Quarterly Report (10-q)

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Smaller reporting company

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 September 30, 2013

¨	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. 0-50358

CLIFTON SAVINGS BANCORP, INC.

(Exact Name of Registrant as Specified in Its Charter)

United States

34-1983738

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

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)

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 November 1, 2013: 26,249,640.

CLIFTON SAVINGS BANCORP, INC.

AND SUBSIDIARIES

INDEX


		Page Number
PART I - FINANCIAL INFORMATION

Item 1:	Financial Statements

	Consolidated Statements of Financial Condition (Unaudited) at September 30, 2013 and March 31, 2013	1

	Consolidated Statements of Income (Unaudited) For the Three And Six Months Ended September 30, 2013 and 2012	2

	Consolidated Statements of Comprehensive Income (Unaudited) For the Three And Six Months Ended September 30, 2013 and 2012	3

	Consolidated Statements of Cash Flows (Unaudited) For the Six Months Ended September 30, 2013 and 2012	4 - 5

	Notes to Consolidated Financial Statements	6 - 25

Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26 - 38

Item 3:	Quantitative and Qualitative Disclosures About Market Risk	39 - 40

Item 4:	Controls and Procedures	41

PART II - OTHER INFORMATION

Item 1:	Legal Proceedings	42

Item 1A:	Risk Factors	42

Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	42

Item 3:	Defaults Upon Senior Securities	43

Item 4:	Mine Safety Disclosures	43

Item 5:	Other Information	43

Item 6:	Exhibits	43

SIGNATURES		44

CLIFTON SAVINGS BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

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


	September 30, 2013			March 31, 2013
ASSETS
Cash and due from banks	$	7,780		$	15,048
Interest-bearing deposits in other banks		7,032			10,848

Cash and Cash Equivalents		14,812			25,896

Securities available for sale, at fair value:		4,181			15,399
Securities held to maturity, at cost (fair value of $454,229 at September 30, 2013 and $479,339 at March 31, 2013):		451,842			462,728

Loans receivable		557,400			459,312
Allowance for loan losses		(2,950	)		(2,500	)

Net Loans		554,450			456,812


Bank owned life insurance		36,017			35,499
Premises and equipment		7,597			7,841
Federal Home Loan Bank of New York stock		5,639			3,897
Interest receivable		3,266			3,177
Real estate owned		405			215
Other assets		4,657			4,620

Total Assets	$	1,082,866		$	1,016,084


LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Deposits:
Non-interest bearing	$	16,079		$	13,228
Interest bearing		775,308			750,464

Total Deposits		791,387			763,692

Advances from Federal Home Loan Bank of New York		92,500			52,500
Advance payments by borrowers for taxes and insurance		5,655			5,071
Other liabilities and accrued expenses		4,803			7,493

Total Liabilities		894,345			828,756


Commitments and Contingencies		—			—


Stockholders’ Equity
Preferred stock ($.01 par value), 1,000,000 shares authorized; shares issued or outstanding - none		—			—
Common stock ($.01 par value), 75,000,000 shares authorized; 30,530,470 shares issued, 26,248,040 shares outstanding at September 30, 2013; 26,166,652 shares outstanding at March 31, 2013		305			305
Paid-in capital		136,356			136,154
Deferred compensation obligation under Rabbi Trust		303			292
Retained earnings		102,348			102,292
Treasury stock, at cost; 4,282,430 shares at September 30, 2013; 4,363,818 shares at March 31, 2013		(46,222	)		(47,067	)
Common stock acquired by Employee Stock Ownership Plan (“ESOP”)		(3,847	)		(4,213	)
Accumulated other comprehensive loss		(455	)		(188	)
Stock held by Rabbi Trust		(267	)		(247	)

Total Stockholders’ Equity		188,521			187,328

Total Liabilities and Stockholders’ Equity	$	1,082,866		$	1,016,084

See notes to consolidated financial statements.

- 1 -

CLIFTON SAVINGS BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

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


	Three Months Ended September 30,					Six Months Ended September 30,
	2013		2012			2013		2012
Interest Income:
Loans	$	5,150	$	4,939		$	9,962	$	9,878
Mortgage-backed securities		2,546		3,194			5,330		6,662
Debt securities		573		746			1,123		1,865
Other interest-earning assets		41		61			82		125

Total Interest Income		8,310		8,940			16,497		18,530

Interest Expense:
Deposits		2,000		2,473			4,042		5,170
Advances		514		591			986		1,330

Total Interest Expense		2,514		3,064			5,028		6,500


Net Interest Income		5,796		5,876			11,469		12,030
Provision for Loan Losses		356		192			536		292

Net Interest Income after Provision for Loan Losses		5,440		5,684			10,933		11,738


Non-Interest Income:
Fees and service charges		60		57			119		112
Bank owned life insurance		260		218			518		433
Gain on sale of securities		—		647			566		647
Loss on extinguishment of debt		—		(527	)		—		(527	)
Loss on write-down of land held for sale		—		—			—		(99	)
Other		1		1			1		1

Total Non-Interest Income		321		396			1,204		567


Non-Interest Expenses:
Salaries and employee benefits		2,040		1,850			4,089		3,712
Occupancy expense of premises		397		367			777		719
Equipment		305		289			612		560
Directors’ compensation		211		182			439		371
Advertising		47		44			151		113
Legal		37		56			74		91
Federal deposit insurance premium		125		128			243		258
Other		462		466			912		979

Total Non-Interest Expenses		3,624		3,382			7,297		6,803


Income before Income Taxes		2,137		2,698			4,840		5,502
Income Taxes		732		950			1,687		1,934

Net Income	$	1,405	$	1,748		$	3,153	$	3,568


Net Income per Common Share:
Basic	$	0.05	$	0.07		$	0.12	$	0.14

Diluted	$	0.05	$	0.07		$	0.12	$	0.14


Dividends per common share	$	0.06	$	0.06		$	0.12	$	0.12


Weighted Average Number of Common Shares and Common Stock Equivalents Outstanding:
Basic		25,848,551		25,671,734			25,833,659		25,662,903

Diluted		26,101,427		25,688,840			26,077,428		25,679,503

See notes to consolidated financial statements.

