UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
For the quarterly period ended March 31, 2024
or
For transition period from __________ to __________
Commission File Number: 001-35791
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
| (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)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
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 the 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 | ☐ | ☒ | |||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | |||||||||
| Emerging growth company | |||||||||||
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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of April 30, 2024, the registrant had 44,344,225 shares of Common Stock, par value $0.01 per share, issued and outstanding.
NORTHFIELD BANCORP, INC.
Form 10-Q Quarterly Report
Table of Contents
| Page | ||||||||
| Item 1. | ||||||||
| Item 2. | ||||||||
| Item 3. | ||||||||
| Item 4. | ||||||||
| Item 1. | ||||||||
| Item 1A. | ||||||||
| Item 2. | ||||||||
| Item 3. | ||||||||
| Item 4. | ||||||||
| Item 5. | ||||||||
| Item 6. | ||||||||
3
PART I
ITEM 1. FINANCIAL STATEMENTS
NORTHFIELD BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited) (In thousands, except share amounts)
| March 31, 2024 | December 31, 2023 | ||||||||||
| ASSETS: | |||||||||||
| Cash and due from banks | $ | $ | |||||||||
| Interest-bearing deposits in other financial institutions | |||||||||||
| Total cash and cash equivalents | |||||||||||
| Trading securities | |||||||||||
Debt securities available-for-sale, at estimated fair value (with | |||||||||||
| Debt securities held-to-maturity, at amortized cost | |||||||||||
(estimated fair value of $ | |||||||||||
| Equity securities | |||||||||||
| Loans held-for-investment | |||||||||||
| Less: allowance for credit losses | ( | ( | |||||||||
| Net loans held-for-investment | |||||||||||
| Accrued interest receivable | |||||||||||
| Bank-owned life insurance | |||||||||||
Federal Home Loan Bank (“FHLB”) of New York stock, at cost | |||||||||||
| Operating lease right-of-use assets | |||||||||||
| Premises and equipment, net | |||||||||||
| Goodwill | |||||||||||
| Other assets | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY: | |||||||||||
| LIABILITIES: | |||||||||||
| Deposits | $ | $ | |||||||||
| Securities sold under agreements to repurchase | |||||||||||
| FHLB advances and other borrowings | |||||||||||
| Subordinated debentures, net of issuance costs | |||||||||||
| Operating lease liabilities | |||||||||||
| Advance payments by borrowers for taxes and insurance | |||||||||||
| Accrued expenses and other liabilities | |||||||||||
| Total liabilities | |||||||||||
| STOCKHOLDERS’ EQUITY: | |||||||||||
Preferred stock, $ | |||||||||||
Common stock, $ | |||||||||||
March 31, 2024 and December 31, 2023, | |||||||||||
| Additional paid-in-capital | |||||||||||
| Unallocated common stock held by employee stock ownership plan | ( | ( | |||||||||
| Retained earnings | |||||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
Treasury stock at cost: | ( | ( | |||||||||
| Total stockholders’ equity | |||||||||||
| Total liabilities and stockholders’ equity | $ | $ | |||||||||
See accompanying notes to unaudited consolidated financial statements.
4
NORTHFIELD BANCORP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited) (In thousands, except per share data)
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Interest income: | |||||||||||
| Loans | $ | $ | |||||||||
| Mortgage-backed securities | |||||||||||
| Other securities | |||||||||||
| FHLB of New York dividends | |||||||||||
| Deposits in other financial institutions | |||||||||||
| Total interest income | |||||||||||
| Interest expense: | |||||||||||
| Deposits | |||||||||||
| Borrowings | |||||||||||
| Subordinated debt | |||||||||||
| Total interest expense | |||||||||||
| Net interest income | |||||||||||
| Provision for credit losses | |||||||||||
| Net interest income after provision for credit losses | |||||||||||
| Non-interest income: | |||||||||||
| Fees and service charges for customer services | |||||||||||
| Income on bank-owned life insurance | |||||||||||
| Gains on available-for-sale debt securities, net | |||||||||||
| Gains on trading securities, net | |||||||||||
| Other | |||||||||||
| Total non-interest income | |||||||||||
| Non-interest expense: | |||||||||||
| Compensation and employee benefits | |||||||||||
| Occupancy | |||||||||||
| Furniture and equipment | |||||||||||
| Data processing | |||||||||||
| Professional fees | |||||||||||
| Advertising | |||||||||||
| Federal Deposit Insurance Corporation insurance | |||||||||||
| Credit loss expense for off-balance sheet exposures | |||||||||||
| Other | |||||||||||
| Total non-interest expense | |||||||||||
| Income before income tax expense | |||||||||||
| Income tax expense | |||||||||||
| Net income | $ | $ | |||||||||
| Net income per common share: | |||||||||||
| Basic | $ | $ | |||||||||
| Diluted | $ | $ | |||||||||
| See accompanying notes to unaudited consolidated financial statements. | |||||||||||
5
NORTHFIELD BANCORP, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - (Continued) (Unaudited) (In thousands) | |||||||||||
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Net income | $ | $ | |||||||||
| Other comprehensive income: | |||||||||||
| Unrealized gains on debt securities available-for-sale: | |||||||||||
| Net unrealized holding gains | |||||||||||
| Less: reclassification adjustment for net gains included in net income | ( | ||||||||||
| Net unrealized gains | |||||||||||
| Post-retirement benefits adjustment | |||||||||||
| Other comprehensive income before tax | |||||||||||
| Income tax expense related to net unrealized holding gains on debt securities available-for-sale | ( | ( | |||||||||
| Income tax benefit related to post retirement benefit adjustment | ( | ||||||||||
| Other comprehensive income, net of tax | |||||||||||
| Comprehensive income | $ | $ | |||||||||
See accompanying notes to unaudited consolidated financial statements.
6
NORTHFIELD BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
Three Months Ended March 31, 2024 and 2023
(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, 2022 | $ | $ | $ | ( | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||||||
| Net income | |||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income, net of tax | |||||||||||||||||||||||||||||||||||||||||||||||
| ESOP shares allocated or committed to be released | |||||||||||||||||||||||||||||||||||||||||||||||
| Stock compensation expense | |||||||||||||||||||||||||||||||||||||||||||||||
| Restricted stock issuance | ( | ||||||||||||||||||||||||||||||||||||||||||||||
| Restricted stock forfeitures | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Exercise of stock options, net | ( | ||||||||||||||||||||||||||||||||||||||||||||||
Cash dividends declared and paid ($ | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
Repurchase of treasury stock (average cost of $ | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2023 | $ | $ | $ | ( | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | ( | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||||||
| Net income | |||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income, net of tax | |||||||||||||||||||||||||||||||||||||||||||||||
| ESOP shares allocated or committed to be released | |||||||||||||||||||||||||||||||||||||||||||||||
| Stock compensation expense | |||||||||||||||||||||||||||||||||||||||||||||||
| Restricted stock issuance | ( | ||||||||||||||||||||||||||||||||||||||||||||||
| Restricted stock forfeitures | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
Cash dividends declared and paid ($ | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Purchase of employee restricted stock to fund statutory tax withholding | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
Repurchase of treasury stock (average cost of $ | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2024 | $ | $ | $ | ( | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||||||
See accompanying notes to unaudited consolidated financial statements.
7
NORTHFIELD BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (In thousands)
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Net income | $ | $ | |||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Provision for credit losses | |||||||||||
| ESOP and stock compensation expense | |||||||||||
| Depreciation | |||||||||||
| (Accretion) amortization of premiums and deferred loan costs, net of accretion of discounts and deferred loan fees | ( | ||||||||||
| Amortization of debt issuance costs | |||||||||||
| Amortization of intangible assets | |||||||||||
| Amortization of operating lease right-of-use assets | |||||||||||
| Income on bank-owned life insurance | ( | ( | |||||||||
| Gains on available-for-sale debt securities, net | ( | ||||||||||
| Gains on trading securities, net | ( | ( | |||||||||
| Net sales of trading securities | |||||||||||
| (Increase) decrease in accrued interest receivable | ( | ||||||||||
| (Increase) decrease in other assets | ( | ||||||||||
| Increase (decrease) in accrued expenses and other liabilities | ( | ||||||||||
| Net cash provided by operating activities | |||||||||||
| Cash flows from investing activities: | |||||||||||
| Net decrease in loans receivable | |||||||||||
| Purchases of loans | ( | ||||||||||
| Purchases of FHLB of New York stock | ( | ( | |||||||||
| Redemptions of FHLB of New York stock | |||||||||||
| Purchases of debt securities available-for-sale | ( | ||||||||||
| Purchases of equity securities | ( | ||||||||||
| Principal payments and maturities on debt securities available-for-sale | |||||||||||
| Principal payments and maturities on debt securities held-to-maturity | |||||||||||
| Purchases and improvements of premises and equipment | ( | ( | |||||||||
| Net cash (used in) provided by investing activities | ( | ||||||||||
| Cash flows from financing activities: | |||||||||||
| Net increase (decrease) in deposits | ( | ||||||||||
| Dividends paid | ( | ( | |||||||||
| Exercise of stock options | |||||||||||
| Purchase of treasury stock | ( | ( | |||||||||
| Increase in advance payments by borrowers for taxes and insurance | |||||||||||
| Proceeds from FHLB advances and other borrowings and securities sold under agreements to repurchase | |||||||||||
| Repayments related to securities sold under agreements to repurchase and other borrowings | ( | ( | |||||||||
| Net cash provided by financing activities | |||||||||||
| Net increase in cash and cash equivalents | |||||||||||
| Cash and cash equivalents at beginning of period | |||||||||||
| Cash and cash equivalents at end of period | $ | $ | |||||||||
See accompanying notes to unaudited consolidated financial statements
8
NORTHFIELD BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued)
(Unaudited) (In thousands)
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Supplemental cash flow information: | |||||||||||
| Cash paid during the period for: | |||||||||||
| Interest | $ | $ | |||||||||
| Income taxes | |||||||||||
| Non-cash transactions: | |||||||||||
| Loan charge-offs, net | |||||||||||
| Transfer of loans held-for-investment to other real estate owned | |||||||||||
| Right-of-use assets obtained in exchange for new lease liabilities | |||||||||||
See accompanying notes to unaudited consolidated financial statements.
9
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements
Note 1 – Consolidated Financial Statements
Basis of Presentation
The consolidated financial statements are comprised of the accounts of Northfield Bancorp, Inc. and its wholly owned subsidiaries, Northfield Investments, Inc. and Northfield Bank (the “Bank”), and the Bank’s wholly-owned subsidiaries, NSB Services Corp. and NSB Realty Trust (collectively the “Company”). 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 balance sheets and the consolidated statements of comprehensive income for the unaudited periods presented have been included. The results of operations and other data presented for the three months ended March 31, 2024 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2024 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 balance sheets and for the periods indicated in the consolidated statements of comprehensive income. Material estimates that are particularly susceptible to change are: the allowance for credit losses and the valuation allowance against deferred tax assets. 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.
Recent Accounting Pronouncements Adopted
Effective January 1, 2023, the Company adopted Accounting Standards Update (“ASU”) No. 2022-02, “Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures” (“ASU 2022-02”). The amendments in this ASU were issued to (1) eliminate accounting guidance for Troubled Debt Restructurings (“TDRs”) by creditors, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty; (2) require disclosures of current period gross write-offs by year of origination for financing receivables and net investments in leases. Under ASU 2022-02, the Company assesses all loan modifications to determine whether one is granted to a borrower experiencing financial difficulty, regardless of whether the modified loan terms include a concession. Modifications granted to borrowers experiencing financial difficulty may be in the form of an interest rate reduction, an other-than-insignificant payment delay, a term extension, principal forgiveness or a combination thereof.
Prior to the adoption of ASU 2022-02, a TDR occurred when the terms of a loan were modified because of deterioration in the financial condition of the borrower. Modifications could include extension of the repayment terms of the loan, reduced interest rates, or forgiveness of accrued interest and/or principal. For the Company's accounting policy related to TDRs granted prior to the adoption of ASU 2022-02, see “Note 1. Significant Accounting Policies” included in “Item 8. Financial Statements and Supplementary Data” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
The Company adopted ASU 2022-02 on a prospective basis. The adoption of this update did not have a material effect on the Company’s consolidated financial statements. Additional disclosures are included in Note 5 to the consolidated financial statements.
