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Northfield Bancorp, Inc. Announces Fourth Quarter and Year End 2019 Results

NOTABLE ITEMS INCLUDE:

FOURTH QUARTER 2019

  • DILUTED EARNINGS PER COMMON SHARE OF $0.21 FOR THE FOURTH QUARTER OF 2019, COMPARED TO $0.28 FOR THE THIRD QUARTER OF 2019, AND $0.21 FOR THE FOURTH QUARTER OF 2018.
    • Earnings for the current quarter reflect the benefit of $1.0 million, or $0.02 per diluted share, of tax-exempt income from bank owned life insurance proceeds, offset by $755,000 after tax in occupancy costs, related to the consolidation of three branches, and $125,000 of merger-related costs, for a total of $0.02 per diluted share.
    • Earnings for the trailing quarter reflect the benefit of $2.4 million, or $0.05 per diluted share, of tax-exempt income from bank owned life insurance proceeds, and $1.6 million, after tax, or $0.03 per diluted share, of income related to recoveries on loans previously charged-off.
    • Earnings for the fourth quarter of 2018 reflect excess tax benefits related to the exercise or vesting of equity awards of $514,000, or $0.01 per diluted share.
  • ORIGINATED LOANS, NET INCREASED $127.4 MILLION, OR 17.8% ANNUALIZED
  • DEPOSITS, EXCLUDING BROKERED, INCREASED $65.6 MILLION, OR 8.5% ANNUALIZED
  • CONSOLIDATED THREE BRANCHES, EFFECTIVE DECEMBER 31, 2019
  • ANNOUNCED THE PROPOSED ACQUISITION OF VSB BANCORP, INC. ON DECEMBER 23, 2019, WITH APPROXIMATELY $376 MILLION OF ASSETS, $157 MILLION OF LOANS, AND $325 MILLION OF DEPOSITS
  • CASH DIVIDEND OF $0.11 PER SHARE OF COMMON STOCK DECLARED PAYABLE FEBRUARY 26, 2020, TO STOCKHOLDERS OF RECORD AS OF FEBRUARY 12, 2020

FULL YEAR 2019

  • DILUTED EARNINGS PER COMMON SHARE OF $0.85 FOR BOTH 2019 AND 2018
    • 2019 full year earnings reflect $3.4 million, or $0.07 per diluted share, of tax-exempt income from bank owned life insurance proceeds, and $1.6 million, after tax, or $0.03 per diluted share, of income related to recoveries on loans previously charged-off, partially offset by $755,000 after tax in occupancy costs, related to the consolidation of three branches, and $125,000 of merger-related costs, for a total of $0.02 per diluted share.
    • 2018 full year earnings reflect excess tax benefits of $2.7 million, or $0.06 per diluted share.
  • ORIGINATED LOANS, NET INCREASED $308.2 MILLION, OR 11.5%
  • DEPOSITS, EXCLUDING BROKERED, INCREASED $138.1 MILLION, OR 4.6%
  • REPURCHASED 1.0 MILLION SHARES IN THE AMOUNT OF $15.8 MILLION UNDER A STOCK REPURCHASE PROGRAM

WOODBRIDGE, N.J., Jan. 29, 2020 (GLOBE NEWSWIRE) -- NORTHFIELD BANCORP, INC. (the “Company”) (NASDAQ:NFBK), the holding company for Northfield Bank, reported net income of $10.1 million, or diluted earnings per common share of $0.21, for the quarter ended December 31, 2019, as compared to net income of $13.1 million, or diluted earnings per common share of $0.28, for the quarter ended September 30, 2019, and net income of $9.9 million, or diluted earnings per common share of $0.21, for the quarter ended December 31, 2018. For the year ended December 31, 2019, the Company reported net income of $40.2 million, or diluted earnings per common share of $0.85, compared to net income of $40.1 million, or diluted earnings per common share of $0.85, for the year ended December 31, 2018.

Earnings for the quarters ended December 31, 2019, and September 30, 2019, and year ended December 31, 2019, included $1.0 million, or $0.02 per diluted share, $2.4 million, or $0.05 per diluted share, and $3.4 million, or $0.07 per diluted share, respectively, of tax-exempt income from bank owned life insurance proceeds in excess of the cash surrender value of the policies. Earnings for the quarter ended September 30, 2019, and year ended December 31, 2019, also included $1.6 million, after tax, or $0.03 per diluted share, of income related to recoveries on loans previously charged-off. Earnings for the quarter and year ended December 31, 2019, included $755,000 after tax in occupancy costs, related to the consolidation of three branches, and $125,000 of merger-related costs, for a total of $0.02 per diluted share. Earnings for the quarter and year ended December 31, 2018, benefited from excess tax benefits related to the exercise or vesting of equity awards of $514,000, or $0.01 per diluted share, and $2.7 million, or $0.06 per diluted share, respectively. There were no material excess tax benefits for the quarter or year ended December 31, 2019.

Commenting on the fourth quarter and annual results, Steven M. Klein, the Company’s President and Chief Executive Officer noted, “We reported strong financial results for the three months and year ended December 31, 2019, as we continued to successfully execute on our key strategic initiatives, focused on prudent and disciplined loan and deposit growth, technology investment and implementation, team member training and development, and promotion of our brand. Additionally, we announced the merger agreement with VSB Bancorp, Inc. which will strengthen Northfield’s presence on Staten Island and bring total assets to approximately $5.4 billion. We look forward to the combination of two organizations that expands our market share on Staten Island and enables us to better serve the business and retail customers of Staten Island.”

Mr. Klein further noted, “I’m pleased to announce that the Board of Directors has declared a cash dividend of $0.11 per common share payable on February 26, 2020, to stockholders of record on February 12, 2020.”

Results of Operations

Comparison of Operating Results for the Years Ended December 31, 2019 and 2018

Net income was $40.2 million and $40.1 million for the years ended December 31, 2019 and 2018, respectively. Significant variances from the prior year are as follows: a $543,000 increase in net interest income, a $2.6 million decrease in the provision for loan losses, a $6.7 million increase in non-interest income, a $6.5 million increase in non-interest expense, and a $3.2 million increase in income tax expense.