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CLIFTON SAVINGS BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In Thousands, Unaudited)


	Three Months Ended September 30,					Six Months Ended September 30,
	2013		2012			2013			2012

Net income	$	1,405	$	1,748		$	3,153		$	3,568


Other comprehensive income (loss):
Gross unrealized holding gain (loss) on securities available for sale, net of income taxes of ($5), ($13), $81 and $54, respectively		5		21			(118	)		(76	)
Reclassification adjustment for net realized gains on securities available for sale, net of income taxes of $0, $264, $120 and $264, respectively (A)		—		(383	)		(175	)		(383	)
Benefit plans, net of income tax of ($9), ($8), ($18) and ($14), respectively (B)		14		8			26			18

Total other comprehensive income (loss)		19		(354	)		(267	)		(441	)

Total comprehensive income	$	1,424	$	1,394		$	2,886		$	3,127

(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 SAVINGS BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands, Unaudited)


	Six Months Ended September 30,
	2013			2012
Cash flows from operating activities:
Net income	$	3,153		$	3,568
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of premises and equipment		323			302
Net amortization (accretion) of deferred fees and costs, premiums and discounts		33			(75	)
Provision for loan losses		536			292
Realized sale gain on securities available for sale		(295	)		(647	)
Realized sale gain on securities held to maturity		(271	)		—
Loss on extinguishment of debt		—			527
Loss on write-down of land held for sale		—			99
Loss on write-down of real estate owned		11			46
(Increase) decrease in interest receivable		(89	)		480
Deferred income tax (benefit)		(407	)		(130	)
Decrease in other assets		597			257
Increase (decrease) in accrued interest payable		41			(74	)
Increase (decrease) in other liabilities		320			(450	)
(Increase) in cash surrender value of bank owned life insurance		(518	)		(433	)
ESOP shares committed to be released		446			371
Restricted stock expense		31			31
Stock option expense		25			42
Increase in deferred compensation obligation under Rabbi Trust		11			9

Net cash provided by operating activities		3,947			4,215


Cash flows from investing activities:
Proceeds from calls, maturities and repayments of:
Securities available for sale		6,358			42,998
Securities held for maturity		56,728			143,334
Proceeds from sale of securities available for sale		4,659			8,827
Proceeds from sale of securities held to maturity		5,579			—
Redemptions of Federal Home Loan Bank of New York stock		58			1,774
Purchases of:
Securities available for sale		—			(15,000	)
Securities held for maturity		(54,303	)		(96,680	)
Loans receivable		(50,171	)		(26,695	)
Premises and equipment		(79	)		(89	)
Federal Home Loan Bank of New York stock		(1,800	)		(675	)
Net (increase) decrease in loans receivable		(48,133	)		8,233

Net cash (used in) provided by investing activities		(81,104	)		66,027

See notes to consolidated financial statements.

- 4 -

CLIFTON SAVINGS BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONT’D)

(In Thousands, Unaudited)


	Six Months Ended September 30,
	2013			2012
Cash flows from financing activities:
Net increase (decrease) in deposits	$	27,695		$	(43,629	)
Net increase in short-term advances from Federal Home Loan Bank of New York		15,000			—
Proceeds from long-term advances from Federal Home Loan Bank of New York		25,000			—
Payments on advances from Federal Home Loan Bank of New York		—			(23,819	)
Net increase in payments by borrowers for taxes and insurance		584			(160	)
Exercise of stock options		827			—
Dividends paid		(3,097	)		(3,076	)
Purchase of treasury stock		(15	)		(12	)
Income tax benefit from stock based compensation		79			5

Net cash provided by (used in) financing activities		66,073			(70,691	)


Net (decrease) in cash and cash equivalents		(11,084	)		(449	)
Cash and cash equivalents - beginning		25,896			40,257

Cash and cash equivalents - ending	$	14,812		$	39,808


Supplemental information:
Cash paid during the period for:
Interest on deposits and borrowings	$	4,987		$	6,574

Income taxes paid	$	2,147		$	3,052

Non cash activities:
Amounts due (settled with) brokers for security purchases	$	(3,050	)	$	1,925

Transfer from loans receivable to real estate owned	$	201		$	215

See notes to consolidated financial statements.

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CLIFTON SAVINGS BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

The consolidated financial statements include the accounts of Clifton Savings 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 (“GAAP”). However, in the opinion of management, all adjustments (consisting solely of normal recurring adjustments) necessary for a fair presentation of the consolidated financial statements have been included. The results of operations for the six month period ended September 30, 2013 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 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 Company’s audited consolidated financial statements and related notes thereto for the year ended March 31, 2013, which are included in the Company’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission on June 6, 2013.

The Company has evaluated events and transactions occurring subsequent to the statement of financial condition date of September 30, 2013, 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. The calculation of diluted EPS for the three and six months ended September 30, 2013 includes incremental shares related to outstanding options of 252,876 and 243,769, respectively. During the three and six months ended September 30, 2013, the average number of options which were antidilutive were -0- for both periods. The calculation of diluted EPS for the three and six months ended September 30, 2012 includes incremental shares related to outstanding options of 17,106 and 16,600, respectively. During the three and six months ended September 30, 2012, the average number of options which were antidilutive totaled 1,321,960 for both periods.

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CLIFTON SAVINGS BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3. STOCK REPURCHASE PLANS

On November 28, 2012, the Company’s Board of Directors authorized the Company’s tenth stock repurchase plan for up to 280,000 shares of the Company’s outstanding common stock, representing approximately 3% of the outstanding shares owned by entities other than the Company’s majority stockholder, Clifton MHC, on that date. There were no stock repurchases under this plan or any other repurchase plans made during the six months ended September 30, 2013 and 2012.

Additionally, during the six months ended September 30, 2013 and 2012, 1,283 and 1,202 shares, respectively, were repurchased at an aggregate cost of approximately $16,000, or $12.15 per share, and $12,000, or $10.07 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 held as treasury stock for general corporate use.

4. RETIREMENT PLAN-COMPONENTS OF NET PERIODIC PENSION COST

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


	Three Months Ended September 30,				Six Months Ended September 30,
	2013		2012		2013		2012
	(In Thousands)

Service cost	$	40	$	15	$	80	$	30
Interest cost		35		36		70		72
Amortization of past service cost		10		10		20		20
Amortization of unrecognized net loss		12		6		24		12

Net periodic benefit cost	$	97	$	67	$	194	$	134

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CLIFTON SAVINGS BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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:


	September 30, 2013
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(In Thousands)
Available for sale:
Mortgage-backed securities:
Federal National Mortgage Association	$	3,970	$	211	$	—	$	4,181

Total available for sale securities	$	3,970	$	211	$	—	$	4,181


	March 31, 2013
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(In Thousands)
Available for sale:
Debt securities:
Government-sponsored enterprises	$	5,000	$	4	$	—	$	5,004


Mortgage-backed securities:
Federal Home Loan Mortgage Corporation		4,838		387		—		5,225
Federal National Mortgage Association		4,856		314		—		5,170

		9,694		701		—		10,395

Total available for sale securities	$	14,694	$	705	$	—	$	15,399

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CLIFTON SAVINGS BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5. SECURITIES (CONT’D)


	September 30, 2013
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(In Thousands)
Held to maturity:
Debt securities:
Government-sponsored enterprises	$	89,999	$	106	$	199	$	89,906
Corporate bonds		49,949		1,252		113		51,088

		139,948		1,358		312		140,994

Mortgage-backed securities:
Federal Home Loan Mortgage Corporation		87,266		2,900		1,261		88,905
Federal National Mortgage Association		202,349		4,156		5,653		200,852
Governmental National Mortgage Association		22,279		1,321		122		23,478

		311,894		8,377		7,036		313,235

Total held to maturity securities	$	451,842	$	9,735	$	7,348	$	454,229


	March 31, 2013
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(In Thousands)
Held to maturity:
Debt securities:
Government-sponsored enterprises	$	69,999	$	607	$	11	$	70,595
Corporate bonds		49,917		1,951		1		51,867

		119,916		2,558		12		122,462

Mortgage-backed securities:
Federal Home Loan Mortgage Corporation		106,346		5,459		125		111,680
Federal National Mortgage Association		207,781		7,118		350		214,549
Governmental National Mortgage Association		28,685		1,998		35		30,648

