Northfield Bancorp, Inc. Announces Fourth Quarter and Year End 2013 Results

NOTABLE ITEMS INCLUDE:

• EARNINGS PER SHARE INCREASED OVER 16% FOR THE YEAR
• TOTAL ORIGINATED LOANS INCREASED 26.8% DURING THE YEAR, FUELED BY 42.7% GROWTH IN MULTIFAMILY LOANS
• NET INTEREST INCOME INCREASED 9.6% FOR THE YEAR
• NONPERFORMING ASSETS TO TOTAL ASSETS DECREASED TO 0.68% AS NONPERFORMING LOANS DECLINED 49.9% FROM THE PRIOR YEAR END
• CASH DIVIDEND OF $0.06 PER COMMON SHARE DECLARED PAYABLE FEBRUARY 26, 2014, TO STOCKHOLDERS OF RECORD AS OF FEBRUARY 12, 2014
• BOARD OF DIRECTORS AUTHORIZES A 5% STOCK REPURCHASE PROGRAM

WOODBRIDGE, N.J., Jan. 29, 2014 (GLOBE NEWSWIRE) -- Northfield Bancorp, Inc. NFBK, the holding company for Northfield Bank, reported basic earnings per common share of $0.09 and $0.35 for the quarter and year ended December 31, 2013, respectively, compared to basic earnings per common share of $0.06 and $0.30 for the quarter and year ended December 31, 2012, respectively, and diluted earnings per common share of $0.09 and $0.34 for the quarter and year ended December 31, 2013, respectively, compared to diluted earnings per common share of $0.06 and $0.29 for the quarter and year ended December 31, 2012, respectively.

"This is a landmark year for Northfield as we completed our transition to a fully public company," noted John W. Alexander, Chairman and Chief Executive Officer of Northfield. "This accomplishment is highlighted by a 16.7 percent increase in earnings per share, and the payment of $0.49 in total dividends for 2013, which included a $0.25 special dividend. This growth was accomplished, in part, from an over 20% increase in our net loans held-for-investment, fueled by an almost 43 percent increase in multifamily loans. We were able to maintain a stable net interest margin in a very competitive environment as we continued to reposition the balance sheet away from lower yielding securities."

Mr. Alexander continued, "As we have warned previously, the ever changing interest rate environment could restrict loan growth prospectively as the Federal Reserve tapers its bond purchases. This tapering is expected to result in increasing interest rates and related borrowing costs, and could have the effect of reducing our loan originations."

"We continue to focus on deploying our almost 26 percent capital," Mr. Alexander added. "With the completion of the one year moratorium on share repurchases, I'm pleased to announce that the Board of Directors has authorized a 5% stock repurchase program. I also am pleased to announce the Board of Directors has declared a quarterly cash dividend of $0.06 per common share. The quarterly dividend will be payable on February 26, 2014, to stockholders of record as of February 12, 2014."

Financial Condition

Total assets decreased $110.4 million, or 3.9%, to $2.70 billion at December 31, 2013, from $2.81 billion at December 31, 2012. The decrease was primarily attributable to decreases in cash and cash equivalents of $67.5 million and securities available-for-sale of $338.5 million, partially offset by increases in net loans held-for-investment of $246.9 million, bank owned life insurance of $32.1 million, and other assets of $19.0 million.

Total loans held-for-investment, net, increased $246.5 million to $1.49 billion at December 31, 2013, as compared to $1.24 billion at December 31, 2012.

Originated loans held-for-investment, net, totaled $1.35 billion at December 31, 2013, as compared to $1.07 billion at December 31, 2012. The increase was primarily due to an increase in multifamily real estate loans, of $260.8 million, or 42.7%, to $871.0 million at December 31, 2013, from $610.1 million at December 31, 2012. In the current economic environment, management is primarily focused on originating multifamily loans, with less emphasis on other loan types. The following table details our multifamily originations for the year ended December 31, 2013 (dollars in thousands):

Purchased credit-impaired (PCI) loans, primarily acquired as part of a transaction with the Federal Deposit Insurance Corporation, totaled $59.5 million at December 31, 2013, as compared to $75.3 million at December 31, 2012. The Company accreted interest income of $5.7 million for the year ended December 31, 2013, compared to $6.4 million for the year ended December 31, 2012.

