Clifton Bancorp Inc. - FORM 10-Q

Attached files

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EX-10.0 - EX-10.0 - Clifton Bancorp Inc.	csbk-ex100_617.htm
EX-31.2 - EX-31.2 - Clifton Bancorp Inc.	csbk-ex312_201506307.htm
EX-32.0 - EX-32.0 - Clifton Bancorp Inc.	csbk-ex320_201506308.htm
EX-31.1 - EX-31.1 - Clifton Bancorp Inc.	csbk-ex311_201506306.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2015

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 001-36390

CLIFTON BANCORP INC.

(Exact Name of Registrant as Specified in Its Charter)

Maryland		46-4757900
(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification No.)

1433 Van Houten Avenue, Clifton, New Jersey		07015
(Address of Principal Executive Offices)		(Zip Code)

(973) 473-2200

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one)

Large Accelerated Filer	¨		Accelerated Filer	x

Non-Accelerated Filer	¨	(Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The number of shares outstanding of each of the issuer’s classes of common stock, as of July 31, 2015: 25,831,756 shares outstanding.

CLIFTON BANCORP INC.AND SUBSIDIARIES

INDEX

		Page
		Number
PART I - FINANCIAL INFORMATION

Item 1:	Financial Statements (Unaudited)

	Consolidated Statements of Financial Condition at June 30, 2015 and March 31, 2015	1

	Consolidated Statements of Income For the Three Months Ended June 30, 2015 and 2014	2

	Consolidated Statements of Comprehensive Income For the Three Months Ended June 30, 2015 and 2014	3

	Consolidated Statements of Changes in Stockholders’ Equity For the Three Months Ended June 30, 2015	4

	Consolidated Statements of Cash Flows For the Three Months Ended June 30, 2015 and 2014	5 – 6

	Notes to Consolidated Financial Statements	7 – 23

Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24 – 30

Item 3:	Quantitative and Qualitative Disclosures About Market Risk	31 – 32

Item 4:	Controls and Procedures	33

PART II - OTHER INFORMATION

Item 1:	Legal Proceedings	34

Item 1A:	Risk Factors	34

Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	34

Item 3:	Defaults Upon Senior Securities	34

Item 4:	Mine Safety Disclosures	34

Item 5:	Other Information	35

Item 6:	Exhibits	35

SIGNATURES		36

CLIFTON BANCORP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(In Thousands, Except Share and Per Share Data, Unaudited)

	June 30, 2015			March 31, 2015
ASSETS
Cash and due from banks	$	9,081		$	12,579
Interest-bearing deposits in other banks		14,417			36,729
Cash and Cash Equivalents		23,498			49,308
Securities available for sale, at fair value		10,778			18,314
Securities held to maturity, at cost (fair value of $388,540 at June 30, 2015 and $409,554 at March 31, 2015):		384,608			400,561
Loans receivable		658,327			644,559
Allowance for loan losses		(3,525	)		(3,475	)
Net Loans		654,802			641,084
Bank owned life insurance		56,244			55,858
Premises and equipment		7,050			7,108
Federal Home Loan Bank of New York stock		6,085			6,041
Interest receivable		3,274			3,274
Other assets		6,368			5,376
Total Assets		1,152,707			1,186,924

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits:
Non-interest bearing		13,906			12,897
Interest bearing		671,342			686,579
Total Deposits		685,248			699,476
Advances from Federal Home Loan Bank of New York		107,500			107,500
Advance payments by borrowers for taxes and insurance		7,246			6,837
Other liabilities and accrued expenses		4,949			5,110
Total Liabilities		804,943			818,923
Commitments and Contingencies
Stockholders' Equity
Preferred stock ($.01 par value), 10,000,000 shares authorized; none issued or outstanding		—			—
Common stock ($.01 par value), 85,000,000 shares authorized; 25,960,056 issued and outstanding at June 30, 2015; 27,325,847 issued and outstanding at March 31, 2015		260			273
Paid-in capital		256,425			275,341
Deferred compensation obligation under Rabbi Trust		326			273
Retained earnings		103,703			105,032
Common stock acquired by Employee Stock Ownership Plan ("ESOP")		(12,124	)		(12,437	)
Accumulated other comprehensive loss		(591	)		(481	)
Stock held by Rabbi Trust		(235	)		—
Total Stockholders' Equity		347,764			368,001
Total Liabilities and Stockholders' Equity	$	1,152,707		$	1,186,924

See notes to consolidated financial statements.

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CLIFTON BANCORP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In Thousands, Except Share and Per Share Data, Unaudited)

	Three Months Ended June 30,
	2015		2014
Interest Income
Loans	$	5,984	$	5,676
Mortgage-backed securities		1,942		2,365
Debt securities		709		590
Other interest-earning assets		77		81
Total Interest Income		8,712		8,712
Interest Expense
Deposits		1,573		1,717
Advances		562		594
Total Interest Expense		2,135		2,311
Net Interest Income		6,577		6,401
Provision for Loan Losses		73		138
Net Interest Income after Provision for Loan Losses		6,504		6,263
Non-Interest Income
Fees and service charges		55		52
Bank owned life insurance		386		295
Gain on sale of securities		72		—
Other		1		1
Total Non-Interest Income		514		348
Non-Interest Expenses
Salaries and employee benefits		2,705		2,425
Occupancy expense of premises		396		385
Equipment		357		303
Directors' compensation		211		212
Advertising and marketing		57		74
Professional services		254		197
Federal deposit insurance premium		124		158
Other		411		383
Total Non-Interest Expenses		4,515		4,137
Income before Income Taxes		2,503		2,474
Income Taxes		845		852
Net Income	$	1,658	$	1,622
Net Income per Common Share
Basic	$	0.07	$	0.06
Diluted	$	0.07	$	0.06
Dividends per common share	$	0.12	$	0.12

Weighted Average Number of Common Shares and Common Stock Equivalents Outstanding:
Basic		25,421,469		25,244,252
Diluted		25,494,037		25,412,932

See notes to consolidated financial statements.

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CLIFTON BANCORP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In Thousands, Unaudited)

	Three Months Ended June 30,
	2015			2014
Net income	$	1,658		$	1,622
Other comprehensive (loss) income:
Gross unrealized holding (loss) gain on securities available for sale, net of income (taxes) benefit of $56 and $(25), respectively		(79	)		37
Reclassification adjustment for net realized gains on securities available for sale, net of income taxes of $29 and $0, respectively (A)		(43	)		—
Benefit plan amortization, net of income tax benefit of $(9) and $(6), respectively (B)		12			8
Total other comprehensive (loss) income		(110	)		45
Total comprehensive income	$	1,548		$	1,667

(A)	Net realized gain and related income taxes are included in the consolidated statements of income within the gain on sale of securities and income taxes lines, respectively.

(B)	Benefit plan amounts represent the amortization of past service cost and unrecognized net loss; such amounts are included in the consolidated statements of income within the directors' compensation line. The related income tax amounts are included in income taxes.

See notes to consolidated financial statements.

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CLIFTON BANCORP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(In Thousands, Except Share and Per Share Data, Unaudited)

										Deferred								Accumulated
										Compensation					Common Stock			Other			Stock Held
	Common Stock						Paid-In			Obligation Under		Retained			Acquired			Comprehensive			by Rabbi
Three Months Ended June 30, 2015	Shares			Par Value			Capital			Rabbi Trust		Earnings			by ESOP			Income (Loss)			Trust			Total
Balance - March 31, 2015		27,325,847		$	273		$	275,341		$	273	$	105,032		$	(12,437	)	$	(481	)	$	—		$	368,001
Net income		—			—			—			—		1,658			—			—			—			1,658
Other comprehensive loss, net of income tax		—			—			—			—		—			—			(110	)		—			(110	)
ESOP shares committed to be released		—			—			118			—		—			313			—			—			431
Stock option expense		—			—			4			—		—			—			—			—			4
Restricted stock awards earned		—			—			10			—		—			—			—			—			10
Repurchase restricted stock awards		(887	)		—			(12	)		—		—			—			—			—			(12	)
Funding of Supplemental Executive Retirement Plan		—			—			—			53		—			—			—			(235	)		(182	)
Tax benefit from stock based compensation		—			—			129			—		—			—			—			—			129
Exercise of stock options		113,020			1			1,180			—		—			—			—			—			1,181
Repurchase common stock		(1,477,924	)		(14	)		(20,345	)		—		—			—			—			—			(20,359	)
Cash dividends declared ($0.12 per share)		—			—			—			—		(2,987	)		—			—			—			(2,987	)
Balance - June 30, 2015		25,960,056		$	260		$	256,425		$	326	$	103,703		$	(12,124	)	$	(591	)	$	(235	)	$	347,764

See notes to consolidated financial statements.

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CLIFTON BANCORP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands, Unaudited)

	Three Months Ended June 30,
	2015			2014
Cash Flows From Operating Activities:
Net income	$	1,658		$	1,622
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of premises and equipment		142			153
Net amortization of deferred fees and costs, premiums and discounts		197			68
Provision for loan losses		73			138
Realized gain on sale of securities available for sale		(72	)		—
(Increase) in interest receivable		—			(23	)
Deferred income tax (benefit)		(99	)		(237	)
(Increase) decrease in other assets		(796	)		1,472
Increase (decrease) in accrued interest payable		8			(4	)
(Decrease) in other liabilities		(169	)		(185	)
Income from bank owned life insurance		(386	)		(295	)
ESOP shares committed to be released		431			377
Restricted stock expense		10			11
Stock option expense		4			7
(Decrease) increase in deferred compensation obligation under Rabbi Trust		(182	)		42
Net Cash Provided by Operating Activities		819			3,146

Cash Flows From Investing Activities:
Proceeds from calls, maturities and repayments of:
Securities available for sale		5,483			266
Securities held to maturity		37,041			18,294
Proceeds from sale of securities available for sale		1,908			—
Redemptions of Federal Home Loan Bank of New York stock		—			675
Purchases of:
Securities available for sale		—			(12,303	)
Securities held to maturity		(21,178	)		(54,572	)
Loans receivable		(12,319	)		(19,200	)
Premises and equipment		(84	)		(36	)
Federal Home Loan Bank of New York stock		(44	)		(128	)
Net (increase) in loans receivable		(1,569	)		(7,506	)
Net Cash Provided by (Used in) Investing Activities		9,238			(74,510	)

See notes to consolidated financial statements.