10
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)
Note 2 – Debt Securities Available-for-Sale
The following is a comparative summary of mortgage-backed securities and other debt securities available-for-sale at March 31, 2024 and December 31, 2023 (in thousands):
| March 31, 2024 | |||||||||||||||||||||||
| Gross | Gross | Estimated | |||||||||||||||||||||
| Amortized | unrealized | unrealized | fair | ||||||||||||||||||||
| cost | gains | losses | value | ||||||||||||||||||||
| U.S. Treasuries | $ | $ | $ | ( | $ | ||||||||||||||||||
| U.S. Government agency securities | ( | ||||||||||||||||||||||
| Mortgage-backed securities: | |||||||||||||||||||||||
| Pass-through certificates: | |||||||||||||||||||||||
| Government sponsored enterprises ("GSEs") | ( | ||||||||||||||||||||||
| Real estate mortgage investment conduits ("REMICs"): | |||||||||||||||||||||||
| GSE | ( | ||||||||||||||||||||||
| Total mortgage-backed securities | ( | ||||||||||||||||||||||
| Other debt securities: | |||||||||||||||||||||||
| Municipal bonds | ( | ||||||||||||||||||||||
| Corporate bonds | ( | ||||||||||||||||||||||
| ( | |||||||||||||||||||||||
| Total debt securities available-for-sale | $ | $ | $ | ( | $ | ||||||||||||||||||
| December 31, 2023 | |||||||||||||||||||||||
| Gross | Gross | Estimated | |||||||||||||||||||||
| Amortized | unrealized | unrealized | fair | ||||||||||||||||||||
| cost | gains | losses | value | ||||||||||||||||||||
| U.S. Treasuries | $ | $ | $ | $ | |||||||||||||||||||
| U.S. Government agency securities | ( | ||||||||||||||||||||||
| Mortgage-backed securities: | |||||||||||||||||||||||
| Pass-through certificates: | |||||||||||||||||||||||
| GSE | ( | ||||||||||||||||||||||
| REMICs: | |||||||||||||||||||||||
| GSE | ( | ||||||||||||||||||||||
| Total mortgage-backed securities | ( | ||||||||||||||||||||||
| Other debt securities: | |||||||||||||||||||||||
| Municipal bonds | ( | ||||||||||||||||||||||
| Corporate bonds | ( | ||||||||||||||||||||||
| ( | |||||||||||||||||||||||
| Total debt securities available-for-sale | $ | $ | $ | ( | $ | ||||||||||||||||||
11
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)
The following is a summary of the expected maturity distribution of debt securities available-for-sale, other than mortgage-backed securities, at March 31, 2024 (in thousands):
| Available-for-sale | Amortized cost | Estimated fair value | ||||||||||||
| Due in one year or less | $ | $ | ||||||||||||
| Due after one year through five years | ||||||||||||||
| Due after five years through ten years | ||||||||||||||
| $ | $ | |||||||||||||
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 March 31, 2024 and December 31, 2023, the fair value of debt securities available-for-sale that were pledged to secure borrowings and deposits was $471.7 million and $272.9 million, respectively.
For the three months ended March 31, 2024, the Company had no proceeds on sales of debt securities available-for-sale, and no no proceeds on sales of debt securities available-for-sale, with gross realized gains of $1,000 related to the payoff of securities and no gross realized losses. During the three months ended March 31, 2024 and 2023, the Company recognized net gains of $699,000 and $512,000 , respectively, on its trading securities portfolio.
Gross unrealized losses on mortgage-backed securities 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 March 31, 2024 and December 31, 2023, were as follows (in thousands):
| March 31, 2024 | |||||||||||||||||||||||||||||||||||
| Less than 12 months | 12 months or more | Total | |||||||||||||||||||||||||||||||||
| Unrealized | Estimated | Unrealized | Estimated | Unrealized | Estimated | ||||||||||||||||||||||||||||||
| losses | fair value | losses | fair value | losses | fair value | ||||||||||||||||||||||||||||||
| U.S. Treasuries | $ | ( | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||
| U.S. Government agency securities | ( | ( | |||||||||||||||||||||||||||||||||
| Mortgage-backed securities: | |||||||||||||||||||||||||||||||||||
| Pass-through certificates: | |||||||||||||||||||||||||||||||||||
| GSE | ( | ( | |||||||||||||||||||||||||||||||||
| REMICs: | |||||||||||||||||||||||||||||||||||
| GSE | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Other debt securities: | |||||||||||||||||||||||||||||||||||
| Municipal bonds | ( | ( | |||||||||||||||||||||||||||||||||
| Corporate bonds | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Total | $ | ( | $ | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||||||||
12
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)
| December 31, 2023 | |||||||||||||||||||||||||||||||||||
| Less than 12 months | 12 months or more | Total | |||||||||||||||||||||||||||||||||
| Unrealized | Estimated | Unrealized | Estimated | Unrealized | Estimated | ||||||||||||||||||||||||||||||
| losses | fair value | losses | fair value | losses | fair value | ||||||||||||||||||||||||||||||
| U.S. Government agency securities | $ | $ | $ | ( | $ | $ | ( | $ | |||||||||||||||||||||||||||
| Mortgage-backed securities: | |||||||||||||||||||||||||||||||||||
| Pass-through certificates: | |||||||||||||||||||||||||||||||||||
| GSE | ( | ( | |||||||||||||||||||||||||||||||||
| REMICs: | |||||||||||||||||||||||||||||||||||
| GSE | ( | ( | |||||||||||||||||||||||||||||||||
| Other debt securities: | |||||||||||||||||||||||||||||||||||
| Municipal bonds | ( | ( | |||||||||||||||||||||||||||||||||
| Corporate bonds | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Total | $ | ( | $ | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||||||||
The Company held 115 pass-through mortgage-backed securities issued or guaranteed by GSEs, 71 REMIC mortgage-backed securities issued or guaranteed by GSEs, six corporate bonds, and five U.S. Government agency securities that were in a continuous unrealized loss position of twelve months or greater at March 31, 2024. There were six pass-through mortgage-backed securities issued or guaranteed by GSEs, five corporate bonds, four REMIC mortgage-backed securities issued or guaranteed by GSEs, one municipal bond, and one U.S. Treasury that were in an unrealized loss position of less than twelve months at March 31, 2024. Substantially all securities referred to above were rated investment grade at March 31, 2024.
Available for sale debt securities in unrealized loss positions are evaluated for impairment related to credit losses on a quarterly basis. In performing an assessment of whether any decline in fair value is due to a credit loss, the Company considers the extent to which the fair value is less than the amortized cost, changes in credit ratings, any adverse economic conditions, as well as all relevant information at the individual security level such as credit deterioration of the issuer or collateral underlying the security. In assessing the impairment, the Company compares the present value of cash flows expected to be collected with the amortized cost basis of the security. If it is determined that the decline in fair value was due to credit losses, an allowance for credit losses is recorded, limited to the amount the fair value is less than amortized cost basis. The Company did no
The non-credit related decrease in the fair value, such as a decline due to changes in market interest rates, is recorded in other comprehensive income, net of tax. The Company also assesses its intent to sell the securities (as well as the likelihood of a near-term recovery). If the Company intends to sell an available-for-sale debt security or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis, the debt security is written down to its fair value and the write down is charged to the debt security’s fair value at the reporting date with any incremental impairment reported in earnings.
The Company has made the accounting policy election to exclude accrued interest receivable on available-for-sale securities from the estimate of credit losses. Accrued interest receivable associated with debt securities available-for-sale totaled $3.1 million and $2.4 million, at March 31, 2024 and December 31, 2023, respectively, and was reported in accrued interest receivable on the . The Company elected not to measure an allowance for credit losses on accrued interest receivable, as an allowance on possible uncollectible accrued interest is not warranted.
13
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)
Note 3 – Debt Securities Held-to-Maturity
The following is a summary of mortgage-backed securities held-to-maturity at March 31, 2024 and December 31, 2023 (in thousands):
| March 31, 2024 | |||||||||||||||||||||||
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | ||||||||||||||||||||
| Mortgage-backed securities: | |||||||||||||||||||||||
| Pass-through certificates: | |||||||||||||||||||||||
| GSE | $ | $ | $ | ( | $ | ||||||||||||||||||
| Total securities held-to-maturity | $ | $ | $ | ( | $ | ||||||||||||||||||
| December 31, 2023 | |||||||||||||||||||||||
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | ||||||||||||||||||||
| Mortgage-backed securities: | |||||||||||||||||||||||
| Pass-through certificates: | |||||||||||||||||||||||
| GSE | $ | $ | $ | ( | $ | ||||||||||||||||||
| Total securities held-to-maturity | $ | $ | $ | ( | $ | ||||||||||||||||||
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
At both March 31, 2024 and December 31, 2023, debt securities held-to-maturity with a carrying value of $9.7
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 March 31, 2024 and December 31, 2023 were as follows (in thousands):
| March 31, 2024 | |||||||||||||||||||||||||||||||||||
| 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 | $ | $ | $ | ( | $ | $ | ( | $ | |||||||||||||||||||||||||||
| Total | $ | $ | $ | ( | $ | $ | ( | $ | |||||||||||||||||||||||||||
| December 31, 2023 | |||||||||||||||||||||||||||||||||||
| 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 | $ | $ | $ | ( | $ | $ | ( | $ | |||||||||||||||||||||||||||
| Total | $ | $ | $ | ( | $ | $ | ( | $ | |||||||||||||||||||||||||||
14
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)
The Company held nine pass-through mortgage-backed debt securities held-to-maturity issued or guaranteed by GSEs that were in a continuous unrealized loss position of twelve months or greater at March 31, 2024.
The Company's held-to-maturity securities are residential mortgage-backed securities issued by Ginnie Mae, Freddie Mac and Fannie Mae, and it is expected that the securities will not be settled at prices less than the amortized cost bases of the securities as such securities are backed by the full faith and credit of and/or guaranteed by the U.S. Government. Accordingly, no allowance for credit losses has been recorded for these securities.
The Company has made the accounting policy election to exclude accrued interest receivable on held-to-maturity securities from the estimate of credit losses. Accrued interest receivable associated with held-to-maturity securities totaling $35,000 and $36,000 , at March 31, 2024 and December 31, 2023, respectively, was reported in accrued interest receivable on the . The Company elected not to measure an allowance for credit losses on accrued interest receivable, as an allowance on possible uncollectible accrued interest is not warranted.
Note 4 – Equity Securities
Equity securities totaled $11.0 million and $10.6 million at March 31, 2024 and December 31, 2023, respectively. Equity securities consisted of money market mutual funds, recorded at fair value of $1.0 million and $330,000 at March 31, 2024 and December 31, 2023, respectively, and an investment in a private SBA loan fund (the “SBA Loan Fund”) recorded at net asset value of $10.0 million and $10.3 million at March 31, 2024 and December 31, 2023, respectively. 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 SBA Loan Fund was recorded at net asset value as a practical expedient for reporting fair value.
Note 5 – Loans
The following table summarizes the Company’s loans held-for-investment (in thousands):
| March 31, | December 31, | |||||||||||||
| 2024 | 2023 | |||||||||||||
| Real estate loans: | ||||||||||||||
| Multifamily | $ | $ | ||||||||||||
| Commercial mortgage | ||||||||||||||
| One-to-four family residential mortgage | ||||||||||||||
| Home equity and lines of credit | ||||||||||||||
| Construction and land | ||||||||||||||
| Total real estate loans | ||||||||||||||
| Commercial and industrial loans | ||||||||||||||
| Other loans | ||||||||||||||
| Total commercial and industrial and other loans | ||||||||||||||
Loans held-for-investment (excluding purchased credit-deteriorated (“PCD”) loans) | ||||||||||||||
| PCD loans | ||||||||||||||
| Total loans held-for-investment | ||||||||||||||
| Allowance for credit losses | ( | ( | ||||||||||||
| Net loans held-for-investment | $ | $ | ||||||||||||
The Company did not
15
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)
In addition to originating loans, the Company may acquire loans through portfolio purchases or acquisitions of other companies. Purchased loans that have evidence of more than insignificant credit deterioration since origination are deemed PCD loans. For PCD loans, each loan pool is accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows. PCD loans totaled $10.0 million at March 31, 2024, as compared to $9.9 million at December 31, 2023. The majority of the PCD loan balances were acquired as part of a Federal Deposit Insurance Corporation-assisted transaction. At March 31, 2024, PCD loans consisted of approximately 11 % home equity loans, 24 % commercial real estate loans, 56 % commercial and industrial loans, and 9 % in one-to-four family residential loans. At December 31, 2023, PCD loans consisted of approximately 7 % one-to-four family residential loans, 25 % commercial real estate loans, 57 % commercial and industrial loans, and 11 % in home equity loans.
Credit Quality Indicators
The Company monitors the credit quality of its loan portfolio on a regular basis. Credit quality is monitored by reviewing certain credit quality indicators. Management has determined that loan-to-value (“LTV”) ratios (at period end) and internally assigned credit risk ratings by loan type are the key credit quality indicators that best measure the credit quality of the Company’s loan receivables. LTV ratios used by management in monitoring credit quality are based on current period loan balances and original appraised values at the time of origination (unless a current appraisal has been obtained as a result of the loan being deemed impaired).
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 provision for credit losses on loans and the allowance for credit losses for loans held-for-investment. After determining the loss factor for each portfolio segment held-for-investment, the collectively evaluated for impairment balance of the held-for-investment portfolio is multiplied by the collectively evaluated for impairment loss factor for the respective portfolio segment in order to determine the allowance for loans collectively evaluated for impairment.
When assigning a credit 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.