The Company's securities available-for-sale portfolio totaled $937.1 million at December 31, 2013, compared to $1.28 billion at December 31, 2012. At December 31, 2013, $855.6 million of the portfolio consisted of residential mortgage-backed securities issued or guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae. The Company also held residential mortgage-backed securities not guaranteed by these three entities, referred to as "private label securities." The private label securities had an amortized cost of $4.5 million and an estimated fair value of $4.6 million at December 31, 2013. In addition to the above mortgage-backed securities, the Company held $76.5 million in corporate bonds which were all rated investment grade at December 31, 2013, and $510,000 of equity investments in money market mutual funds.

Interest-bearing deposits in other financial institutions totaled $45.9 million at December 31, 2013, as compared to $103.4 million at December 31, 2012. The decrease is primarily attributable to funding loan growth and the purchase of bank owned life insurance.

Total liabilities decreased $411.7 million, or 17.2%, to $1.99 billion at December 31, 2013, from $2.40 billion at December 31, 2012. The decrease was primarily attributable to decreased deposits of $464.2 million, partially offset by increased borrowings of $51.2 million.

The decrease in deposits at December 31, 2013 from December 31, 2012, was $174.6 million, or 10.5%, after excluding the deposits of $289.6 million used to purchase stock in the second-step conversion in the first quarter of 2013.  The decrease was attributable to decreases of $175.2 million in certificates of deposit accounts and $60.4 million in money market accounts, partially offset by increases of $47.6 million in transaction accounts and $13.4 million in savings accounts. The decline in deposits results from with the Company's decision not to retain higher cost time deposits.

Borrowings increased by $51.2 million, or 12.2%, to $470.3 million at December 31, 2013, from $419.1 million at December 31, 2012. 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 short-term borrowings) and the weighted average rate by year (dollars in thousands):

Total stockholders' equity increased by $301.2 million to $716.1 million at December 31, 2013, from $414.9 million at December 31, 2012. This increase was primarily attributable to a $330.1 million increase related to the net proceeds from the stock conversion, net income of $19.1 million for the year ended December 31, 2013, and a $5.4 million increase related to ESOP and equity award activity. These increases were partially offset by a $22.9 million decrease in accumulated other comprehensive income as a result of an increased interest rate environment, treasury share repurchases of $3.6 million, and dividend payments of $26.9 million, which included a special dividend of $14.5 million paid on May 22, 2013. 

Asset Quality

The following table details total non-accruing loans, total non-performing loans, total non-performing assets, troubled debt restructurings on which interest is accruing, and accruing loans 30 to 89 days delinquent at December 31, 2013, September 30, 2013, and December 31, 2012 (dollars in thousands): 

Total Non-accruing Loans

Total non-accruing loans decreased $17.2 million to $17.8 million at December 31, 2013, from $35.0 million at December 31, 2012. The following table details the decrease (dollars in thousands):

Loans Subject to Troubled Debt Restructuring (TDR) Agreements

Included in non-accruing loans are loans subject to TDR agreements totaling $10.7 million and $19.3 million at December 31, 2013, and December 31, 2012, respectively. At December 31, 2013, $7.5 million, or 70.4% of the $10.7 million were not performing in accordance with their restructured terms, as compared to $3.3 million, or 17.0%, at December 31, 2012.  One relationship accounts for the entire $7.5 million of loans not performing in accordance with their restructured terms at December 31, 2013. The relationship is made of up of several loans totaling $7.5 million collateralized by real estate, with an aggregate appraised value of $9.5 million.