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CLIFTON BANCORP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONT’D)

(In Thousands, Unaudited)

	Three Months Ended June 30,
	2015			2014
Cash Flows From Financing Activities:
Net (decrease) in deposits	$	(14,228	)	$	(27,355	)
Net (decrease) in short-term advances from Federal Home Loan Bank of New York		—			(15,000	)
Net proceeds from stock offering		—			8,867
Net increase in payments by borrowers for taxes and insurance		409			275
Repurchase restricted stock award		(12	)		(11	)
Exercise of stock options		1,181			62
Repurchase common stock		(20,359	)		—
Dividends paid		(2,987	)		(3,026	)
Income tax benefit from stock based compensation		129			13
Net Cash (Used in) Financing Activities		(35,867	)		(36,175	)
Net (Decrease) in Cash and Cash Equivalents		(25,810	)		(107,539	)
Cash and Cash Equivalents - Beginning		49,308			192,581
Cash and Cash Equivalents - Ending	$	23,498		$	85,042
Supplemental Information:
Cash paid during the period for:
Interest on deposits and borrowings		2,127		$	2,315
Income taxes paid		2,188		$	1,475
Non cash activities:
Transfer from loans receivable to real estate owned	$	—		$	124
Issuance of common stock funded by stock subscriptions received prior to April 1, 2014	$	—		$	154,345

See notes to consolidated financial statements.

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CLIFTON BANCORP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

The consolidated financial statements include the accounts of Clifton Bancorp Inc. (the “Company”), the Company’s wholly-owned subsidiary, Clifton Savings Bank (the “Bank”), and the Bank’s wholly-owned subsidiary, Botany Inc. (“Botany”). The Company’s business consists principally of investing in securities and the operations of the Bank. Botany’s business consists solely of holding investment and mortgage-backed securities, and Botany is treated under New Jersey tax law as a New Jersey investment company. All significant intercompany accounts and transactions have been eliminated in consolidation.

The accompanying unaudited consolidated financial statements were prepared in accordance with the instructions for Form 10-Q and Regulation S-X and do not include information or footnotes necessary for a complete presentation of financial condition, results of operations, or cash flows in conformity with accounting principles generally accepted in the United States of America. However, in the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the consolidated financial statements have been included. The results of operations for the three month period ended June 30, 2015 are not necessarily indicative of the results which may be expected for the entire fiscal year or any other period. The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reported periods. Actual results could differ from those estimates. These consolidated financial statements should be read in conjunction with the Clifton Bancorp’s audited consolidated financial statements and related notes thereto for the year ended March 31, 2015, which are included in the Company’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission on June 5, 2015.

The Company has evaluated events and transactions occurring subsequent to the statement of financial condition date of June 30, 2015, for items that should potentially be recognized or disclosed in these consolidated financial statements. The evaluation was conducted through the date these consolidated financial statements were issued.

2. EARNINGS PER SHARE (EPS)

Basic EPS is based on the weighted average number of common shares actually outstanding, and is adjusted for employee stock ownership plan shares not yet committed to be released and deferred compensation obligations required to be settled in shares of Company stock. Unvested restricted stock awards, which contain rights to non-forfeitable dividends, are considered participating securities and the two-class method of computing basic and diluted EPS is applied. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock, such as outstanding stock options, were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company. Diluted EPS is calculated by adjusting the weighted average number of shares of common stock outstanding to include the effect of contracts or securities exercisable (such as stock options) or which could be converted into common stock, if dilutive, using the treasury stock method. Basic and diluted EPS have been determined based on the adjusted numbers of weighted average shares. The calculation of diluted EPS for the three months ended June 30, 2015 and 2014 includes incremental shares related to outstanding stock options of 72,568 and 168,680, respectively. Shares issued, or retired during any period are weighted for the portion of the period they were outstanding. During the three months ended June 30, 2015 and 2014, the average number of options which were antidilutive were 882 and -0-, respectively.

3. STOCK REPURCHASE

On March 11, 2015, the Company announced that the Board of Directors authorized a stock repurchase plan, that became effective on April 2, 2015, to acquire up to 2,731,000 shares, or 10%, of the Company’s outstanding stock. During the three months ended June 30, 2015, approximately 1,478,000 shares were repurchased at an aggregate cost of approximately $20.4 million, or $13.78 per share. There were no stock repurchase plans in effect for the three months ended June 30, 2014.

Additionally, during the three months ended June 30, 2015 and 2014, 887 and 887 shares, respectively, were repurchased at an aggregate cost of approximately $12,000, or $13.89 per share, and $11,000, or $11.93 per share, respectively, representing the withholding of shares subject to restricted stock awards under the Clifton Savings Bancorp, Inc. 2005 Equity Incentive Plan for payment of taxes due upon the vesting of restricted stock awards. All repurchased shares are retired.

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CLIFTON BANCORP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4. RETIREMENT PLAN-COMPONENTS OF NET PERIODIC PENSION COST

Periodic pension expense for the directors’ retirement plan and a former president’s post-retirement health care plan were as follows:

	Three Months Ended
	June 30,
	2015		2014
	(In Thousands)
Service cost	$	44	$	45
Interest cost		31		30
Amortization of unrecognized net loss		12		4
Amortization of past service cost		9		10
Net periodic benefit cost	$	96	$	89

5. SECURITIES

The amortized cost, gross unrealized gains and losses and estimated fair value of securities available for sale and held to maturity for the dates indicated are as follows:

	June 30, 2015
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(In Thousands)
Available for sale:
Mortgage-backed securities:
Federal National Mortgage Association	$	10,778	$	39	$	39	$	10,778
Total available for sale securities	$	10,778	$	39	$	39	$	10,778

	March 31, 2015
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(In Thousands)
Available for sale:
Debt securities:
Government-sponsored enterprises	$	5,000	$	—	$	—	$	5,000
Mortgage-backed securities:
Federal National Mortgage Association		13,107		207		—		13,314
Total available for sale securities	$	18,107	$	207	$	—	$	18,314

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CLIFTON BANCORP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5. SECURITIES (CONT’D)

	June 30, 2015
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(In Thousands)
Held to maturity:
Debt securities:
Government-sponsored enterprises	$	64,914	$	214	$	15	$	65,113
Corporate bonds		50,045		772		85		50,732
Municipal bonds		3,104		1		20		3,085
		118,063		987		120		118,930
Mortgage-backed securities:
Federal Home Loan Mortgage Corporation		54,473		999		500		54,972
Federal National Mortgage Association		197,071		3,476		1,698		198,849
Government National Mortgage Association		15,001		863		75		15,789
		266,545		5,338		2,273		269,610
Total held to maturity securities	$	384,608	$	6,325	$	2,393	$	388,540

	March 31, 2015
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(In Thousands)
Held to maturity:
Debt securities:
Government-sponsored enterprises	$	74,904	$	393	$	16	$	75,281
Corporate bonds		45,009		1,291		—		46,300
Municipal bonds		16,139		23		1		16,161
		136,052		1,707		17		137,742
Mortgage-backed securities:
Federal Home Loan Mortgage Corporation		56,286		1,673		132		57,827
Federal National Mortgage Association		191,117		5,102		413		195,806
Government National Mortgage Association		17,106		1,122		49		18,179
		264,509		7,897		594		271,812
Total held to maturity securities	$	400,561	$	9,604	$	611	$	409,554

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CLIFTON BANCORP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5. SECURITIES (CONT’D)

Contractual maturity data for securities are as follows:

	June 30, 2015
	Amortized		Fair
	Cost		Value
	(In Thousands)
Available for sale:
Mortgage-backed securities:
Due after five through ten years	$	2,045	$	2,017
Due after ten years		8,733		8,761
Total available for sale securities	$	10,778	$	10,778

Held to maturity:
Debt securities:
Due less than one year	$	16,343	$	16,604
Due after one through five years		70,450		70,753
Due after five through ten years		25,496		25,808
Due after ten years		5,774		5,765
		118,063		118,930
Mortgage-backed securities:
Due after one through five years		13,196		13,040
Due after five through ten years		73,716		73,188
Due after ten years		179,633		183,382
		266,545		269,610
Total held to maturity securities	$	384,608	$	388,540

The amortized cost and carrying values shown above are by contractual final maturity. Actual maturities will differ from contractual final maturities due to scheduled monthly payments related to mortgage-backed securities and due to the borrowers having the right to prepay obligations with or without prepayment penalties. The Company’s mortgage-backed securities are generally secured by residential mortgage loans with contractual maturities of 15 years or greater, and multi-family loans with maturities of five to ten years. However, the effective lives of those securities are generally shorter than their contractual maturities due to principal amortization and prepayment of the loans within those securities. Investors in pass-through securities generally share in the receipt of principal repayments on a pro-rata basis as paid by the borrowers.