		342,812		14,575		510		356,877

Total held to maturity securities	$	462,728	$	17,133	$	522	$	479,339

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CLIFTON SAVINGS BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5. SECURITIES (CONT’D)

Contractual maturity data for securities are as follows:


	September 30, 2013
	Amortized Cost		Fair Value
	(In Thousands)
Available for sale:
Mortgage-backed securities:
Due after ten years	$	3,970	$	4,181

Total available for sale securities	$	3,970	$	4,181


Held to maturity:
Debt securities:
Due less than one year	$	4,935	$	5,014
Due after one through five years		115,010		116,003
Due after five through ten years		20,003		19,977

		139,948		140,994

Mortgage-backed securities:
Due after one through five years		1,225		1,301
Due after five through ten years		80,247		76,295
Due after ten years		230,422		235,639

		311,894		313,235

Total held to maturity securities	$	451,842	$	454,229

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 and multi-family mortgage loans. The effective lives of those securities are generally shorter than their contractual maturities due to principal amortization and prepayment of the mortgage loans comprised within those securities. Investors in mortgage 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 SAVINGS 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 September 30 and March 31, 2013 were as follows:


	Less Than 12 Months				12 Months or More				Total
September 30, 2013	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
	(In Thousands)
Held to maturity:
Debt securities:
Government-sponsored enterprises	$	49,800	$	199	$	—	$	—	$	49,800	$	199
Corporate bonds		14,890		113		—		—		14,890		113

		64,690		312		—		—		64,690		312

Mortgage-backed securities:
Federal Home Loan Mortgage Corporation		36,156		1,260		28		1		36,184		1,261
Federal National Mortgage Association		106,025		5,571		5,073		82		111,098		5,653
Government National Mortgage Association		1,480		122		—		—		1,480		122

		143,661		6,953		5,101		83		148,762		7,036

Total held to maturity securities	$	208,351	$	7,265	$	5,101	$	83	$	213,452	$	7,348


	Less Than 12 Months				12 Months or More				Total
March 31, 2013	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
	(In Thousands)
Held to maturity:
Debt securities:
Government-sponsored enterprises	$	9,988	$	11	$	—	$	—	$	9,988	$	11
Corporate bonds		—		—		4,999		1		4,999		1

		9,988		11		4,999		1		14,987		12

Mortgage-backed securities:
Federal Home Loan Mortgage Corporation		10,368		124		30		1		10,398		125
Federal National Mortgage Association		42,609		347		187		3		42,796		350
Government National Mortgage Association		1,585		35		—		—		1,585		35

		54,562		506		217		4		54,779		510

Total held to maturity securities	$	64,550	$	517	$	5,216	$	5	$	69,766	$	522

Management does not believe that any of the unrealized losses at September 30, 2013 (ten bonds of Government-sponsored enterprises and three corporate bonds included in debt securities, and thirty FNMA, thirteen FHLMC, 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 SAVINGS BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5. SECURITIES (CONT’D)

During the six months ended September 30, 2013, the proceeds from sales of securities available for sale totaled $4.7 million and the proceeds from sales of securities held to maturity totaled $5.6 million, resulting in gross realized gains of $295,000 and $272,000, respectively, and gross realized losses of $-0- and $1,000, respectively. The remaining principal balance for each of the securities held to maturity sold was less than 15% of the original principal purchased. The proceeds from sales of mortgage-backed securities available for sale totaled $8.8 million during the six months ended September 30, 2012, and the gross realized gains on the sales totaled $647,000. There were no sales of securities held to maturity during the six months ended September 30, 2012.

6. LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES

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


	September 30,			March 31,
	2013			2013
	(In Thousands)
Real estate:
One- to four-family	$	501,269		$	419,240
Multi-family		22,206			14,990
Commercial		19,842			13,671
Construction		522			937

		543,839			448,838
Consumer:
Second mortgage		8,638			6,687
Passbook or certificate		866			838
Equity lines of credit		2,336			2,218
Other loans		60			55

		11,900			9,798

Total Loans		555,739			458,636

Less:
Loans in process		(69	)		(169	)
Net purchase premiums, discounts, and deferred loan costs		1,730			845

		1,661			676

Total Loans, Net	$	557,400		$	459,312

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 historical loss factor is adjusted by qualitative risk factors which include:

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

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CLIFTON SAVINGS BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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.

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 believes it 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.

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CLIFTON SAVINGS BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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 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 deposit 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 considered a low credit risk because of their small balances.

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 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 and six months ended September 30, 2013 and 2012 is as follows:


	One-to-Four Family Real Estate			Multi-Family Real Estate		Commercial Real Estate		Construction Real Estate			Second Mortgage and Equity Lines of Credit			Passbook or Certificate and Other Loans			Unallocated			Total
	(In Thousands)
At June 30, 2013:
Total allowance for loan losses	$	2,163		$	229	$	128	$	4		$	50		$	1		$	65		$	2,640
Charge-offs		(46	)		—		—		—			—			—			—			(46	)
Recoveries		—			—		—		—			—			—			—			—
Provision charged to operations		323			7		37		(1	)		(1	)		(1	)		(8	)		356

At September 30, 2013:
Total allowance for loan losses	$	2,440		$	236	$	165	$	3		$	49		$	—		$	57		$	2,950

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CLIFTON SAVINGS BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


	One-to-Four Family Real Estate			Multi-Family Real Estate		Commercial Real Estate		Construction Real Estate			Second Mortgage and Equity Lines of Credit		Passbook or Certificate and Other Loans			Unallocated		Total
	(In Thousands)
At March 31, 2013:
Total allowance for loan losses	$	2,127		$	187	$	99	$	5		$	38	$	1		$	43	$	2,500
Charge-offs		(91	)		—		—		—			—		—			—		(91	)
Recoveries		5			—		—		—			—		—			—		5
Provision charged to operations		399			49		66		(2	)		11		(1	)		14		536

At September 30, 2013:
Total allowance for loan losses	$	2,440		$	236	$	165	$	3		$	49	$	—		$	57	$	2,950


	One-to-Four Family Real Estate			Multi-Family Real Estate		Commercial Real Estate		Construction Real Estate		Second Mortgage and Equity Lines of Credit			Passbook or Certificate and Other Loans		Unallocated		Total
	(In Thousands)
At June 30, 2012:
Total allowance for loan losses	$	1,842		$	189	$	103	$	5	$	40		$	1	$	10	$	2,190
Charge-offs		(82	)		—		—		—		—			—		—		(82	)
Recoveries		—			—		—		—		—			—		—		—
Provision charged to operations		138			14		3		4		(1	)		—		34		192

At September 30, 2012:
Total allowance for loan losses	$	1,898		$	203	$	106	$	9	$	39		$	1	$	44	$	2,300


	One-to-Four Family Real Estate			Multi-Family Real Estate		Commercial Real Estate		Construction Real Estate		Second Mortgage and Equity Lines of Credit			Passbook or Certificate and Other Loans		Unallocated		Total
	(In Thousands)
At March 31, 2012:
Total allowance for loan losses	$	1,733		$	193	$	105	$	4	$	42		$	1	$	12	$	2,090
Charge-offs		(82	)		—		—		—		—			—		—		(82	)
Recoveries		—			—		—		—		—			—		—		—
Provision charged to operations		247			10		1		5		(3	)		—		32		292

At September 30, 2012:
Total allowance for loan losses	$	1,898		$	203	$	106	$	9	$	39		$	1	$	44	$	2,300

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CLIFTON SAVINGS 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 by loan class at September 30 and March 31, 2013.