The Company also holds loans subject to restructuring agreements that are on accrual status, totaling $26.2 million and $25.7 million at December 31, 2013 and December 31, 2012, respectively. At December 31, 2013, loans of $3.6 million, or 13.7% of the $26.2 million were not performing in accordance with the restructured terms, as compared to none at December 31, 2012. 

Loans 90 Days or More Past Due and Still Accruing and Other Real Estate Owned

Loans 90 days or more past due and still accruing decreased $589,000 to $32,000 at December 31, 2013, from $621,000 at December 31, 2012. The decrease resulted from certain loans being transferred to non-accrual status.

Other real estate owned was $634,000 and $870,000 at December 31, 2013 and December 31, 2012, respectively.

Accruing Loans 30 to 89 Days Delinquent

Loans 30 to 89 days delinquent and on accrual status at December 31, 2013, totaled $13.3 million, a decrease of $1.5 million from the December 31, 2012, balance of $14.8 million. The following table sets forth delinquencies for accruing loans by type and by amount at December 31, 2013, September 30, 2013, and December 31, 2012 (dollars in thousands). 

PCI Loans (Held-for-Investment)

At December 31, 2013, based on recorded contractual principal, 6.6% of PCI loans were past due 30 to 89 days, and 14.9% were past due 90 days or more, as compared to 5.4% and 11.4%, respectively, at December 31, 2012. The increase in the percentage of delinquencies results from declining PCI principal balances of $15.9 million to $59.5 at December 31, 2013 from December 31, 2012.

Results of Operations

Comparison of Operating Results for the Three Months Ended December 31, 2013 and 2012

Net income was $5.0 million and $3.2 million for the quarters ended December 31, 2013 and 2012, respectively. Significant variances from the comparable prior year period are as follows: a $724,000 increase in net interest income, a $1.5 million decrease in the provision for loan losses, a $1.1 million increase in non-interest income, a $462,000 increase in non-interest expense, and a $1.2 million increase in income tax expense.

Net interest income for the quarter ended December 31, 2013, increased $724,000, or 4.0%, due primarily to a $104.1 million, or 4.3%, increase in our interest-earning assets partially offset by a one basis point decrease in our net interest margin to 2.95%. The increase in average interest-earning assets was due primarily to increases in average loans outstanding of $283.9 million and other securities of $10.5 million partially offset by decreases in mortgage-backed securities of $187.4 million and deposits in financial institutions of $7.0 million. The 2013 fourth quarter included loan prepayment income of $290,000, as compared to $559,000 for the quarter ended December 31, 2012. Rates paid on interest-bearing liabilities decreased 19 basis points to 0.90% for the current quarter, as compared to 1.09% for the prior year period. This was partially offset by a 28 basis point decrease in yield earned on interest earning assets to 3.57% for the quarter ended December 31, 2013, as compared to 3.85% for the comparable quarter in 2012.

The provision for loan losses decreased $1.5 million, or 77.8%, to $416,000 for the quarter ended December 31, 2013, from $1.9 million for the quarter ended December 31, 2012. The decrease in the provision for loan losses resulted primarily from a decrease in net charge-offs of approximately $1.0 million and a decrease  in non-performing loans, partially offset by loan growth. Originated loan growth was approximately 7.9% for the quarter ended December 31, 2013, compared to 4.4% for the quarter ended December 31, 2012. Net charge-offs were $1.5 million for the quarter ended December 31, 2013, compared to net charge-offs of $2.5 million for the quarter ended December 31, 2012.

