates, economic conditions, and competition. The Bank is a member of the FHLBNY, which provides an additional source of short-term and long-term funding. The Bank also has short-term borrowing capabilities with the Federal Reserve Bank of New York. The Bank’s borrowed funds, excluding capitalized lease obligations and floating rate advances, were $435.6 million at September 30, 2018 , and had a weighted average interest rate of 1.93% . A total of $155.6 million of these borrowings will mature in less than one year. Borrowed funds, excluding capitalized lease obligations, floating rate advances, and overnight line of credit, were $466.2 million at December 31, 2017 . The Bank has the ability to obtain additional funding from the FHLB and Federal Reserve Bank of New York's discount window of approximately $1.15 billion utilizing unencumbered securities of $395.6 million and loans of $764.4 million at September 30, 2018 . The Bank expects to have sufficient funds available to meet current commitments in the normal course of business.

Northfield Bancorp, Inc. (standalone) is a separate legal entity from the Bank and must provide for its own liquidity to pay dividends, repurchase its stock, and for other corporate purposes. Northfield Bancorp, Inc.'s primary source of liquidity is dividend payments from the Bank. At September 30, 2018 , Northfield Bancorp, Inc. (standalone) had liquid assets of $10.9 million.

Capital Resources . Federal regulations require federally insured depository institutions to meet several minimum capital standards: a common equity Tier 1 capital to risk-based assets ratio of 4.5%, a Tier 1 capital to risk-based assets ratio of 6.0%, a total capital to risk-based assets of 8.0%, and a 4.0% Tier 1 capital to total assets leverage ratio. These capital requirements were effective January 1, 2015, and are the result of a final rule implementing recommendations of the Basel Committee on Banking Supervision and certain requirements of the Dodd-Frank Act. In addition to establishing the minimum regulatory capital requirements, the regulations limit capital distributions and certain discretionary bonus payments to management if the institution does not hold a “capital conservation buffer” consisting of 2.5% of capital to risk-weighted assets above the amount necessary to meet its minimum risk-based capital requirements. The capital conservation buffer requirement was phased in beginning January 1, 2016, at 0.625% of risk-weighted assets and increases each year until fully implemented at 2.5% on January 1, 2019. For calendar year 2018, the capital conservation buffer is 1.875%.

As a result of the recently enacted Economic Growth, Regulatory Relief, and Consumer Protection Act, the federal banking agencies are required to develop a “Community Bank Leverage Ratio” (the ratio of a bank’s tangible equity capital to average total consolidated assets) for financial institutions with assets of less than $10 billion. A “qualifying community bank” that exceeds this ratio will be deemed to be in compliance with all other capital and leverage requirements, including the capital requirements to be considered “well capitalized” under Prompt Corrective Action statutes. The federal banking agencies may consider a financial institution’s risk profile when evaluating whether it qualifies as a community bank for purposes of the capital ratio requirement. The federal banking agencies must set the minimum capital for the new Community Bank Leverage Ratio at not less than 8% and not more than 10%. A financial institution can elect to be subject to this new definition.

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At September 30, 2018 and December 31, 2017 , as set forth in the following table, both the Bank and Northfield Bancorp, Inc. exceeded all of the regulatory capital requirements to which they were subject at such dates.



	Northfield Bank	Northfield Bancorp, Inc.	For Capital Adequacy Purposes ⁽¹⁾	For Well Capitalized Under Prompt Corrective Action Provisions
As of September 30, 2018:
Common equity Tier 1 capital (to risk-weighted assets)	16.47%	17.48%	6.375%	6.50%
Tier 1 leverage	14.01%	14.86%	4.000%	5.00%
Tier I capital (to risk-weighted assets)	16.47%	17.48%	7.875%	8.00%
Total capital (to risk-weighted assets)	17.25%	18.26%	9.875%	10.00%
As of December 31, 2017:
Common equity Tier 1 capital (to risk-weighted assets)	16.70%	18.02%	5.750%	6.50%
Tier 1 leverage	14.15%	15.27%	4.000%	5.00%
Tier I capital (to risk-weighted assets)	16.70%	18.02%	7.250%	8.00%
Total capital (to risk-weighted assets)	17.49%	18.81%	9.250%	10.00%

(1) Includes capital conservation buffer at September 30, 2018 and December 31, 2017.