September 30, 2013	One-to-Four Family Real Estate		Multi-Family Real Estate		Commercial Real Estate		Construction Real Estate		Second Mortgage and Equity Lines of Credit		Passbook or Certificate and Other Loans		Unallocated		Total
	(In Thousands)
Allowance for loan losses:
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Collectively evaluated for impairment		2,440		236		165		3		49		—		57		2,950

Total	$	2,440	$	236	$	165	$	3	$	49	$	—	$	57	$	2,950

Loans:
Individually evaluated for impairment	$	317	$	—	$	249	$	—	$	—	$	—	$	—	$	566
Collectively evaluated for impairment		500,952		22,206		19,593		522		10,974		926		—		555,173

Total	$	501,269	$	22,206	$	19,842	$	522	$	10,974	$	926	$	—	$	555,739


March 31, 2013	One-to Four Family Real Estate		Multi-Family Real Estate		Commercial Real Estate		Construction Real Estate		Second Mortgage and Equity Lines of Credit		Passbook or Certificate and Other Loans		Unallocated		Total
	(In Thousands)
Allowance for loan losses:
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Collectively evaluated for impairment		2,127		187		99		5		38		1		43		2,500

Total	$	2,127	$	187	$	99	$	5	$	38	$	1	$	43	$	2,500

Loans:
Individually evaluated for impairment	$	528	$	—	$	251	$	—	$	—	$	—	$	—	$	779
Collectively evaluated for impairment		418,712		14,990		13,420		937		8,905		893		—		457,857

Total	$	419,240	$	14,990	$	13,671	$	937	$	8,905	$	893	$	—	$	458,636

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CLIFTON SAVINGS 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 September 30 and March 31, 2013:


September 30, 2013	One-to-four Family Real Estate		Multi-family Real Estate		Commercial Real Estate		Construction Real Estate		Second Mortgage and Equity Lines of Credit		Passbook or certificate and Other Loans		Total Loans
					(In Thousands)
Non-classified:	$	495,098	$	22,206	$	19,593	$	522	$	10,839	$	926		549,184
Classified:
Special mention		1,771		—		—		—		40		—		1,811
Substandard		4,400		—		249		—		95		—		4,744
Doubtful		—		—		—		—		—		—		—
Loss		—		—		—		—		—		—		—

Total loans	$	501,269	$	22,206	$	19,842	$	522	$	10,974	$	926	$	555,739


March 31, 2013	One-to-four Family Real Estate		Multi-family Real Estate		Commercial Real Estate		Construction Real Estate		Second Mortgage and Equity Lines of Credit		Passbook or certificate and Other Loans		Total Loans
					(In Thousands)
Non-classified:	$	412,488	$	14,990	$	13,356	$	937	$	8,748	$	893		451,412
Classified:
Special mention		1,191		—		64		—		9		—		1,264
Substandard		5,561		—		251		—		148		—		5,960
Doubtful		—		—		—		—		—		—		—
Loss		—		—		—		—		—		—		—

Total loans	$	419,240	$	14,990	$	13,671	$	937	$	8,905	$	893	$	458,636

The following table provides information with respect to the Bank’s nonaccrual loans at September 30 and March 31, 2013. Loans are generally placed on nonaccrual status when they become more than 90 days delinquent, or when the collection of principal and/or interest becomes 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 a sustained period of repayment performance (generally six consecutive 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.


	September 30,		March 31,
	2013		2013
	(In Thousands)
Nonaccrual loans:
Real estate loans:
One-to four-family	$	4,400	$	5,496
Commercial		249		251
Consumer and other loans:
Second mortgage		95		148

Total nonaccrual loans	$	4,744	$	5,895

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CLIFTON SAVINGS 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 September 30 and March 31, 2013.


September 30, 2013	30-59 Days Past Due		60-89 Days Past Due		90 Days Or More Past Due		Total Past Due		Current		Total Gross Loans
	(In Thousands)
Real estate loans:
One-to four-family	$	2,963	$	681	$	2,598	$	6,242	$	495,027	$	501,269
Multi-family		—		—		—		—		22,206		22,206
Commercial		—		—		249		249		19,593		19,842
Construction		—		—		—		—		522		522
Consumer and other loans:
Second mortgage and equity lines of credit		19		20		74		113		10,861		10,974
Passbook or certificate and other loans		—		—		—		—		926		926

Total	$	2,982	$	701	$	2,921	$	6,604	$	549,135	$	555,739


March 31, 2013	30-59 Days Past Due		60-89 Days Past Due		90 Days Or More Past Due		Total Past Due		Current		Total Gross Loans
	(In Thousands)
Real estate loans:
One-to four-family	$	2,076	$	300	$	3,693	$	6,069	$	413,171	$	419,240
Multi-family		—		—		—		—		14,990		14,990
Commercial		—		251		—		251		13,420		13,671
Construction		—		—		—		—		937		937
Consumer and other loans:
Second mortgage and equity lines of credit		9		4		39		52		8,853		8,905
Passbook or certificate and other loans		—		96		—		96		797		893

Total	$	2,085	$	651	$	3,732	$	6,468	$	452,168	$	458,636

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CLIFTON SAVINGS BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

There were no loans that are past due greater than 90 days that were accruing as of September 30 and March 31, 2013.

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 separately evaluate them for impairment, unless they are considered troubled debt restructurings. All other loans are evaluated for impairment on an individual basis.

Impaired loans, none of which had a related allowance at or for the three and six months ended September 30, 2013 and 2012, and at or for the year ended March 31, 2013, were as follows:


At or For The Three Months Ended September 30, 2013	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
	(In Thousands)
With no related allowance recorded:
Real estate loans:
One-to four-family	$	317	$	490	$	—	$	317	$	4
Commercial		249		249		—		250		2

Total impaired loans	$	566	$	739	$	—	$	567	$	6


At or For The Three Months Ended September 30, 2012	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
	(In Thousands)
With no related allowance recorded:
Real estate loans:
One-to four-family	$	529	$	721	$	—	$	529	$	8
Commercial		254		254		—		254		3

Total impaired loans	$	783	$	975	$	—	$	783	$	11

- 19 -

CLIFTON SAVINGS BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


At or For The Six Months Ended September 30, 2013	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
	(In Thousands)
With no related allowance recorded:
Real estate loans:
One-to four-family	$	317	$	490	$	—	$	407	$	9
Commercial		249		249		—		250		6

Total impaired loans	$	566	$	739	$	—	$	657	$	15


At or For The Six Months Ended September 30, 2012	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
	(In Thousands)
With no related allowance recorded:
Real estate loans:
One-to four-family	$	529	$	721	$	—	$	647	$	14
Commercial		254		254		—		255		5

Total impaired loans	$	783	$	975	$	—	$	902	$	19


At or For The Year Ended March 31, 2013	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
	(In Thousands)
With no related allowance recorded:
Real estate loans:
One-to four-family	$	528	$	718	$	—	$	593	$	19
Commercial		251		251		—		253		12

Total impaired loans	$	779	$	969	$	—	$	846	$	31

The recorded investment in loans modified in a troubled debt restructuring totaled $317,000 and $528,000, respectively, at September 30 and March 31, 2013, of which $8,000 and $-0-, respectively, were 60-89 days past due, and $-0- and $217,000, respectively, of which were 90 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 September 30 and March 31, 2013. Loans that were modified in a troubled debt restructuring represent concessions made to borrowers experiencing financial difficulties. The Company works with these borrowers to modify existing loan terms usually by extending maturities or reducing interest rates. The Company 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. During the three and six months ended September 30, 2013 and 2012, there were no new troubled debt restructurings and there were no defaults on troubled debt restructurings that occurred within twelve months of restructuring.