16
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)
The following table presents the Company’s loans held-for-investment and current period gross charge-offs, excluding PCD loans, by loan class, credit risk ratings and year of origination, at March 31, 2024 (in thousands):
| March 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | 2022 | 2021 | 2020 | Prior | Revolving Loans | Total | ||||||||||||||||||||||||||||||||||||||||
| Real Estate: | |||||||||||||||||||||||||||||||||||||||||||||||
| Multifamily | |||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Special mention | |||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||||||||||||||
| Total multifamily | |||||||||||||||||||||||||||||||||||||||||||||||
| Commercial | |||||||||||||||||||||||||||||||||||||||||||||||
| Pass | |||||||||||||||||||||||||||||||||||||||||||||||
| Special mention | |||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||||||||||||||
| Total commercial | |||||||||||||||||||||||||||||||||||||||||||||||
| One-to-four family residential | |||||||||||||||||||||||||||||||||||||||||||||||
| Pass | |||||||||||||||||||||||||||||||||||||||||||||||
| Special mention | |||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||||||||||||||
| Total one-to-four family residential | |||||||||||||||||||||||||||||||||||||||||||||||
| Home equity and lines of credit | |||||||||||||||||||||||||||||||||||||||||||||||
| Pass | |||||||||||||||||||||||||||||||||||||||||||||||
| Special mention | |||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||||||||||||||
| Total home equity and lines of credit | |||||||||||||||||||||||||||||||||||||||||||||||
| Construction and land | |||||||||||||||||||||||||||||||||||||||||||||||
| Pass | |||||||||||||||||||||||||||||||||||||||||||||||
| Total construction and land | |||||||||||||||||||||||||||||||||||||||||||||||
| Total real estate loans | |||||||||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial | |||||||||||||||||||||||||||||||||||||||||||||||
| Pass | |||||||||||||||||||||||||||||||||||||||||||||||
| Special mention | |||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||||||||||||||
| Total commercial and industrial | |||||||||||||||||||||||||||||||||||||||||||||||
| Current period gross charge-offs | |||||||||||||||||||||||||||||||||||||||||||||||
| Other | |||||||||||||||||||||||||||||||||||||||||||||||
| Pass | |||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||||||||||||||
| Total other | |||||||||||||||||||||||||||||||||||||||||||||||
| Total loans held-for-investment | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Total current-period gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
17
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)
The following table presents the Company’s loans held-for-investment and current period gross charge-offs, excluding PCD loans, by loan class, credit risk ratings and year of origination, at December 31, 2023 (in thousands):
December 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||
| 2023 | 2022 | 2021 | 2020 | 2019 | Prior | Revolving Loans | Total | ||||||||||||||||||||||||||||||||||||||||
| Real Estate: | |||||||||||||||||||||||||||||||||||||||||||||||
| Multifamily | |||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Special mention | |||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||||||||||||||
| Total multifamily | |||||||||||||||||||||||||||||||||||||||||||||||
| Commercial | |||||||||||||||||||||||||||||||||||||||||||||||
| Pass | |||||||||||||||||||||||||||||||||||||||||||||||
| Special mention | |||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||||||||||||||
| Total commercial | |||||||||||||||||||||||||||||||||||||||||||||||
| One-to-four family residential | |||||||||||||||||||||||||||||||||||||||||||||||
| Pass | |||||||||||||||||||||||||||||||||||||||||||||||
| Special mention | |||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||||||||||||||
| Total one-to-four family residential | |||||||||||||||||||||||||||||||||||||||||||||||
| Home equity and lines of credit | |||||||||||||||||||||||||||||||||||||||||||||||
| Pass | |||||||||||||||||||||||||||||||||||||||||||||||
| Special mention | |||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||||||||||||||
| Total home equity and lines of credit | |||||||||||||||||||||||||||||||||||||||||||||||
| Construction and land | |||||||||||||||||||||||||||||||||||||||||||||||
| Pass | |||||||||||||||||||||||||||||||||||||||||||||||
| Total construction and land | |||||||||||||||||||||||||||||||||||||||||||||||
| Total real estate loans | |||||||||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial | |||||||||||||||||||||||||||||||||||||||||||||||
| Pass | |||||||||||||||||||||||||||||||||||||||||||||||
| Special mention | |||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||||||||||||||
| Total commercial and industrial | |||||||||||||||||||||||||||||||||||||||||||||||
| Current period gross charge-offs | |||||||||||||||||||||||||||||||||||||||||||||||
| Other | |||||||||||||||||||||||||||||||||||||||||||||||
| Pass | |||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||||||||||||||
| Total other | |||||||||||||||||||||||||||||||||||||||||||||||
| Total loans held-for-investment | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Total current-period gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
18
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)
Past Due and Non-Accrual Loans
Included in loans receivable held-for-investment 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 $16.8 million and $10.1 million at March 31, 2024 and December 31, 2023, respectively. Generally, originated 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 revised 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 non-accruing status.
When an individual loan no longer demonstrates the similar credit risk characteristics as other loans within its current segment, the Company evaluates each for expected credit losses on an individual basis. All non-accrual loans $500,000 and above and all loans designated as TDRs prior to the adoption of ASU 2022-02 are individually evaluated. The non-accrual amounts included in loans individually evaluated for impairment were $10.4 million and $6.0 million at March 31, 2024, and December 31, 2023, 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 $6.4 million and $4.1 million at March 31, 2024 and December 31, 2023, respectively. Loans past due 90 453,000 and $1.3 million at March 31, 2024 and December 31, 2023, respectively, and consisted of loans that are well-secured and in the process of collection.
19
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)
The following tables set forth the detail, and delinquency status, of non-performing loans (non-accrual loans and loans past due 90
| March 31, 2024 | |||||||||||||||||||||||||||||||||||
| Total Non-Performing Loans | |||||||||||||||||||||||||||||||||||
| Non-Accruing Loans | |||||||||||||||||||||||||||||||||||
| Current | 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: | |||||||||||||||||||||||||||||||||||
| Multifamily | |||||||||||||||||||||||||||||||||||
| Substandard | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Total multifamily | |||||||||||||||||||||||||||||||||||
| Commercial | |||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||
| Total commercial | |||||||||||||||||||||||||||||||||||
| One-to-four family residential | |||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||
| Total one-to-four family residential | |||||||||||||||||||||||||||||||||||
| Home equity and lines of credit | |||||||||||||||||||||||||||||||||||
| Pass | |||||||||||||||||||||||||||||||||||
| Special mention | |||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||
| Total home equity and lines of credit | |||||||||||||||||||||||||||||||||||
| Total real estate | |||||||||||||||||||||||||||||||||||
| Commercial and industrial loans | |||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||
| Total commercial and industrial loans | |||||||||||||||||||||||||||||||||||
| Other loans | |||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||
| Total other | |||||||||||||||||||||||||||||||||||
| Total non-performing loans | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
20
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)
| December 31, 2023 | |||||||||||||||||||||||||||||||||||
| Total Non-Performing Loans | |||||||||||||||||||||||||||||||||||
| Non-Accruing Loans | |||||||||||||||||||||||||||||||||||
| Current | 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: | |||||||||||||||||||||||||||||||||||
| Multifamily | |||||||||||||||||||||||||||||||||||
| Substandard | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Total multifamily | |||||||||||||||||||||||||||||||||||
| Commercial | |||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||
| Total commercial | |||||||||||||||||||||||||||||||||||
| One-to-four family residential | |||||||||||||||||||||||||||||||||||
| Pass | |||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||
| Total one-to-four family residential | |||||||||||||||||||||||||||||||||||
| Home equity and lines of credit | |||||||||||||||||||||||||||||||||||
| Pass | |||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||
| Total home equity and lines of credit | |||||||||||||||||||||||||||||||||||
| Total real estate | |||||||||||||||||||||||||||||||||||
| Commercial and industrial loans | |||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||
| Total commercial and industrial loans | |||||||||||||||||||||||||||||||||||
| Other loans | |||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||
| Total other | |||||||||||||||||||||||||||||||||||
| Total non-performing loans | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
21
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)
The following tables set forth the detail and delinquency status of loans held-for-investment, excluding PCD loans, net of deferred fees and costs, at March 31, 2024, and December 31, 2023 (in thousands):
| March 31, 2024 | |||||||||||||||||||||||||||||||||||
| Past Due Loans | |||||||||||||||||||||||||||||||||||
| 30-89 Days Past Due | 90 Days or More Past Due | 90 Days or More Past Due and Accruing | Total Past Due | Current | Total Loans Receivable, net | ||||||||||||||||||||||||||||||
| Loans held-for-investment: | |||||||||||||||||||||||||||||||||||
| Real estate loans: | |||||||||||||||||||||||||||||||||||
| Multifamily | |||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Special mention | |||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||
| Total multifamily | |||||||||||||||||||||||||||||||||||
| Commercial | |||||||||||||||||||||||||||||||||||
| Pass | |||||||||||||||||||||||||||||||||||
| Special mention | |||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||
| Total commercial | |||||||||||||||||||||||||||||||||||
| One-to-four family residential | |||||||||||||||||||||||||||||||||||
| Pass | |||||||||||||||||||||||||||||||||||
| Special mention | |||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||
| Total one-to-four family residential | |||||||||||||||||||||||||||||||||||
| Home equity and lines of credit | |||||||||||||||||||||||||||||||||||
| Pass | |||||||||||||||||||||||||||||||||||
| Special mention | |||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||
| Total home equity and lines of credit | |||||||||||||||||||||||||||||||||||
| Construction and land | |||||||||||||||||||||||||||||||||||
| Pass | |||||||||||||||||||||||||||||||||||
| Total construction and land | |||||||||||||||||||||||||||||||||||
| Total real estate | |||||||||||||||||||||||||||||||||||
| Commercial and industrial | |||||||||||||||||||||||||||||||||||
| Pass | |||||||||||||||||||||||||||||||||||
| Special mention | |||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||
| Total commercial and industrial | |||||||||||||||||||||||||||||||||||
| Other loans | |||||||||||||||||||||||||||||||||||
| Pass | |||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||
| Total other loans | |||||||||||||||||||||||||||||||||||
| Total loans held-for-investment | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
22
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)
| December 31, 2023 | |||||||||||||||||||||||||||||||||||
| Past Due Loans | |||||||||||||||||||||||||||||||||||
| 30-89 Days Past Due | 90 Days or More Past Due | 90 Days or More Past Due and Accruing | Total Past Due | Current | Total Loans Receivable, net | ||||||||||||||||||||||||||||||
| Loans held-for-investment: | |||||||||||||||||||||||||||||||||||
| Real estate loans: | |||||||||||||||||||||||||||||||||||
| Multifamily | |||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Special mention | |||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||
| Total multifamily | |||||||||||||||||||||||||||||||||||
| Commercial | |||||||||||||||||||||||||||||||||||
| Pass | |||||||||||||||||||||||||||||||||||
| Special mention | |||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||
| Total commercial | |||||||||||||||||||||||||||||||||||
| One-to-four family residential | |||||||||||||||||||||||||||||||||||
| Pass | |||||||||||||||||||||||||||||||||||
| Special mention | |||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||
| Total one-to-four family residential | |||||||||||||||||||||||||||||||||||
| Home equity and lines of credit | |||||||||||||||||||||||||||||||||||
| Pass | |||||||||||||||||||||||||||||||||||
| Special mention | |||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||
| Total home equity and lines of credit | |||||||||||||||||||||||||||||||||||
| Construction and land | |||||||||||||||||||||||||||||||||||
| Pass | |||||||||||||||||||||||||||||||||||
| Total construction and land | |||||||||||||||||||||||||||||||||||
| Total real estate | |||||||||||||||||||||||||||||||||||
| Commercial and industrial | |||||||||||||||||||||||||||||||||||
| Pass | |||||||||||||||||||||||||||||||||||
| Special mention | |||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||
| Total commercial and industrial | |||||||||||||||||||||||||||||||||||
| Other loans | |||||||||||||||||||||||||||||||||||
| Pass | |||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||
| Total other loans | |||||||||||||||||||||||||||||||||||
| Total loans held-for-investment | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
23
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)
The following tables summarize information on non-accrual loans, excluding PCD loans, as of March 31, 2024 and December 31, 2023 (in thousands):
| March 31, 2024 | |||||||||||||||||
| Recorded Investment | Unpaid Principal Balance | With No Related Allowance | |||||||||||||||
| Real estate loans: | |||||||||||||||||
| Multifamily | $ | $ | $ | ||||||||||||||
| Commercial | |||||||||||||||||
| One-to-four family residential | |||||||||||||||||
| Home equity and lines of credit | |||||||||||||||||
| Commercial and industrial | |||||||||||||||||
| Other | |||||||||||||||||
| Total non-accrual loans | $ | $ | $ | ||||||||||||||
| December 31, 2023 | |||||||||||||||||
| Recorded Investment | Unpaid Principal Balance | With No Related Allowance | |||||||||||||||
| Real estate loans: | |||||||||||||||||
| Multifamily | $ | $ | $ | ||||||||||||||
| Commercial | |||||||||||||||||
| One-to-four family residential | |||||||||||||||||
| Home equity and lines of credit | |||||||||||||||||
| Commercial and industrial | |||||||||||||||||
| Other | |||||||||||||||||
| Total non-accrual loans | $ | $ | $ | ||||||||||||||
The following table summarizes interest income on non-accrual loans, excluding PCD loans, during the three months ended March 31, 2024 and March 31, 2023 (in thousands):
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Real estate loans: | |||||||||||
| Multifamily | $ | $ | |||||||||
| Commercial | |||||||||||
| One-to-four family residential | |||||||||||
| Commercial and industrial | |||||||||||
| Total interest income on non-accrual loans | $ | $ | |||||||||
24
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)
Collateral-Dependent Loans
Loans for which the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral are considered to be collateral-dependent loans. Collateral can have a significant financial effect in mitigating exposure to credit risk and, where there is sufficient collateral, an allowance for credit losses is not recognized or is minimal. For collateral-dependent loans, the allowance for credit losses is individually assessed based on the fair value of the collateral less estimated costs of sale. The Company's collateral-dependent loans are secured by real estate. Collateral values are generally based on appraisals which are adjusted for changes in market indices. As of March 31, 2024 and December 31, 2023, the Company had $12.2 million and $7.9 million of collateral-dependent impaired loans, respectively. The collateral-dependent loans at March 31, 2024 consisted of $10.0 million of commercial real estate loans, $1.9 million of multifamily loans, and $289,000 of one-to-four family residential loans. For the three months ended March 31, 2024, there was no significant deterioration or changes in the collateral securing these loans.
Loan Modifications Made to Borrowers Experiencing Financial Difficulty
Effective January 1, 2023, the Company adopted ASU 2022-02, which eliminated the accounting for TDRs while expanding loan modification and vintage disclosure requirements. See Note 1 to the consolidated financial statements for further information.
The following table presents the amortized cost basis at March 31, 2024 of loan modifications made to borrowers experiencing financial difficulty that were modified during the three months ended March 31, 2024 by class and by type of modification (dollars in thousands):
| Three Months Ended March 31, 2024 | ||||||||||||||||||||||||||||||||||||||
| Payment Delay | Term Extension(1) | Payment Delay and Term Extension | Payment Delay, Term Extension, and Interest Rate Reductions | Total | Percentage of Total Class of Financing Receivable | |||||||||||||||||||||||||||||||||
| Commercial mortgage | $ | $ | $ | $ | $ | % | ||||||||||||||||||||||||||||||||
| Commercial and industrial | % | |||||||||||||||||||||||||||||||||||||
| Total loans | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||
(1) Includes one loan with a balance of $13.4 million at March 31, 2024, that was risk rated substandard and was modified during the quarter ended March 31, 2024, to receive a maturity extension of 90 -days through May 1, 2024. This loan previously had multiple 90-day extensions. The loan was originally downgraded to substandard due to operating losses, however the current debt service coverage ratio is 1.57 x and the loan is adequately secured by eligible receivables of approximately $18 million. The loan was current as of March 31, 2024.