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CLIFTON BANCORP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5. SECURITIES (CONT’D)

The age of gross unrealized losses and the fair value of related securities at June 30 and March 31, 2015 were as follows:

	Less Than 12 Months				12 Months or More				Total
			Gross				Gross				Gross
			Unrealized				Unrealized				Unrealized
June 30, 2015	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
Available for sale:	(In Thousands)
Mortgage-backed securities:
Federal National Mortgage Association	$	6,529	$	39	$	—	$	—	$	6,529	$	39
Total available for sale securities	$	6,529	$	39	$	—	$	—	$	6,529	$	39

Held to maturity:
Debt securities:
Government-sponsored enterprises	$	14,992	$	8	$	4,993	$	7	$	19,985	$	15
Municipal bonds		1,419		20		—		—		1,419		20
Corporate bonds		4,952		85		—		—		4,952		85
		21,363		113		4,993		7		26,356		120
Mortgage-backed securities:
Federal Home Loan Mortgage Corporation		18,803		251		8,033		249		26,836		500
Federal National Mortgage Association		97,152		1,012		21,728		686		118,880		1,698
Government National Mortgage Association		—		—		1,459		75		1,459		75
		115,955		1,263		31,220		1,010		147,175		2,273
Total held to maturity securities	$	137,318	$	1,376	$	36,213	$	1,017	$	173,531	$	2,393

	Less Than 12 Months				12 Months or More				Total
			Gross				Gross				Gross
			Unrealized				Unrealized				Unrealized
March 31, 2015	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
	(In Thousands)
Held to maturity:
Debt securities:
Government-sponsored enterprises	$	4,996	$	4	$	9,988	$	12	$	14,984	$	16
Municipal bonds		2,999		1		—		—		2,999		1
		7,995		5		9,988		12		17,983		17
Mortgage-backed securities:
Federal Home Loan Mortgage Corporation		—		—		8,364		132		8,364		132
Federal National Mortgage Association		20,293		18		22,524		395		42,817		413
Government National Mortgage Association		—		—		1,494		49		1,494		49
		20,293		18		32,382		576		52,675		594
Total held to maturity securities	$	28,288	$	23	$	42,370	$	588	$	70,658	$	611

Management does not believe that any of the unrealized losses at June 30, 2015 (four bonds of Government-sponsored enterprises, one corporate bond, and eight municipal bonds included in debt securities, and thirty-four FNMA mortgage-backed securities, eight FHLMC mortgage-backed securities, and one GNMA mortgage-backed security) represent an other-than-temporary impairment as they are primarily related to market interest rates and not related to the underlying credit quality of the issuers of the securities. Additionally, the Company and its subsidiaries have the ability, and management has the intent, to hold such securities for the time necessary to recover amortized cost and does not have the intent to sell the securities, and it is more likely than not that it will not have to sell the securities before recovery of their amortized cost.

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CLIFTON BANCORP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5. SECURITIES (CONT’D)

During the three months ended June 30, 2015, the proceeds from sales of securities available for sale totaled $1.9 million, resulting in gross realized gains of $72,000. There were no sales of securities held to maturity during the three months ended June 30, 2015. There were no sales of securities available for sale or held to maturity during the three months ended June 30, 2014.

6. LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES

The following is a summary of loans by segment and the classes within those segments:

	June 30,			March 31,
	2015			2015
	(In Thousands)
Real estate:
One- to four-family	$	571,450		$	557,301
Multi-family		35,221			35,410
Commercial		38,195			38,838
Construction		582			611
		645,448			632,160
Consumer:
Second mortgage		7,114			7,121
Passbook or certificate		650			602
Equity lines of credit		2,778			2,556
Other loans		70			70
		10,612			10,349
Total Loans		656,060			642,509

Loans in process		(477	)		(533	)
Net purchase premiums, discounts, and deferred loan costs		2,744			2,583
		2,267			2,050
Total Loans, Net	$	658,327		$	644,559

The allowance for loan losses consists of general and unallocated components. For loans that are classified as impaired, a valuation allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component of the allowance covers pools of loans by loan class not considered impaired, as well as smaller balance homogeneous loans, such as one- to four-family real estate, construction real estate, second mortgage loans, home equity lines of credit and passbook loans. These pools of loans are evaluated for loss exposure based upon historical loss rates for each of these categories of loans, adjusted for qualitative factors to reflect current conditions. The qualitative risk factors which include:

1.	Lending policies and procedures, including underwriting standards and collection, charge-off, and recovery practices.

2.	National, regional, and local economic and business conditions, including the value of underlying collateral for collateral dependent loans.

3.	Nature and volume of the portfolio and terms of loans.

4.	Experience, ability, and depth of lending management and staff.

5.	The quality of the Bank’s loan review system.

6.	Volume and severity of past due, classified and nonaccrual loans.

7.	Existence and effect of any concentrations of credit and changes in the level of such concentrations.

8.	Effect of external factors, such as competition and legal and regulatory requirements.

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CLIFTON BANCORP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6. LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES (CONT’D)

Each factor is assigned a value to reflect improving, stable or declining conditions based on management’s best judgment using relevant information available at the time of the evaluation. Adjustments to the factors are supported through documentation of changes in conditions in a narrative accompanying the allowance for loan loss calculation.

An unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating losses in the portfolio.

The evaluation of the adequacy of the allowance is based on an analysis which categorizes the entire loan portfolio by certain risk characteristics. The loan portfolio segments are further disaggregated into the following loan classes, where the risk level for each type is analyzed when determining the allowance for loan losses.

Real Estate:

1. One- to Four-Family Loans - consists of loans secured by first liens on either owner occupied or investment properties. These loans can be affected by economic conditions and the value of the underlying properties. The risk is considered relatively low as the Bank has always had conservative underwriting standards and does not have sub-prime loans in its loan portfolio.

2. Multi-Family Loans - consists of loans secured by multi-family real estate which generally involve a greater degree of risk than one- to four-family residential mortgage loans. These loans can be affected by economic conditions and the value of the underlying properties. The risk is considered relatively low as the Bank believes it has always had conservative underwriting standards.

3. Commercial Loans - consists of loans secured by commercial real estate which generally involve a greater degree of risk than one- to four-family residential mortgage loans. These loans can be affected by economic conditions and the value of the underlying properties. The risk is considered relatively low as the Bank believes it has always had conservative underwriting standards. These loans are affected by economic conditions to a greater degree than one- to four-family and multi-family loans.

4. Construction Loans - consists primarily of the financing of construction of one- to four-family properties or construction/permanent loans for the construction of one- to four-family homes to be occupied by the borrower. Construction loans generally are considered to involve a higher degree of risk of loss than long-term financing on improved, occupied real estate due to uncertainty of construction costs. Independent inspections are performed prior to disbursement of loan proceeds as construction progresses to mitigate these risks. These loans are also affected by economic conditions.

Consumer:

1. Second Mortgage and Equity Lines of Credit - consists of one- to four-family loans secured by first, second or third liens (when the Bank has the two other lien positions) or, in one instance, a commercial property. These loans are affected by the borrower’s continuing financial stability, and therefore are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy. The credit risk is considered slightly higher than one- to four-family first lien loans as these loans are also dependent on the value of underlying properties, but in many instances, have the added risk of a subordinate collateral position.

2. Passbook or Certificate and Other Loans - consists of loans secured by passbook accounts and certificates of deposits and unsecured loans. The passbook or certificate loans have low credit risk as they are fully secured by their collateral. Unsecured loans, included in other loans, are two loans in a New Jersey loan fund and they also are considered a low credit risk.

The allowance calculation methodology includes further segregation of loan classes into risk rating categories. The borrower’s overall financial condition, repayment sources, guarantors and value of collateral, if appropriate, are evaluated when credit deficiencies arise, such as delinquent loan payments. Credit quality risk ratings include regulatory classifications of special mention, substandard, doubtful and loss. Loans classified as special mention have potential weaknesses that deserve management’s close attention. If uncorrected, the potential weaknesses may result in deterioration of the repayment prospects. Loans classified as substandard have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They include loans that are inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified as doubtful have all the weaknesses inherent in loans classified as substandard with the added characteristic that collection or liquidation in full, on the basis of current conditions and facts, is highly improbable. Loans classified as a loss are considered uncollectible and are

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CLIFTON BANCORP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6. LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES (CONT’D)

charged to the allowance for loan losses. Non-classified assets are rated as a pass or pass-watch. Pass-watch loans require current oversight or tracking by management generally due to incomplete documentation or monitoring due to previous delinquent status.

In addition, the Office of the Comptroller of the Currency (the “OCC”), as an integral part of its examination process, periodically reviews the Bank’s loan portfolio and the related allowance for loan losses. The OCC may require the allowance for loan losses to be increased based on its review of information available at the time of the examination.

The change in the allowance for loan losses for the three months ended June 30, 2015 and 2014 is as follows:

												Second		Passbook or
	One- to Four											Mortgage and		Certificate
	-Family			Multi-Family			Commercial			Construction		Equity Lines		and Other
	Real Estate			Real Estate			Real Estate			Real Estate		of Credit		Loans		Unallocated		Total
	(In Thousands)
At March 31, 2015:
Total allowance for loan losses	$	2,704		$	350		$	353		$	1	$	42	$	—	$	25	$	3,475
Charge-offs		(26	)		—			—			—		—		—		—		(26	)
Recoveries		3			—			—			—		—		—		—		3
Provision charged to operations		143			(50	)		(25	)		—		3		—		2		73
At June 30, 2015:
Total allowance for loan losses	$	2,824		$	300		$	328		$	1	$	45	$	—	$	27	$	3,525

										Second			Passbook or
	One- to Four									Mortgage and			Certificate
	-Family			Multi-Family		Commercial		Construction		Equity Lines			and Other
	Real Estate			Real Estate		Real Estate		Real Estate		of Credit			Loans		Unallocated			Total
	(In Thousands)
At March 31, 2014:
Total allowance for loan losses	$	2,460		$	186	$	224	$	2	$	45		$	1	$	153		$	3,071
Charge-offs		(84	)																(84	)
Recoveries		—			—		—		—		—			—		—			—
Provision charged to operations		144			61		42		—		(2	)		—		(107	)		138
At June 30, 2014:
Total allowance for loan losses	$	2,520		$	247	$	266	$	2	$	43		$	1	$	46		$	3,125

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CLIFTON BANCORP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6. LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES (CONT’D)

The following table presents the allocation of the allowance for loan losses and related loans by loan class at June 30 and March 31, 2015.