- 20 -

CLIFTON SAVINGS BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7. FAIR VALUE

The 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 prices 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.

For assets measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy used at September 30 and March 31, 2013 are as follows:


Description	Carrying Value		(Level 1) Quoted Prices in Active Markets for Identical Assets		(Level 2) Significant Other Observable Inputs		(Level 3) Significant Unobservable Inputs
	(In Thousands)
September 30, 2013:
Securities available for sale:
Mortgage-backed securities:
Federal National Mortgage Association	$	4,181	$	—	$	4,181	$	—

Total securities available for sale	$	4,181	$	—	$	4,181	$	—

March 31, 2013:
Securities available for sale:
Mortgage-backed securities:
Federal Home Loan Mortgage Corporation	$	5,225	$	—	$	5,225	$	—
Federal National Mortgage Association		5,170		—		5,170		—
Debt securities:
Government-sponsored enterprises		5,004		—		5,004		—

Total securities available for sale	$	15,399	$	—	$	15,399	$	—

- 21 -

CLIFTON SAVINGS BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7. FAIR VALUE (CONT’D)

For assets measured at fair value on a non-recurring basis, the fair value measurements by level within the fair value hierarchy used at September 30, 2013 are as follow:


Description	Carrying Value		(Level 1) Quoted Prices in Active Markets for Identical Assets		(Level 2) Significant Other Observable Inputs		(Level 3) Significant Unobservable Inputs
	(In Thousands)
September 30, 2013
Real estate owned	$	204	$	—	$	—	$	204

There were no assets measured at fair value on a non-recurring basis at March 31, 2013. There were no liabilities measured at fair value on a recurring or non-recurring basis at September 30 or March 31, 2013.

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.


September 30, 2013	Fair Value Estimate		Valuation Techniques	Unobservable Input	Range (Weighted Average)

Real Estate Owned	$	204	Appraisal value (1)	Liquidation expenses (2)	7% (7%)

(1)	Fair value is based upon the current value based on an appraisal by an independent licensed appraiser.

(2)	Includes estimated liquidation expenses.

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 September 30 and March 31, 2013.

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.

- 22 -

CLIFTON SAVINGS BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7. FAIR VALUE (CONT’D)

Securities

The fair value of all securities, whether classified as available for sale (carried at fair value) or held to maturity (carried at amortized 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 prices received from an independent pricing service. The Company’s pricing service 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 independent 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 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 fair values since they are based on either unobservable inputs that are significant to the discounted cash flow measurement or the fair value of the loan’s collateral.

Real Estate Owned

Real estate owned, acquired through foreclosure or deed-in-lieu of foreclosure, is initially recorded at fair value, less estimated selling costs when acquired, establishing a new cost basis. Adjustments to real estate owned are measured at fair value less estimated selling costs. Fair value is estimated through current appraisals by an independent licensed appraiser and, as such, foreclosed real estate properties are classified as Level 3.

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.

- 23 -

CLIFTON SAVINGS BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7. FAIR VALUE (CONT’D)

As of September 30 and March 31, 2013, the fair value of the commitments to extend credit were not considered to be material.

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


September 30, 2013	Carrying Value		Estimated Fair Value		(Level 1) Quoted Prices in Active Markets for Identical Assets		(Level 2) Significant Other Observable Inputs		(Level 3) Significant Unobservable Inputs
	(In Thousands)
Financial assets:
Cash and cash equivalents	$	14,812	$	14,812	$	14,812	$	—	$	—
Securities available for sale		4,181		4,181		—		4,181		—
Securities held to maturity		451,842		454,229		—		454,229		—
Net loans receivable		554,450		545,001		—		—		545,001
Federal Home Loan Bank of New York stock		5,639		5,639		—		5,639		—
Interest receivable		3,266		3,266		—		3,266		—
Financial liabilities:
Deposits		791,387		796,278		—		796,278		—
FHLB advances		92,500		97,694		—		97,694		—
Interest payable		216		216		—		216		—


March 31, 2013	Carrying Value		Estimated Fair Value		(Level 1) Quoted Prices in Active Markets for Identical Assets		(Level 2) Significant Other Observable Inputs		(Level 3) Significant Unobservable Inputs
	(In Thousands)
Financial assets:
Cash and cash equivalents	$	25,896	$	25,896	$	25,896	$	—	$	—
Securities available for sale		15,399		15,399		—		15,399		—
Securities held to maturity		462,728		479,339		—		479,339		—
Net loans receivable		456,812		485,249		—		—		485,249
Federal Home Loan Bank of New York stock		3,897		3,897		—		3,897		—
Interest receivable		3,177		3,177		—		3,177		—
Financial liabilities:
Deposits		763,692		770,479		—		770,479		—
FHLB advances		52,500		59,786		—		59,786		—
Interest payable		175		175		—		175		—

- 24 -

CLIFTON SAVINGS BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8. RECENT ACCOUNTING PRONOUNCEMENTS

On June 7, 2013, the FASB issued ASU 2013-08, “Financial Services – Investment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements.” The amendments in this Update modify the guidance for determining whether an entity is an investment company, update the measurement requirements for noncontrolling interests in other investment companies and require additional disclosures for investment companies under US GAAP. The amendments in the Update develop a two-tiered approach for the assessment of whether an entity is an investment company which requires an entity to possess certain fundamental characteristics while allowing judgment in assessing other typical characteristics. The amendments in this Update also revise the measurement guidance in Topic 946 (Financial Services-Investment Companies) such that investment companies must measure noncontrolling ownership interests in other investment companies at fair value, rather than applying the equity method of accounting to such interests. This standard, effective after December 15, 2013, does not apply to the Company and will not have an impact on the Company’s consolidated financial statements.

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CLIFTON SAVINGS 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, 2013 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 direct result of the prevailing 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 42.1% and 51.2%, respectively, of total assets at September 30, 2013, as compared to 47.1% and 45.0%, respectively, of total assets at March 31, 2013. Cash and cash equivalents decreased to 1.4% of total assets at September 30, 2013, as compared to 2.5% at March 31, 2013. The Company’s mortgage-backed securities portfolio at September 30, 2013 consists solely of U.S. government-sponsored or guaranteed enterprises and the investment portfolio consists of approximately 64% U.S. government-sponsored or guaranteed enterprises and 36% corporate bonds.