Off-Balance Sheet Arrangements and Contractual Obligations

In the normal course of operations, the Company engages in a variety of financial transactions that, in accordance with U.S. GAAP, are not recorded in the financial statements. These transactions primarily relate to lending commitments. These arrangements are not expected to have a material impact on the Company's results of operations or financial condition.

The following table shows the contractual obligations of the Company by expected payment period as of September 30, 2018 (in thousands):



Contractual Obligations	Total		Less than One Year			One to less than Three Years		Three to less than Five Years		More than Five Years
Debt obligations (excluding capitalized leases)	$	441,081	$	161,081	⁽¹⁾	$	160,000	$	107,500	$	12,500
Commitments to originate loans	50,442		50,442			—		—		—
Commitments to fund unused lines of credit	109,326		109,326			—		—		—

⁽¹⁾ Includes $5.5 million of floating rate advances.

Commitments to fund unused lines of credit are agreements to lend additional funds to customers as long as there have been no violations of any of the conditions established in the agreements (original or restructured). Commitments to originate loans generally have a fixed expiration or other termination clauses, which may or may not require payment of a fee. Since some of these loan commitments are expected to expire without being drawn upon, total commitments do not necessarily represent future cash requirements.

For further information regarding our off-balance sheet arrangements and contractual obligations, see "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 .

Recent Accounting Standards

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

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Management of Market Risk

General . A majority of our assets and liabilities are monetary in nature. Consequently, our most significant form of market risk is interest rate risk. Our assets, consisting primarily of mortgage-related securities and loans, generally have longer maturities than our liabilities, which consist primarily of deposits and wholesale borrowings. As a result, a principal part of our business strategy involves managing interest rate risk and limiting the exposure of our net interest income to changes in market interest rates. Accordingly, our board of directors has established a Management Asset-Liability Committee, comprised of our SVP & Chief Investment Officer and Treasurer, who chairs this Committee, our President and Chief Executive Officer, our EVP & Chief Administrative Officer, EVP & Chief Financial Officer, EVP & Chief Lending Officer, EVP Operations, EVP & Director of Business Development and SVP & Director of Marketing, and other officers and staff as necessary or appropriate to manage interest rate risk. This committee is responsible for, among other things, evaluating the interest rate risk inherent in our assets and liabilities, for recommending to the risk management committee of our board of directors the level of risk that is appropriate given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the guidelines approved by the board of directors.

We seek to manage our interest rate risk in order to minimize the exposure of our earnings and capital to changes in interest rates. As part of our ongoing asset-liability management, we currently use the following strategies to manage our interest rate risk:


•	originating multifamily loans and commercial real estate loans that generally have shorter maturities than one-to-four family residential real estate loans and have higher interest rates that generally reset from five to ten years;


•	investing in shorter-term investment grade corporate securities and mortgage-backed securities; and


•	obtaining general financing through lower-cost core deposits, brokered deposits, and longer-term FHLB advances and repurchase agreements.

Shortening the average term of our interest-earning assets by increasing our investments in shorter-term assets, as well as originating loans with variable interest rates, helps to match the maturities and interest rates of our assets and liabilities better, thereby reducing the exposure of our net interest income to changes in market interest rates.

Net Portfolio Value Analysis . We compute amounts by which the net present value of our assets and liabilities (net portfolio value or NPV) would change in the event market interest rates changed over an assumed range of rates. Our simulation model uses a discounted cash flow analysis to measure the interest rate sensitivity of NPV. Depending on current market interest rates, we estimate the economic value of these assets and liabilities under the assumption that interest rates experience an instantaneous and sustained increase of 100, 200, 300, or 400 basis points, or a decrease of 100 and 200 basis points, which is based on the current interest rate environment. A basis point equals one-hundredth of one percent, and 100 basis points equals one percent. An increase in interest rates from 3% to 4% would mean, for example, a 100 basis point increase in the “Change in Interest Rates” column below.