Net interest income for the year ended December 31, 2019, increased $543,000, or 0.5%, to $111.8 million, from $111.2 million for the year ended December 31, 2018, primarily due to a $427.7 million, or 10.8%, increase in our average interest-earning assets, partially offset by a 26 basis point decrease in our net interest margin to 2.55% from 2.81% for the year ended December 31, 2018. The increase in average interest-earning assets was primarily attributable to increases in average loans outstanding of $120.9 million, average mortgage-backed securities of $237.1 million, and average other securities of $62.8 million. The decrease in our net interest margin was primarily due to the cost of our interest bearing liabilities outpacing the improvement in yields earned on interest-earning assets. The cost of interest bearing liabilities increased 35 basis points to 1.51% for the year ended December 31, 2019, from 1.16% for the year ended December 31, 2018, while yields on interest-earning assets increased four basis points to 3.76% for the year ended December 31, 2019, from 3.72% for the year ended December 31, 2018, primarily driven by higher yields on loans and securities. Net interest income for the year ended December 31, 2019, included loan prepayment income of $1.6 million, compared to $2.0 million for the year ended December 31, 2018. Also included in net interest income for the year ended December 31, 2019 is $314,000 of interest income recorded from the pay-off of a non-accrual loan.

The provision for loan losses decreased by $2.6 million to $22,000 for the year ended December 31, 2019, from $2.6 million for the year ended December 31, 2018. The decrease in the provision was primarily due to a $1.8 million recovery on a loan previously charged-off and an improvement in asset quality indicators, offset by a $521,000 charge-off on an impaired commercial real estate loan, and loan growth. Net recoveries were $1.2 million for the year ended December 31, 2019, as compared to net charge-offs of $1.3 million for the year ended December 31, 2018.

Non-interest income increased $6.7 million, or 82.2%, to $14.8 million for the year ended December 31, 2019, from $8.1 million for the year ended December 31, 2018, primarily due to an increase in income on bank owned life insurance, attributable to $3.4 million of insurance proceeds in excess of the related cash surrender value of the policies, and an increase of $2.9 million in gains on trading securities, net. For the year ended December 31, 2019, gains on trading securities were $2.0 million, as compared to losses of $879,000 for the year ended December 31, 2018. 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 increased $6.5 million, or 9.7%, to $73.5 million for the year ended December 31, 2019, from $67.0 million for the year ended December 31, 2018. This is due primarily to increases of $4.8 million in employee compensation and benefits; $1.6 million in occupancy costs; $668,000 in data processing costs; and $716,000 in advertising costs. Of the $4.8 million increase in compensation and employee benefits, $2.9 million is related to the Company's deferred compensation plan, which is described above and has no effect on net income, with the remainder attributable to increased costs associated with new hires related to a branch opening and new lending personnel, merit increases effective January 1, 2019, and higher medical benefit costs, partially offset by a decrease in equity award expense. The increase in occupancy costs is primarily attributable to costs associated with the consolidation of three branches, and to a lesser extent higher rent expense associated with a new branch opening. The increase in data processing costs is related to our continued strategic initiative to enhance our technology solutions both internally and to our customers, and growth in the number of accounts we service. The increase in advertising expense is attributable to the timing of advertising programs and increased expenditure focused on driving growth. These increases were partially offset by decreases of $502,000 in federal insurance premiums due to a reduction in our deposit insurance assessment as a result of the utilization of credits, and $869,000 in other non-interest expense, primarily related to a decrease in Directors' equity award expense. Non-interest expense included equity award expense of $3.2 million for the year ended December 31, 2019, as compared to $5.4 million for the year ended December 31, 2018. The lower expense in the current year is primarily attributable to equity awards that were fully vested on June 11, 2019.

On September 16, 2019, the Company announced its intention to combine three branch offices (two located in Brooklyn, New York, and one in Milltown, New Jersey) into existing nearby Northfield Bank locations. The branch consolidations were effective December 31, 2019, and the Company recorded a one-time charge in occupancy costs of approximately $1.0 million, attributable to accelerated lease rental expense and accelerated leasehold amortization expense. The Company expects the benefit of annual pre-tax cost savings of approximately $1.5 million going forward as a result of the consolidation.

The Company recorded income tax expense of $12.8 million for the year ended December 31, 2019, compared to $9.6 million for the year ended December 31, 2018. The effective tax rate for the year ended December 31, 2019, was 24.1%, compared to 19.4% for the year ended December 31, 2018. The increase was primarily due to lower excess tax benefits related to the exercise or vesting of equity awards and changes in New Jersey tax laws, partially offset by $3.4 million of tax-exempt income from bank owned life insurance proceeds in excess of the cash surrender value of the policies. There were no material excess tax benefits recorded for year ended December 31, 2019. Excess tax benefits were $2.7 million for year ended December 31, 2018. Excess tax benefits will fluctuate throughout the year based on the Company's stock price and timing of employee stock option exercises and vesting of other share-based awards.

On May 15, 2019, the State of New Jersey issued a tax technical bulletin, subsequently revised on December 16, 2019, which gives guidance on the treatment of real estate investment trusts in connection with the combined reporting for New Jersey corporate business tax purposes. Real estate investment trusts and investment companies will be excluded from the combined group and will continue to file separate New Jersey tax returns. As a result of this guidance the Company recorded an additional $889,000 of state tax expense net of federal benefit for the year ended December 31, 2019. The $889,000 increase was comprised of $1.1 million of current tax expense, partially offset by a write-up of deferred tax assets of $239,000.

Comparison of Operating Results for the Three Months Ended December 31, 2019, and 2018

Net income was $10.1 million and $9.9 million for the quarters ended December 31, 2019 and December 31, 2018, respectively. Significant variances from the comparable prior year quarter are as follows: a $472,000 increase in net interest income, a $165,000 increase in the provision for loan losses, a $3.6 million increase in non-interest income, a $2.9 million increase in non-interest expense, and a $738,000 increase in income tax expense.