Interest-bearing liabilities consist of deposits and borrowings from the Federal Home Loan Bank of New York (the “FHLB”). Interest bearing deposits increased $24.8 million, or 3.3%, and non-interest bearing deposits increased $2.9 million, or 21.6%, between March 31, 2013 and September 30, 2013 and borrowed funds increased $40.0 million, or 76.2%, during the period. The increase in interest bearing deposits was mainly due to the promotional rates offered on a bonus passbook account at the Bank’s two newest branches. The balance in borrowed funds was $92.5 million at September 30, 2013 as compared to $52.5 million at March 31, 2013. During the six months ended September 30, 2013, we incurred $15.0 million in short-term borrowings with a rate of 0.48% and $25.0 million in long-term borrowings with a rate of 0.65% and no borrowings were repaid. Borrowings were needed to fund increased loan origination and purchase volumes.

Net interest income decreased $80,000, or 1.4%, during the three months ended September 30, 2013, when compared with the same 2012 period. This decrease in net interest income was due to a $630,000 decrease in total interest income partially offset by a decrease in total interest expense of $550,000. Average interest-earning assets increased $6.0 million, or 0.6%, during the three months ended September 30, 2013, while average interest-bearing liabilities increased $12.7 million, or 1.5%, when compared with the same 2012 period. The $6.7 million decrease in average net interest-earning assets was mainly attributable to decreases of $38.3 million in mortgage-backed securities, $4.2 million in investment securities, and $21.0 million in other interest-earning assets, coupled with an increase $15.2 million in borrowings, partially offset by an increase of $69.5 million in loans, and a decrease of $2.5 million in interest bearing deposits.

- 26 -

CLIFTON SAVINGS BANCORP, INC. AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview of Financial Condition and Results of Operations (Cont’d)

The net interest rate spread remained unchanged at 2.15% during the three months ended September 30, 2013 and 2012. This was due to a decrease of 28 basis points in the cost of interest-bearing liabilities which was offset by a decrease of 28 basis points in the return on interest-earning assets. 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 September 30, 2013, non-interest income decreased $75,000, or 18.9%, as compared to the comparable period in 2012. The decrease was mainly due to the 2012 period including a gain on sales of securities of $647,000 partially offset by a loss on the extinguishment of debt of $527,000 resulting from a deleveraging strategy implemented in July 2012. No such transactions occurred during the three months ended September 30, 2013. Provision for loan losses increased $164,000, or 85.4%, for the three months ended September 30, 2013, and non-interest expense increased $242,000, or 7.2%, between periods.

Changes in Financial Condition

The Company’s assets totaled $1.08 billion at September 30, 2013, which represents an increase of $66.8 million, or 6.6%, as compared with $1.02 billion at March 31, 2013.

Cash and cash equivalents decreased $11.1 million, or 42.8%, to $14.8 million at September 30, 2013 as compared to $25.9 million at March 31, 2013 as funds were redeployed into higher yielding assets.

Securities available for sale decreased $11.2 million, or 72.9%, to $4.2 million at September 30, 2013 from $15.4 million at March 31, 2013. The decrease during the six months ended September 30, 2013 resulted primarily from calls and repayments totaling $6.4 million, proceeds from sales totaling $4.7 million and a decrease of $494,000 in the unrealized gain on the portfolio.

Securities held to maturity decreased $10.9 million, or 2.4%, to $451.8 million at September 30, 2013 from $462.7 million at March 31, 2013. The decrease during the six months ended September 30, 2013 resulted primarily from maturities, calls and repayments totaling $56.7 million, and proceeds from sale of securities totaling $5.6 million, partially offset by purchases of securities totaling $54.3 million. Certain mortgage-backed securities which had principal balances remaining of less than 15% of the principal balance purchased were sold during the 2013 period.

Net loans increased $97.6 million, or 21.4%, to $554.5 million at September 30, 2013 when compared with $456.8 million at March 31, 2013. The increase during the six months ended September 30, 2013 resulted primarily from origination volume and purchases of loans exceeding repayment levels. The largest increase in the loan portfolio was in one- to four-family real estate loans, which increased $82.0 million, or 19.6%. During 2013, the Bank increased its efforts to increase its one-to four-family residential loan originations. In addition, the Bank continues to supplement its internal origination volume with purchases of loans from various sources. In late 2012, the Bank established a commercial loan department to expand its multi-family and commercial lending activities. Commercial and multi-family loans increased $13.4 million, or 46.7%, during the six months ended September 30, 2013.

Total liabilities increased $65.5 million, or 7.9%, to $894.3 million at September 30, 2013 from $828.8 million at March 31, 2013. Deposits at September 30, 2013 increased $27.7 million, or 3.6%, to $791.4 million when compared with $763.7 million at March 31, 2013 mainly due to the promotional rates offered at the Bank’s two newest branches. Borrowed funds increased $40.0 million, or 76.2%, to $92.5 million at September 30, 2013, as compared with $52.5 million at March 31, 2013. At September 30, 2013, the remaining borrowings of $92.5 million had a weighted average interest rate of 2.27%. Borrowings increased during the six-month period in order to fund the Bank’s increased lending efforts.

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CLIFTON SAVINGS BANCORP, INC. AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Changes in Financial Condition (Cont’d)

Stockholders’ equity totaled $188.5 million and $187.3 million at September 30, 2013 and March 31, 2013, respectively. The increase of $1.19 million, or 0.6%, for the six months ended September 30, 2013, resulted primarily from net income of $3.15 million, employee stock ownership shares committed to be released of $446,000, $897,000 for the exercise of stock options and related tax benefits, partially offset by a net decrease in unrealized gains on the available for sale securities portfolio, net of income taxes, of $293,000 and cash dividends declared of $3.1 million.

Comparison of Operating Results for the Three Months Ended September 30, 2013 and 2012

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.

- 28 -

CLIFTON SAVINGS 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 September 30, 2013 and 2012 (Cont’d.)


	Three Months Ended September 30,
	2013								2012
	Average Balance			Interest and Dividends		Yield/ Cost			Average Balance			Interest and Dividends		Yield/ Cost
	(Dollars in thousands)
Assets:
Interest-earning assets:
Loans receivable	$	521,682		$	5,150		3.95	%	$	452,146		$	4,939		4.37	%
Mortgage-backed securities		319,670			2,546		3.19	%		357,920			3,194		3.57	%
Investment securities		136,191			573		1.68	%		140,384			746		2.13	%
Other interest-earning assets		19,459			41		0.84	%		40,507			61		0.60	%

Total interest-earning assets		997,002			8,310		3.33	%		990,957			8,940		3.61	%


Noninterest-earning assets		70,792								63,644

Total assets	$	1,067,794							$	1,054,601


Liabilities and stockholders’ equity:
Interest-bearing liabilities:
Demand accounts	$	58,127			20		0.14	%	$	57,060			27		0.19	%
Savings and Club accounts		154,660			112		0.29	%		123,611			77		0.25	%
Certificates of deposit		562,805			1,868		1.33	%		597,420			2,369		1.59	%

Total interest-bearing deposits		775,592			2,000		1.03	%		778,091			2,473		1.27	%
Borrowed funds		75,000			514		2.74	%		59,825			591		3.95	%

Total interest-bearing liabilities		850,592			2,514		1.18	%		837,916			3,064		1.46	%


