Northfield Bancorp, Inc.NFBK
Northfield Bancorp, Inc. Fair Value Disclosure
Fair Value Measurements
The following tables present the assets reported on the consolidated balance sheets at their estimated fair value as of December 31, 2024 and 2023, by level within the fair value hierarchy as required by the Fair Value Measurements and Disclosures Topic of the FASB Accounting Standards Codification. Financial assets and liabilities are classified in their entirety based on the level of input that is significant to the fair value measurement. The fair value hierarchy is as follows:
•Level 1 Inputs – Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.
•Level 2 Inputs – Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (for example, interest rates, volatilities, prepayment speeds, loss severities, credit risks and default rates) or inputs that are derived principally from or corroborated by observable market data by correlations or other means.
•Level 3 Inputs – Significant unobservable inputs that reflect the Company’s own assumptions that market participants would use in pricing the assets or liabilities.
Fair Value Measurements at December 31, 2024 Using: | |||||||||||||||||||||||
| Carrying Value | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Measured on a recurring basis: | |||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Investment securities: | |||||||||||||||||||||||
| Debt securities available-for-sale: | |||||||||||||||||||||||
| U.S. Government agency securities | $ | 75,348 | $ | — | $ | 75,348 | $ | — | |||||||||||||||
| Mortgage-backed securities: | |||||||||||||||||||||||
| Pass-through certificates: | |||||||||||||||||||||||
| GSE | 261,676 | — | 261,676 | — | |||||||||||||||||||
| REMICs: | |||||||||||||||||||||||
| GSE | 727,343 | — | 727,343 | — | |||||||||||||||||||
| Total mortgage-backed securities | 989,019 | — | 989,019 | — | |||||||||||||||||||
| Other debt securities: | |||||||||||||||||||||||
| Municipal bonds | 685 | — | 685 | — | |||||||||||||||||||
| Corporate bonds | 35,765 | — | 35,765 | — | |||||||||||||||||||
| Total other debt securities | 36,450 | — | 36,450 | — | |||||||||||||||||||
| Total debt securities available-for-sale | 1,100,817 | — | 1,100,817 | — | |||||||||||||||||||
| Trading securities | 13,884 | 13,884 | — | — | |||||||||||||||||||
Equity securities (1) | 4,261 | 4,261 | — | — | |||||||||||||||||||
| Total | $ | 1,118,962 | $ | 18,145 | $ | 1,100,817 | $ | — | |||||||||||||||
| Measured on a non-recurring basis: | |||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Loans individually evaluated for impairment: | |||||||||||||||||||||||
| Real estate loans: | |||||||||||||||||||||||
| Commercial real estate | $ | 1,083 | $ | — | $ | — | $ | 1,083 | |||||||||||||||
| Multifamily | 1,727 | — | — | 1,727 | |||||||||||||||||||
| Home equity and lines of credit | 18 | — | — | 18 | |||||||||||||||||||
| Total individually evaluated real estate loans | 2,828 | — | — | 2,828 | |||||||||||||||||||
| Commercial and industrial loans | 1,291 | — | — | 1,291 | |||||||||||||||||||
| Total | $ | 4,119 | $ | — | $ | — | $ | 4,119 | |||||||||||||||
(1) Excludes investment measured at net asset value of $10.0 million at December 31, 2024, which has not been classified in the fair value hierarchy.