Net interest income for the quarter ended December 31, 2019, increased by $472,000, or 1.7%, to $28.5 million, from $28.0 million for the quarter ended December 31, 2018, primarily due to an increase in our average interest-earning assets of $521.8 million, or 12.8%, partially offset by a 27 basis point decrease in our net interest margin to 2.45% from 2.72% for the quarter ended December 31, 2018. The increase in average interest-earning assets was due to increases in average loans outstanding of $182.3 million, average mortgage-backed securities of $344.4 million, average interest-earning deposits in financial institutions of $32.1 million, and average Federal Home Loan Bank of New York (“FHLBNY”) stock of $12.9 million, partially offset by a $49.9 million decrease in average other securities. The decrease in net interest margin was due to the cost of our interest-bearing liabilities, which increased 15 basis points to 1.50% for the quarter ended December 31, 2019, from 1.35% for the quarter ended December 31, 2018, coupled with lower yields earned on interest-earning assets, primarily attributable to lower yields on mortgage-backed and other securities, which decreased 11 basis points to 3.67% for the quarter ended December 31, 2019, from 3.78% for the quarter ended December 31, 2018. Net interest income for the quarter ended December 31, 2019, included loan prepayment income of $362,000 as compared to $503,000 for the quarter ended December 31, 2018.

The provision for loan losses increased by $165,000 to $772,000 for the quarter ended December 31, 2019, from $607,000 for the quarter ended December 31, 2018, primarily due to originated loan growth, partially offset by a decrease in net charge-offs and an improvement in asset quality indicators. Net charge-offs were $131,000 for the quarter ended December 31, 2019, compared to $797,000 for the quarter ended December 31, 2018.

Non-interest income increased by $3.6 million to $4.2 million for the quarter ended December 31, 2019, from $640,000 for the quarter ended December 31, 2018, primarily due to a $1.0 million increase in income on bank owned life insurance, attributable to insurance proceeds in excess of the related cash surrender value of the policies, and a $2.1 million increase in gains on trading securities, net. Gains on trading securities were $531,000 for the quarter ended December 31, 2019, as compared to losses of $1.6 million in the comparative prior year quarter. As previously noted, 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, and 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.

Non-interest expense increased by $2.9 million, or 18.7%, to $18.7 million for the quarter ended December 31, 2019, as compared to $15.8 million for the comparable prior year quarter, primarily due to a $2.6 million increase in compensation and employee benefits, $2.1 million of which is related to the mark-to-market adjustment on trading securities in the Company’s deferred compensation plan and has no effect on net income, with the remainder attributable to higher salary expense, partially offset by lower equity award expense. Additionally, there was a $1.2 million increase in occupancy costs, primarily attributable to costs associated with the consolidation of three branches effective December 31, 2019 (discussed above). Partially offsetting the increases, were decreases of $310,000 in advertising expense, related to the timing of programs, $227,000 in federal insurance premiums due to a reduction is our deposit insurance assessment as a result of utilization of credits, and $356,000 in other non-interest expense, primarily related to lower Directors' equity award expense. Non-interest expense included equity award expense of $371,000 and $1.3 million for the quarters ended December 31, 2019 and December 31, 2018, respectively. The lower expense in the current quarter is primarily attributable to equity awards that were fully vested on June 11, 2019.  Also included in non-interest expense for the quarter ended December 31, 2019, is $125,000 of merger-related expense.

The Company recorded income tax expense of $3.1 million for the quarter ended December 31, 2019, compared to $2.3 million for the quarter ended December 31, 2018. The effective tax rate for the quarter ended December 31, 2019, was 23.2%, as compared to 18.9% for the quarter ended December 31, 2018, the higher rate due in part to changes in New Jersey tax laws related to treatment of real estate investment trusts in connection with combined reporting for New Jersey corporate business tax purposes, partially offset by $1.0 million of tax-exempt income from bank owned life insurance proceeds in excess of the cash surrender value of the policies.

Comparison of Operating Results for the Three Months Ended December 31, 2019, and September 30, 2019

Net income was $10.1 million and $13.1 million for the quarters ended December 31, 2019 and September 30, 2019, respectively. Significant variances from the prior quarter are as follows: a $344,000 decrease in net interest income, a $2.1 million increase in the provision for loan losses, a $537,000 decrease in non-interest income, a $1.9 million increase in non-interest expense, and a $1.8 million decrease in income tax expense.

Net interest income for the quarter ended December 31, 2019, decreased by $344,000, or 1.2%, to $28.5 million, from $28.8 million for the quarter ended September 30, 2019, as a 12 basis point decrease in our net interest margin to 2.45% more than offset a $161.5 million, or 3.6%, increase in our average interest-earning assets as compared to prior quarter. The decrease in net interest margin was primarily due to a decrease in yields earned on interest-earning assets, which decreased 15 basis points to 3.67% for the quarter ended December 31, 2019, from 3.82% for the quarter ended September 30, 2019, partially offset by a decrease in the cost of interest-bearing liabilities of five basis points to 1.50% for the current quarter as compared to 1.55% for the prior quarter. The increase in our average interest-earning assets was primarily due to increases in average loans outstanding of $50.7 million, average mortgage-backed securities of $99.6 million, average interest-earning deposits in financial institutions of $30.4 million, and average FHLBNY stock of $6.1 million, partially offset by decreases in average other securities of $25.3 million. Net interest income for the quarter ended December 31, 2019, included loan prepayment income of $362,000 as compared to $596,000 for the quarter ended September 30, 2019.

The provision for loan losses increased by $2.1 million to $772,000 for the quarter ended December 31, 2019, from a negative provision of $1.3 million for the quarter ended September 30, 2019, primarily due to loan growth. The negative provision in the prior quarter was primarily related to a $1.8 million recovery on a loan previously charged off. Net charge-offs were $131,000 for the quarter ended December 31, 2019, compared to net recoveries of $1.5 million for the quarter ended September 30, 2019.