Noninterest-bearing liabilities:
Noninterest-bearing deposits		15,219								9,324
Other noninterest-bearing liabilities		13,988								20,499

Total noninterest-bearing liabilities		29,207								29,823

Total liabilities		879,799								867,739
Stockholders’ equity		187,995								186,862

Total liabilities and stockholders’ equity	$	1,067,794							$	1,054,601


Net interest income				$	5,796							$	5,876

Interest rate spread							2.15	%							2.15	%
Net interest margin							2.33	%							2.37	%
Average interest-earning assets to average interest-bearing liabilities		1.17	x							1.18	x

Net income decreased $343,000, or 19.6%, to $1.41 million for the three months ended September 30, 2013 compared with $1.75 million for the same 2012 period. The decrease in net income during the 2013 period resulted primarily from an increase of $242,000, or 7.2%, in noninterest expenses and an increase of $164,000, or 85.4%, in the provision for loan losses, coupled with a decrease of $80,000, or 1.4%, in net interest income, and a decrease of $75,000, or 18.9%, in noninterest income, partially offset by a decrease of $218,000, or 22.9%, in income taxes.

- 29 -

CLIFTON SAVINGS 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 September 30, 2013 and 2012 (Cont’d.)

Interest income on loans increased by $211,000, or 4.3%, to $5.15 million during the three months ended September 30, 2013, when compared with $4.94 million for the same 2012 period. The increase during the 2013 period mainly resulted from an increase of $69.5 million, or 15.4%, in the average balance when compared to the same period in 2012, partially offset by a decrease of 42 basis points on the yield earned on the loan portfolio to 3.95% from 4.37%. Interest income on mortgage-backed securities decreased $648,000, or 20.3%, to $2.55 million during the three months ended September 30, 2013, when compared with $3.19 million for the same 2012 period. The decrease during the 2013 period resulted from a decrease of 38 basis points in the yield earned on mortgage-backed securities to 3.19% from 3.57%, coupled with a decrease of $38.3 million, or 10.7%, in the average balance of mortgage-backed securities outstanding. Interest earned on investment securities decreased by $173,000, or 23.2%, to $573,000 during the three months ended September 30, 2013, when compared to $746,000 during the same 2012 period, due to a decrease in the average balance of $4.2 million, or 3.0%, coupled with a 45 basis point decrease in yield to 1.68% from 2.13%. Interest earned on other interest-earning assets decreased by $20,000, or 32.8%, to $41,000 during the three months ended September 30, 2013, when compared to $61,000 during the same 2012 period primarily due to a decrease of $21.0 million, or 52.0%, in the average balance, partially offset by a 24 basis point increase in the yield to 0.84% from 0.60%. The decrease in balances and corresponding decreases in income on mortgage-backed securities, investment securities and other interest-earning assets resulted from most funds being redeployed into higher yielding loans. The decrease in the yield on most interest-earning assets was the result of overall lower market interest rates.

Interest expense on deposits decreased $473,000, or 19.1%, to $2.00 million during the three months ended September 30, 2013, when compared to $2.47 million during the same 2012 period. The decrease was primarily attributable to a decrease of 24 basis points in the cost of interest-bearing deposits to 1.03% from 1.27%, coupled with a decrease of $2.5 million, or 0.3%, in the average balance of interest-bearing deposits. The decrease in the average cost of deposits reflected lower market interest rates. Interest expense on borrowed money decreased $77,000, or 13.0%, to $514,000 during the three months ended September 30, 2013 when compared with $591,000 during the same 2012 period. The decrease was primarily attributable to a decrease of 121 basis points in the cost of borrowings to 2.74% from 3.95%, partially offset by an increase of $15.2 million, or 25.4%, in the average balance of borrowings. The $12.7 million increase in average interest-bearing liabilities was due to an increase of $15.2 million in borrowings, partially offset by a decrease of $2.5 million in interest-bearing deposits. Net interest income decreased $80,000, or 1.4%, during the three months ended September 30, 2013, to $5.80 million when compared to $5.88 million for the same 2012 period. The net interest rate spread remained unchanged at 2.15% for the 2013 and 2012 periods.

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CLIFTON SAVINGS 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 September 30, 2013 and 2012 (Cont’d.)

The provision for loan losses increased $164,000, or 85.4%, to $356,000 for the three months ended September 30, 2013 as compared to $192,000 for the same period in 2012. The allowance for loan losses is based on management’s qualitative analysis which includes an evaluation of economic and other factors. 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 September 30, 2013 and 2012, the Bank’s non-accrual loans totaled $4.7 million and $4.2 million, respectively, representing 0.85% and 0.91%, respectively, of total gross loans. At March 31, 2013, nonaccrual loans totaled $5.9 million, or 1.29% of total gross loans. During the three months ended September 30, 2013, the Bank recorded a $46,000 charge off on a one-to four-family loan. At September 30, 2013, non-accrual loans consisted of twenty-six loans secured by one- to four-family residential real estate, one loan secured by commercial real estate, and four second mortgage loans secured by one- to four-family residential real estate, while at September 30, 2012, non-accrual loans consisted of twenty-three loans secured by one- to four-family residential real estate, three second mortgage loans secured by one- to four-family residential real estate, and one second mortgage loan secured by commercial real estate. Included in non-accrual loans at September 30, 2013 are fourteen loans totaling $1.8 million that are current or less than ninety days delinquent. At September 30, 2012, there were seven loans totaling $787,000 that were current or less than ninety days delinquent included in non-accrual loans. At March 31, 2013, there were thirteen loans totaling $2.2 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 $566,000, $779,000 and $783,000 at September 30, 2013, March 31, 2013 and September 30, 2012, respectively. The allowance for loan losses amounted to $2.95 million, $2.50 million, and $2.30 million, respectively, at September 30, 2013, March 31, 2013, and September 30, 2012, representing 0.53%, 0.55%, and 0.50% of total gross loans at September 30, 2013, March 31, 2013 and September 30, 2012, respectively.

Non-interest income decreased $75,000, or 18.9%, to $321,000 for the three months ended September 30, 2013 compared to $396,000 for the three months ended September 30, 2012. The decrease was primarily due to the 2012 period including a $647,000 gain on sale of securities partially offset by a loss on the extinguishment of debt of $527,000 resulting from a deleveraging strategy implemented in July 2012. No such transactions occurred during the three months ended September 30, 2013.

Non-interest expense increased $242,000, or 7.2%, to $3.62 million for the three months ended September 30, 2013 as compared to $3.38 million for the three months ended September 30, 2012. The increase was primarily the result of increases of $190,000, or 10.3%, in salaries and employee benefits, $29,000, or 15.9%, in directors’ compensation, and $30,000, or 8.2%, in occupancy expense of premises. The increase in salaries and employee benefits was mainly due to an increase in costs associated with the hiring of two commercial loan officers in December 2012 and April 2013, along with normal annual salary increases. The increase in directors’ compensation was due to an increase in directors’ fees in 2013, and the resulting increase in the directors’ retirement plan expense. Occupancy expense of premises increased due to normal annual increases as well as the additional expense associated with the Bank’s loan department being moved to a new leased location in September 2012.