Non-interest income increased $1.1 million, or 78.0%, to $2.6 million for the quarter ended December 31, 2013, from $1.5 million for the quarter ended December 31, 2012. This increase was primarily a result of a $230,000 increase in gain on securities transactions, net, a $275,000 increase in income on bank owned life insurance, and a $442,000 increase in other non-interest income which was primarily related to the sale of vacant land adjacent to a branch. Securities gains in the fourth quarter of 2013 included $267,000 related to the Company's trading portfolio, while the fourth quarter of 2012 included securities losses of $72,000 related to the Company's trading portfolio. The trading portfolio is utilized to fund the Company's deferred compensation obligation to certain employees and directors of the 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 $462,000, or 3.7%, for the quarter ended December 31, 2013, compared to the quarter ended December 31, 2012.  This is due primarily to a $657,000 increase in compensation and employee benefits which is related to increased staff due to branch openings, additional ESOP expense related to the issuance of shares in the second step conversion, and to a lesser extent salary adjustments effective January 1, 2013, and includes an increase of $339,000 in expense related to the Company's deferred compensation plan which is described above, and had no effect on net income.  Additionally, there was a $408,000 increase in occupancy expense primarily related to new branches and the renovation of existing branches. The increases were partially offset by a $135,000 decrease in professional fees, a $109,000 decrease in FDIC insurance and a $363,000 decrease in other expenses primarily related to a decrease in OREO expenses and reserves on loan commitments. 

The Company recorded income tax expense of $2.9 million for the quarter ended December 31, 2013, compared to $1.8 million for the quarter ended December 31, 2012. The effective tax rate for the quarter ended December 31, 2013, was 37.2%, as compared to 35.5% for the quarter ended December 31, 2012. 

Comparison of Operating Results for the Year Ended December 31, 2013 and 2012

Net income was $19.1 million and $16.0 million for the years ended December 31, 2013 and 2012, respectively. Significant variances from the comparable prior year are as follows: a $6.6 million increase in net interest income, a $1.6 million decrease in the provision for loan losses, a $1.6 million increase in non-interest income, a $4.9 million increase in non-interest expense, and a $1.8 million increase in income tax expense.

Net interest income for the year ended December 31, 2013, increased $6.6 million, or 9.6%, as the $232.3 million, or 10.1%, increase in our interest-earning assets more than offset the one basis point decrease in our net interest margin to 2.97%. The increase in average interest-earning assets was due primarily to increases in average net loans outstanding of $238.7 million, other securities of $13.2 million, and deposits in financial institutions of $4.7 million partially offset by a decrease in mortgage-backed securities of $24.8 million. The December 31, 2013 year included loan prepayment income of $2.2 million compared to $1.5 million for the year ended December 31, 2012. The year ended December 31, 2013, also included a recovery of $256,000 of interest that was previously applied to principal. Rates paid on interest-bearing liabilities decreased 25 basis points to 0.95% for the current year as compared to 1.20% for the prior year. This was offset by a 33 basis point decrease in yields earned on interest earning assets to 3.63% for the year ended December 31, 2013, as compared to 3.96% for 2012.

The provision for loan losses decreased $1.6 million, or 45.5%, to $1.9 million for the year ended December 31, 2013, from $3.5 million for the year ended December 31, 2012. The decrease in the provision for loan losses resulted primarily from a decrease in net charge-offs of approximately $1.6 million, a decrease in non-performing loans, partially offset by loan growth. Originated loan growth was approximately 26.8% for the year ended December 31, 2013, compared to 8.1% for the year ended December 31, 2012. Net charge-offs were $2.3 million for the year ended December 31, 2013, compared to net charge-offs of $3.9 million for the year ended December 31, 2012.

Non-interest income increased $1.6 million, or 18.3%, to $10.2 million for the year ended December 31, 2013, from $8.6 million for the year ended December 31, 2012. This increase was primarily a result of an increase of $683,000 in gain on securities transactions, net, a $724,000 increase in income on bank owned life insurance and a $401,000 increase in other non-interest income which was primarily related to the sale of vacant land adjacent to a branch, partially offset by an increase of $410,000 in other-than-temporary impairment losses on securities.  Securities gains in 2013 included $963,000 related to the Company's trading portfolio, while 2012 included securities gains of $384,000 related to the Company's trading portfolio. 