Non-interest income decreased by $537,000, or 11.4%, to $4.2 million for the quarter ended December 31, 2019, from $4.7 million for the quarter ended September 30, 2019, primarily due to a $1.3 million decrease in income on bank owned life insurance, attributable to lower insurance proceeds in excess of the related cash surrender value of the policies, partially offset by an increase of $500,000 in gains on trading securities, net.

Non-interest expense increased by $1.9 million, or 11.0%, to $18.7 million for the quarter ended December 31, 2019, as compared to $16.9 million for the quarter ended September 30, 2019, primarily due to an increase in compensation and employee benefits of $648,000, largely related to the mark-to-market adjustment on trading securities in the Company’s deferred compensation plan, and a $1.1 million increase in occupancy costs, primarily related to the consolidation of three branches effective December 31, 2019 (discussed above). Included in non-interest expense for the quarter ended December 31, 2019, is $125,000 of merger-related expenses.

The Company recorded income tax expense of $3.1 million for the quarter ended December 31, 2019, compared to $4.8 million for the quarter ended September 30, 2019. The effective tax rate for the quarter ended December 31, 2019, was 23.2%, as compared to 26.9% for the quarter ended September 30, 2019. The effective tax rate for the September quarter was higher due to tax benefits on non-qualified stock options and restricted stock exceeding actual deduction at vesting or exercise, partially offset by higher tax-exempt income received.

Financial Condition

Total assets increased $646.9 million, or 14.7%, to $5.06 billion at December 31, 2019, from $4.41 billion at December 31, 2018. The increase was primarily attributable to increases in our available-for-sale debt securities portfolio of $330.3 million, or 40.9%, loans held-for-investment, net, of $191.9 million, or 5.9%, cash and cash equivalents of $70.1 million or 90.1%, FHLBNY stock of $17.1 million, or 75.8%, and the recording of our operating leased assets of $39.5 million from the adoption of a new lease accounting standard, Accounting Standards Update (ASU) No. 2016-02 Leases (Topic 842) on January 1, 2019. The new lease standard requires us to recognize on the balance sheet right-of-use assets, which approximate the present value of our remaining lease payments.

As of December 31, 2019, we estimate that our non-owner occupied commercial real estate concentration (as defined by regulatory guidance issued in 2006) to total risk-based capital was approximately 449%. Management believes that Northfield Bank (the Bank) has implemented appropriate risk management practices including risk assessments, board approved underwriting policies and related procedures which include monitoring bank portfolio performance, performing market analysis (economic and real estate), and stressing of the Bank’s commercial real estate portfolio under severe adverse economic conditions. Although management believes the Bank has implemented appropriate policies and procedures to manage our commercial real estate concentration risk, the Bank’s regulators could require us to implement additional policies and procedures or could require us to maintain higher levels of regulatory capital, which might adversely affect our loan originations, ability to pay dividends, and profitability.

Cash and cash equivalents increased by $70.1 million, or 90.1%, to $147.8 million at December 31, 2019, from $77.8 million at December 31, 2018, primarily due to an increase in cash balances held at the Federal Reserve Bank as a result of management's efforts to increase cash and liquidity throughout the year through deposit inflows. 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.

Loans held-for-investment, net, increased $191.9 million to $3.44 billion at December 31, 2019, as compared to $3.25 billion at December 31, 2018, primarily due to an increase in originated loans held-for-investment, net, partially offset by decreases in acquired loans of $113.5 million and purchased credit-impaired  (“PCI”) loans of $2.8 million. Originated loans held-for-investment, net, totaled $2.99 billion at December 31, 2019, as compared to $2.68 billion at December 31, 2018. The increase was primarily due to an increase in multifamily real estate loans of $265.9 million, or 13.8%, to $2.20 billion at December 31, 2019, from $1.93 billion at December 31, 2018, and to a lesser extent, a $29.4 million, or 5.9%, increase in commercial real estate loans to $528.7 million at December 31, 2019, from $499.3 million at December 31, 2018.

On June 12, 2019, New York City announced revised rent laws that included: repealing provisions that remove units from rent stabilization when rent crosses a high threshold or when a unit becomes vacant; or if the tenant’s income is $200,000 or higher in the preceding two years. The updated laws also eliminate a “vacancy bonus” provision which allowed property owners to raise rents as much as 20% each time a unit becomes vacant. At December 31, 2019, the Company has approximately $397.8 million in multifamily loans in New York City with tenants that have some form of rent stabilization or rent control. The weighted average loan to value (“LTV”) was 46.1% based on the current balance and the collateral value at date of origination on this portfolio. The highest LTV in this portfolio is 72.8%. All of the loans are performing as agreed. Management will continue to evaluate the effect of rent regulations on the collateral values.

The following tables detail our multifamily real estate originations for the years ended December 31, 2019 and 2018 (dollars in thousands):

 
Year Ended December 31, 2019
Originations   Weighted Average
Interest Rate
  Weighted Average
Loan-to-Value Ratio
  Weighted Average Months to Next
Rate Change or Maturity for Fixed
Rate Loans
  (F)ixed or
(V)ariable
  Amortization Term
$ 455,688     4.02%   58%   99   V   10-30 Years
23,310     4.39%   50%   167   F   10-15 Years
$ 478,998     4.04%   58%            


Year Ended December 31, 2018
Originations   Weighted Average
Interest Rate
  Weighted Average
Loan-to-Value Ratio
  Weighted Average Months to Next
Rate Change or Maturity for Fixed
Rate Loans
  (F)ixed or
(V)ariable
  Amortization Term
$ 383,062     4.01%   62%   79   V   15-30 Years
16,230     4.23%   36%   181   F   15 Years
$ 399,292     4.02%   61%            
                         

Acquired loans decreased by $113.5 million to $432.7 million at December 31, 2019, from $546.2 million at December 31, 2018, primarily due to paydowns of lower yield one-to-four family residential and multifamily loans with weighted average interest rates (net of the servicing fee retained by the originating bank) of 3.48% and 3.44%, respectively, partially offset by purchases of one-to-four family residential mortgage loan pools totaling $44.2 million.