									Second		Passbook or
	One-to-Four								Mortgage and		Certificate
	Family		Multi-Family		Commercial		Construction		Equity Lines		and Other
June 30, 2015	Real Estate		Real Estate		Real Estate		Real Estate		of Credit		Loans		Unallocated		Total
	(In Thousands)
Allowance for loan losses:
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Collectively evaluated for impairment		2,824		300		328		1		45		—		27		3,525
Total	$	2,824	$	300	$	328	$	1	$	45	$	—	$	27	$	3,525
Loans:
Individually evaluated for impairment	$	1,088	$	776	$	436	$	—	$	12	$	—	$	—	$	2,312
Collectively evaluated for impairment		570,362		34,445		37,759		582		9,880		720		—		653,748
Total	$	571,450	$	35,221	$	38,195	$	582	$	9,892	$	720	$	—	$	656,060

									Second		Passbook or
	One-to-Four								Mortgage and		Certificate
	Family		Multi-Family		Commercial		Construction		Equity Lines		and Other
March 31, 2015	Real Estate		Real Estate		Real Estate		Real Estate		of Credit		Loans		Unallocated		Total
	(In Thousands)
Allowance for loan losses:
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Collectively evaluated for impairment		2,704		350		353		1		42		—		25		3,475
Total	$	2,704	$	350	$	353	$	1	$	42	$	—	$	25	$	3,475
Loans:
Individually evaluated for impairment	$	885	$	784	$	439	$	—	$	13	$	—	$	—	$	2,121
Collectively evaluated for impairment		556,416		34,626		38,399		611		9,664		672		—		640,388
Total	$	557,301	$	35,410	$	38,838	$	611	$	9,677	$	672	$	—	$	642,509

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CLIFTON BANCORP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6. LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES (CONT’D)

The aggregate amount of classified loan balances are as follows at June 30 and March 31, 2015:

									Second		Passbook or
	One- to Four								Mortgage and		Certificate
	-Family		Multi-family		Commercial		Construction		Equity Lines		and Other		Total
June 30, 2015	Real Estate		Real Estate		Real Estate		Real Estate		of Credit		Loans		Loans
	(In Thousands)
Non-classified:	$	566,403	$	34,647	$	37,759	$	582	$	9,815	$	720	$	649,926
Classified:
Special mention		789		—		—		—		5		—		794
Substandard		4,258		574		436		—		72		—		5,340
Doubtful		—		—		—		—		—		—		—
Loss		—		—		—		—		—		—		—
Total loans	$	571,450	$	35,221	$	38,195	$	582	$	9,892	$	720	$	656,060

									Second		Passbook or
	One- to Four								Mortgage and		Certificate
	-Family		Multi-family		Commercial		Construction		Equity Lines		and Other		Total
March 31, 2015	Real Estate		Real Estate		Real Estate		Real Estate		of Credit		Loans		Loans
	(In Thousands)
Non-classified:	$	551,680	$	34,829	$	38,399	$	611	$	9,585	$	672		635,776
Classified:
Special mention		1,008		—		—		—		19		—		1,027
Substandard		4,613		581		439		—		73		—		5,706
Doubtful		—		—		—		—		—		—		—
Loss		—		—		—		—		—		—		—
Total loans	$	557,301	$	35,410	$	38,838	$	611	$	9,677	$	672	$	642,509

The following table provides information with respect to the Bank’s nonaccrual loans at June 30 and March 31, 2015. Loans are generally placed on nonaccrual status when they become more than 90 days delinquent, or when the collection of principal and, or interest become doubtful. Nonaccrual loans differed from the amount of total loans past due greater than 90 days due to some previously delinquent loans that are currently not more than 90 days delinquent which are maintained on nonaccrual status for a minimum of six months until the borrower has demonstrated the ability to satisfy the loan terms. A loan is returned to accrual status when there is sustained period of repayment performance (generally six months) by the borrower in accordance with the contractual terms of the loan, or in some circumstances, when the factors indicating doubtful collectability no longer exist and the Bank expects repayment of the remaining contractual amounts due.

	June 30, 2015		March 31, 2015
	(In Thousands)
Nonaccrual loans:
Real estate loans:
One- to four-family	$	4,258	$	4,555
Multi-family		574		581
Commercial		436		439
Consumer and other loans:
Second mortgage		72		73
Total nonaccrual loans	$	5,340	$	5,648

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CLIFTON BANCORP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6. LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES (CONT’D)

The following table provides information about delinquencies in the Bank’s loan portfolio at June 30 and March 31, 2015.

	30-59		60-89		90 Days						Total
	Days		Days		Or More		Total				Gross
June 30, 2015	Past Due		Past Due		Past Due		Past Due		Current		Loans
	(In Thousands)
Real estate loans:
One- to four-family	$	2,298	$	267	$	3,071	$	5,636	$	565,814	$	571,450
Multi-family		574		—		—		574		34,647		35,221
Commercial		—		192		244		436		37,759		38,195
Construction		—		—		—		—		582		582
Consumer and other loans:
Second mortgage and equity lines of credit		—		30		72		102		9,790		9,892
Passbook or certificate and other loans		—		—		—		—		720		720
Total	$	2,872	$	489	$	3,387	$	6,748	$	649,312	$	656,060

	30-59		60-89		90 Days						Total
	Days		Days		Or More		Total				Gross
March 31, 2015	Past Due		Past Due		Past Due		Past Due		Current		Loans
	(In Thousands)
Real estate loans:
One- to four-family	$	1,289	$	239	$	3,262	$	4,790	$	552,511	$	557,301
Multi-family		—		—		581		581		34,829		35,410
Commercial		—		—		439		439		38,399		38,838
Construction		—		—		—		—		611		611
Consumer and other loans:
Second mortgage and equity lines of credit		13		—		60		73		9,604		9,677
Passbook or certificate and other loans		4		—		—		4		668		672
Total	$	1,306	$	239	$	4,342	$	5,887	$	636,622	$	642,509

There were no loans that are past due greater than 90 days that were accruing as of June 30 and March 31, 2015.

A loan is defined as impaired when, based on current information and events, it is probable that a creditor will be unable to collect all amounts due under the contractual terms of the loan agreement. The Company considers one- to four-family mortgage loans and consumer installment loans to be homogeneous and, therefore, does not generally evaluate them individually for impairment, unless they are considered troubled debt restructurings. All other loans are evaluated for impairment on an individual basis.

- 17 -

CLIFTON BANCORP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6. LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES (CONT’D)

Impaired loans, none of which had a related allowance at or for the three months ending June 30, 2015 and 2014, and at or for the year ended March 31, 2015, were as follows:

			Unpaid		Average		Interest
	Recorded		Principal		Recorded		Income
At or For The Three Months Ended June 30, 2015	Investment		Balance		Investment		Recognized
	(In Thousands)
With no related allowance recorded:
Real estate loans:
One-to four-family	$	1,088	$	1,260	$	1,005	$	7
Multi-family		776		801		779		15
Commercial		436		436		437		4
Consumer and other loans:
Second mortgage		12		12		12		—
Total impaired loans	$	2,312	$	2,509	$	2,233	$	26

			Unpaid		Average		Interest
	Recorded		Principal		Recorded		Income
At or For The Three Months Ended June 30, 2014	Investment		Balance		Investment		Recognized
	(In Thousands)
With no related allowance recorded:
Real estate loans:
One-to four-family	$	766	$	943	$	621	$	2
Multi-family		207		234		207		3
Commercial		246		246		246		3
Total impaired loans	$	1,219	$	1,423	$	1,074	$	8

			Unpaid		Average		Interest
	Recorded		Principal		Recorded		Income
At or For The Year Ended March 31, 2015	Investment		Balance		Investment		Recognized
	(In Thousands)
With no related allowance recorded:
Real estate loans:
One- to four-family	$	885	$	1,058	$	746	$	20
Multi-family		784		810		250		12
Commercial		439		439		351		16
Consumer and other loans
Second mortgage		13		13		4		—
Total impaired loans	$	2,121	$	2,320	$	1,351	$	48

The recorded investment in loans modified in a troubled debt restructuring totaled $865,000 and $784,000, respectively, at June 30 and March 31, 2015, of which $86,000 and -0- were 90 days or more past due, and $6,000 and $7,000, respectively, were 60 days or more past due. The remaining loans modified were current at the time of the restructuring and have complied with the terms of their restructure agreements at June 30 and March 31, 2015. Loans that were modified in a troubled debt restructuring represent concessions made to borrowers experiencing financial difficulties. The Bank works with these borrowers to modify existing loan terms usually by extending maturities or reducing interest rates. The Bank records an impairment loss, if any, based on the present value of expected future cash flows discounted at the original loan’s effective interest rate. Subsequently, these loans are individually evaluated for impairment.

- 18 -

CLIFTON BANCORP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6. LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES (CONT’D)

The following table presents troubled debt restructurings by class during the period indicated.

		Pre-restructuring		Post-restructuring
		Outstanding		Outstanding		Charge-off
	Number of	Recorded		Recorded		Recorded Upon
	Loans	Investment		Investment		Restructuring
		(Dollar In Thousands)
Three Months Ended June 30, 2015
One- to Four-Family Real Estate	1	$	86	$	99	$	—
Three Months Ended June 30, 2014
One- to Four-Family Real Estate	1	$	210	$	214	$	7

The restructuring of the terms of such loans included one or a combination of the following: a reduction of the stated interest rate of the loan, capitalization of prior past dues, and payment recalculation and re-amortization.

There were no new troubled debt restructurings which defaulted within twelve months of restructuring during the three months ended June 30, 2015 and 2014.

7. FAIR VALUE

Accounting guidance on fair value measurement establishes a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy describes three levels of inputs that may be used to measure fair value:

Level 1: Quoted prices in active markets for identical assets or liabilities.

Level 2: Observable inputs other than Level 1 prices, such as quoted for similar assets or liabilities; quoted prices in markets that are not active; or inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

In addition, the guidance requires the Company to disclose the fair value for certain assets and liabilities on both a recurring and non-recurring basis.

An asset’s or liability’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

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CLIFTON BANCORP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7. FAIR VALUE (CONT’D)

For assets measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy used at June 30 and March 31, 2015 are as follows:

			(Level 1)		(Level 2)
			Quoted Prices		Significant		(Level 3)
			in Active		Other		Significant
	Carrying		Markets for		Observable		Unobservable
Description	Value		Identical Assets		Inputs		Inputs
	(In Thousands)
June 30, 2015
Securities available for sale:
Mortgage-backed securities:
Federal National Mortgage Association	$	10,778	$	—	$	10,778	$	—
Total securities available for sale	$	10,778	$	—	$	10,778	$	—

March 31, 2015
Securities available for sale:
Debt securities:
Government-sponsored enterprises	$	5,000	$	—	$	5,000	$	—
Mortgage-backed securities:
Federal National Mortgage Association		13,314		—		13,314		—
Total securities available for sale	$	18,314	$	—	$	18,314	$	—

For assets measured at fair value on a non-recurring basis, the fair value measurements by level within the fair value hierarchy used at June 30 and March 31, 2015 are as follow:

			(Level 1)		(Level 2)
			Quoted Prices		Significant		(Level 3)
	Carrying		Markets for		Observable		Unobservable
Description	Value		Identical Assets		Inputs		Inputs
	(In Thousands)
June 30, 2015
Impaired loans	$	365	$	—	$	—	$	365
March 31, 2015
Impaired loans	$	245	$	—	$	—	$	245

- 20 -

CLIFTON BANCORP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7. FAIR VALUE (CONT’D)

There were no liabilities measured at fair value on a recurring or non-recurring basis at June 30 and March 31, 2015.