Non-interest expense increased $4.9 million, or 9.9%, for the year ended December 31, 2013, compared to the year ended December 31, 2012.  This was due primarily to a $3.0 million increase in compensation and employee benefits which is related to increased staff due to branch openings and the Flatbush Federal Bancorp merger (Merger), additional ESOP expense related to the issuance of shares in the second step conversion, and to a lesser extent salary adjustments effective January 1, 2013, and includes an increase of $579,000 in expense related to the Company's deferred compensation plan which is described above, and had no effect on net income.  Additionally, there was a $1.5 million increase in occupancy expense primarily related to new branches, the Merger, and the renovation of existing branches, and a $562,000 increase in data processing fees due to data conversion charges related to the Merger. This increase was partially offset by a $394,000 decrease in professional fees. 

The Company recorded income tax expense of $10.7 million for the year ended December 31, 2013, compared to $8.9 million for the year ended December 31, 2012. The effective tax rate for the year ended December 31, 2013, was 35.9%, as compared to 35.7% for the year ended December 31, 2012. 

Comparison of Operating Results for the Three Months Ended December 31, 2013, and September 30, 2013

Net income was $5.0 million and $5.1 million for the quarters ended December 31, 2013, and September 30, 2013, respectively. Significant variances from the prior quarter are as follows: a $638,000 decrease in net interest income, a $401,000 decrease in the provision for loan losses, a $31,000 increase in non-interest income, a $320,000 decrease in non-interest expense, and a $258,000 increase in income tax expense.

Net interest income for the quarter ended December 31, 2013, decreased $638,000, or 3.3%, as our net interest margin decreased by 13 basis points to 2.95%, and was partially offset by interest-earning assets increasing by $24.1 million. The increase in average interest-earning assets was due primarily to increases in average loans outstanding of $99.1 million and deposits in financial institutions of $9.3 million, partially offset by decreases in mortgage-backed securities of $57.8 million and in other securities of $30.5 million. The December 31, 2013, quarter included loan prepayment income of $290,000 compared to $1.1 million for the quarter ended September 30, 2013. Rates paid on interest-bearing liabilities decreased four basis points to 0.90% for the current quarter as compared to 0.94% for the prior period. Yields earned on interest earning assets decreased by 15 basis points to 3.57% for the quarter ended December 31, 2013, as compared to 3.72% for the quarter ended September 30, 2013.

The provision for loan losses decreased $401,000, or 49.1%, to $416,000 for the quarter ended December 31, 2013, from $817,000 for the quarter ended September 30, 2013. The decrease in the provision for loan losses is primarily attributable to a decrease in historical loss factors and a decrease in non-performing loans at December 31, 2013, as compared to September 30, 2013 partially offset by loan growth. Net charge-offs were $1.5 million for the quarter ended December 31, 2013, compared to net charge-offs of $523,000 for the quarter ended September 30, 2013.

Non-interest income was relatively flat at $2.6 million for the quarters ended December 31, 2013 and September 30, 2013. Significant variances from the prior quarter were a $467,000 decrease in gain on securities transactions, net, an increase of $96,000 in fees and service charges, and an increase of $382,000 in other non-interest income which was primarily related to the sale of vacant land adjacent to a branch. Securities gains in the fourth quarter of 2013 included $267,000 related to the Company's trading portfolio described above, while the third quarter of 2013 included securities gains of $390,000 related to the Company's trading portfolio.  

Non-interest expense decreased $320,000, or 2.4%, for the quarter ended December 31, 2013, compared to the quarter ended September 30, 2013.  This is due primarily to a $109,000 decrease in occupancy expense, an $89,000 decrease in professional fees and a $167,000 decrease in other expenses. 

The Company recorded income tax expense of $2.9 million for the quarter ended December 31, 2013 compared to $2.7 million for the quarter ended September 30, 2013. The effective tax rate for the quarter ended December 31, 2013 was 37.2%, as compared to 34.5% for the quarter ended September 30, 2013. 

About Northfield Bank

Northfield Bank, founded in 1887, operates 30 full-service banking offices in Staten Island and Brooklyn, New York and Middlesex 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.

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