The following table provides the details of the loan pools purchased during the year ended December 31, 2019 (dollars in thousands):

                         
Purchase
Amount
  Loan Type   Weighted
Average Interest
Rate (1)
  Weighted Average
Loan-to-Value
Ratio
  Weighted Average Months to
Next Rate Change or
Maturity for Fixed Rate
Loans
  (F)ixed or
(V)ariable
  Original
Amortization
Term
$ 4,230   Residential   4.19%   70.5%   324   F   15 - 30 Years
17,253   Residential   3.69%   63.0%   78   V   30 Years
19,448   Residential   4.19%   71.3%   333   F   30 Years
3,262   Residential   3.93%   65.5%   346   F   30 Years
$ 44,193       3.98%                


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

The geographic locations of the properties collateralizing the loans purchased in the table above are as follows: 83% in Massachusetts, 13% in New York, and 4% in New Jersey.

Purchased credit-impaired (PCI) loans totaled $17.4 million at December 31, 2019, as compared to $20.1 million at December 31, 2018. The majority of the PCI loan balance consists of loans acquired as part of a Federal Deposit Insurance Corporation-assisted transaction. The Company accreted interest income of $1.0 million and $4.1 million attributable to PCI loans for the three months and year ended December 31, 2019, respectively, as compared to $1.0 million and $4.2 million for the three months and year-ended December 31, 2018, respectively.

The Company’s debt securities available-for-sale portfolio increased by $330.3 million, or 40.9%, to $1.14 billion at December 31, 2019, from $808.0 million at December 31, 2018. The increase was primarily attributable to purchases of mortgage-backed and corporate securities, partially offset by paydowns and sales. At December 31, 2019, $973.1 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 $164.9 million in corporate bonds, substantially all of which were considered investment grade at December 31, 2019, and municipal bonds of $299,000.

Other assets decreased $5.4 million, or 17.0%, to $26.2 million at December 31, 2019, from $31.6 million at December 31, 2018. The decrease was primarily attributable to a decrease in net deferred tax assets associated with an increase in net unrealized gains on our debt securities available-for-sale portfolio.

Total liabilities increased $617.5 million, or 16.5%, to $4.36 billion at December 31, 2019, from $3.74 billion at December 31, 2018. The increase was primarily attributable to increases in deposits of $121.7 million, securities sold under agreements to repurchase of $75.0 million, other borrowings of $373.1 million, and lease liabilities of $44.1 million, attributable to capitalization of our operating leases as a result of the adoption of ASU No. 2016-02, effective January 1, 2019.
               
Deposits increased $121.7 million, or 3.7%, to $3.41 billion at December 31, 2019, as compared to $3.29 billion at December 31, 2018. The increase was primarily attributable to increases of $107.9 million in transaction accounts and $152.9 million in savings accounts, partially offset by decreases of $90.8 million in money market accounts, and $48.3 million in certificate of deposit accounts.

Deposit account balances are summarized as follows (dollars in thousands):

           
  December 31, 2019   September 30, 2019   December 31, 2018
Transaction:          
Non-interest bearing checking $ 387,409   $ 399,237   $ 395,375
Negotiable orders of withdrawal 573,927   542,315   458,012
Total transaction 961,336   941,552   853,387
Savings:          
Savings 747,186   733,086   594,290
Money market 651,159   670,904   741,939
Total savings 1,398,345   1,403,990   1,336,229
Certificates of deposit:          
Brokered deposits 259,024   253,651   275,398
$250,000 and under 654,565   622,785   696,957
Over $250,000 134,963   115,331   124,541
Total certificates of deposit 1,048,552   991,767   1,096,896
Total deposits $ 3,408,233   $ 3,337,309   $ 3,286,512
                 

Included in the table above are business and municipal deposit account balances as follows (dollars in thousands):

           
  December 31, 2019   September 30, 2019   December 31, 2018
Business customers $ 508,901   $ 517,670   $ 468,166
Municipal customers $ 371,214   $ 363,574   $ 337,053
                 

Borrowings and securities sold under agreements to repurchase increased to $857.0 million at December 31, 2019, from $408.9 million at December 31, 2018.  Management utilizes borrowings to mitigate interest rate risk, for short-term liquidity, and to a lesser extent as part of leverage strategies.

The following is a table of term borrowing maturities (excluding capitalized leases and overnight borrowings) and the weighted average rate by year at December 31, 2019 (dollars in thousands):

         
Year   Amount   Weighted Average Rate
2020   $411,000   1.77%
2021   170,000   1.98%
2022   120,000   2.29%
2023   87,500   2.89%
2024   50,000   2.47%
Thereafter   12,500   3.00%
    $851,000   2.06%
         

Total stockholders’ equity increased by $29.4 million to $695.9 million at December 31, 2019, from $666.4 million at December 31, 2018. This increase was primarily attributable to net income of $40.2 million for year ended December 31, 2019, a $13.8 million increase in accumulated other comprehensive income associated with unrealized gains on our debt securities available-for-sale portfolio, and a $11.4 million increase in ESOP and equity award activity. The increase was partially offset by $20.2 million in dividend payments and $15.8 million in stock repurchases.