Net Interest Income Analysis. In addition to NPV calculations, we analyze our sensitivity to changes in interest rates through our net interest income model. Net interest income is the difference between the interest income we earn on our interest-earning assets, such as loans and securities, and the interest we pay on our interest-bearing liabilities, such as deposits and borrowings. In our model, we estimate what our net interest income would be for a twelve-month period. Depending on current market interest rates we then calculate what the net interest income would be for the same period under the assumption that interest rates experience an instantaneous and sustained increase or decrease of 100, 200, 300, or 400 basis points, or a decrease of 100 and 200 basis points, which is based on the current interest rate environment.

The following tables set forth, as of September 30, 2018 and December 31, 2017 , our calculation of the estimated changes in our NPV, NPV ratio, and percent change in net interest income that would result from the designated instantaneous and sustained changes in interest rates (dollars in thousands). Computations of prospective effects of hypothetical interest rate changes are based on numerous assumptions, including relative levels of market interest rates, loan prepayments and deposit repricing characteristics including decay rates, and correlations to movements in interest rates, and should not be relied on as indicative of actual results.

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	NPV at September 30, 2018
Change in Interest Rates (basis points)	Estimated Present Value of Assets		Estimated Present Value of Liabilities		Estimated NPV		Estimated Change In NPV			Estimated Change in NPV %		Estimated NPV/Present Value of Assets Ratio		Next 12 Months Net Interest Income Percent Change		Months 13-24 Net Interest Income Percent Change
+400	$	3,910,546	$	3,192,993	$	717,553	$	(162,039	)	(18.42	)%	18.35	%	(13.89	)%	(5.14	)%
+300	4,005,344		3,249,689		755,655		(123,937		)	(14.09	)	18.87		(10.38	)	(3.79	)
+200	4,106,727		3,308,255		798,472		(81,120		)	(9.22	)	19.44		(6.67	)	(2.04	)
+100	4,209,326		3,369,422		839,904		(39,688		)	(4.51	)	19.95		(3.17	)	(0.70	)
—	4,313,737		3,434,145		879,592		—			—		20.39		—		—
(100)	4,418,438		3,505,901		912,537		32,945			3.75		20.65		1.38		(0.38	)
(200)	4,522,818		3,583,243		939,575		59,983			6.82		20.77		0.62		(1.90	)



	NPV at December 31, 2017
Change in Interest Rates (basis points)	Estimated Present Value of Assets		Estimated Present Value of Liabilities		Estimated NPV		Estimated Change In NPV			Estimated Change in NPV %		Estimated NPV/Present Value of Assets Ratio		Next 12 Months Net Interest Income Percent Change		Months 13-24 Net Interest Income Percent Change
400	$	3,637,558	$	2,979,633	$	657,925	$	(171,778	)	(20.70	)%	18.09	%	(10.35	)%	(0.70	)%
300	3,730,853		3,032,696		698,157		(131,546		)	(15.85	)	18.71		(7.59	)	(0.37	)
200	3,832,498		3,088,081		744,417		(85,286		)	(10.28	)	19.42		(4.67	)	0.46
100	3,933,263		3,145,932		787,331		(42,372		)	(5.11	)	20.02		(2.20	)	0.47
—	4,036,107		3,206,404		829,703		—			—		20.56		—		—
(100)	4,138,762		3,275,424		863,338		33,635			4.05		20.86		1.21		0.22
(200)	4,244,864		3,347,146		897,718		68,015			8.20		21.15		0.21		(0.56	)

At September 30, 2018 , in the event of a 200 basis point decrease in interest rates, we would experience a 6.82% increase in estimated net portfolio value and a 0.62% increase in net interest income in year one and a 1.90% decrease in net interest income in year two. In the event of a 400 basis point increase in interest rates, we would experience an 18.42% decrease in estimated net portfolio value and a 13.89% decrease in net interest income in year one and a 5.14% decrease in net interest income in year two. Our policies provide that, in the event of a 200 basis point decrease or less in interest rates, our net present value ratio should decrease by no more than 300 basis points and 10%, and in the event of a 400 basis point increase or less, our net present value should decrease by no more than 475 basis points and 35%. In the event of a 200 basis point decrease or less, our projected net interest income should decrease by no more than 10% in year one, and in the event of a 400 basis point increase or less, our projected net interest income should decrease by no more than 30% in year one and 22% in year two. However, when the federal funds rate is low and negative rate shocks do not produce meaningful results, management may temporarily suspend use of guidelines for negative interest rate shocks. At September 30, 2018 , we were in compliance with all board approved policies with respect to interest rate risk management.

