Market Overview

Northfield Bancorp, Inc. Announces First Quarter 2018 Results

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  • EARNINGS PER SHARE INCREASED 4.8% TO $0.22 FOR THE FIRST QUARTER OF 2018, COMPARED TO $0.21 FOR THE  FIRST QUARTER OF 2017,  AND A LOSS PER SHARE OF $0.04 FOR THE FOURTH QUARTER OF 2017, INCLUDING

    • $0.02 and $0.04 per share in additional tax benefits related to stock option exercises in the first quarters of 2018 and 2017, respectively
    • $0.02 per share in income related to bank owned life insurance proceeds exceeding the cash surrender value of the underlying life insurance policies in the first quarter of 2017
    • $0.23 per share in tax expense related to Federal enacted tax reform in the fourth quarter of 2017
  • TOTAL ASSETS INCREASED TO $4.1 BILLION, OR 1.9%, AND EQUITY TO ASSETS DECREASED TO 15.8% FROM YEAR END 2017, INCLUDING
    • Loan balances remained stable at $3.1 billion
    • Securities increased by $78.8 million, or 14.7%
  • DEPOSITS, EXCLUDING BROKERED, INCREASED 2.8% FROM YEAR END 2017
  • NET INTEREST MARGIN DECREASED TO 2.93%, OR 11 BASIS POINTS, FOR THE FIRST QUARTER OF 2018, AS COMPARED TO 3.04% FOR THE FIRST QUARTER OF 2017, AND 2.96% FOR THE FOURTH QUARTER OF 2017
  • EFFICIENCY RATIO INCREASED TO 57.18% FOR THE FIRST QUARTER OF 2018 COMPARED TO 56.92% FOR THE FIRST QUARTER OF 2017, INCLUDING
    • A reduction in non-interest expense of $418 thousand, or 2.4%
    • An increase of net interest income of $867 thousand, or 3.2%
    • A decrease in non-interest income of $1.7 million, or 42.0%, related primarily to $1.5 million in income on bank owned life insurance proceeds exceeding the cash surrender value of the underlying life insurance policies in the first quarter of 2017
  • ASSET QUALITY REMAINED STABLE COMPARED TO DECEMBER 31, 2017, WITH NONPERFORMING ASSETS AT 0.16% OF TOTAL ASSETS AND NON PERFORMING LOANS AT 0.18% OF TOTAL LOANS
  • CASH DIVIDEND DECLARED OF $0.10 PER SHARE OF COMMON STOCK, PAYABLE MAY 23, 2018 TO STOCKHOLDERS OF RECORD AS OF MAY 9, 2018

WOODBRIDGE, N.J., April 25, 2018 (GLOBE NEWSWIRE) -- NORTHFIELD BANCORP, INC. (NASDAQ:NFBK), the holding company for Northfield Bank, reported basic and diluted earnings per common share of $0.23 and $0.22, respectively, for the quarter ended March 31, 2018, compared to a loss per common share of $0.04 for the quarter ended December 31, 2017, and basic and diluted earnings per common share of $0.22 and $0.21, respectively, for the quarter ended March 31, 2017. Earnings for the quarter ended March 31, 2018, benefited from a lower effective tax rate due to the recently enacted federal tax reform (the "Tax Reform Act"), which reduced the federal statutory corporate tax rate to 21% in the first quarter of 2018 from 35% in the fourth quarter of 2017, as well as $869,000, or $0.02 per diluted share, of excess tax benefits from the exercise or vesting of equity awards. Earnings for the quarter ended December 31, 2017, include an estimated tax charge of $10.5 million, or $0.23 per diluted share, primarily associated with a reduction in the valuation of the Company's net deferred tax assets related to the Tax Reform Act which resulted in the Company recording an adjustment of $10.5 million to reduce its net deferred tax assets, with a corresponding charge to income tax expense. Earnings for the quarter ended March 31, 2017, benefited from $1.7 million, or $0.04 per diluted share, of excess tax benefits and $1.5 million, or $0.02 per diluted share, of tax-exempt income from bank-owned life insurance proceeds in excess of the cash-surrender value of the policies.