Asset Quality

The following table details total originated and acquired (but excluding PCI) non-accruing loans, non-performing loans, non-performing assets, troubled debt restructurings on which interest is accruing, and accruing loans 30 to 89 days delinquent at December 31, 2019, September 30, 2018, and December 31, 2018 (dollars in thousands):

           
  December 31, 2019   September 30, 2019   December 31, 2018
Held-for-investment          
Real estate loans:          
Commercial(1) $ 7,922     $ 8,310     $ 7,291  
One-to-four family residential 889     895     1,129  
Multifamily 437     444     566  
Home equity and lines of credit 185     149     151  
Commercial and industrial         25  
Total non-accrual loans: 9,433     9,798     9,162  
Loans delinquent 90 days or more and still accruing:          
Held-for-investment          
Real estate loans:          
Commercial 253     553      
One-to-four family residential 265     6     33  
Home equity and lines of credit     37      
Total loans delinquent 90 days or more and still accruing 518     596     33  
Total non-performing loans 9,951     10,394     9,195  
Total non-performing assets $ 9,951     $ 10,394     $ 9,195  
Non-performing loans to total loans held-for-investment, net 0.29 %   0.31 %   0.28 %
Non-performing assets to total assets 0.20 %   0.22 %   0.21 %
Loans subject to restructuring agreements and still accruing $ 14,143     $ 14,316     $ 16,390  
Accruing loans 30-89 days delinquent $ 8,206     $ 5,348     $ 8,562  


(1) Included in commercial non-accrual loans is a $1.3 million loan that was paid-off in full in January 2020.
   

Accruing Loans 30 to 89 Days Delinquent

Loans 30 to 89 days delinquent and on accrual status totaled $8.2 million and $8.6 million at December 31, 2019, and December 31, 2018, respectively. The following table sets forth delinquencies for accruing loans by type and by amount at December 31, 2019, September 30, 2018, and December 31, 2018 (dollars in thousands):

           
  December 31, 2019   September 30, 2019   December 31, 2018
Real estate loans:          
Commercial $ 5,450   $ 2,475   $ 2,377
One-to-four family residential 1,590   2,235   4,120
Construction and land 147    
Multifamily 547   431   2,018
Home equity and lines of credit 217   112  
Commercial and industrial loans 229   87   45
Other loans 26   8   2
Total delinquent accruing loans $ 8,206   $ 5,348   $ 8,562
                 

PCI Loans (Held-for-Investment)

At December 31, 2019, based on contractual principal, 20.9% of PCI loans were past due 30 to 89 days, and 24.3% were past due 90 days or more, as compared to 10.0% and 23.3%, respectively, at December 31, 2018.

About Northfield Bank

Northfield Bank, founded in 1887, operates 37 full-service banking offices in Staten Island and Brooklyn, New York, and Hunterdon, Middlesex, Mercer, and Union counties, New Jersey. For more information about Northfield Bank, please visit www.eNorthfield.com.

Forward-Looking Statements: This release may contain certain "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, and may be identified by the use of such words as "may," "believe," "expect," "anticipate," "should," "plan," "estimate," "predict," "continue," and "potential" or the negative of these terms or other comparable terminology.  Examples of forward-looking statements include, but are not limited to, estimates with respect to the financial condition, results of operations and business of Northfield Bancorp, Inc.  Any or all of the forward-looking statements in this release and in any other public statements made by Northfield Bancorp, Inc. may turn out to be wrong.  They can be affected by inaccurate assumptions Northfield Bancorp, Inc. might make or by known or unknown risks and uncertainties as described in our SEC filings, including, but not limited to, those related to general economic conditions, particularly in the market areas in which the Company operates, competition among depository and other financial institutions, changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements, inflation and changes in the interest rate environment that reduce our margins or reduce the fair value of financial instruments, our ability to successfully integrate acquired entities, if any, and adverse changes in the securities markets.  Consequently, no forward-looking statement can be guaranteed. Northfield Bancorp, Inc. does not intend to update any of the forward-looking statements after the date of this release, or conform these statements to actual events.

(Tables to follow)

NORTHFIELD BANCORP, INC.
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

  At or For the Three Months Ended   At or For the Year
Ended
  December 31,   September 30,   December 31,
  2019   2018   2019   2019   2018
Selected Financial Ratios:                  
Performance Ratios(1):                  
Return on assets (ratio of net income to average total assets) (7) (8) (9) (10) 0.82 %   0.91 %   1.10 %   0.86 %   0.95 %
Return on equity (ratio of net income to average equity) (7) (8) (9) (10) 5.79     6.00     7.59     5.89     6.17  
Average equity to average total assets 14.11     15.18     14.44     14.58     15.47  
Interest rate spread 2.16     2.43     2.27     2.25     2.56  
Net interest margin 2.45     2.72     2.57     2.55     2.81  
Efficiency ratio(2) (8) (9) 57.32     55.08     50.28     58.10     56.16  
Non-interest expense to average total assets 1.51     1.44     1.41     1.57     1.60  
Non-interest expense to average total interest-earning assets 1.61     1.53     1.50     1.68     1.69  
Average interest-earning assets to average interest-bearing liabilities 123.40     126.72     123.91     124.47     127.84  
Asset Quality Ratios:                  
Non-performing assets to total assets 0.20     0.21     0.22     0.20     0.21  
Non-performing loans(3) to total loans(4) 0.29     0.28     0.31     0.29     0.28  
Allowance for loan losses to non-performing loans held-for-investment(3) 288.48     299.06     270.02     288.48     299.06  
Allowance for loan losses to originated loans held-for-investment, net(5) 0.93     0.99     0.94     0.93     0.99  
Allowance for loan losses to total loans held-for-investment, net(6) 0.84     0.85     0.84     0.84     0.85  