The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis and for which the Company has utilized adjusted Level 3 inputs to determine fair value.

	Fair Value		Valuation	Unobservable	Range (Weighted
	Estimate		Techniques	Input	Average)
	(Dollars in Thousand)
June 30, 2015
Impaired Loans	$	365	Market valuation of underlying collateral (1)	Selling costs (2)	7% (7%)
March 31, 2015
Impaired Loans	$	245	Market valuation of underlying collateral (1)	Selling costs (2)	7% (7%)

(1)	Fair value is based on third party appraisals.

(2)	Includes estimated costs to sell.

The following information should not be interpreted as an estimate of the fair value of the Company since a fair value calculation is only provided for a limited portion of the Company’s assets and liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company’s disclosures and those of other companies may not be meaningful. The following methods and assumptions were used to estimate the fair values of certain of the Company’s assets and liabilities at June 30 and March 31, 2015:

Cash and Cash Equivalents, Interest Receivable, and Interest Payable (Carried at Cost)

The carrying amounts reported in the consolidated statements of financial condition for cash and cash equivalents, interest receivable, and interest payable approximate their fair values.

Securities

The fair value of all securities, whether classified as available for sale (carried at fair value) or held to maturity (carried at cost), is determined by reference to quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments. Securities are measured on a recurring basis. The fair values of these securities are obtained from quotes received from an independent broker. The Company’s broker provides it with prices which are categorized as Level 2 since quoted prices in active markets for identical assets are generally not available. As the Company is responsible for the determination of fair value, it performs monthly analyses on the prices received from the pricing service to determine whether the prices are reasonable estimates of fair value. Specifically, the Company compares the prices received from the pricing service to a secondary pricing source. The Company’s internal price verification procedures and review of fair value methodology documentation provided by third- party pricing services has not historically resulted in adjustment in the prices obtained from the pricing service.

Loans Receivable (Carried at Cost)

Fair value is estimated by discounting the future cash flows, using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities, of such loans.

Impaired Loans (Carried based on Collateral Fair Value or Discounted Cash Flows)

Impaired loans are those accounted for under ASC Topic 310 “Accounting by Creditors for Impairment of a Loan” in which the Company has measured impairment generally based on either the fair value of the loan’s collateral or discounted cash flows. These assets are included as Level 3 assets.

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CLIFTON BANCORP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7. FAIR VALUE (CONT’D)

Federal Home Loan Bank of New York Stock (Carried at Cost)

Fair value approximates cost basis as these instruments are redeemable only with the issuing agency at face value.

Deposits (Carried at Cost)

The fair value of non-interest-bearing demand, Crystal Checking, NOW, Super NOW, Money Market and Savings and Club accounts is the amount payable on demand at the reporting date. For fixed-maturity certificates of deposit, fair value is estimated by discounting future cash flows using the rates currently offered for deposits of similar remaining maturities.

Advances from Federal Home Loan Bank of New York (Carried at Cost)

The fair value is estimated by discounting future cash flows using rates currently offered for liabilities of similar remaining maturities, or when available, quoted market prices.

Commitments to Extend Credit

The fair value of commitments to extend 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.

As of June 30 and March 31, 2015, the fair value of the commitments to extend credit were not considered to be material.

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CLIFTON BANCORP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7. FAIR VALUE (CONT’D)

The carrying amounts and fair values of financial instruments are as follows:

					(Level 1)		(Level 2)
					Quoted Prices		Significant		(Level 3)
					in Active		Other		Significant
	Carrying		Estimated		Markets for		Observable		Unobservable
June 30, 2015	Value		Fair Value		Identical Assets		Inputs		Inputs
	(In Thousands)
Financial assets:
Cash and cash equivalents	$	23,498	$	23,498	$	23,498	$	—	$	—
Securities available for sale		10,778		10,778		—		10,778		—
Securities held to maturity		384,608		388,540		—		388,540		—
Net loans receivable		654,802		652,292		—		—		652,292
Federal Home Loan Bank of New York stock		6,085		6,085		—		6,085		—
Interest receivable		3,274		3,274		—		3,274		—
Financial liabilities:
Deposits		685,248		689,493		—		689,493		—
FHLB advances		107,500		110,600		—		110,600		—
Interest payable		252		252		—		252		—

					(Level 1)		(Level 2)
					Quoted Prices		Significant		(Level 3)
					in Active		Other		Significant
	Carrying		Estimated		Markets for		Observable		Unobservable
March 31, 2015	Value		Fair Value		Identical Assets		Inputs		Inputs
	(In Thousands)
Financial assets:
Cash and cash equivalents	$	49,308	$	49,308	$	49,308	$	—	$	—
Securities available for sale		18,314		18,314		—		18,314		—
Securities held to maturity		400,561		409,554		—		409,554		—
Net loans receivable		641,084		645,801		—		—		645,801
Federal Home Loan Bank of New York stock		6,041		6,041		—		6,041		—
Interest receivable		3,274		3,274		—		3,274		—
Financial liabilities:
Deposits		699,476		704,788		—		704,788		—
FHLB advances		107,500		111,008		—		111,008		—
Interest payable		244		244		—		244		—

8. RECENT ACCOUNTING PRONOUNCEMENTS

On May 28, 2014, the FASB and International Accounting Standards Board (“IASB”) issued their final standard on revenue from contracts with customers. The standard, issued as ASU 2014-09 by the FASB and as IFRS 152 by the IASB, outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The goals of the revenue recognition project are to clarify and converge the revenue recognition principles under U.S. GAAP and IFRS and to develop guidance that would streamline and enhance revenue recognition requirements while also providing “a more robust framework for addressing revenue issues.” The boards believe that the standard will improve the consistency of requirements, comparability of revenue recognition practices, and usefulness of disclosures. The ASU is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. The adoption of this standard effective April 1, 2018 is not expected to have a material impact on the Company’s consolidated financial statements.

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CLIFTON BANCORP INC. AND SUBSIDIARIES

ITEM 2:

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

This Form 10-Q may include, and from time to time the Company may disclose, certain forward-looking statements based on current management expectations. The Company’s actual results could differ materially from those management expectations. Factors that could cause future results to vary from current management expectations include, but are not limited to, general economic conditions, legislative and regulatory changes, monetary and fiscal policies of the federal government, changes in tax policies, rates and regulations of federal, state and local tax authorities, changes in interest rates, deposit flows, the cost of funds, demand for loan products, demand for financial services, competition, changes in the quality or composition of loan and investment portfolios, changes in accounting principles, policies or guidelines, and other economic, competitive, governmental and technological factors affecting the Company’s operations, markets, products, services and prices. (See Part II - “Item 1A: Risk Factors.”) Additional factors are discussed in the Company’s Annual Report on Form 10-K for the year ended March 31, 2015 under Part I - “Item 1A. Risk Factors”. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Forward-looking statements speak only as of the date they are made and the Company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date of the forward-looking statements or to reflect the occurrence of unanticipated events. Accordingly, past results and trends should not be used by investors to anticipate future results or trends.

Overview of Financial Condition and Results of Operations

The Company’s results of operations depend primarily on its net interest income, which is a function of the interest rate environment. Net interest income is the difference between the interest income earned on interest-earning assets and the interest paid on interest-bearing liabilities. It is a function of the average balances of loans and securities versus deposits and borrowed funds outstanding in any one period and the yields earned on those loans and securities and the cost of those deposits and borrowed funds.

Interest-earning assets consist primarily of investment and mortgage-backed securities and net loans which comprised 34.3% and 56.8%, respectively, of total assets at June 30, 2015, as compared to 35.3% and 54.0%, respectively, of total assets at March 31, 2015. Cash and cash equivalents decreased to 2.0% of total assets at June 30, 2015, as compared to 4.2% at March 31, 2015. The Company’s mortgage-backed securities portfolio at June 30, 2015 consists solely of U.S. government-sponsored or guaranteed enterprises and the investment portfolio consists of approximately 55.0% U.S. government-sponsored or guaranteed enterprises, 42.4% corporate bonds and 2.6% municipal bonds.

Interest-bearing liabilities consist of deposits and borrowings from the Federal Home Loan Bank of New York (the “FHLB”). Deposits decreased $14.2 million, or 2.0%, between March 31, 2015 and June 30, 2015. The decrease in deposits was mainly due to our continued strategy of managing the cost of funds by allowing controlled, higher priced time deposit runoff. Borrowed funds remained stable at $107.5 million at June 30, 2015.

Net interest income increased $176,000, or 2.7%, during the three months ended June 30, 2015, when compared with the same 2014 period. This increase in net interest income was due to a $176,000 decrease in total interest expense. Average interest-earning assets decreased $7.6 million, or 0.7%, compared with the same 2014 period, while average interest-bearing liabilities decreased $78.8 million, or 9.1%, when compared with the same 2014 period. The $71.2 million increase in average net interest-earning assets was mainly attributable to an increase of $49.3 million in the average balance of loans, coupled with decreases of $55.0 million in the average balance of interest bearing deposits, and $23.8 million in the average balance of FHLB advances, partially offset by decreases of $27.7 million in the average balance of mortgage-backed securities, $13.3 million in the average balance of investment securities, and $15.9 million in the average balance of other interest-earning assets.

The net interest rate spread stayed unchanged at 2.11% for the three months ended June 30, 2015. This was due to an increase of 2 basis points in the yield on interest-earning assets fully offset by an increase of 2 basis points in the cost of interest-bearing liabilities. Results of operations also depend, to a lesser extent, on non-interest income generated, any provision for loan losses recorded, and non-interest expenses incurred. During the three months ended June 30, 2015, non-interest income increased $166,000, or 47.7%, as compared to the comparable period in 2014 mainly as the result of an increase in income from bank owned life insurance and the inclusion of $72,000 in gains on sales of available for sale securities in the 2015 period. Provision for loan losses decreased $65,000, or 47.1%, for the three months ended June 30, 2015, and non-interest expenses increased $378,000, or 9.1%, between periods.