The following table presents the financial effect of loan modifications made to borrowers experiencing financial difficulty during the three months ended March 31, 2024 (in thousands):
| Weighted-Average Term Extension (in months) | Weighted-Average Interest Rate Reduction | |||||||||||||
| Three Months Ended March 31, 2024 | ||||||||||||||
| Commercial mortgage | % | |||||||||||||
| Commercial and industrial | 4.3 | % | ||||||||||||
There were no loan modifications made to borrowers experiencing financial difficulty during the three months ended March 31, 2023.
No modifications involved forgiveness of principal. There were no commitments to lend additional funds at March 31, 2024 to borrowers experiencing financial difficulty whose terms have been restructured.
25
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)
For modified loans, a subsequent payment default is defined in terms of delinquency, when a principal or interest payment is 90 days past due or classified into non-accrual status during the reporting period. Of the loans modified since adoption of ASU 2022-02, there were two commercial and industrial loans with a combined balance of approximately $176,000 that subsequently defaulted and were charged-off. One additional commercial mortgage loan with a balance of approximately $245,000 also defaulted during the quarter ended March 31, 2024, and was placed on non-accrual status.
The Company closely monitors the performance of loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of the modification efforts. The following table presents the aging analysis of loan modifications made to borrowers experiencing financial difficulty as of March 31, 2024 (in thousands):
As of March 31, 2024 | |||||||||||||||||||||||||||||
| Current | 30-89 Days Past Due | 90 Days or More Past Due | Non-Accrual | Total | |||||||||||||||||||||||||
| Commercial mortgage | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Commercial and industrial | |||||||||||||||||||||||||||||
| Total loans | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Note 6 – Allowance for Credit Losses (“ACL”) on Loans
Allowance for Collectively Evaluated Loans Held-for-Investment
In estimating the quantitative component of the allowance on a collective basis, the Company uses a risk rating migration model which calculates an expected life of loan loss percentage for each loan by generating probability of default and loss given default metrics. These metrics are multiplied by the exposure at the potential default, taking into consideration estimated prepayments, to calculate the quantitative component of the ACL. The metrics are based on the migration of loans from performing to loss by credit risk rating or delinquency categories using historical life-of-loan analysis periods for each loan portfolio pool, and the severity of loss, based on the aggregate net lifetime losses incurred using the Company's own historical loss experience and comparable peer data loss history. The model's expected losses based on loss history are adjusted for qualitative adjustments to address risks that may not be adequately represented in the risk rating migration model. Among other things, these adjustments include and account for differences in: (i) changes in lending policies and procedures; (ii) changes in local, regional, national, and international economic and business conditions and developments that affect the collectability of our portfolio, including the condition of various market segments; (iii) changes in the experience, ability and depth of lending management and other relevant staff; (iv) changes in the quality of our loan review system; (v) the existence and effect of any concentrations of credit, and changes in the level of such concentrations; and (vi) the effect of other external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in our existing portfolio.
The Company utilizes a two-year reasonable and supportable forecast period after which estimated losses revert to historical loss experience immediately for the remaining life of the loan. In establishing its estimate of expected credit losses, the Company utilizes five externally-sourced forward-looking economic scenarios developed by Moody's Analytics (“Moody's”).
Management utilizes five different Moody's scenarios so as to incorporate uncertainties related to the economic environment. These scenarios, which range from more benign to more severe economic outlooks, include a “most likely outcome” (the “Baseline” scenario) and four less likely scenarios referred to as the “Upside” and “Downside” scenarios. Each scenario is assigned a weighting with a majority of the weighting placed on the Baseline scenario and lower weights placed on both the Upside and Downside scenarios. The weighting assigned by management is based on the economic outlook and available information at the reporting date. The model projects economic variables under each scenario based on detailed statistical analyses. The Company has identified and selected key variables that most closely correlated to its historical credit performance, which include: Gross domestic product, unemployment, and three collateral indices: the Commercial Property Price Index, the Commercial Property Price Apartment Index and the Case-Shiller Home Price Index.
26
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)
Allowance for Individually Evaluated Loans
The Company measures specific reserves for individual loans that do not share common risk characteristics with other loans, consisting of all loans previously modified as TDRs (prior to the adoption of ASU 2022-02) and non-accrual loans with an outstanding balance of $500,000 or greater. Loans individually evaluated for impairment are assessed to determine whether 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 for modified loans 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 credit losses on these loans, which could have a material effect on our financial results. Individually impaired loans that have no impairment losses are not considered for collective allowances described earlier. At March 31, 2024 and December 31, 2023, the ACL for loans individually evaluated for impairment was $44,300 and $45,200 , respectively.
Allowance for Credit Losses – Off-Balance Sheet Exposures
An ACL for off-balance-sheet exposures represents an estimate of expected credit losses arising from off-balance sheet exposures such as loan commitments, standby letters of credit and unused lines of credit (loans already on the books). 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 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. The reserve for off-balance sheet exposures is determined using the Current Expected Credit Losses (“CECL”) reserve factor in the related funded loan segment, adjusted for an average historical funding rate. The allowance for credit losses for off-balance sheet credit exposures is recorded in other liabilities on the consolidated balance sheets and the corresponding provision is included in other non-interest expense.
The table below summarizes the allowance for credit losses for off-balance sheet credit exposures as of, and for, the three months ended March 31, 2024, and March 31, 2023 (in thousands):
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Balance at beginning of period | $ | $ | |||||||||
| Provision for credit losses | |||||||||||
| Balance at end of period | $ | $ | |||||||||
27
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)
| Three Months Ended March 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Real Estate | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial (1) | One-to-Four Family | Home Equity and Lines of Credit | Construction and Land | Commercial and Industrial | Other | Total Loans (excluding PCD) | PCD | Total | |||||||||||||||||||||||||||||||||||||||||||||
| Allowance for credit losses: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Beginning balance | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
| Charge-offs | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Recoveries | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Provisions (credit) | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
| Ending balance | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended March 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Real Estate | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial (1) | One-to-Four Family | Home Equity and Lines of Credit | Construction and Land | Commercial and Industrial | Other | Total Loans (excluding PCD) | PCD | Total | |||||||||||||||||||||||||||||||||||||||||||||
| Allowance for credit losses: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Beginning balance | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
| Charge-offs | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| Recoveries | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Provisions (credit) | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
| Ending balance | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
The allowance for credit losses on loans decreased to $37.0 million at March 31, 2024, compared to $37.5 million as of December 31, 2023, primarily due to a decrease in loan balances and an improvement in the economic forecast within our CECL model for the quarter. The decrease was partially offset by increases in quantitative reserves in the commercial and industrial and home equity and lines of credit loan portfolios due to an increase in non-performing loans in these categories.
28
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 credit losses that is allocated to each loan portfolio segment, at March 31, 2024 and December 31, 2023 (in thousands):
| March 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Real Estate | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial (1) | One-to-Four Family | Home Equity and Lines of Credit | Construction and Land | Commercial and Industrial | Other | Total Loans (excluding PCD) | PCD | Total | |||||||||||||||||||||||||||||||||||||||||||||
| Allowance for credit losses: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Ending balance: individually evaluated for impairment | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
| Ending balance: collectively evaluated for impairment | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Ending balance: PCD loans evaluated for impairment (2) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loans, net: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Ending balance | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
| Ending balance: individually evaluated for impairment | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Ending balance: collectively evaluated for impairment | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Ending balance: PCD loans evaluated for impairment (2) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
PPP loans not evaluated for impairment (3) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Real Estate | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial (1) | One-to-Four Family | Home Equity and Lines of Credit | Construction and Land | Commercial and Industrial | Other | Total Loans (excluding PCD) | PCD | Total | |||||||||||||||||||||||||||||||||||||||||||||
| Allowance for credit losses: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Ending balance: individually evaluated for impairment | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
| Ending balance: collectively evaluated for impairment | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Ending balance: PCD loans evaluated for impairment (2) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loans, net: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Ending balance | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
| Ending balance: individually evaluated for impairment | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Ending balance: collectively evaluated for impairment | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Ending balance: PCD loans evaluated for impairment (2) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
PPP loans not evaluated for impairment (3) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
(2) Upon adoption of CECL, the Company elected to maintain pools of PCD loans that were previously accounted for under ASC 310-30, and will continue to evaluate PCD loans under this guidance.
(3) PPP loans are guaranteed by the SBA and therefore excluded from the allowance for credit losses.
29
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)
Note 7 – Deposits
Deposit account balances are summarized as follows (in thousands):
| March 31, 2024 | December 31, 2023 | ||||||||||
| Non-interest-bearing checking | $ | $ | |||||||||
| Negotiable orders of withdrawal (“NOW”) and interest-bearing checking | |||||||||||
| Savings and money market | |||||||||||
| Certificates of deposit | |||||||||||
| Total deposits | $ | $ | |||||||||
Interest expense on deposit accounts is summarized for the periods indicated (in thousands):
Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| NOW and interest-bearing checking, savings, and money market | $ | $ | |||||||||
| Certificates of deposit | |||||||||||
| Total interest expense on deposit accounts | $ | $ | |||||||||
Note 8 – Subordinated Debt
On June 17, 2022, the Company issued $62.0 million in aggregate principal amount of fixed-to-floating subordinated notes (the “Notes”) to certain institutional investors. The Notes mature on June 30, 2032, unless redeemed earlier. The Notes initially bear interest, payable semi-annually in arrears, at a fixed rate of 5.00 % per annum until June 30, 2027. Beginning June 30, 2027 and until maturity or redemption, the interest rate applicable to the outstanding principal amount of the Notes due will reset quarterly to an interest rate per annum equal to the then current three-month Secured Overnight Financing Rate plus 200 basis points, payable quarterly in arrears. The Company has the option to redeem the Notes, at par and in whole or in part, beginning on June 30, 2027 and to redeem the Notes at any time in whole upon certain other events. Any redemption of the Notes will be subject to prior regulatory approval to the extent required. Debt issuance costs totaled $1.1 million and are being amortized to maturity. At March 31, 2024 and December 31, 2023, subordinated debt totaled $61.3 million and $61.2 million, respectively, which included $725,000 and $781,000 , respectively, of unamortized debt issuance costs. The Company recognized amortization expense of $56,000
30
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)
Note 9 – Equity Incentive Plans
The following table is a summary of the Company’s stock options outstanding as of March 31, 2024, and changes therein during the three months then ended.
| Number of Stock Options | Weighted Average Grant Date Fair Value | Weighted Average Exercise Price | Weighted Average Contractual Life (years) | ||||||||||||||||||||
| Outstanding and Exercisable - December 31, 2023 | $ | $ | |||||||||||||||||||||
| Outstanding and Exercisable - March 31, 2024 | |||||||||||||||||||||||
On January 26, 2024, the Company granted to directors and employees, under the 2019 Equity Incentive Plan, 194,049 restricted stock awards with a total grant date fair value of $2.6 million. Of these grants, 38,203 vest one year from the date of grant and 155,846 vest in equal installments over a three-year period beginning one year from the date of grant. The Company also issued 43,672 performance-based restricted stock units to its executive officers with a total grant date fair value of $581,000 . Vesting of the performance-based restricted stock units will be based on achievement of certain levels of Core Return on Average Assets and will cliff vest after a three-year measurement period ending January 26, 2027. At the end of the performance period, the number of actual shares to be awarded may vary between 0 % and 225 % of target amounts.
The following is a summary of the status of the Company’s restricted stock awards and performance-based restricted stock units at March 31, 2024, and changes therein during the three months then ended.
| Number of Shares Awarded | Weighted Average Grant Date Fair Value | ||||||||||
| Non-vested at December 31, 2023 | $ | ||||||||||
| Granted | |||||||||||
| Vested | ( | ||||||||||
| Forfeited | ( | ||||||||||
| Non-vested at March 31, 2024 | |||||||||||
Expected future stock award expense related to the non-vested restricted share awards and performance-based restricted stock units as of March 31, 2024, was $5.3 million over a weighted average period of 2.1 years.
During the three months ended March 31, 2024 and March 31, 2023, the Company recorded $620,000 and $718,000 , respectively, of stock-based compensation related to the above plan.
Note 10 – Fair Value Measurements
The following tables present the assets reported on the consolidated balance sheets at their estimated fair value as of March 31, 2024, and December 31, 2023, by level within the fair value hierarchy as required by the Fair Value Measurements and Disclosures Topic of the FASB ASC. Financial assets and liabilities are classified in their entirety based on the level of input that is significant to the fair value measurement. The fair value hierarchy is as follows:
•Level 1 Inputs – Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.
•Level 2 Inputs – Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (for example, interest rates, volatilities, prepayment speeds, loss severities, credit risks and default rates) or inputs that are derived principally from or corroborated by observable market data by correlations or other means.
•Level 3 Inputs – Significant unobservable inputs that reflect the Company’s own assumptions that market participants would use in pricing the assets or liabilities.
31
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)
The methods of determining the fair value of assets and liabilities presented in this note are consistent with our methodologies disclosed in Note 16 to the Consolidated Financial Statements of the Company’s 2022 Annual Report on Form 10-K.