(1) Annualized when appropriate.
(2) The efficiency ratio represents non-interest expense divided by the sum of net interest income and non-interest income.
(3) Non-performing loans consist of non-accruing loans and loans 90 days or more past due and still accruing (excluding PCI loans), and are included in total loans held-for-investment, net.
(4) Includes originated loans held-for-investment, PCI loans, and acquired loans.
(5) Excludes PCI loans and acquired loans held-for-investment, and related reserve balances.
(6) Includes PCI and acquired loans held-for-investment.
(7) The three months and year ended December 31, 2018, included excess tax benefits of $514,000, and $2.7 million, respectively, related to the exercise or vesting of equity awards. There were no material tax benefits in the three months or year ended December 31, 2019, and the three months ended September 30, 2019. Excess tax benefits will fluctuate based on the Company's stock price and timing of employee stock option exercises and vesting of other share-based awards.
(8) The three months ended December 31, 2019, and September 30, 2019, included tax-exempt income of $1.0 million and 2.4 million, respectively, from bank owned life insurance proceeds in excess of the cash surrender value of the policies. The year ended December 31, 2019, included tax-exempt income of $3.4 million from bank owned life insurance proceeds in excess of the cash surrender value of the policies.
(9) The three months and year ended December 31, 2019, included $755,000, after-tax, in occupancy expense related to the consolidation of three branches, and $125,000 of merger-related expenses.
(10) The three months ended September 30, 2019, and the year ended December 31, 2019, included after tax income of $1.6 million related to recoveries on loans previously charged-off.
   

NORTHFIELD BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share and per share amounts) (unaudited)

  December 31, 2019   September 30, 2019   December 31, 2018
ASSETS:          
Cash and due from banks $ 15,409     $ 17,487     $ 15,147  
Interest-bearing deposits in other financial institutions 132,409     52,165     62,615  
Total cash and cash equivalents 147,818     69,652     77,762  
Trading securities 11,222     10,375     8,968  
Debt securities available-for-sale, at estimated fair value 1,138,352     1,059,560     808,031  
Debt securities held-to-maturity, at amortized cost 8,762     8,817     9,505  
Equity securities 3,341     2,288     1,280  
Originated loans held-for-investment, net 2,987,067     2,859,704     2,678,877  
Loans acquired 432,653     478,009     546,150  
Purchased credit-impaired (PCI) loans held-for-investment 17,365     17,435     20,143  
Loans held-for-investment, net 3,437,085     3,355,148     3,245,170  
Allowance for loan losses (28,707 )   (28,066 )   (27,497 )
Net loans held-for-investment 3,408,378     3,327,082     3,217,673  
Accrued interest receivable 14,609     13,818     12,959  
Bank owned life insurance 153,459     154,204     154,135  
Federal Home Loan Bank of New York stock, at cost 39,575     32,105     22,517  
Operating lease right of use assets 39,504     41,228      
Premises and equipment, net 25,659     25,967     25,605  
Goodwill 38,411     38,411     38,411  
Other assets 26,212     24,804     31,586  
Total assets $ 5,055,302     $ 4,808,311     $ 4,408,432  
           
LIABILITIES AND STOCKHOLDERS’ EQUITY:          
LIABILITIES          
Deposits $ 3,408,233     $ 3,337,309     $ 3,286,512  
Securities sold under agreements to repurchase 75,000     75,000      
Federal Home Loan Bank advances and other borrowings 782,004     616,161     408,891  
Lease liabilities 44,069     45,196      
Advance payments by borrowers for taxes and insurance 20,045     18,751     18,007  
Accrued expenses and other liabilities 30,098     25,954     28,583  
Total liabilities 4,359,449     4,118,371     3,741,993  
Total stockholders’ equity 695,853     689,940     666,439  
Total liabilities and stockholders’ equity $ 5,055,302     $ 4,808,311     $ 4,408,432  
           
Total shares outstanding 49,175,347     49,154,878     49,635,673  
Tangible book value per share (1) $ 13.35     $ 13.24     $ 12.63  


(1) Tangible book value per share is calculated based on total stockholders' equity, excluding intangible assets (goodwill and core deposit intangibles), divided by total shares outstanding as of the balance sheet date. Core deposit intangibles were $769,000, $833,000, and $1.0 million at December 31, 2019, September 30, 2019, and December 31, 2018, respectively, and are included in other assets.
   

NORTHFIELD BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except share and per share amounts) (unaudited)

  Three Months Ended   Year Ended
  December 31,   September 30,   December 31,
  2019   2018   2019   2019   2018
Interest income:                  
Loans $ 34,950   $ 32,905     $ 35,285     $ 136,133   $ 127,591  
Mortgage-backed securities 5,628   3,718     5,409     19,710   12,987  
Other securities 1,256   1,685     1,511     6,331   4,112  
Federal Home Loan Bank of New York dividends 480   443     396     1,618   1,683  
Deposits in other financial institutions 323   197     246     1,351   919  
Total interest income 42,637   38,948     42,847     165,143   147,292  
Interest expense:                  
Deposits 10,016   8,887     10,516     41,328   27,741  
Borrowings 4,145   2,057     3,511     12,030   8,309  
Total interest expense 14,161   10,944     14,027     53,358   36,050  
Net interest income 28,476   28,004     28,820     111,785   111,242  
Provision (recovery) for loan losses 772   607     (1,300 )   22   2,615  
Net interest income after provision for loan losses 27,704   27,397     30,120     111,763   108,627  
Non-interest income:                  
Fees and service charges for customer services 1,248   1,275     1,286     4,881   4,877  
Income on bank owned life insurance 1,952   918     3,268     7,023   3,705  
Gains on available-for-sale debt securities, net 177       123     514   178  
Gains (losses) on trading securities, net 531   (1,593 )   28     1,988   (879 )
Other 287   40     28     402   246  
Total non-interest income 4,195   640     4,733     14,808   8,127  
Non-interest expense:                  
Compensation and employee benefits 9,681   7,121     9,033     39,571   34,802  
Occupancy 4,190   3,035     3,084     13,676   12,096  
Furniture and equipment 281   257     280     1,085   1,004  
Data processing 1,462   1,484     1,517     5,679   5,011  
Professional fees 1,049   924     938     3,545   3,482  
Advertising 601   911     746     3,442   2,726  
FDIC insurance 26   253     5     563   1,065  
Other 1,436   1,792     1,266     5,988   6,857  
Total non-interest expense 18,726   15,777     16,869     73,549   67,043  
Income before income tax expense 13,173   12,260     17,984     53,022   49,711  
Income tax expense(1) 3,052   2,314     4,845     12,787   9,632  
Net income $ 10,121   $ 9,946     $ 13,139     $ 40,235   $ 40,079  
Net income per common share:                  
Basic $ 0.22   $ 0.21     $ 0.28     $ 0.86   $ 0.87  
Diluted $ 0.21   $ 0.21     $ 0.28     $ 0.85   $ 0.85  
Basic average shares outstanding 46,709,366   46,698,667     46,631,008     46,783,442   46,319,760  
Diluted average shares outstanding 47,119,309   47,013,958     46,979,214     47,163,804   47,107,433  
                         