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CLIFTON BANCORP INC. AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Changes in Financial Condition

Assets at June 30, 2015 totaled $1.15 billion, which represents a decrease of $34.2 million, or 2.9%, as compared with $1.19 billion at March 31, 2015. The decrease in total assets was primarily due to our continued management of the cost of funds by allowing controlled, higher priced time deposit runoff funded by repayments on securities coupled with a decrease in cash, which was used primarily to repurchase common stock.

Cash and cash equivalents decreased $25.8 million, or 52.3%, to $23.5 million at June 30, 2015 as compared to $49.3 million at March 31, 2015, mainly due to the repurchase of $20.4 million of common stock during the three months ended June 30, 2015.

Securities available for sale at June 30, 2015 decreased $7.5 million, or 41.1%, to $10.8 million from $18.3 million at March 31, 2015, resulting primarily from maturities and principal repayments of $5.5 million, $1.9 million in proceeds from the sale of securities, and a decrease of $207,000 in the unrealized gain on the portfolio.

Securities held to maturity at June 30, 2015 decreased $16.0 million, or 4.0%, to $384.6 million from $400.6 million at March 31, 2015, resulting primarily from maturities, calls and repayments totaling $37.0 million, partially offset by purchases of securities totaling $21.2 million.

Net loans at June 30, 2015 increased $13.7 million, or 2.1%, to $654.8 million when compared with $641.1 million at March 31, 2015. The largest increase in the loan portfolio was in one- to four-family real estate loans, which increased $14.1 million, or 2.5%. Repayment levels remained stable.

Total liabilities decreased $14.0 million, or 1.7%, to $804.9 million at June 30, 2015 from $818.9 million at March 31, 2014. Deposits at June 30, 2015 decreased $14.2 million, or 2.0%, to $685.2 million when compared with $699.5 million at March 31, 2015 mainly due to the previously noted planned run-off of higher priced deposits. From March 31, 2015 to June 30, 2015, borrowed funds remained at $107.5 million with a weighted average interest rate of 2.08%.

Total stockholders’ equity decreased $20.2 million, or 5.5%, to $347.8 million at June 30, 2015 from $368.0 million at March 31, 2015. The decrease resulted primarily from cash dividends paid of $3.0 million and repurchases of common stock of $20.4 million, partially offset by net income of $1.7 million.

Comparison of Operating Results for the Three Months Ended June 30, 2015 and 2014

Average Balances and Yields. The following table presents information regarding average balances of assets and liabilities, as well as the total dollar amounts of interest income and dividends from average interest-earning assets and interest expense on average interest-bearing liabilities and the resulting average yields and costs. The yields and costs for the periods indicated are derived by dividing income or expense by the average balances of assets or liabilities, respectively, for the periods presented. For purposes of this table, average balances have been calculated using the average of month-end balances, and nonaccrual loans are included in average balances; however, accrued interest income has been excluded from these loans. Loan fees (costs) are included in interest income on loans and are insignificant. Yields are not presented on a tax-equivalent basis. Any adjustments necessary to present yields on a tax equivalent basis are insignificant.

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CLIFTON BANCORP INC. AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Comparison of Operating Results for the Three Months Ended June 30, 2015 and 2014 (Cont’d.)

	Three Months Ended June 30,
	2015								2014
				Interest								Interest
	Average			and		Yield/			Average			and		Yield/
	Balance			Dividends		Cost			Balance			Dividends		Cost
	(Dollars in thousands)
Assets:
Interest-earning assets:
Loans receivable	$	646,459		$	5,984		3.70	%	$	597,112		$	5,676		3.80	%
Mortgage-backed securities		279,074			1,942		2.78	%		306,831			2,365		3.08	%
Investment securities		128,390			709		2.21	%		141,681			590		1.67	%
Other interest-earning assets		34,236			77		0.90	%		50,128			81		0.65	%
Total interest-earning assets		1,088,159			8,712		3.20	%		1,095,752			8,712		3.18	%
Non-interest-earning assets		81,378								149,253
Total assets	$	1,169,537							$	1,245,005
Liabilities and stockholders' equity:
Interest-bearing liabilities:
Demand accounts	$	54,037			15		0.11	%	$	56,799			18		0.13	%
Savings and Club accounts		141,798			58		0.16	%		143,501			63		0.18	%
Certificates of deposit		482,464			1,500		1.24	%		533,040			1,636		1.23	%
Total interest-bearing deposits		678,299			1,573		0.93	%		733,340			1,717		0.94	%
FHLB Advances		107,500			562		2.09	%		131,250			594		1.81	%
Total interest-bearing liabilities		785,799			2,135		1.09	%		864,590			2,311		1.07	%
Non-interest-bearing liabilities:
Non-interest-bearing deposits		13,556								12,452
Other non-interest-bearing liabilities		11,699								13,281
Total non-interest-bearing liabilities		25,255								25,733
Total liabilities		811,054								890,323
Stockholders' equity		358,483								354,682
Total liabilities and stockholders' equity	$	1,169,537							$	1,245,005
Net interest income				$	6,577							$	6,401
Interest rate spread							2.11	%							2.11	%
Net interest margin							2.42	%							2.34	%
Average interest-earning assets to average interest-bearing liabilities		1.38	x							1.27	x

Net income increased $36,000, or 2.2%, to $1.66 million for the three months ended June 30, 2015 compared with $1.62 million for the same 2014 period. The increase in net income during the 2015 period resulted primarily from increases of $176,000, or 2.7%, in net interest income and $166,000, or 47.7%, in non-interest income, as well as a decrease of $65,000, or 47.1%, in provision for loan losses, partially offset by an increase of $378,000, or 9.1%, in non-interest expense.

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CLIFTON BANCORP INC. AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Comparison of Operating Results for the Three Months Ended June 30, 2015 and 2014 (Cont’d.)

Interest income on loans increased by $308,000, or 5.4%, to $6.0 million during the three months ended June 30, 2015, when compared with $5.7 million for the same 2014 period. The increase during the 2015 period mainly resulted from an increase of $49.3 million, or 8.3%, in the average balance when compared to the same period in 2014, partially offset by a decrease of 10 basis points in the yield earned on the loan portfolio, to 3.70% from 3.80%. Interest income on mortgage-backed securities decreased $423,000, or 17.9%, to $1.9 million during the three months ended June 30, 2015, when compared with $2.4 million for the same 2014 period. The decrease during the 2015 period resulted from a decrease of 30 basis points in the yield earned on mortgage-backed securities to 2.78% from 3.08%, coupled with a decrease of $27.8 million, or 9.0%, in the average balance of mortgage-backed securities outstanding. Interest earned on investment securities increased by $119,000, or 20.2%, to $709,000 during the three months ended June 30, 2015, when compared to $590,000 during the same 2014 period, due to a 54 basis point increase in yield to 2.21% from 1.67%, partially offset by a decrease in the average balance of $13.3 million, or 9.4%. Interest earned on other interest-earning assets decreased by $4,000, or 4.9%, to $77,000 during the three months ended June 30, 2015, when compared to $81,000 during the same 2014 period. The decrease was primarily due to a decrease of $15.9 million, or 31.7%, in average balance, partially offset by a 25 basis point increase in the yield to 0.90% from 0.65%. The decrease in the yields on most interest-earning assets was the result of continued overall lower market interest rates.

Interest expense on deposits decreased $144,000, or 8.4%, to $1.6 million during the three months ended June 30, 2015, when compared to $1.7 million during the same 2014 period. The decrease was primarily attributable to a decrease of 1 basis point in the cost of interest-bearing deposits to 0.93% from 0.94%, coupled with a decrease of $55.0 million, or 7.5%, in the average balance of interest-bearing deposits. Interest expense on borrowed money decreased approximately $32,000, or 5.4%, to $562,000 during the three months ended June 30, 2015 when compared with $594,000 during the same 2014 period. The decrease was primarily attributable to a decrease of $23.8 million, or 18.1%, in the average balance of borrowings, mostly from short-term borrowings originated in late 2014, partially offset by an increase of 28 basis points in the cost of borrowings to 2.09% from 1.81%. The $78.8 million decrease in average interest-bearing liabilities was due to a decrease of $55.0 million in the interest-bearing deposits and $23.8 million in the average balance of borrowings. Net interest income increased $176,000, or 2.7%, during the three months ended June 30, 2015, to $6.6 million when compared to $6.4 million for the same 2014 period. The net interest rate spread remained unchanged at 2.11% for both period due to a 2 basis point increase in the yield earned on interest-earning assets, fully offset by a 2 basis point increase in the cost of interest-bearing liabilities.

The provision for loan losses decreased $65,000, or 47.1%, to $73,000 for the three months ended June 30, 2015 as compared to $138,000 for the same period in 2014. The allowance for loan losses is based on management’s qualitative analysis, which includes an evaluation of economic and other factors to determine the adequacy of the allowance for loan loss balance. The Bank continually evaluates the need for a provision for loan losses based on its periodic review of the loan portfolio and general market conditions. At June 30, 2015 and 2014, the Bank’s non-accrual loans totaled $5.3 million and $5.5 million, respectively, representing 0.81% and 0.89%, respectively, of total gross loans, and 0.46% and 0.44%, respectively, of total assets. At March 31, 2015, nonaccrual loans totaled $5.6 million, or 0.88% and 0.48% of total gross loans and total assets, respectively. During the three months ended June 30, 2015, the Bank recorded $23,000 in net charge-offs on three one- to four-family residential real estate loans. During the three months ended June 30, 2014, the Bank recorded $84,000 in net charge-offs on two one- to four-family residential real estate loans. At June 30, 2015, non-accrual loans consisted of twenty-two loans secured by one- to four-family residential real estate, two loans secured by commercial real estate, one loan secured by multi-family real estate, one second mortgage loan secured by one- to four-family residential real estate, and one second mortgage loan secured by commercial real estate, while at June 30, 2014, non-accrual loans consisted of twenty-five loans secured by one- to four-family residential real estate, one loan secured by commercial real estate, and one second mortgage loans secured by one- to four-family residential real estate. Included in non-accrual loans at June 30, 2015 are ten loans totaling $2.0 million that were current or less than ninety days delinquent. At June 30, 2014, there were thirteen loans totaling $3.0 million that were current or less than ninety days delinquent included in non-accrual loans. All non-accrual loans included above are secured by properties located in the state of New Jersey. Impaired loans totaled $2.3 million, $2.1 million and $1.2 million at June 30, 2015, March 31, 2015 and June 30, 2014, respectively. The allowance for loan losses amounted to $3.53 million, $3.48 million, and $3.13 million, respectively, at June 30, 2015, March 31, 2015, and June 30, 2014, representing 0.54%, 0.54%, and 0.51% of total gross loans, respectively.