Commenting on the first quarter 2018 results, Steven M. Klein, the Company's President and Chief Executive Officer, noted, "Earnings continued to increase in the first quarter as we remained focused on deploying the Company's significant capital base through deposit growth and asset generation opportunities, while managing our net interest margin and operating expenses." Mr. Klein continued, "Our success in the first quarter in growing deposits allowed us to decrease our borrowings and increase our total assets.  While rising interest rates and competition for high quality loans presents significant challenges to growing our loan portfolio, Northfield remains committed to our underwriting standards, and our team was successful in maintaining our loan balances.  The rise in market interest rates, while increasing competition for deposits and placing downward pressure on our net interest margin, also presents opportunities to invest in higher yielding shorter term high quality securities to increase our earnings and liquidity, while maintaining an appropriate interest rate risk position."

Mr. Klein further noted, "I'm pleased to announce that the Board of Directors has declared a dividend of $0.10 per common share, payable on May 23, 2018, to stockholders of record on May 9, 2018."

Results of Operations

Comparison of Operating Results for the Three Months Ended March 31, 2018 and 2017

Net income was $10.4 million and $9.9 million for the quarters ended March 31, 2018, and March 31, 2017, respectively. Significant variances from the comparable prior year quarter are as follows: an $867,000 increase in net interest income, a $338,000 decrease in the provision for loan losses, a $1.7 million decrease in non-interest income, a $418,000 decrease in non-interest expense, and a $616,000 decrease in income tax expense. 

Net interest income for the quarter ended March 31, 2018, increased $867,000, or 3.2%, primarily due to a $255.2 million, or 7.2%, increase in our average interest-earning assets, partially offset by an 11 basis point decrease in our net interest margin to 2.93% from 3.04% for the quarter ended March 31, 2017. The increase in average interest-earning assets was primarily attributable to increases in average loans outstanding of $157.6 million, average mortgage-backed securities of $34.5 million, average other securities of $33.0 million, and average interest-earning deposits in financial institutions of $31.6 million. The increase in average loans was due to loan pool purchases and originated loan growth. Net interest income for the quarter ended March 31, 2018 included loan prepayment income of $628,000, as compared to $327,000 for the quarter ended March 31, 2017. Yields earned on interest-earning assets increased four basis points to 3.69% for the quarter ended March 31, 2018, from 3.65% for the quarter ended March 31, 2017, driven by higher yields on all asset classes. The cost of interest-bearing liabilities increased 19 basis points to 0.98% for the current quarter as compared to 0.79% for the comparable prior year quarter, due to higher rates on interest-bearing deposits and borrowed funds, attributable to the rising rate environment.

The provision for loan losses decreased by $338,000 to $34,000 for the quarter ended March 31, 2018, from $372,000 for the quarter ended March 31, 2017, primarily due to lower loan origination volume compared to the first quarter of 2017, coupled with improving asset quality trends, partially offset by higher net-charge-offs. Net charge-offs were $22,000 for the quarter ended March 31, 2018, compared to net recoveries of $317,000 for the quarter ended March 31, 2017. The 2017 quarter benefited from insurance proceeds received related to a previously impaired loan, resulting in net recoveries.