NORTHFIELD BANCORP, INC.
ANALYSIS OF NET INTEREST INCOME
(Dollars in thousands) (unaudited)

  For the Three Months Ended
  December 31, 2019   September 30, 2019   December 31, 2018
  Average Outstanding Balance   Interest   Average Yield/ Rate (1)   Average Outstanding Balance   Interest   Average Yield/ Rate (1)   Average Outstanding Balance   Interest   Average Yield/ Rate (1)
Interest-earning assets:                                  
Loans (2) $ 3,380,580   $ 34,950   4.10 %   $ 3,329,893   $ 35,285   4.20 %   $ 3,198,288   $ 32,905   4.08 %
Mortgage-backed securities (3) 932,649   5,628   2.39     833,071   5,409   2.58     588,201   3,718   2.51  
Other securities (3) 182,912   1,256   2.72     208,196   1,511   2.88     232,777   1,685   2.87  
Federal Home Loan Bank of New York stock 36,045   480   5.28     29,974   396   5.24     23,128   443   7.60  
Interest-earning deposits in financial institutions 79,241   323   1.62     48,841   246   2.00     47,190   197   1.66  
Total interest-earning assets 4,611,427   42,637   3.67     4,449,975   42,847   3.82     4,089,584   38,948   3.78  
Non-interest-earning assets 303,297           303,406           243,019        
Total assets $ 4,914,724           $ 4,753,381           $ 4,332,603        
                                   
Interest-bearing liabilities:                                  
Savings, NOW, and money market accounts $ 1,967,609   $ 5,021   1.01 %   $ 1,940,764   $ 5,281   1.08 %   $ 1,767,276   $ 3,907   0.88 %
Certificates of deposit 990,855   4,995   2.00     1,007,163   5,235   2.06     1,037,437   4,980   1.90  
Total interest-bearing deposits 2,958,464   10,016   1.34     2,947,927   10,516   1.42     2,804,713   8,887   1.26  
Borrowed funds 778,386   4,145   2.11     643,280   3,511   2.17     422,422   2,057   1.93  
Total interest-bearing liabilities 3,736,850   14,161   1.50     3,591,207   14,027   1.55     3,227,135   10,944   1.35  
Non-interest bearing deposits 390,834           382,563           397,022        
Accrued expenses and other liabilities 93,497           93,143           50,820        
Total liabilities 4,221,181           4,066,913           3,674,977        
Stockholders' equity 693,543           686,468           657,626        
Total liabilities and stockholders' equity $ 4,914,724           $ 4,753,381           $ 4,332,603        
                                   
Net interest income     $ 28,476           $ 28,820           $ 28,004    
Net interest rate spread (4)         2.16 %           2.27 %           2.43 %
Net interest-earning assets (5) $ 874,577           $ 858,768           $ 862,449        
Net interest margin (6)         2.45 %           2.57 %           2.72 %
Average interest-earning assets to interest-bearing liabilities         123.40 %           123.91 %           126.72 %


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

NORTHFIELD BANCORP, INC.
ANALYSIS OF NET INTEREST INCOME
(Dollars in thousands) (unaudited)

  For the Years Ended
  December 31, 2019   December 31, 2018
  Average Outstanding Balance   Interest   Average Yield/ Rate   Average Outstanding Balance   Interest   Average Yield/ Rate
Interest-earning assets:                      
Loans (1) $ 3,297,859     $ 136,133     4.13 %   $ 3,176,965     $ 127,591     4.02 %
Mortgage-backed securities (2) 777,997     19,710     2.53     540,859     12,987     2.40  
Other securities (2) 216,125     6,331     2.93     153,346     4,112     2.68  
Federal Home Loan Bank of New York stock 28,223     1,618     5.73     24,731     1,683     6.81  
Interest-earning deposits in financial institutions 67,289     1,351     2.01     63,898     919     1.44  
Total interest-earning assets 4,387,493     165,143     3.76     3,959,799     147,292     3.72  
Non-interest-earning assets 297,872             242,128          
Total assets $ 4,685,365             $ 4,201,927          
                       
Interest-bearing liabilities:                      
Savings, NOW, and money market accounts $ 1,921,564     $ 20,473     1.07 %   $ 1,681,567     $ 11,053     0.66 %
Certificates of deposit 1,027,122     20,855     2.03     956,821     16,688     1.74  
Total interest-bearing deposits 2,948,686     41,328     1.40     2,638,388     27,741     1.05  
Borrowed funds 576,284     12,030     2.09     459,180     8,309     1.81  
Total interest-bearing liabilities 3,524,970     53,358     1.51     3,097,568     36,050     1.16  
Non-interest bearing deposits 384,740             405,319          
Accrued expenses and other liabilities 92,469             49,157          
Total liabilities 4,002,179             3,552,044          
Stockholders' equity 683,186             649,883          
Total liabilities and stockholders' equity $ 4,685,365             $ 4,201,927          
                       
Net interest income     $ 111,785             $ 111,242      
Net interest rate spread (3)         2.25 %           2.56 %
Net interest-earning assets (4) $ 862,523             $ 862,231          
Net interest margin (5)         2.55 %           2.81 %
Average interest-earning assets to interest-bearing liabilities         124.47 %           127.84 %


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

Company Contact:
William R. Jacobs
Chief Financial Officer
Tel: (732) 499-7200 ext. 2519

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