Fair Value Measurements at December 31, 2023 Using: | |||||||||||||||||||||||
| Carrying Value | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Measured on a recurring basis: | |||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Investment securities: | |||||||||||||||||||||||
| Debt securities available-for-sale: | |||||||||||||||||||||||
| U.S. Treasuries | $ | 44,379 | $ | 44,379 | $ | — | $ | — | |||||||||||||||
| U.S Government agency securities | 73,908 | — | 73,908 | — | |||||||||||||||||||
| Mortgage-backed securities | |||||||||||||||||||||||
| Pass-through certificate | |||||||||||||||||||||||
| GSE | 337,540 | — | 337,540 | — | |||||||||||||||||||
| REMICs: | |||||||||||||||||||||||
| GSE | 213,100 | — | 213,100 | — | |||||||||||||||||||
| Total mortgage-backed securities | 550,640 | — | 550,640 | — | |||||||||||||||||||
| Other debt securities: | |||||||||||||||||||||||
| Municipal bonds | 763 | — | 763 | — | |||||||||||||||||||
| Corporate bonds | 125,774 | — | 125,774 | — | |||||||||||||||||||
| Total other debt securities | 126,537 | — | 126,537 | — | |||||||||||||||||||
| Total debt securities available-for sale | 795,464 | 44,379 | 751,085 | — | |||||||||||||||||||
| Trading securities | 12,549 | 12,549 | — | — | |||||||||||||||||||
Equity securities (1) | 330 | 330 | — | — | |||||||||||||||||||
| Total | $ | 808,343 | $ | 57,258 | $ | 751,085 | $ | — | |||||||||||||||
| Measured on a non-recurring basis: | |||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Loans individually evaluated for impairment: | |||||||||||||||||||||||
| Real estate loans: | |||||||||||||||||||||||
| Commercial real estate | $ | 2,291 | $ | — | $ | — | $ | 2,291 | |||||||||||||||
| Multifamily | 1,906 | — | — | 1,906 | |||||||||||||||||||
| Home equity and lines of credit | 21 | — | — | 21 | |||||||||||||||||||
| Total individually evaluated real estate loans | 4,218 | — | — | 4,218 | |||||||||||||||||||
| Commercial and industrial loans | 59 | — | — | 59 | |||||||||||||||||||
| Total | $ | 4,277 | $ | — | $ | — | $ | 4,277 | |||||||||||||||
(1) Excludes investment measured at net asset value of $10.3 million at December 31, 2023, which has not been classified in the fair value hierarchy.
The following table presents qualitative information for Level 3 assets measured at fair value on a non-recurring basis at December 31, 2024 (dollars in thousands):
| Fair Value | Valuation Methodology | Unobservable Inputs | Range of Inputs | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Individually evaluated loans: | |||||||||||||||||||||||
| Commercial real estate | $ | 1,083 | Appraisals | Adjustments to selling cost | 7.0% - 10.0% | ||||||||||||||||||
| Multifamily | 1,727 | Appraisals | Adjustments to selling costs | 0% - 10.0% | |||||||||||||||||||
| Home equity and lines of credit | 18 | Discounted cash flows | Interest rates | 6.0% | |||||||||||||||||||
| Commercial and industrial loans | 1,291 | Discounted cash flows | Interest rates | 6.0% - 50.0% | |||||||||||||||||||
The following table presents qualitative information for Level 3 assets measured at fair value on a non-recurring basis at December 31, 2023 (dollars in thousands):
| Fair Value | Valuation Methodology | Unobservable Inputs | Range of Inputs | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Individually evaluated loans: | |||||||||||||||||||||||
| Commercial real estate | $ | 2,291 | Appraisals and discounted cash flows | Adjustments to selling cost | 4.9% - 10.0% | ||||||||||||||||||
| Multifamily | 1,906 | Appraisals | Adjustments to selling costs | 0% - 10.0% | |||||||||||||||||||
| Home equity and lines of credit | 21 | Discounted cash flows | Interest rates | 6.0% | |||||||||||||||||||
| Commercial and industrial loans | 59 | Discounted cash flows | Interest rates | 5.3% - 7.5% | |||||||||||||||||||
The valuation techniques described below were used to measure fair value of financial instruments in the tables below on a recurring basis and a non-recurring basis as of December 31, 2024 and 2023.
Debt Securities Available-for-Sale: The estimated fair values for mortgage-backed securities, corporate, and other debt securities are obtained from an independent nationally recognized third-party pricing service. The estimated fair values are derived primarily from cash flow models, which include assumptions for interest rates, credit losses, and prepayment speeds. Broker/dealer quotes are utilized as well, when such quotes are available and deemed representative of the market. The significant inputs utilized in the cash flow models are based on market data obtained from sources independent of the Company (Observable Inputs), and are therefore classified as Level 2 within the fair value hierarchy. There were no transfers of securities between Level 1 and Level 2 during the years ended December 31, 2024 and 2023.
Trading Securities: Fair values are derived from quoted market prices in active markets. The assets consist of publicly traded mutual funds.
Equity Securities: Fair values of equity securities consisting of publicly traded mutual funds are derived from quoted market prices in active markets.