Fair Value Measurements at March 31, 2024 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: | |||||||||||||||||||||||
| U.S. Treasuries | $ | $ | $ | $ | |||||||||||||||||||
| U.S. Government agency | |||||||||||||||||||||||
| Mortgage-backed securities: | |||||||||||||||||||||||
| Pass-through certificates: | |||||||||||||||||||||||
| GSE | |||||||||||||||||||||||
| REMICs: | |||||||||||||||||||||||
| GSE | |||||||||||||||||||||||
| Total mortgage-backed securities | |||||||||||||||||||||||
| Other debt securities: | |||||||||||||||||||||||
| Municipal bonds | |||||||||||||||||||||||
| Corporate bonds | |||||||||||||||||||||||
| Total debt securities available-for-sale | |||||||||||||||||||||||
| Trading securities | |||||||||||||||||||||||
Equity securities (1) | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
| Measured on a non-recurring basis: | |||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Loans individually evaluated for impairment: | |||||||||||||||||||||||
| Real estate loans: | |||||||||||||||||||||||
| Commercial real estate | $ | $ | $ | $ | |||||||||||||||||||
| Multifamily | |||||||||||||||||||||||
| Home equity and lines of credit | |||||||||||||||||||||||
| Total individually evaluated real estate loans | |||||||||||||||||||||||
| Commercial and industrial loans | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
(1) Excludes investment measured at net asset value of $10.0 million at March 31, 2024, which has not been classified in the fair value hierarchy.
32
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)
Fair Value Measurements at December 31, 2023 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: | |||||||||||||||||||||||
| U.S. Treasuries | $ | $ | $ | $ | |||||||||||||||||||
| U.S. Government agency securities | |||||||||||||||||||||||
| Mortgage-backed securities: | |||||||||||||||||||||||
| Pass-through certificates: | |||||||||||||||||||||||
| GSE | |||||||||||||||||||||||
| REMICs: | |||||||||||||||||||||||
| GSE | |||||||||||||||||||||||
| Total mortgage-backed securities | |||||||||||||||||||||||
| Other debt securities: | |||||||||||||||||||||||
| Municipal bonds | |||||||||||||||||||||||
| Corporate bonds | |||||||||||||||||||||||
| Total debt securities available-for-sale | |||||||||||||||||||||||
| Trading securities | |||||||||||||||||||||||
Equity securities (1) | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
| Measured on a non-recurring basis: | |||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Loans individually evaluated for impairment: | |||||||||||||||||||||||
| Real estate loans: | |||||||||||||||||||||||
| Commercial real estate | $ | $ | $ | $ | |||||||||||||||||||
| Multifamily | |||||||||||||||||||||||
| Home equity and lines of credit | |||||||||||||||||||||||
| Total impaired real estate loans | |||||||||||||||||||||||
| Commercial and industrial loans | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
(1) Excludes investment measured at net asset value of $10.3 million at December 31, 2023, which has not been classified in the fair value hierarchy.
The following table presents qualitative information for Level 3 assets measured at fair value on a non-recurring basis at March 31, 2024 and December 31, 2023 (dollars in thousands):
| Fair Value | Valuation Methodology | Unobservable Inputs | Range of Inputs | ||||||||||||||||||||||||||||||||
| March 31, 2024 | December 31, 2023 | March 31, 2024 | December 31, 2023 | ||||||||||||||||||||||||||||||||
| Individually evaluated loans | $ | $ | Appraisals | Discount for costs to sell | |||||||||||||||||||||||||||||||
| Discount for quick sale | |||||||||||||||||||||||||||||||||||
| Discounted cash flows | Interest rates | ||||||||||||||||||||||||||||||||||
33
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 at March 31, 2024, and December 31, 2023.
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 three months ended March 31, 2024 or March 31, 2023.
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.
Loans Individually Evaluated for Impairment: At March 31, 2024 and December 31, 2023, the Company had loans individually evaluated for impairment (excluding PCD loans) with outstanding principal balances of $5.9 million and $6.0 million, respectively, which were recorded at their estimated fair value of $4.2 million and $4.3 million, respectively. The Company recorded a net decrease in the specific reserve for impaired loans of $900 and a net increase of $7,000 for the three months ended March 31, 2024 and March 31, 2023, respectively. Net charge-offs of $911,000 and $2.0 million were recorded for the three months ended March 31, 2024 and March 31, 2023, respectively, utilizing Level 3 inputs. For purposes of estimating the fair value of impaired loans, management utilizes independent appraisals, if the loan is collateral-dependent, adjusted downward by management, as necessary, for changes in relevant valuation factors subsequent to the appraisal date, or the present value of expected future cash flows for non-collateral dependent loans and TDRs.
Other Real Estate Owned: At March 31, 2024 and December 31, 2023, the Company had no
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.
(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.
34
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)
(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
Federal Home Loan Bank of New York (“FHLBNY”) stock is carried at cost, which approximates fair 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 non-performing 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 non-performance 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 interest and 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.
(i) Borrowings
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.
(k) Derivatives
The fair value of the Company's derivatives is determined using discounted cash flow analysis using observable market-based inputs, which are considered Level 2 inputs.
35
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)
The estimated fair values of the Company’s significant financial instruments at March 31, 2024 and December 31, 2023, are presented in the following tables (in thousands):
| March 31, 2024 | |||||||||||||||||||||||||||||
| Estimated Fair Value | |||||||||||||||||||||||||||||
| Carrying Value | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||
| Financial assets: | |||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Trading securities | |||||||||||||||||||||||||||||
| Debt securities available-for-sale | |||||||||||||||||||||||||||||
| Debt securities held-to-maturity | |||||||||||||||||||||||||||||
Equity securities (1) | |||||||||||||||||||||||||||||
| FHLBNY stock, at cost | |||||||||||||||||||||||||||||
| Net loans held-for-investment | |||||||||||||||||||||||||||||
| Derivative assets | |||||||||||||||||||||||||||||
| Financial liabilities: | |||||||||||||||||||||||||||||
| Deposits | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| FHLB advances and other borrowings (including securities sold under agreements to repurchase) | |||||||||||||||||||||||||||||
| Subordinated debentures, net of issuance costs | |||||||||||||||||||||||||||||
| Advance payments by borrowers for taxes and insurance | |||||||||||||||||||||||||||||
| Derivative liabilities | |||||||||||||||||||||||||||||
(1) Excludes investment measured at net asset value of $10.0 million at March 31, 2024, which has not been classified in the fair value hierarchy.
| December 31, 2023 | |||||||||||||||||||||||||||||
| Estimated Fair Value | |||||||||||||||||||||||||||||
| Carrying Value | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||
| Financial assets: | |||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Trading securities | |||||||||||||||||||||||||||||
| Debt securities available-for-sale | |||||||||||||||||||||||||||||
| Debt securities held-to-maturity | |||||||||||||||||||||||||||||
Equity securities (1) | |||||||||||||||||||||||||||||
| FHLBNY stock, at cost | |||||||||||||||||||||||||||||
| Net loans held-for-investment | |||||||||||||||||||||||||||||
| Derivative assets | |||||||||||||||||||||||||||||
| Financial liabilities: | |||||||||||||||||||||||||||||
| Deposits | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| FHLB advances and other borrowings (including securities sold under agreements to repurchase) | |||||||||||||||||||||||||||||
| Subordinated debentures, net of issuance costs | |||||||||||||||||||||||||||||
| Advance payments by borrowers for taxes and insurance | |||||||||||||||||||||||||||||
| Derivative liabilities | |||||||||||||||||||||||||||||
36
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 11 – 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 and performance-based restricted stock units.
The following is a summary of the Company’s earnings per share calculations and reconciliation of basic to diluted earnings per share for the periods indicated (in thousands, except per share data):
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Net income available to common stockholders | $ | $ | |||||||||
| Weighted average shares outstanding-basic | |||||||||||
| Effect of non-vested restricted stock and stock, performance-based restricted stock units and options outstanding | |||||||||||
| Weighted average shares outstanding-diluted | |||||||||||
| Earnings per share-basic | $ | $ | |||||||||
| Earnings per share-diluted | $ | $ | |||||||||
| Anti-dilutive shares | |||||||||||
Note 12 – Leases
The Company’s leases primarily relate to real estate property for branches and office space with terms extending from two months up to 31.3 years. At March 31, 2024, all of the Company’s leases are classified as operating leases, which are required to be recognized on the consolidated balance sheets as a right-of-use asset and a corresponding lease liability.
37
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)
The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use assets and operating lease liabilities on the consolidated balance sheets. Right-of-use assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recorded at the present value of lease payments over the lease term. As the Company's leases do not provide an implicit rate, the Company uses its incremental borrowing rate, at lease inception, over a similar term in determining the present value of lease payments. Certain leases include options to renew, with one or more renewal terms ranging from to ten years . If the exercise of a renewal option is considered to be reasonably certain, the Company includes the extended term in the calculation of the right-of-use asset and lease liability.
At March 31, 2024, the Company’s operating lease right-of-use assets and operating lease liabilities included on the consolidated balance sheet were $30.1 million and $34.9 million, respectively. At December 31, 2023, the Company’s operating lease right-of-use assets and operating lease liabilities included on the consolidated balance sheet were $30.2 million and $35.2 million, respectively. Operating lease expense is recognized on a straight-line basis over the lease term, while variable lease payments are recognized as incurred. Variable lease payments include common area maintenance charges, real estate taxes, repairs and maintenance costs and utilities. Operating and variable lease expenses are recorded in occupancy expense on the consolidated statements of comprehensive income.
Supplemental lease information at or for the three months ended March 31, 2024, and March 31, 2023 is as follows (dollars in thousands):
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Operating lease cost | $ | $ | |||||||||
| Variable lease cost | |||||||||||
| Net lease cost | $ | $ | |||||||||
| Cash paid for amounts included in measurement of operating lease liabilities | $ | $ | |||||||||
| Right-of-use assets obtained in exchange for new operating lease liabilities | $ | $ | |||||||||
| Weighted average remaining lease term | |||||||||||
| Weighted average discount rate | % | % | |||||||||
The following table summarizes lease payment obligations for each of the next five years and thereafter in addition to a reconcilement to the Company's current lease liability (in thousands):
| Year | Amount | ||||
| 2024 | $ | ||||
| 2025 | |||||
| 2026 | |||||
| 2027 | |||||
| 2028 | |||||
| Thereafter | |||||
| Total lease payments | |||||
| Less: imputed interest | ( | ||||
| Present value of lease liabilities | $ | ||||
As of March 31, 2024, the Company had not entered into any leases that have not yet commenced.
38
NORTHFIELD BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements - (Continued)
Note 13 – Derivatives
The Company has interest rate derivatives resulting from a service provided to certain qualified borrowers in a loan-related transaction and, therefore, are not used to manage interest rate risk in the Company’s assets or liabilities. The interest rate swap agreement which the Company executed with the commercial borrower is collateralized by the borrower’s commercial real estate financed by the Company. The collateral exceeds the maximum potential amount of future payments under the credit derivative. As these interest rate swaps do not meet the hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings.
At March 31, 2024, the Company had ten interest rate swaps with a notional amount of $72.0 million. At December 31, 2023, the Company had ten interest rate swaps with a notional amount of $72.7 million. There was no fee income related to these swaps for the three months ended March 31, 2024. The Company recorded fee income related to these swaps of $231,000 for the three months ended March 31, 2023.
The table below presents the fair value of the derivatives as well as their location on the consolidated balance sheets (in thousands):
| Fair Value | ||||||||||||||
| Balance Sheet Location | March 31, 2024 | December 31, 2023 | ||||||||||||
| Other assets | $ | $ | ||||||||||||
| Other liabilities | ||||||||||||||
39
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 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, internationally, nationally, or in our market areas, including inflationary and/or recessionary pressures, employment prospects, real estate values, military conflict, geopolitical risks, and downgrades of the U.S. credit rating;
•competition among depository and other financial institutions, including with respect to fees and interest rates;
•inflation and changes in the interest rate environment that reduce our margins and yields, or reduce the market value of our assets including the fair value of financial instruments;
•adverse changes in the securities or credit markets;
•changes in laws, tax policies, or government regulations or policies affecting financial institutions, changes in regulatory fees, assessments, and capital requirements;
•changes in the quality and/or composition of our loan and securities portfolios, changes in prepayment speeds, and changes in our allowance for credit losses;
•our ability to manage our liquidity, including unanticipated changes in our liquidity position, but not limited to, changes in our access to or the cost of funding and our ability to secure alternate funding sources;
•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 (the “FASB”), the Securities and Exchange Commission (the “SEC”), or the Public Company Accounting Oversight Board;
•cyber-attacks, computer viruses and other technological risks that may breach the security of our website 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 to implement than expected;
•changes in our organization, compensation, and benefit plans;
•our ability to attract and/or retain key employees;
•changes in the value of our goodwill or other intangible assets;
•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;
•the ability of third-party providers to perform their obligations to us;
•the effects of natural disasters, climate change, extreme weather events and increases in flood insurance premiums;
•changes in our ability to continue to pay dividends, either at current rates or at all;
•operational or risk management failures by us or critical third parties;
•increased operational risks resulting from remote work;
•negative outcomes from claims or litigation;
•our ability to manage our reputation risks;
•our ability to timely and effectively implement our strategic initiatives;
40
•the disruption to local, regional, national and global economic activity caused by infectious disease outbreaks such as COVID-19, and the significant impact that such pandemics may have on our growth, operations, earnings and asset quality;
•significant increases in asset quality, prepayment speeds and/or our credit losses; and
•changes in the financial condition, results of operations, or future prospects of issuers of securities that we own.
Because of these and other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements. 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, 2023, 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 on 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 credit losses on loans and judgments regarding 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 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.