Certain shortcomings are inherent in the methodologies used in determining interest rate risk through changes in net portfolio value and net interest income. Our model requires us to make certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. However, we also apply consistent parallel yield curve shifts (in both directions) to determine possible changes in net interest income if the theoretical yield curve shifts occurred gradually. Net interest income analysis also adjusts the asset and liability repricing analysis based on changes in prepayment rates resulting from the parallel yield curve shifts. In addition, the net portfolio value and net interest income information presented assume that the composition of our interest-sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and assume that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities. Accordingly, although interest rate risk calculations provide an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on our net portfolio value or net interest income and will differ from actual results.

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ITEM 4. CONTROLS AND PROCEDURES

An evaluation was performed under the supervision and with the participation of the Company’s management, including the President and Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended) as of September 30, 2018 . Based on that evaluation, the Company’s management, including the President and Chief Executive Officer and the Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective.

During the three months ended September 30, 2018 , there were no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II

ITEM 1. LEGAL PROCEEDINGS

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

ITEM 1A. RISK FACTORS

During the quarter ended September 30, 2018 , there have been no material changes to the risk factors as previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017 , as filed with the Securities and Exchange Commission.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS


(a)	Unregistered Sale of Equity Securities . There were no sales of unregistered securities during the period covered by this report.


(b)	Use of Proceeds . Not applicable.


(c)	Repurchases of Our Equity Securities .

The Company did not repurchase any of its common stock during the three months ended September 30, 2018 . The previously adopted repurchase program permitted $185.0 million shares of common stock to be repurchased in open market or private transactions, through block trades, and pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities and Exchange Commission. There were no shares remaining to be purchased at September 30, 2018 .

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS

The following exhibits required by Item 601 of Regulation S-K are included with this Quarterly Report on Form 10-Q.



Exhibit Number		Description
31.1		Certification of Steven M. Klein, President 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 Steven M. Klein, President 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 Quarterly Report on Form 10-Q for the quarter ended September 30, 2018, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Comprehensive Income, (iii) the Consolidated Statements of Changes in Stockholders’ Equity, (iv) the Consolidated Statements of Cash Flows and (v) the Notes to Consolidated Financial Statements

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

NORTHFIELD BANCORP, INC.

(Registrant)

Date: November 9, 2018

/s/ Steven M. Klein

Steven M. Klein

President and Chief Executive Officer

/s/ William R. Jacobs

William R. Jacobs

Executive Vice President and Chief Financial Officer

(Principal Financial and Accounting Officer)

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Part I Item 1. Financial Statements Note 1 Basis Of Presentation Note 2 Debt Securities Available-for-sale Note 3 Debt Securities Held-to-maturity Note 4 Equity Securities Note 5 Loans Note 6 Deposits Note 7 Equity Incentive Plan Note 8 Fair Value Measurements Note 9 Earnings Per Share Note 10 Commitments Note 11 Revenue Recognition Note 12 Recently Issued and Adopted Accounting Pronouncements Item 2. Management S Discussion and Analysis Of Financial Condition and Results Of Operations Note 1 To The Company S Audited Consolidated Financial Statements For The Year Ended Item 3. Quantitative and Qualitative Disclosures About Market Risk Item 4. Controls and Procedures Part II Item 1. Legal Proceedings Item 1A. Risk Factors Item 2. Unregistered Sales Of Equity Securities and Use Of Proceeds Item 3. Defaults Upon Senior Securities Item 4. Mine Safety Disclosures Item 5. Other Information Item 6. Exhibits

Exhibits

31.1 Certification of Steven M. Klein, President 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 Steven M. Klein, President 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

NFBK 10-Q Quarter ended Sept. 30, 2018

Exhibits