Loans Individually Evaluated for Impairment: At December 31, 2024, and December 31, 2023, the Company had loans individually evaluated for impairment (excluding PCD loans) with outstanding principal balances of $7.2 million and $6.0 million, respectively, which were recorded at their estimated fair value of $4.1 million and $4.3 million, respectively. The Company recorded a net increase in the specific reserve for impaired loans of $1.2 million and $7,000 for the years ended December 31, 2024 and 2023, respectively. Net charge-offs of $6.6 million and $6.4 million were recorded for the years ended December 31, 2024 and 2023, respectively, utilizing Level 3 inputs. For purposes of estimating the fair value of impaired loans, management utilizes independent appraisals, if the loan is collateral-dependent, adjusted downward by management, as necessary, for changes in relevant valuation factors subsequent to the appraisal date, or the present value of expected future cash flows for non-collateral-dependent loans.
Other Real Estate Owned: At December 31, 2024 and December 31, 2023 the Company had no assets acquired through foreclosure.
In addition, the Company may be required, from time to time, to measure the fair value of certain other financial assets on a non-recurring basis in accordance with U.S. GAAP. The adjustments to fair value usually result from the application of lower-of-cost-or-market accounting or write downs of individual assets.
Fair Value of Financial Instruments
The FASB ASC Topic for Financial Instruments requires disclosure of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring or non-recurring basis. The methodologies for estimating the fair value of financial assets and financial liabilities that are measured at fair value on a recurring or non-recurring basis are discussed above. The following methods and assumptions were used to estimate the fair value of other financial assets and financial liabilities not already discussed above:
(a) Cash and Cash Equivalents
Cash and cash equivalents are short-term in nature with original maturities of three months or less; the carrying amount approximates fair value. Certificates of deposit having original terms of six-months or less; the carrying value generally approximates fair value. Certificates of deposit with an original maturity of six months or greater; the fair value is derived from discounted cash flows.
(b) Debt Securities (Held-to-Maturity)
The estimated fair values for substantially all of our securities are obtained from an independent, nationally recognized pricing service. The independent pricing service utilizes market prices of same or similar securities whenever such prices are available. Prices involving distressed sellers are not utilized in determining fair value. Where necessary, the independent third-party pricing service estimates fair value using models employing techniques such as discounted cash flow analysis. The assumptions used in these models typically include assumptions for interest rates, credit losses, and prepayments, utilizing market observable data where available.
(c) Investments in Equity Securities at Net Asset Value Per Share
The Company uses net asset value as a practical expedient to record its investment in a private SBA Loan Fund since the shares in the fund are not publicly traded, do not have a readily determinable fair value, and the net asset value per share is calculated in a manner consistent with the measurement principles of an investment company.
(d) FHLBNY Stock
FHLBNY stock is carried at cost, which approximates fair value, since this is the amount for which it could be redeemed and there is no active market for this stock. Due to restrictions placed on the transferability of FHLBNY stock it is not practical to determine the fair value as there is no active market for this stock.
(e) Loans (Held-for-Investment)
Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type such as originated and purchased, and further segregated by residential mortgage, construction, land, multifamily, commercial and consumer. Each loan category is further segmented into amortizing and non-amortizing and fixed and adjustable rate interest terms and by performing and non-performing categories. The fair value of loans is estimated using a discounted cash flow analysis. The discount rates used to determine fair value use interest rate spreads that reflect factors such as liquidity, credit, and non-performance risk of the loans.
(f) Loans (Held-for-Sale)
Held-for-sale loans are carried at the lower of aggregate cost or estimated fair value, less costs to sell, and therefore fair value is equal to carrying value.
(g) Deposits
The fair value of deposits with no stated maturity, such as interest and non-interest-bearing demand deposits, savings, NOW and money market accounts, is equal to the amount payable on demand. The fair value of certificates of deposit is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for deposits of similar remaining maturities.
(h) Commitments to Extend Credit and Standby Letters of Credit
The fair value of commitments to extend credit and standby letters of credit is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair value of off-balance-sheet commitments is insignificant and therefore not included in the following table.
(i) Borrowings
The fair value of borrowed funds is estimated by discounting future cash flows based on rates currently available for debt with similar terms and remaining maturity.
(j) Advance Payments by Borrowers for Taxes and Insurance
Advance payments by borrowers for taxes and insurance have no stated maturity; the fair value is equal to the amount currently payable.
(k) Derivatives
The fair value of the Company's derivatives is determined using discounted cash flow analysis using observable market-based inputs, which are considered Level 2 inputs.