The accounting estimates relating to the allowance for credit losses remain "critical accounting estimates" for the following reasons:
•Changes in the provision for credit losses can materially affect our financial results;
•Estimates relating to the allowance for credit losses require us to utilize a reasonable and supportable forecast period based upon forward-looking economic scenarios in order to estimate probability of default and loss given default rates, which our Current Expected Credit Losses (“CECL”) methodology encompasses;
•The allowance for credit losses is influenced by factors outside of our control such as industry and business trends, as well as economic conditions such as trends in housing prices, interest rates, gross domestic product, inflation, and unemployment; and
•Judgment is required to determine whether the models used to generate the allowance for credit losses produce an estimate that is sufficient to encompass the current view of lifetime expected credit losses.
Our estimation process is subject to risks and uncertainties, including a reliance on historical loss and trend information that may not be representative of current conditions and indicative of future performance. Changes in such estimates could significantly impact our allowance and provision for credit losses. Accordingly, our actual credit loss experience may not be in line with our expectations.
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, 2023.
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Overview
This overview highlights selected information and may not contain all the information that is important to you in understanding our performance during the periods presented. 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, 2023.
Net income was $6.2 million for the three months ended March 31, 2024, as compared to $11.7 million for the three months ended March 31, 2023. Basic and diluted earnings per common share were $0.15 for the three months ended March 31, 2024, compared to basic and diluted earnings per common share of $0.26 for the three months ended March 31, 2023. For the three months ended March 31, 2024, our return on average assets was 0.43%, as compared to 0.84% for the three months ended March 31, 2023. For the three months ended March 31, 2024, our return on average stockholders’ equity was 3.59% as compared to 6.82% for the three months ended March 31, 2023. Net earnings for the three months ended March 31, 2024, were down from the comparative prior year period primarily due to an increase in interest expense on deposits and borrowings, offset in part by an increase in interest income on interest-earning assets.
Total assets increased by $253.2 million, or 4.5%, to $5.85 billion at March 31, 2024, from $5.60 billion at December 31, 2023. Total liabilities increased $254.2 million, or 5.2%, to $5.15 billion at March 31, 2024, from $4.90 billion at December 31, 2023.
Comparison of Financial Condition at March 31, 2024 and December 31, 2023
Total assets increased by $253.2 million, or 4.5%, to $5.85 billion at March 31, 2024, from $5.60 billion at December 31, 2023. The increase was primarily due to an increase in available-for-sale debt securities of $280.3 million, or 35.2%, an increase in cash and cash equivalents of $9.3 million, or 4.0%, and an increase in other assets of $2.4 million, or 4.9%, partially offset by a decrease in loans receivable of $41.2 million.
Cash and cash equivalents increased by $9.3 million, or 4.0%, to $238.8 million at March 31, 2024, from $229.5 million at December 31, 2023, primarily due to an increase in Federal Reserve Bank (“FRB”) balances driven by excess cash from borrowings. Balances fluctuate based on the timing of receipt of security and loan repayments and the redeployment of cash into higher-yielding assets such as loans and securities, or the funding of deposit outflows or borrowing maturities. During 2023 and continuing into the first quarter of 2024, management believed it was prudent to increase balance sheet liquidity given general market volatility and uncertainty.
The Company’s available-for-sale debt securities portfolio increased by $280.3 million, or 35.2%, to $1.08 billion at March 31, 2024, from $795.5 million at December 31, 2023. The increase was primarily attributable to purchases of U.S Treasuries, mortgage-backed securities and corporate bonds, partially offset by paydowns, calls and maturities. At March 31, 2024, $716.0 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 $174.3 million in U.S. Treasuries, $73.7 million in U.S. Government agency securities, $111.0 million in corporate bonds, substantially all of which were considered investment grade, and $762,000 in municipal bonds at March 31, 2024. Unrealized losses, net of tax, on available-for-sale debt securities and held-to-maturity securities approximated $32.3 million and $359,000, respectively, at March 31, 2024, and $32.5 million and $279,000, respectively, at December 31, 2023.
Equity securities were $11.0 million at March 31, 2024 and $10.6 million at December 31, 2023. Equity securities are primarily comprised of an investment in a Small Business Administration Loan Fund. This investment is utilized by the Bank as part of its Community Reinvestment Act program.
As of March 31, 2024, non-owner occupied commercial real estate loans (as defined by regulatory guidance) to total risk-based capital was estimated at approximately 446%. 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 its commercial real estate concentration risk, the Bank’s regulators could require it to implement additional policies and procedures or could require it to maintain higher levels of regulatory capital, which might adversely affect its loan originations, the Company's ability to pay dividends, and overall profitability.
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Loans held-for-investment, net, decreased by $41.2 million, or 1.0%, to $4.16 billion at March 31, 2024 from $4.20 billion at December 31, 2023, primarily due to decreases in multifamily and commercial real estate loans, partially offset by an increase in commercial and industrial loans. The overall decrease in loan balances reflects the Company remaining strategically focused on both managing the concentration of its commercial and multifamily real estate loan portfolios and disciplined loan pricing, as well as lower customer demand in the current elevated interest rate environment. Multifamily loans decreased $35.1 million, or 1.3%, to $2.72 billion at March 31, 2024 from $2.75 billion at December 31, 2023, commercial real estate loans decreased $13.5 million, or 1.5%, to $916.1 million at March 31, 2024 from $929.6 million at December 31, 2023, one-to-four family residential loans decreased $4.5 million, or 2.8%, to $156.3 million at March 31, 2024 from $160.8 million at December 31, 2023, construction and land loans decreased $453,000, or 1.5%, to $30.5 million at March 31, 2024 from $31.0 million at December 31, 2023, and other loans decreased $944,000, or 36.5%, to $1.6 million at March 31, 2024 from $2.6 million at December 31, 2023. Partially offsetting these decreases was an increase in commercial and industrial loans of $13.3 million, or 8.6%, to $168.6 million at March 31, 2024 from $155.3 million at December 31, 2023.
Our real estate portfolio includes credit risk exposure to loans collateralized by office buildings and multifamily properties in New York State subject to some form of rent regulation limiting rent increases for rent stabilized multifamily properties. At March 31, 2024, office-related loans represented $206.1 million, or approximately 5% of our total loan portfolio, with an average balance of $1.8 million (although we have originated these type of loans in amounts substantially greater than this average) and a weighted average loan-to-value ratio of 58%. Approximately 43% were owner-occupied. The geographic locations of the properties collateralizing our office-related loans are as follows: 54.3% in New York and 45.7% in New Jersey. At March 31, 2024, our largest office-related loan had a principal balance of $90.0 million (with a net active principal balance for the Bank of $30.0 million as we have a 33.3% participation interest), was secured by an office facility located in Staten Island, New York, and was performing in accordance with its original contractual terms. At March 31, 2024, multifamily loans that have some form of rent stabilization or rent control totaled approximately $444.4 million, or approximately 11% of our total loan portfolio, with an average balance of $1.7 million (although we have originated these type of loans in amounts substantially greater than this average) and a weighted average loan-to-value ratio of 52%. At March 31, 2024, our largest rent-regulated loan had a principal balance of $17.1 million, was secured by an apartment building located in Staten Island, New York, and was performing in accordance with its original contractual terms. Management continues to closely monitor its office and rent-regulated portfolios. For further details on our rent-regulated multifamily portfolio see “Asset Quality — Rent Regulated Multifamily Loans.”
Purchased credit-deteriorated (“PCD”) loans totaled $10.0 million and $9.9 million at March 31, 2024 and December 31, 2023, respectively. The majority of the remaining PCD loan balance consists of loans acquired as part of a Federal Deposit Insurance Corporation-assisted transaction. The Company accreted interest income of $426,000 attributable to PCD loans for the three months ended March 31, 2024, as compared to $341,000 for the three months ended March 31, 2023, respectively. PCD loans had an allowance for credit losses of approximately $3.1 million at March 31, 2024.
Total liabilities increased $254.2 million, or 5.2%, to $5.15 billion at March 31, 2024, from $4.90 billion at December 31, 2023. The increase was primarily attributable to increases in borrowings of $205.3 million, primarily FRB borrowings, and total deposits of $42.9 million. The Company routinely utilizes brokered deposits and borrowed funds to manage interest rate risk, the cost of interest-bearing liabilities, and funding needs related to loan originations and deposit activity.
Deposits increased $42.9 million, or 1.1%, to $3.92 billion at March 31, 2024, as compared to $3.88 billion at December 31, 2023. Brokered deposits decreased by $1.3 million, or 1.3%. Deposits, excluding brokered deposits, increased $44.2 million, or 1.2%. The increase in deposits, excluding brokered deposits, was primarily attributable to increases of $30.8 million in time deposits, $44.0 million in transaction accounts and $5.0 million in savings accounts. Transaction growth was attributable to dedicated business development efforts, including targeted marketing mailings, while growth in time deposits was attributable to the current interest rate environment and offering competitive interest rates to attract deposits. These increases were partially offset by a decrease of $35.7 million in money market accounts as customers shifted balances into higher yielding time deposit accounts. Estimated gross uninsured deposits at March 31, 2024 were $1.73 billion. This total includes fully collateralized uninsured governmental deposits and intercompany deposits of $890.4 million, leaving estimated net uninsured deposits of approximately $842.4 million, or 21.5%, of total deposits. At December 31, 2023, estimated net uninsured deposits totaled $869.9 million, or 22.4% of total deposits.
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Borrowed funds increased to $1.13 billion at March 31, 2024, from $920.5 million at December 31, 2023. The increase in borrowings for the period was primarily due to an increase in FRB borrowings of $205.5 million under the Federal Reserve Bank Term Funding Program (“BTFP”) which included favorable terms and conditions as compared to FHLB advances. Management utilizes borrowings to mitigate interest rate risk, for short-term liquidity, and to a lesser extent from time to time, as part of leverage strategies.
The following table sets forth term borrowing maturities (excluding overnight borrowings, floating rate advances, and subordinated debt) and the weighted average rate by year at March 31, 2024 (dollars in thousands):
| Year | Amount (1) | Weighted Average Rate | ||||||||||||
| 2024 | $100,765 | 3.58% | ||||||||||||
| 2025 | 482,500 | 3.99% | ||||||||||||
| 2026 | 148,000 | 4.36% | ||||||||||||
| 2027 | 173,000 | 3.19% | ||||||||||||
| 2028 | 154,288 | 3.96% | ||||||||||||
| $1,058,553 | 3.87% | |||||||||||||
((1) Borrowings maturing in 2025 include $300.0 million of FRB borrowings that can be repaid without any penalty.
Total stockholders’ equity decreased by $1.0 million to $698.4 million at March 31, 2024, from $699.4 million at December 31, 2023. The decrease was attributable to $3.1 million in stock repurchases and $5.6 million in dividend payments, partially offset by net income of $6.2 million for the three months ended March 31, 2024, a $743,000 increase in accumulated other comprehensive income associated with an increase in the estimated fair value of our debt securities available-for-sale portfolio, and a $700,000 increase in equity award activity. During the three months ended March 31, 2024, the Company repurchased 252,631 of its common stock outstanding at an average price of $12.17 for a total of $3.1 million pursuant to approved stock repurchase plans. As of March 31, 2024, the Company had no remaining capacity under its current repurchase program. The Board of Directors approved a new $5.0 million stock repurchase plan on April 24, 2024.
Comparison of Operating Results for the Three Months Ended March 31, 2024 and 2023
Net Income. Net income was $6.2 million and $11.7 million for the three months ended March 31, 2024 and March 31, 2023, respectively. Significant variances from the comparable prior year period are as follows: a $7.0 million decrease in net interest income, a $449,000 decrease in the provision for credit losses on loans, a $1.2 million increase in non-interest expense, and a $2.2 million decrease in income tax expense.
Interest Income. Interest income increased $8.7 million, or 17.5%, to $58.6 million for the three months ended March 31, 2024, from $49.9 million for the three months ended March 31, 2023, primarily due to a 51 basis point increase in yield on interest-earning assets due to the rising rate environment coupled with a $135.1 million, or 2.5%, increase in the average balance of interest-earning assets. The increase in the average balance of interest-earning assets was primarily due to increases in the average balance of interest-earning deposits in financial institutions of $185.6 million and the average balance of other securities of $116.0 million, partially offset by decreases in the average balance of loans of $70.1 million and the average balance of mortgage-backed securities of $97.9 million. The Company accreted interest income related to PCD loans of $426,000 for the three months ended March 31, 2024, as compared to $341,000 for the three months ended March 31, 2023. Interest income for the three months ended March 31, 2024, included loan prepayment income of $351,000 as compared to $961,000 for the three months ended March 31, 2023.
Interest Expense. Interest expense increased $15.7 million, or 104.7%, to $30.8 million for the three months ended March 31, 2024, as compared to $15.0 million for the three months ended March 31, 2023. The increase was primarily due to an increase in interest expense on deposits of $11.5 million, or 146.4%, and an increase in interest expense on borrowings of $4.3 million, or 66.8%. The increase in interest expense on deposits was attributable to a 148 basis point increase in the cost of interest-bearing deposits from 1.01% to 2.49% for the three months ended March 31, 2024, due to rising market interest rates and a shift in the composition of the deposit portfolio towards higher-costing certificates of deposit. The increase in interest expense on deposits was partially offset by a $29.8 million, or 0.9%, decrease in the average balance of interest-bearing deposits due to a decrease in transaction accounts. The increase in interest expense on borrowings was attributable to a 47 basis point increase in the average cost of borrowings, and a $346.0 million, or 45.3%, increase in the average balance of borrowings.