Non-interest income decreased $1.7 million, or 42.0%, to $2.4 million for the quarter ended March 31, 2018, as compared to $4.1 million for the quarter ended March 31, 2017. The decrease was primarily due to $1.5 million of income on bank owned life insurance, attributable to insurance proceeds in excess of the related cash surrender value of the policies, received in the first quarter of 2017. In addition, gains on securities transactions, net, decreased by $247,000, primarily due to lower gains on trading securities. Securities gains, net, in the quarter ended March 31, 2018, included gains of $106,000 related to the Company's trading portfolio, while the comparative 2017 quarter included gains of $408,000 related to the Company's trading portfolio. The trading portfolio is utilized to fund the Company's deferred compensation obligation to certain employees and directors of the Company's deferred compensation plan (the Plan). The participants of this Plan, at their election, defer a portion of their compensation. Gains and losses on trading securities have no effect on net income since participants benefit from, and bear the full risk of, changes in the trading securities market values. Therefore, the Company records an equal and offsetting amount in compensation expense, reflecting the change in the Company's obligations under the Plan.

Non-interest expense decreased $418,000, or 2.4%, to $17.1 million for the quarter ended March 31, 2018, from $17.5 million for the quarter ended March 31, 2017. The decrease was due primarily to a decrease of $855,000 in employee compensation and benefits, attributable to a decrease in expense related to the Company's deferred compensation plan which is described above, and had no effect on net income, and a decrease in equity award expense, partially offset by an increase of $352,000 in other expense, primarily due to higher advertising expenses.

The Company recorded income tax expense of $2.3 million for the quarter ended March 31, 2018, compared to $3.0 million for the quarter ended March 31, 2017. The effective tax rate for the quarter ended March 31, 2018, was 18.3% compared to 22.9% for the quarter ended March 31, 2017. The effective tax rate for the first quarter of 2018 was lower due to the enactment of the Tax Reform Act, which reduced the federal statutory corporate tax rate to 21% in the first quarter of 2018 from 35% in the fourth quarter of 2017, partially offset by lower excess tax benefits of $869,000 in the first quarter of 2018, as compared to $1.7 million in the first quarter of 2017. 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. In addition, the effective tax rate for the quarter ended March 31, 2017, also benefited from $1.5 million of tax-exempt income from bank owned life insurance proceeds in excess of the cash surrender value of the policies.

Comparison of Operating Results for the Three Months Ended March 31, 2018, and December 31, 2017

Net income was $10.4 million for the quarter ended March 31, 2018, as compared to a net loss of $1.7 million for the quarter ended December 31, 2017. Significant variances from the prior quarter are as follows: a $13.3 million decrease in income tax expense, a $411,000 decrease in net interest income, and a $738,000 increase in non-interest expense.  Net income for the quarter ended December 31, 2017 included an estimated tax charge of approximately $10.5 million related to the enactment of the Tax Reform Act.

Net interest income for the quarter ended March 31, 2018, decreased by $411,000, or 1.5%, primarily due to an increase in the cost of interest-bearing liabilities, which increased seven basis points to 0.98% for the quarter ended March 31, 2018, as compared to 0.91% for the quarter ended December 31, 2017, which more than offset the increase in average interest-earning assets of $75.4 million, or 2.0%. Yields earned on interest-earning assets increased two basis points to 3.69% for the quarter ended March 31, 2018, from 3.67% for the quarter ended December 31, 2017, driven by an increase in the yields on all asset classes. Net interest income for the quarter ended March 31, 2018, included loan prepayment income of $628,000 as compared to $558,000 for the quarter ended December 31, 2017.

The provision for loan losses decreased by $6,000 to $34,000 for the quarter ended March 31, 2018, from $40,000 for the quarter ended December 31, 2017, primarily due to lower loan origination volume, partially offset by higher net charge-offs. Net charge-offs were $22,000 for the quarter ended March 31, 2018, compared to net recoveries of $21,000 for the quarter ended December 31, 2017.

Non-interest income remained level at $2.4 million for both quarters ended March 31, 2018 and December 31, 2017.

Non-interest expense increased $738,000, or 4.5%, to $17.1 million for the quarter ended March 31, 2018, from $16.4 million for the quarter ended December 31, 2017. The increase was primarily due to increases of $219,000 in compensation and employee benefits, which is related to increased staff due to a new branch opening, and annual merit increases effective January 2018, $286,000 in occupancy expenses primarily related to snow removal costs and increased rent expense associated with the new branch opening, $75,000 in data processing costs, and $121,000 in other expenses.