The estimated fair values of the Company’s significant financial instruments at December 31, 2024 and 2023, are presented in the following tables (in thousands):
| December 31, 2024 | |||||||||||||||||||||||||||||
| Estimated Fair Value | |||||||||||||||||||||||||||||
| Carrying Value | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||
| Financial assets: | |||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 167,744 | $ | 167,744 | $ | — | $ | — | $ | 167,744 | |||||||||||||||||||
| Trading securities | 13,884 | 13,884 | — | — | 13,884 | ||||||||||||||||||||||||
| Debt securities available-for-sale | 1,100,817 | — | 1,100,817 | — | 1,100,817 | ||||||||||||||||||||||||
| Debt securities held-to-maturity | 9,303 | — | 8,762 | — | 8,762 | ||||||||||||||||||||||||
Equity securities (1) | 4,261 | 4,261 | — | — | 4,261 | ||||||||||||||||||||||||
| FHLBNY stock, at cost | 35,894 | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||
| Loans held-for-sale | 4,897 | — | — | 4,897 | 4,897 | ||||||||||||||||||||||||
| Net loans held-for-investment | 3,987,041 | — | — | 3,792,302 | 3,792,302 | ||||||||||||||||||||||||
| Derivative assets | 5,149 | — | 5,149 | — | 5,149 | ||||||||||||||||||||||||
| Financial liabilities: | |||||||||||||||||||||||||||||
| Deposits | $ | 4,138,477 | $ | — | $ | 4,139,094 | $ | — | $ | 4,139,094 | |||||||||||||||||||
| FHLB advances and other borrowings (including securities sold under agreements to repurchase) | 666,402 | — | 657,705 | — | 657,705 | ||||||||||||||||||||||||
| Subordinated debentures, net of issuance costs | 61,442 | — | 45,604 | — | 45,604 | ||||||||||||||||||||||||
| Advance payments by borrowers for taxes and insurance | 24,057 | — | 24,057 | — | 24,057 | ||||||||||||||||||||||||
| Derivative liabilities | 5,152 | — | 5,152 | — | 5,152 | ||||||||||||||||||||||||
(1) Excludes investment measured at net asset value of $10.0 million at December 31, 2024, which has not been classified in the fair value hierarchy.
| December 31, 2023 | |||||||||||||||||||||||||||||
| Estimated Fair Value | |||||||||||||||||||||||||||||
| Carrying Value | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||
| Financial assets: | |||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 229,506 | $ | 229,506 | $ | — | $ | — | $ | 229,506 | |||||||||||||||||||
| Trading securities | 12,549 | 12,549 | — | — | 12,549 | ||||||||||||||||||||||||
| Debt securities available-for-sale | 795,464 | 44,379 | 751,085 | — | 795,464 | ||||||||||||||||||||||||
| Debt securities held-to-maturity | 9,866 | — | 9,586 | — | 9,586 | ||||||||||||||||||||||||
Equity securities (1) | 330 | 330 | — | — | 330 | ||||||||||||||||||||||||
| FHLBNY stock, at cost | 39,667 | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||
| Net loans held-for-investment | 4,166,119 | — | — | 3,887,033 | 3,887,033 | ||||||||||||||||||||||||
| 4,903 | — | 4,903 | — | 4,903 | |||||||||||||||||||||||||
| Financial liabilities: | |||||||||||||||||||||||||||||
| Deposits | $ | 3,878,435 | $ | — | $ | 3,879,286 | $ | — | $ | 3,879,286 | |||||||||||||||||||
| FHLB advances and other borrowings (including securities sold under agreements to repurchase) | 859,272 | — | 844,766 | — | 844,766 | ||||||||||||||||||||||||
| Subordinated debentures, net of issuance costs | 61,219 | — | 45,531 | 45,531 | |||||||||||||||||||||||||
| Advance payments by borrowers for taxes and insurance | 25,102 | — | 25,102 | — | 25,102 | ||||||||||||||||||||||||
| Derivative liabilities | 4,905 | — | 4,905 | — | 4,905 | ||||||||||||||||||||||||
(1) Excludes investment measured at net asset value of $10.3 million at December 31, 2023, which has not been classified in the fair value hierarchy.
Limitations
Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected losses, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
Fair value estimates are based on existing on- and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.