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CLIFTON BANCORP INC. AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Comparison of Operating Results for the Three Months Ended June 30, 2015 and 2014 (Cont’d.)

Non-interest income increased $166,000, or 47.7%, to $514,000 for the three months ended June 30, 2015 as compared to $348,000 for the three months ended June 30, 2014. The increase was mainly attributable to a $91,000 increase in income from bank owned life insurance, resulting from a $12.5 million additional investment in the quarter ended December 31, 2014, and a gain of $72,000 on sales of available for sale securities being included in the 2015 period. There were no such gains in the 2014 period.

Non-interest expenses increased $378,000, or 9.1%, to $4.52 million for the three months ended June 30, 2015, as compared to $4.14 million for the three months ended June 30, 2014. The increase was driven by increases of $280,000, or 11.5%, in salaries and employee benefits, $54,000, or 17.8%, in equipment expense, and $57,000, or 28.9%, in professional services. The increase in salaries and employee benefits includes typical annual increases in compensation and benefits expenses and costs related to the hiring of additional personnel, as well as a related increase in employee stock ownership plan expense. The increase in equipment expense related to the increase in costs for the development and implementation of new products. Professional services included an increase in legal fees primarily related to the development and implementation of products and services and the Bank’s branding and marketing efforts.

Income taxes totaled $845,000 and $852,000 during the three months ended June 30, 2015 and 2014, respectively. The decrease of $7,000, or 0.8%, during the 2015 period resulted from a decrease in the effective income tax rate. The overall effective income tax rate was 33.8% for the 2015 period compared with 34.4% for the 2014 period.

Liquidity and Capital Resources

The Company maintains levels of liquid assets sufficient to ensure the Bank’s safe and sound operation. The Company adjusts its liquidity levels in order to meet funding needs for deposit outflows, payment of real estate taxes from escrow accounts on mortgage loans, repayment of borrowings, when applicable, and loan funding commitments. The Company also adjusts its liquidity level as appropriate to meet its asset/liability objectives. Liquid assets, which include cash and cash equivalents and securities available for sale, totaled $34.3 million, or 3.0% of total assets at June 30, 2015, as compared to $67.6 million, or 5.7% of total assets at March 31, 2015.

The Company’s liquidity, represented by cash and cash equivalents and securities available for sale, is a product of its operating, investing and financing activities.

The Company is a separate legal entity from the Bank and must provide for its own liquidity. In addition to its operating expenses, the Company alone is responsible for paying any dividends declared to its shareholders. The Company also may repurchase shares of its common stock. Its primary source of income is dividends received from the Bank. The amount of dividends that the Bank may declare and pay to the Company in any calendar year, without the receipt of prior approval from the Office of the Comptroller of the Currency (“the OCC”) but with prior notice to the OCC, cannot exceed net income for that year to date plus retained net income for the preceding two calendar years. On a stand-alone basis, at June 30, 2015, the Company had liquid assets of $85.5 million, which included $74.7 million in cash and cash equivalent and $10.8 million in securities available for sale.

Cash was generated by operating and investing activities and used by financing activities during the three months ended June 30, 2015. The primary sources of cash were net income, and proceeds from principal repayments, maturities and calls of securities. The primary uses of funds were purchases of securities and loans, net loan originations, decrease in deposits, and the repurchase of common stock. Dividends declared and paid totaled $3.0 million during the three months ended June 30, 2015.

The Company’s primary investing activities are the origination and purchase of loans, and the purchases of securities. Net loans amounted to $654.8 million and $641.1 million at June 30, 2015 and March 31, 2015, respectively. Securities, including available for sale and held to maturity issues, totaled $395.4 million and $418.9 million at June 30, 2015 and March 31, 2015, respectively. In addition to funding new loan production through operating and investing activities, such activities were funded by principal repayments, maturities, and calls on existing loans and securities, and the sale of securities.

Liquidity management is both a daily and long-term function of business management. Excess liquidity is generally invested in short to intermediate-term investments. If the Bank requires funds beyond its ability to generate them internally, it can borrow funds from

- 28 -

CLIFTON BANCORP INC. AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Liquidity and Capital Resources (Cont’d)

the FHLB under an overnight advance program up to the Bank’s maximum borrowing capacity based on its ability to collateralize such borrowings. Members in good standing can borrow up to 50% of their asset size as long as they have qualifying collateral to support the advance and purchase of FHLB capital stock. At June 30, 2015, advances from the FHLB amounted to $107.5 million at a weighted average rate of 2.08%. Additionally, the Bank has the ability to borrow funds of up to an aggregate of $88.0 million at two large financial institutions under established, unsecured, overnight lines of credit at a daily adjustable interest rate.

The Bank anticipates that it will have sufficient funds available to meet its current commitments. At June 30, 2015, the Bank had outstanding commitments to originate one- to four-family mortgage loans totaling approximately $6.4 million which included $4.9 million for fixed rate loans with interest rates ranging from 3.125% to 4.00%, and $1.5 million for adjustable rate loans with initial interest rates ranging from 3.00% to 3.50%.

In addition, at June 30, 2015, the Bank had outstanding commitments to originate an adjustable rate multi-family real estate loan of $700,000 with an initial interest rate of 4.25%, and an adjustable rate commercial real estate loan of $560,000 with an initial interest rate of 4.50%.

At June 30, 2015 the Bank also had outstanding commitments to purchase one- to four-family mortgage loans totaling approximately $8.9 million, which included $2.8 million for adjustable rate loans with initial interest rates ranging from 2.875% to 3.25%, and $6.1 million for fixed rate loans with interest rates ranging from 3.00% to 4.50%.

At June 30, 2015, undisbursed funds from customer approved unused lines of credit under a homeowners’ equity lending program amounted to approximately $5.3 million. Unless they are specifically cancelled by notice from the Bank, these funds represent firm commitments available to the respective borrowers on demand. At June 30, 2015, the Bank also had outstanding commitments to originate fixed rates home equity loans totaling $300,000 with interest rates ranging from 3.50% to 4.50%.

Certificates of deposit due within one year at June 30, 2015 totaled $201.9 million, or 42.3% of total certificates of deposit. Management believes that, based upon its experience and the Bank’s deposit flow history, a significant portion of such deposits will remain with the Bank. FHLB advances due within one year at June 30, 2015 totaled $65.0 million.

The Company and its subsidiary Bank are subject to regulatory capital requirements promulgated by the federal banking agencies. The Federal Reserve establishes capital requirements, including well capitalized standards, for the consolidated financial holding company, and the OCC has similar requirement for the Company’s subsidiary bank.

Effective January 1, 2015, the Company adopted the Basel III final rule. Based on the Company’s capital levels and statement of condition composition, the implementation of the new rule had no material impact on our regulatory capital level or ratios at the Bank level. The new rule establishes limits at the Company level and increased the minimum Tier 1 capital to risk based assets requirement from 4% to 6% of risk-weighted assets; established a new common equity Tier 1 capital; and assigned a higher risk weight (150%) to exposures that are more than 90 days past due or are on nonaccrual status and to certain commercial real estate facilities that finance the acquisition, development or construction of real property. The new rule has a capital conservation buffer requirement that will be phased in beginning January 1, 2016 through January 1, 2019, when the full capital conservation buffer requirement will be effective.

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CLIFTON BANCORP INC. AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Liquidity and Capital Resources (Cont’d)

The following table sets forth the Company’s and the Bank’s capital position at June 30 and March 31, 2015, as compared to the minimum regulatory capital requirements:

						Regulatory Capital Requirements
						Minimum Capital					For Classification as
	Actual					Adequacy					Well-Capitalized
	Amount		Ratio			Amount		Ratio			Amount		Ratio
June 30, 2015	(Dollars In Thousands)
Total risk-based capital (to risk-weighted assets)
Bank	$	252,073		46.07	%	$	43,776		8.00	%	$	54,720		10.00	%
Company		351,879		64.01			43,979		8.00			54,974		10.00
Tier 1 capital (to risk-weighted assets)
Bank		248,548		45.42			32,832		6.00			43,776		8.00
Company		348,354		63.37			32,984		6.00			43,979		8.00
Common equity (tier 1) capital (to risk-weighted assets)
Bank		248,548		45.42			24,624		4.50			35,568		6.50
Company		348,354		63.37			24,738		4.50			35,733		6.50
Core (tier 1) capital (to average total assets)
Bank		248,548		21.92			45,355		4.00			56,694		5.00
Company		348,354		29.70			46,921		4.00			58,651		5.00
March 31, 2015
Total risk-based capital (to risk-weighted assets)
Bank	$	249,980		45.96	%	$	43,508		8.00	%	$	54,385		10.00	%
Company		371,957		67.51			44,075		8.00			55,094		10.00
Tier 1 capital (to risk-weighted assets)
Bank		246,505		45.33			32,631		6.00			43,508		8.00
Company		368,482		66.88			33,056		6.00			44,075		8.00
Common equity (tier 1) capital (to risk-weighted assets)
Bank		246,505		45.33			24,473		4.50			35,350		6.50
Company		368,482		66.88			24,792		4.50			35,811		6.50
Core (tier 1) capital (to average total assets)
Bank		246,505		21.55			45,752		4.00			57,189		5.00
Company		368,482		30.88			47,735		4.00			59,669		5.00

In January 2015, the most recent notification from the OCC categorized the Bank as well capitalized as of June 30, 2014, under the regulatory framework for prompt corrective action. There are no conditions existing or events which have occurred since notification that management believes have changed the Bank’s category.