The Company recorded income tax expense of $2.3 million for the quarter ended March 31, 2018, compared to $15.7 million for the quarter ended December 31, 2017. The effective tax rate for the quarter ended March 31, 2018 was 18.3% compared to 112.3% for the quarter ended December 31, 2017. The effective tax rate for the quarter ended December 31, 2017, includes an estimated tax charge of $10.5 million related to the Tax Reform Act as noted above. Income tax expense for the quarter ended March 31, 2018 benefited from the lower federal statutory corporate and excess tax benefits of $869,000. There were no material excess tax benefits recorded in the quarter ended December 31, 2017.

Financial Condition

Total assets increased $77.8 million, or 1.9%, to $4.07 billion at March 31, 2018, from $3.99 billion at December 31, 2017. The increase was primarily due to an increase in our available-for sale debt securities portfolio of $78.8 million.

As of March 31, 2018, 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 403%. Management believes that Northfield Bank (the Bank) has implemented appropriate risk management practices including risk assessments, board approved underwriting policies and related procedures which include, monitoring bank portfolio performance, performing market analysis (economic and real estate), and stressing of the Bank's commercial real estate portfolio under severe adverse economic conditions. Although management believes the Bank has implemented appropriate policies and procedures to manage our commercial real estate concentration risk, the Bank's regulators could require us to implement additional policies and procedures or could require us to maintain higher levels of regulatory capital, which might adversely affect our loan originations, ability to pay dividends, and profitability.

Loans held-for-investment, net, increased $5.7 million to $3.15 billion at March 31, 2018, from $3.14 billion at December 31, 2017. Originated loans held-for-investment, net, remained level and totaled $2.43 billion at March 31, 2018 and December 31, 2017.

The following tables detail our multifamily real estate originations for the three months ended March 31, 2018 and 2017 (dollars in thousands): 

For the Three Months Ended March 31, 2018
Multifamily Originations   Weighted Average Interest Rate   Weighted Average Loan-to-Value Ratio   Weighted Average Months to Next Rate Change or Maturity for Fixed Rate Loans   (F)ixed or (V)ariable   Amortization Term
$ 57,471     3.72 %   51 %   80   V   30 Years
1,400     3.93 %   44 %   180   F   15 Years
$ 58,871     3.72 %   51 %            
                             


For the Three Months Ended March 31, 2017
Multifamily Originations   Weighted Average Interest Rate   Weighted Average Loan-to-Value Ratio   Weighted Average Months to Next Rate Change or Maturity for Fixed Rate Loans   (F)ixed or (V)ariable   Amortization Term
$ 125,145     3.48 %   61 %   81   V   25 to 30 Years
2,290     3.76 %   40 %   180   F   15 Years
$ 127,435     3.48 %   61 %            
                             

Acquired loans increased by $3.9 million to $696.7 million at March 31, 2018, from $692.8 million at December 31, 2017, primarily due to purchases of one-to-four family residential mortgage loan pools during the quarter ended March 31, 2018, totaling $37.5 million, partially offset by paydowns. The geographic locations of the properties collateralizing the loans purchased are as follows: 32.7% in New York, 29.9% in California, 27.1% in Massachusetts, with the majority of the remaining balance in New Jersey.

The following table provides the details of the loan pools purchased during the three months ended March 31, 2018 (dollars in thousands):

Purchase Amount   Loan Type   Weighted Average Interest Rate(1)   Weighted Average Loan-to-Value Ratio   Weighted Average Months to Next Rate Change or Maturity for Fixed Rate Loans   (F)ixed or (V)ariable   Original Amortization Term
$ 29,963     Residential   2.30 %   55.0 %   1   V   30 Years
4,368     Residential   3.67 %   58.2 %   346   F   15 - 30 Years
3,178     Residential   3.68
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