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Net Interest Income. Net interest income for the three months ended March 31, 2024, decreased $7.0 million, or 20.1%, to $27.9 million, from $34.9 million for the three months ended March 31, 2023, primarily due to a 60 basis point decrease in net interest margin to 2.03% from 2.63% for the three months ended March 31, 2023. The decrease in net interest margin was primarily due to interest-bearing liabilities repricing faster than interest-earning assets. The cost of interest-bearing liabilities increased by 136 basis points to 2.89% for the three months ended March 31, 2024, from 1.53% for the three months ended March 31, 2023, driven primarily by a 47 basis point increase in the cost of borrowings from 3.40% to 3.87% and a 148 basis point increase in the cost of interest-bearing deposits from 1.01% to 2.49% for the three months ended March 31, 2024, due to rising market interest rates, a shift in the composition of the deposit portfolio towards higher-costing certificates of deposit, and a greater reliance on borrowings. The increase in the cost of interest-bearing liabilities was partially offset by an increase in the yield on interest-earning assets, which increased 51 basis points to 4.27% for the three months ended March 31, 2024, from 3.76% for the three months ended March 31, 2023, due to an increase in yields on all classes of interest-earning assets due to the higher interest rate environment. The net interest margin was also negatively affected by approximately eight basis points for the three months ending March 31, 2024, due to a $300 million low risk leverage strategy.
Provision for Credit Losses. The provision for credit losses on loans decreased by $449,000 to $415,000 for the three months ended March 31, 2024, compared to $864,000 for the three months ended March 31, 2023, primarily due to a decline in loan balances, lower net charge-offs and an improvement in the economic forecast for the current period within our Current Expected Credit Loss (“CECL”) model. Partially offsetting the decrease was an increase in reserves in the commercial and industrial and home equity and lines of credit portfolios related to an increase in non-performing loans in these categories. Net charge-offs were $911,000 for the three months ended March 31, 2024, primarily due to $894,000 in net charge-offs on small business unsecured commercial and industrial loans, as compared to net charge-offs of $2.0 million for the three months ended March 31, 2023. Management continues to monitor the small business unsecured commercial and industrial loan portfolio, which totaled $35.6 million at March 31, 2024.
Non-interest Income. Non-interest income remained stable at $3.4 million for the three months ended March 31, 2024 as compared to $3.3 million for the three months ended March 31, 2023. Fees and service charges increased by $235,000, primarily due to increases in overdraft fees. Gains on trading securities, net, increased by $187,000. Partially offsetting these increases was a decrease in other non-interest income of $466,000, primarily due to lower swap fee income. For the three months ended March 31, 2024, gains on trading securities were $699,000, as compared to gains of $512,000 for the three months ended March 31, 2023. 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 increased $1.2 million, or 5.7%, to $22.3 million for the three months ended March 31, 2024, compared to $21.1 million for the three months ended March 31, 2023. The increase was primarily due to a $1.7 million increase in employee compensation and benefits, primarily attributable to higher salary expense, related to annual merit increases, an increase in medical expense and an increase in the mark to market expense of the Company's deferred compensation plan, which as discussed above has no effect on net income. Additionally, there was a $181,000 increase in occupancy expense, primarily due to higher repair and maintenance expense. Partially offsetting the increases was a $162,000 decrease in professional fees, and a $329,000 decrease in advertising expense due to timing of certain campaigns.
Income Tax Expense. The Company recorded income tax expense of $2.3 million for the three months ended March 31, 2024, compared to $4.5 million for the three months ended March 31, 2023, with the decrease due to lower taxable income. The effective tax rate for the three months ended March 31, 2024, was 27.0% compared to 27.9% for the three months ended March 31, 2023. The Company expects that in the second quarter of 2024, options granted in 2014 will expire and this will result in additional tax expense of approximately $700,000 in the second quarter.
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The following table sets forth average balances, average yields and costs, and certain other information for the periods indicated.
For the Three Months Ended | |||||||||||||||||||||||||||||||||||
March 31, 2024 | March 31, 2023 | ||||||||||||||||||||||||||||||||||
| Average Outstanding Balance | Interest | Average Yield/ Rate (1) | Average Outstanding Balance | Interest | Average Yield/ Rate (1) | ||||||||||||||||||||||||||||||
| Interest-earning assets: | |||||||||||||||||||||||||||||||||||
Loans (2) | $ | 4,174,668 | $ | 46,047 | 4.44 | % | $ | 4,244,772 | $ | 43,707 | 4.18 | % | |||||||||||||||||||||||
Mortgage-backed securities (3) | 648,811 | 4,398 | 2.73 | 746,735 | 3,792 | 2.06 | |||||||||||||||||||||||||||||
Other securities (3) | 391,980 | 3,841 | 3.94 | 275,957 | 1,385 | 2.04 | |||||||||||||||||||||||||||||
| Federal Home Loan Bank of New York stock | 39,599 | 970 | 9.85 | 38,066 | 465 | 4.95 | |||||||||||||||||||||||||||||
| Interest-earning deposits in financial institutions | 262,884 | 3,392 | 5.19 | 77,269 | 578 | 3.03 | |||||||||||||||||||||||||||||
| Total interest-earning assets | 5,517,942 | 58,648 | 4.27 | 5,382,799 | 49,927 | 3.76 | |||||||||||||||||||||||||||||
| Non-interest-earning assets | 266,428 | 239,984 | |||||||||||||||||||||||||||||||||
| Total assets | $ | 5,784,370 | $ | 5,622,783 | |||||||||||||||||||||||||||||||
| Interest-bearing liabilities: | |||||||||||||||||||||||||||||||||||
| Savings, NOW, and money market accounts | $ | 2,464,297 | 12,331 | 2.01 | % | $ | 2,523,620 | 3,843 | 0.62 | % | |||||||||||||||||||||||||
| Certificates of deposit | 654,328 | 6,942 | 4.27 | 624,762 | 3,978 | 2.58 | |||||||||||||||||||||||||||||
| Total interest-bearing deposits | 3,118,625 | 19,273 | 2.49 | 3,148,382 | 7,821 | 1.01 | |||||||||||||||||||||||||||||
| Borrowed funds | 1,108,880 | 10,663 | 3.87 | 762,928 | 6,391 | 3.40 | |||||||||||||||||||||||||||||
| Subordinated debt | 61,239 | 828 | 5.44 | 61,015 | 819 | 5.44 | |||||||||||||||||||||||||||||
| Total interest-bearing liabilities | 4,288,744 | 30,764 | 2.89 | 3,972,325 | 15,031 | 1.53 | |||||||||||||||||||||||||||||
| Non-interest bearing deposits | 699,640 | 848,098 | |||||||||||||||||||||||||||||||||
| Accrued expenses and other liabilities | 99,594 | 105,685 | |||||||||||||||||||||||||||||||||
| Total liabilities | 5,087,978 | 4,926,108 | |||||||||||||||||||||||||||||||||
| Stockholders' equity | 696,392 | 696,675 | |||||||||||||||||||||||||||||||||
| Total liabilities and stockholders' equity | $ | 5,784,370 | $ | 5,622,783 | |||||||||||||||||||||||||||||||
| Net interest income | $ | 27,884 | $ | 34,896 | |||||||||||||||||||||||||||||||
Net interest rate spread (4) | 1.38 | % | 2.23 | % | |||||||||||||||||||||||||||||||
Net interest-earning assets (5) | $ | 1,229,198 | $ | 1,410,474 | |||||||||||||||||||||||||||||||
Net interest margin (6) | 2.03 | % | 2.63 | % | |||||||||||||||||||||||||||||||
| Average interest-earning assets to interest-bearing liabilities | 128.66 | % | 135.51 | % | |||||||||||||||||||||||||||||||
(1) Average yields and rates are annualized.
(2) Includes non-accruing loans.
(3) Securities available-for-sale and other securities 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
PCD Loans (Held-for-Investment)
Based on its detailed review of PCD 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 PCD loans ($10.0 million and $9.9 million at March 31, 2024 and December 31, 2023, respectively) as accruing, even though they may be contractually past due. At March 31, 2024, 3.5% of PCD loans were past due 30 to 89 days, and 28.2% were past due 90 days or more, as compared to 2.9% and 27.1%, respectively, at December 31, 2023.
Loans
The following table details total non-accrual loans (excluding PCD), non-performing assets, loans over 90 days delinquent on which interest is accruing, and accruing loans 30 to 89 days delinquent at March 31, 2024 and December 31, 2023 (dollars in thousands):
| March 31, 2024 | December 31, 2023 | ||||||||||
| Non-accrual loans: | |||||||||||
| Held-for-investment | |||||||||||
| Real estate loans: | |||||||||||
| Multifamily | $ | 2,676 | $ | 2,709 | |||||||
| Commercial | 10,680 | 6,491 | |||||||||
| One-to-four family residential | 101 | 104 | |||||||||
| Home equity and lines of credit | 1,125 | 499 | |||||||||
| Commercial and industrial | 2,200 | 305 | |||||||||
| Other | 6 | 7 | |||||||||
| Total non-accrual loans held-for-investment | 16,788 | 10,115 | |||||||||
| Loans delinquent 90 days or more and still accruing: | |||||||||||
| Held-for-investment | |||||||||||
| Real estate loans: | |||||||||||
| Multifamily | 192 | 201 | |||||||||
| One-to-four family residential | 137 | 406 | |||||||||
| Home equity and lines of credit | 124 | 711 | |||||||||
| Total loans delinquent 90 days or more and still accruing held-for-investment | 453 | 1,318 | |||||||||
| Total non-performing assets | $ | 17,241 | $ | 11,433 | |||||||
| Non-performing loans to total loans | 0.41 | % | 0.27 | % | |||||||
| Non-performing assets to total assets | 0.29 | % | 0.20 | % | |||||||
| Accruing loans 30 to 89 days delinquent | $ | 8,266 | $ | 8,683 | |||||||
At March 31, 2024, total non-performing loans included $1.7 million of modified loans to borrowers experiencing financial difficulty and $3.2 million of troubled debt restructuring (“TDR”) loans that existed prior to adoption of Accounting Standards Update (“ASU”) 2022-02 on January 1, 2023. At December 31, 2023, total non-performing loans included $236,000 of modified loans to borrowers experiencing financial difficulty and $3.3 million of troubled debt TDR loans that existed prior to the adoption of ASU 2022-02.
The increase in non-accrual commercial real estate loans from December 31, 2023, was primarily attributable to one loan with a balance of $4.4 million, which was put on non-accrual status during the current quarter. Based on the results of the impairment analysis for this loan as of March 31, 2024, no impairment reserve was necessary as the loan is adequately covered by collateral (a private residence and retail property, both located in Monmouth County, New Jersey), with aggregate appraised values totaling $8.7 million. The increase in non-accrual commercial and industrial loans was primarily due to an increase in non-performing unsecured small business loans. Unsecured small business loans totaled $35.6 million and $37.4 million at March 31, 2024 and December 31, 2023, respectively. Management continues to monitor the small business unsecured commercial and industrial loan portfolio.
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Other Real Estate Owned
At March 31, 2024 and December 31, 2023, the Company had no assets acquired through foreclosure.
Accruing Loans 30 to 89 Days Delinquent
Loans 30 to 89 days delinquent and on accrual status totaled $8.3 million and $8.7 million at March 31, 2024 and December 31, 2023, respectively. The following table sets forth delinquencies for accruing loans by type and by amount at March 31, 2024 and December 31, 2023 (in thousands):
| March 31, 2024 | December 31, 2023 | |||||||||||||
| Held-for-investment | ||||||||||||||
| Real estate loans: | ||||||||||||||
| Multifamily | $ | 171 | $ | 740 | ||||||||||
| Commercial | 2,106 | 1,010 | ||||||||||||
| One-to-four family residential | 1,171 | 3,339 | ||||||||||||
| Home equity and lines of credit | 1,029 | 817 | ||||||||||||
| Construction and land | 1,727 | — | ||||||||||||
| Commercial and industrial loans | 2,062 | 2,767 | ||||||||||||
| Other loans | — | 10 | ||||||||||||
| Total delinquent accruing loans held-for-investment | $ | 8,266 | $ | 8,683 | ||||||||||
48
Rent-Regulated Multifamily Loans
Our multifamily loan portfolio at March 31, 2024 totaled $2.72 billion, or 65% of our total loan portfolio, of which $444.4 million, or 11%, included loans collateralized by properties in New York with units subject to some percentage of rent regulation. The table below sets forth details about our multifamily loan portfolio in New York (dollars in thousands).
| % Rent Regulated | Number of Loans | Balance | % Portfolio Total NY Multifamily Portfolio | Average Balance | Largest Loan | LTV* | DSCR* | 30-89 Days Delinquent | Non-Accrual | Special Mention | Substandard | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 0 | 256 | $ | 314,582 | 41.4 | % | $ | 1,229 | $ | 16,757 | 52.1% | 1.58x | $ | 363 | $ | 375 | $ | 788 | $ | 1,075 | |||||||||||||||||||||||||||||||||||||||||||||||||
| >0-10 | 3 | 4,797 | 0.6 | 1,599 | 2,148 | 52.0 | 1.46 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| >10-20 | 13 | 18,958 | 2.5 | 1,458 | 2,896 | 49.7 | 1.57 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| >20-30 | 8 | 18,067 | 2.4 | 2,258 | 5,573 | 55.4 | 1.41 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| >30-40 | 12 | 15,392 | 2.0 | 1,283 | 3,136 | 48.9 | 1.73 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| >40-50 | 17 | 22,456 | 3.0 | 1,321 | 2,772 | 48.7 | 1.62 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| >50-60 | 6 | 9,600 | 1.3 | 1,600 | 2,368 | 40.3 | 2.03 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| >60-70 | 5 | 16,803 | 2.2 | 3,361 | 11,493 | 55.2 | 1.47 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| >70-80 | 7 | 15,526 | 2.1 | 2,218 | 4,765 | 47.5 | 1.59 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| >80-90 | 18 | 21,109 | 2.8 | 1,173 | 3,170 | 47.1 | 1.68 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| >90-100 | 167 | 301,691 | 39.7 | 1,807 | 17,113 | 52.8 | 1.68 | — | 2,301 | — | 4,587 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | 512 | $ | 758,981 | 100.0% | $ | 1,482 | $ | 17,113 | 51.9% | 1.63x | $ | 363 | $ | 2,676 | $ | 788 | $ | 5,662 | ||||||||||||||||||||||||||||||||||||||||||||||||||
The table below sets forth our New York rent-regulated loans by county (dollars in thousands):
| County | Balance | LTV* | DSCR* | |||||||||||||||||
| Bronx | $ | 120,694 | 52.1% | 1.64x | ||||||||||||||||
| Kings | 193,025 | 51.7% | 1.68 | |||||||||||||||||
| Nassau | 2,196 | 36.5% | 1.88 | |||||||||||||||||
| New York | 41,181 | 47.3% | 1.51 | |||||||||||||||||
| Queens | 39,437 | 44.8% | 1.88 | |||||||||||||||||
| Richmond | 29,981 | 60.8% | 1.68 | |||||||||||||||||
| Westchester | 17,885 | 62.5% | 1.37 | |||||||||||||||||
| Total | $ | 444,399 | 51.8% | 1.66x | ||||||||||||||||
* Weighted Average
None of the loans that are rent-regulated in New York are interest only. During the remainder of 2024, 12 loans with an aggregate principal balance of $17.5 million will re-price.