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CLIFTON BANCORP INC. AND SUBSIDIARIES

ITEM 3:

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Qualitative Analysis

The majority of the Bank’s assets and liabilities are monetary in nature. Consequently, one of our most significant forms of market risk is interest rate risk. The Bank’s assets consist primarily of mortgage loans, and investment and mortgage-backed securities that have longer maturities than the Bank’s liabilities, which consist primarily of deposits. As a result, a principal part of the Bank’s business strategy is to manage interest rate risk and reduce the exposure of net interest income to change in market interest rates. Accordingly, our Board of Directors, through its Enterprise Risk Management Committee, has established an Asset/Liability Management Committee which is responsible for evaluating the interest rate risk inherent in assets and liabilities, for determining the level of risk that is appropriate given the Bank’s business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the guidelines approved by the Board of Directors. Senior management monitors the level of interest rate risk on a regular basis and the Asset/Liability Management Committee, which consists of senior management and one outside director, operates under a policy adopted by the Board of Directors, and meets as needed to review the Bank’s asset/liability policies and interest rate risk position.

The Bank retains an independent, nationally recognized consulting firm that specializes in asset and liability management to complete the quarterly interest rate risk reports. This firm uses a combination of analyses to monitor the Bank’s exposure to changes in interest rates. The economic value of equity analysis is a model that estimates the change in net portfolio value (“NPV”) over a range of instantaneously shocked interest rate scenarios. NPV is the discounted present value of expected cash flows from assets, liabilities, and off-balance sheet contracts. In calculating changes in NPV, assumptions estimating loan prepayment rates, reinvestment rates and deposit decay rates that seem most likely based on historical experience during prior interest rate changes are used.

The net interest income analysis uses data derived from an asset and liability analysis and applies several additional elements, including actual interest rate indices and margins, contractual limitations and the U.S. Treasury yield curve as of the balance sheet date. In addition the model uses consistent parallel yield curve ramps (in both directions) to determine possible changes in net interest income if the theoretical yield curve ramps occurred gradually. Net interest income analysis also adjusts the asset and liability repricing analysis based on changes in prepayment rates resulting from the parallel yield curve shifts.

The asset and liability analysis determines the relative balance between the repricing of assets and liabilities over multiple periods of time (ranging from overnight to five years). This asset and liability analysis includes expected cash flows from loans and mortgage-backed securities, applying prepayment rates based on the differential between the current interest rate and the market interest rate for each loan and security type. This analysis identifies mismatches in the timing of asset and liability repricing but does not necessarily provide an accurate indicator of interest rate risk because the assumptions used in the analysis may not reflect the actual response to market changes.

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CLIFTON BANCORP INC. AND SUBSIDIARIES

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Quantitative Analysis (Cont’d)

The table below sets forth, as of March 31, 2015, the most recent date the Bank’s interest rate risk was measured, the estimated changes in the Bank’s NPV and net interest income that would result from the designated changes in interest rates. Given the current economic environment, the Bank expects that these changes as of June 30, 2015 will not materially differ from the results presented. This data is for the Bank and its subsidiary only and does not include any assets of Clifton Bancorp. Such changes to interest rates are calculated as an immediate and permanent change for the purposes of computing NPV and a gradual change over a one-year period for the purposes of computing net interest income. Computations of prospective effects of hypothetical interest rate changes are based on numerous assumptions, including relative levels of market interest rates, loan prepayments and deposit decay, and should not be relied upon as indicative of actual results. We estimate changes in NPV or net interest income for an interest rate decrease of 100 basis points or an increase of 200 basis points.

		Net Portfolio Value (2)								Net Interest Income
												(Decrease) in
				Estimated Increase						Estimated		Estimated Net
Change in Interest Rates		Estimated		(Decrease)						Net Interest		Interest Income
Basis Point (bp) (1)		NPV		Amount			Percent			Income (3)		Amount			Percent
	(Dollars in Thousands)

+200 bp		$	212,934	$	(46,229	)		(17.84	)%	$	25,437	$	(624	)		(2.39	)	%
0			259,163	—			—				26,061	—			—
(100)			267,795		8,632			3.33			25,819		(242	)		(0.93	)

(1)	Assumes an instantaneous and parallel shift in interest rates at all maturities.

(2)	NPV is the discounted present value of expected cash flows from assets, liabilities and off-balance sheet contracts.

(3)	Assumes a gradual change in interest rates over a one year period at all maturities.

The table set forth above indicates that at March 31, 2015, in the event of a 200 basis point increase in interest rates, we would be expected to experience a 17.84% decrease in NPV and a $624,000 or 2.39%, decrease in net interest income. In the event of a 100 basis point decrease in interest rates, we would be expected to experience a 3.33% increase in NPV and a $242,000, or 0.93%, decrease in net interest income. NPV is a theoretical liquidation calculation that assumes the Bank is no longer a going concern and that the net interest income simulation is built upon a static (no growth or attrition) balance sheet. Accordingly, this data does not reflect any future actions management may take in response to changes in interest rates.

Certain shortcomings are inherent in any methodology used in the above interest rate risk measurements. Modeling changes in NPV and net interest income require certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. In this regard, the NPV and net interest income table presented above assumes the composition of the Bank’s interest-rate sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and, accordingly, the data does not reflect any actions we may take in response to changes in interest rates such as changing the mix of assets and liabilities, which could change the results of the NPV and net interest income calculations. The table also assumes a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration to maturity or the repricing characteristics of specific assets and liabilities. Accordingly, although the NPV and net interest income table provide an indication of the Bank’s sensitivity to interest rate changes at a particular point in time, such measurement is not intended to and does not provide a precise forecast of the effects of changes in market interest rates on the Bank’s NPV and net interest income and will differ from actual results.

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CLIFTON BANCORP INC. AND SUBSIDIARIES

ITEM 4:

CONTROLS AND PROCEDURES

Disclosure Controls and Procedures. The Company’s management, including the Company’s principal executive officer and principal financial officer, have evaluated the effectiveness of the Company’s “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”). Based upon their evaluation, the principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act with the Securities and Exchange Commission (the “SEC”) (1) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2) is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting. There were no changes in the Company’s internal control over financial reporting that occurred during the three months ended June 30, 2015 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

- 33 -

CLIFTON BANCORP INC. AND SUBSIDIARIES

PART II

ITEM 1.

Legal Proceedings

Periodically, there have been various claims and lawsuits against the Company and Bank, such as claims to enforce liens, condemnation proceedings on properties in which we hold security interests, claims involving the making and servicing of real property loans and other issues incident to our business. We are not a party to any pending legal proceedings that we believe would have a material adverse effect on our consolidated financial condition, results of operations or cash flows.

ITEM 1A.

Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed under the section “Risk Factors” in our Annual Report on Form 10-K for the year ended March 31, 2015, as filed with the SEC on June 5, 2015, which could materially affect our business, financial condition and/or operating results. As of June 30, 2015, the risk factors of the Company have not changed materially from those reported in the Form 10-K. The risks described in the Form 10-K are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

ITEM 2.

Unregistered Sales of Equity Securities and Use of Proceeds

(a)	Unregistered Sale of Equity Securities. There were no sales of unregistered securities during the quarter ended June 30, 2015.

(b)	Use of Proceeds. Not applicable.

(c)	The following table sets forth information regarding the Company’s repurchases of its common stock during the quarter ended June 30, 2015.

					Total Number		Maximum
					of Shares		Number of Shares
	Total				Purchased as		That May Yet Be
	Number of		Average		Part of Publicly		Purchased Under
	Shares		Price Paid		Announced Plan		the Plans or
Period	Purchased (1)		Per Share		or Programs		Programs

April 1 - April 30, 2015		44,000	$	13.78		44,000		2,687,000
May 1 - May 31, 2015		1,368,724		13.78		1,368,724		1,318,276
June 1 - June 30, 2015 (2)		66,087		13.79		65,200		1,253,076
Total		1,478,811	$	13.78		1,477,924

(1)	On March 11, 2015, the Company announced that the Board of Directors authorized a stock repurchase plan, which became effective on April 2, 2015, to acquire up to 2,731,000 shares of the Company's outstanding stock.

(2)	In June 2015, 887 shares under the Clifton Savings Bancorp, Inc. 2005 Equity Incentive Plan were repurchased as payment of taxes due upon the vesting of restricted stock awards.

ITEM 3.

Defaults Upon Senior Securities

None.

ITEM 4.

Mine Safety Disclosures

Not applicable.

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CLIFTON BANCORP INC. AND SUBSIDIARIES

PART II

ITEM 5.

Other Information

None.

ITEM 6.

Exhibits

The following Exhibits are filed as part of this report.

3.1	Articles of Incorporation of Clifton Bancorp Inc. ⁽¹⁾

3.2	Bylaws of Clifton Bancorp Inc. ⁽²⁾

4.0	Specimen Stock Certificate of Clifton Bancorp Inc. ⁽³⁾

10.0	Clifton Savings Bank 2016 Performance Incentive Compensation Plan*

31.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer

31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer

32.0	Section 1350 Certification of Chief Executive Officer and Chief Financial Officer

101.0

The following materials from Clifton Bancorp’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Statements of Financial Condition, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Changes in Stockholders’ Equity, (v) the Consolidated Statements of Cash Flows and (vi) the Notes to the Consolidated Financial Statements.

*	Management contract or compensation plan arrangement.

(1)	Incorporated by reference to Exhibit 3.1 to Clifton Bancorp Inc.’s Registration Statement on Form S-1 (File No. 333-192598) filed on November 27, 2014.

(2)	Incorporated by reference to Exhibit 3.2 to Clifton Bancorp Inc.’s Registration Statement on Form S-1 (File No. 333-192598) filed on November 27, 2014.

(3)	Incorporated by reference to Exhibit 4.0 to Clifton Bancorp Inc.’s Registration Statement on Form S-1 (File No. 333-192598) filed on November 27, 2014.

- 35 -

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		CLIFTON BANCORP INC.

Date:	August 6, 2015	By:	/s/ Paul M. Aguggia
			Paul M. Aguggia
			Chairman, President and Chief Executive Officer (principal executive officer)

Date:	August 6, 2015	By:	/s/ Christine R. Piano
			Christine R. Piano
			Executive Vice President, Chief Financial Officer and Treasurer (principal financial and accounting officer)

- 36 -

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