49
Liquidity and Capital Resources
Liquidity. The objective of our liquidity management is to ensure the availability of sufficient funds to meet financial commitments and deposit withdrawals, 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 FRB. On March 12, 2023, the Board of Governors of the Federal Reserve System created the Bank Term Funding Program (“BTFP”), which aims to enhance liquidity by allowing institutions to pledge certain securities at par value, and a pay a borrowing rate of ten basis points over the one-year overnight index swap rate. The BTFP is available to eligible U.S. federally insured depository institutions, with advances having a term of up to one year and no prepayment penalties. As of March 31, 2024, the Company had borrowed $300.0 million under the BTFP. The BTFP ceased making new loans on March 11, 2024. The Bank’s total short-term borrowed funds, excluding lease obligations, floating rate advances and an overnight line of credit, were $1.06 billion at March 31, 2024, and had a weighted average interest rate of 3.87%. A total of $508.3 million of these borrowings will mature in less than one year. Short-term borrowed funds, excluding floating rate advances, were $853.1 million at December 31, 2023.
On June 17, 2022, the Company issued $62.0 million in aggregate principal amount of fixed to floating subordinated notes (the “Notes”). The Notes are non-callable for five years, have a stated maturity of June 30, 2032, and bear interest at a fixed rate of 5.00% until June 30, 2027. From July 2027 to the maturity date or early redemption date, the interest rate will reset quarterly to a level equal to the then current three-month Secured Overnight Financing Rate plus 200 basis points.
The Bank has the ability to obtain additional funding from the FHLBNY of approximately $1.38 billion utilizing unencumbered securities of $561.2 million, loans of $820.7 million, and encumbered securities of $533,000 at March 31, 2024. Additionally, the Bank has remaining borrowing capacity utilizing encumbered securities through the FRB Discount Window of $7.0 million. The Bank expects to have sufficient funds available to meet current commitments in the normal course of business.
The Company has a diversified deposit base, and government deposits are collateralized by assets or letters of credit issued by the FHLBNY. Estimated gross uninsured deposits at March 31, 2024 were $1.73 billion. This total includes fully collateralized uninsured governmental deposits and intercompany deposits of $890.4 million, leaving estimated net uninsured deposits of approximately $842.4 million, or 21.5%, of total deposits. At December 31, 2023, estimated net uninsured deposits totaled $869.9 million, or 22.4% of total deposits.
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 March 31, 2024, Northfield Bancorp, Inc. (standalone) had liquid assets of $20.5 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. 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 common equity Tier 1 capital to risk-weighted assets in addition to the amount necessary to meet its minimum risk-based capital requirements.
The federal banking agencies developed a “Community Bank Leverage Ratio” (“CBLR”) (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 have approved 9% as the current minimum capital for the CBLR. Northfield Bank and Northfield Bancorp have elected to opt into the CBLR framework. The CBLR replaced the risk-based and leverage capital requirements in the generally applicable capital rules.
50
At March 31, 2024, and December 31, 2023, as set forth in the following table, both Northfield 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 | For Well Capitalized Under Prompt Corrective Action Provisions | ||||||||||||||||||||
As of March 31, 2024: | |||||||||||||||||||||||
| CBLR | 12.35% | 12.00% | 9.00% | 9.00% | |||||||||||||||||||
As of December 31, 2023: | |||||||||||||||||||||||
| CBLR | 12.80% | 12.58% | 9.00% | 9.00% | |||||||||||||||||||
Off-Balance Sheet Arrangements and Contractual Obligations
In the normal course of operations, the Company engages in a variety of financial transactions that, in accordance with U.S. GAAP, are not recorded in the financial statements. These transactions primarily relate to lending commitments. These arrangements are not expected to have a material impact on the Company's results of operations or financial condition.
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 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. At March 31, 2024, the reserve for commitments to fund unused lines of credit recorded in accrued expenses and other liabilities was $319,000.
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, 2023.
Accounting Pronouncements Not Yet Adopted
ASU No. 2023-07. In November 2023, the FASB issued Accounting Standards Update (“ASU”) No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures”. The amendments in this ASU require improved reportable segment information on an annual and interim basis, primarily through enhanced disclosures about significant segment expenses. This update will be effective for financial statements issued for fiscal years beginning after December 15, 2023, and interim periods for fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact of this standard on the consolidated financial statements.
ASU No. 2023-09. In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”. The amendments in the this ASU require improved annual income tax disclosures surrounding rate reconciliation, income taxes paid, and other disclosures. This update will be effective for financial statements issued for fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact of this standard on the consolidated financial statements.
51
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 Senior Vice President (“SVP”) & Chief Investment Officer and Treasurer, who chairs this Committee, our President & Chief Executive Officer, our Executive Vice President (“EVP”) & Chief Risk Officer, our EVP & Chief Financial Officer, our EVP & Chief Lending Officer, our EVP & Chief Branch Administration, Deposit Operations & Business Development Officer, and our SVP & Director of Marketing, and other officers and staff as necessary or appropriate. 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 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 change over an assumed range of rates. Our simulation model uses a discounted cash flow analysis to measure the interest rate sensitivity of our 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 or decrease of 100, 200, 300, or 400 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, which is based on the current interest rate environment.
The following tables set forth, as of March 31, 2024 and December 31, 2023, 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.
52
At March 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 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 | $ | 5,127,261 | $ | 4,473,500 | $ | 653,761 | $ | (155,873) | (19.25) | % | 12.75 | % | (18.91) | % | (10.27) | % | ||||||||||||||||||||||||||||||||||
| +300 | 5,232,450 | 4,542,623 | 689,827 | (119,807) | (14.80) | 13.18 | (14.16) | (7.97) | ||||||||||||||||||||||||||||||||||||||||||
| +200 | 5,349,378 | 4,614,998 | 734,380 | (75,254) | (9.29) | 13.73 | (8.73) | (4.25) | ||||||||||||||||||||||||||||||||||||||||||
| +100 | 5,466,170 | 4,690,995 | 775,175 | (34,459) | (4.26) | 14.18 | (3.73) | (1.32) | ||||||||||||||||||||||||||||||||||||||||||
| — | 5,580,701 | 4,771,067 | 809,634 | — | — | 14.51 | — | — | ||||||||||||||||||||||||||||||||||||||||||
| (100) | 5,697,810 | 4,860,392 | 837,418 | 27,784 | 3.43 | 14.70 | 1.50 | (1.26) | ||||||||||||||||||||||||||||||||||||||||||
| (200) | 5,811,547 | 4,954,956 | 856,591 | 46,957 | 5.80 | 14.74 | 1.72 | (4.70) | ||||||||||||||||||||||||||||||||||||||||||
| (300) | 5,931,718 | 5,054,638 | 877,080 | 67,446 | 8.33 | 14.79 | 1.65 | (8.56) | ||||||||||||||||||||||||||||||||||||||||||
| (400) | 6,107,355 | 5,181,543 | 925,812 | 116,178 | 14.35 | 15.16 | 1.66 | (8.24) | ||||||||||||||||||||||||||||||||||||||||||
At December 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 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 | $ | 4,845,088 | $ | 4,222,267 | $ | 622,821 | $ | (139,446) | (18.29) | % | 12.85 | % | (20.93) | % | (5.16) | % | ||||||||||||||||||||||||||||||||||
| +300 | 4,945,428 | 4,292,831 | 652,597 | (109,670) | (14.39) | % | 13.20 | % | (15.79) | % | (4.31) | % | ||||||||||||||||||||||||||||||||||||||
| +200 | 5,060,164 | 4,366,834 | 693,330 | (68,937) | (9.04) | % | 13.70 | % | (9.91) | % | (1.91) | % | ||||||||||||||||||||||||||||||||||||||
| +100 | 5,174,386 | 4,444,681 | 729,705 | (32,562) | (4.27) | % | 14.10 | % | (4.52) | % | (0.49) | % | ||||||||||||||||||||||||||||||||||||||
| — | 5,289,153 | 4,526,886 | 762,267 | — | — | % | 14.41 | % | — | % | — | % | ||||||||||||||||||||||||||||||||||||||
| (100) | 5,410,037 | 4,618,015 | 792,022 | 29,755 | 3.90 | % | 14.64 | % | 2.73 | % | (1.32) | % | ||||||||||||||||||||||||||||||||||||||
| (200) | 5,531,944 | 4,714,497 | 817,447 | 55,180 | 7.24 | % | 14.78 | % | 4.51 | % | (4.34) | % | ||||||||||||||||||||||||||||||||||||||
| (300) | 5,653,051 | 4,818,672 | 834,379 | 72,112 | 9.46 | % | 14.76 | % | 4.39 | % | (9.12) | % | ||||||||||||||||||||||||||||||||||||||
| (400) | 5,815,435 | 4,954,580 | 860,855 | 98,588 | 12.93 | % | 14.80 | % | 4.19 | % | (9.12) | % | ||||||||||||||||||||||||||||||||||||||
At March 31, 2024, in the event of a 400 basis point decrease in interest rates, we would experience a 14.35% increase in estimated net portfolio value, a 1.66% increase in net interest income in year one, and an 8.24% decrease in net interest income in year two. In the event of a 400 basis point increase in interest rates, we would experience a 19.25% decrease in estimated net portfolio value, an 18.91% decrease in net interest income in year one and a 10.27% 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 20% in year two, and in the event of a 400 basis point increase or less, our projected net interest income should decrease by no more than 39% in year one and 26% in year two. At March 31, 2024 and December 31, 2023, 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.
53
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 March 31, 2024. 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 March 31, 2024, 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.
54
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 March 31, 2024, 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, 2023, as filed with the Securities and Exchange Commission, except as previously disclosed in our other filings with the Securities and Exchange Commission.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS, AND ISSUER PURCHASES OF EQUITY SECURITIES
(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.
On November 7, 2023, the Board of Directors of the Company approved a $7.5 million stock repurchase program which was completed in January 2024, and on April 24, 2024, the Board of Directors of the Company approved a new $5.0 million stock repurchase program. The new program permits the Company's 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. The timing of the repurchases depends on certain factors, including but not limited to, market conditions and prices, the Company’s liquidity and capital requirements, and alternative uses of capital. Any repurchased shares are held as treasury stock and available for general corporate purposes. The repurchases can be suspended, terminated or modified at any time for any reason, including market conditions, the cost of repurchasing shares, the availability of alternative investment opportunities, liquidity, and other factors deemed appropriate.
The following table reports information regarding purchases of the Company’s common stock during the three months ended March 31, 2024.
| Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (in thousands) | ||||||||||||||||||||||
| January 1, 2024 to January 31, 2024 | 252,631 | $ | 12.17 | 252,631 | $ | — | ||||||||||||||||||||
| February 1, 2024 to February 29, 2024 | — | — | — | |||||||||||||||||||||||
| March 1, 2024 to March 31, 2024 | — | — | — | |||||||||||||||||||||||
| Total | 252,631 | 252,631 | ||||||||||||||||||||||||
In addition to the repurchases disclosed above, participants in the Company's stock-based incentive plans may have shares withheld to cover income taxes upon the vesting of restricted stock awards. Shares withheld to cover income taxes upon the vesting of restricted stock awards are repurchased pursuant to the terms of the applicable plan and not under the Company's stock repurchase program. Shares repurchased pursuant to these plans during the three months ended three months ended March 31, 2024 were as follows:
| Period | Total Number of Shares Purchased | Average Price Paid per Share | ||||||||||||
| January 1, 2024 to January 31, 2024 | — | $ | — | |||||||||||
| February 1, 2024 to February 28, 2024 | 18,765 | 11.87 | ||||||||||||
| March 1, 2024 to March 31, 2024 | — | — | ||||||||||||
| Total | 18,765 | $ | 11.87 | |||||||||||
55
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
During the three months ended March 31, 2024, no directors or executive officers of the Company adopted terminated
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 | |||||||
Certification of Steven M. Klein, Chairman, President and Chief Executive Officer, Pursuant to Rule 13a-14(a) and Rule 15d-14(a).(1) | ||||||||
Certification of William R. Jacobs, Executive Vice President and Chief Financial Officer, Pursuant to Rule 13a-14(a) and Rule 15d-14(a).(1) | ||||||||
Certification of Steven M. Klein, Chairman, President and Chief Executive Officer, and William R. Jacobs, Executive Vice President and Chief Financial Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.(1) | ||||||||
| 101.INS | XBRL (Extensible Business Reporting Language) Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document. | |||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | |||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |||||||
| 104 | Cover page information from the Company's Quarterly Report on Form 10-Q filed May 10, 2024, formatted in Inline XBRL. | |||||||
(1) Filed herewith.
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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: May 10, 2024
| /s/ Steven M. Klein | ||
| Steven M. Klein | ||
| Chairman, 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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