Income taxes totaled $732,000 and $950,000 during the three months ended September 30, 2013 and 2012, respectively. The decrease of $218,000, or 22.9%, during the 2013 period resulted from a decrease in pre-tax income, coupled with a decrease in the overall effective income tax rate which was 34.3% in the 2013 period compared with 35.2% for the 2012 period.

- 31 -

CLIFTON SAVINGS BANCORP, INC. AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Comparison of Operating Results for the Six Months Ended September 30, 2013 and 2012

- 32 -

CLIFTON SAVINGS BANCORP, INC. AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Comparison of Operating Results for the Six Months Ended September 30, 2013 and 2012 (Cont’d.)


	Six Months Ended September 30,
	2013								2012
	Average Balance			Interest and Dividends		Yield/ Cost			Average Balance			Interest and Dividends		Yield/ Cost
	(Dollars in thousands)
Assets:
Interest-earning assets:
Loans receivable	$	497,604		$	9,962		4.00	%	$	446,300		$	9,878		4.43	%
Mortgage-backed securities		330,413			5,330		3.23	%		358,381			6,662		3.72	%
Investment securities		132,076			1,123		1.70	%		170,149			1,865		2.19	%
Other interest-earning assets		18,528			82		0.89	%		37,219			125		0.67	%

Total interest-earning assets		978,621			16,497		3.37	%		1,012,049			18,530		3.66	%


Noninterest-earning assets		71,294								60,608

Total assets	$	1,049,915							$	1,072,657


Liabilities and stockholders’ equity:
Interest-bearing liabilities:
Demand accounts	$	57,865			43		0.15	%	$	57,065			65		0.23	%
Savings and Club accounts		146,688			203		0.28	%		123,454			185		0.30	%
Certificates of deposit		564,993			3,796		1.34	%		610,272			4,920		1.61	%

Total deposits		769,546			4,042		1.05	%		790,791			5,170		1.31	%
Advances from the FHLB		65,357			986		3.02	%		67,731			1,330		3.93	%

Total interest-bearing liabilities		834,903			5,028		1.20	%		858,522			6,500		1.51	%


Noninterest-bearing liabilities:
Noninterest-bearing deposits		14,415								8,792
Other noninterest-bearing liabilities		12,701								18,571

Total noninterest-bearing liabilities		27,116								27,363

Total liabilities		862,019								885,885
Stockholders’ equity		187,896								186,772

Total liabilities and stockholders’ equity	$	1,049,915							$	1,072,657


Net interest income				$	11,469							$	12,030

Interest rate spread							2.17	%							2.15	%
Net interest margin							2.34	%							2.38	%
Average interest-earning assets to average interest-bearing liabilities		1.17	x							1.18	x

Net income decreased $415,000, or 11.6%, to $3.15 million for the six months ended September 30, 2013 compared with $3.57 million for the same 2012 period. The decrease in net income during the 2013 period resulted primarily from a decrease in net interest income of $561,000, or 4.7%, an increase of $494,000, or 7.3%, in noninterest expense and an increase in provision for loan losses of $244,000, or 83.6%, partially offset by an increase of $637,000, or 112.4%, in noninterest income and a decrease of $247,000, or 12.8%, in income taxes.

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CLIFTON SAVINGS BANCORP, INC. AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Comparison of Operating Results for the Six Months Ended September 30, 2013 and 2012 (Cont’d.)

Interest income on loans increased by $84,000, or 0.9%, to $9.96 million during the six months ended September 30, 2013, when compared with $9.88 million for the same 2012 period. The increase during the 2013 period mainly resulted from an increase of $51.3 million, or 11.5%, in the average balance of loans when compared to the same period in 2012, partially offset by a decrease of 43 basis points on the yield earned on the loan portfolio to 4.00% from 4.43%. Interest income on mortgage-backed securities decreased $1.3 million, or 20.0%, to $5.33 million during the six months ended September 30, 2013, when compared with $6.66 million for the same 2012 period. The decrease during the 2013 period resulted from a decrease of 49 basis points in the yield earned on mortgage-backed securities to 3.23% from 3.72%, coupled with a decrease of $28.0 million, or 7.8% in the average balance of mortgage-backed securities outstanding. Interest earned on investment securities decreased by $742,000, or 39.8%, to $1.12 million during the six months ended September 30, 2013, when compared to $1.87 million during the same 2012 period, due to a decrease in the average balance of $38.1 million, or 22.4%, and a decrease of 49 basis points in yield to 1.70% from 2.19%. Interest earned on other interest-earning assets decreased by $43,000, or 34.4% to $82,000 during the six months ended September 30, 2013, when compared to $125,000 during the same 2012 period primarily due to a decrease of $18.7 million, or 50.2%, in the average balance, partially offset by an increase of 22 basis points in yield to 0.89% from 0.67%. The decrease in balances and corresponding decreases in income on mortgage-backed securities, investment securities and other interest-earning assets resulted from most funds being redeployed into higher yielding loans. The decrease in the yield on most interest-earning assets was the result of overall lower market interest rates.

Interest expense on deposits decreased $1.13 million, or 21.8%, to $4.04 million during the six months ended September 30, 2013, when compared to $5.17 million during the same 2012 period. The decrease was primarily attributable to a decrease of 26 basis points in the cost of interest-bearing deposits to 1.05% from 1.31%, coupled with a decrease of $21.2 million, or 2.7% in the average balance of interest-bearing deposits. The decrease in the average cost of deposits reflected lower market interest rates. The decrease in the balance was the result of the Bank’s continued strategy of pricing deposits to allow for controlled outflow of non-core deposits to maintain the net interest margin and spread in the current economic environment. Interest expense on borrowed money decreased approximately $344,000, or 25.9%, to $986,000 during the six months ended September 30, 2013 when compared with $1.33 million during the same 2012 period. The decrease was primarily attributable to a decrease of $2.4 million, or 3.5%, in the average balance of borrowings, coupled with a decrease of 91 basis points in the cost of borrowings to 3.02% from 3.93%. Net interest income decreased $561,000, or 4.7% during the six months ended September 30, 2013, to $11.47 million when compared to $12.03 million for the same 2012 period. The $23.6 million decrease in average interest-bearing liabilities was primarily due to a decrease of $21.2 million in interest-bearing deposits and a decrease of $2.4 million in borrowings. The net interest rate spread increased 2 basis points due to a 31 basis point decrease in the average cost of interest-bearing liabilities, partially offset by a decrease of 29 basis points in the average yield earned on interest-earning assets.

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CLIFTON SAVINGS BANCORP, INC. AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Comparison of Operating Results for the Six Months Ended September 30, 2013 and 2012 (Cont’d.)

The provision for loan losses increased $244,000, or 83.6%, to $536,000 during the six months ended September 30, 2013 as compared to $292,000 for the same period in 2012. The allowance for loan losses is based on management’s qualitative analysis which includes an evaluation of economic and other factors. 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. See “Comparison of Operating Results for the Three Months Ended September 30, 2013 and 2012” for a discussion of non-performing and impaired loans as of September 30, 2013, March 31, 2013 and September 30, 2013.

Non-interest income increased $637,000, or 112.4%, to $1.2 million for the six months ended September 30, 2013, as compared to $567,000 for the comparable period in 2012, mainly due to the 2012 period including a $527,000 loss on debt extinguishment and a $99,000 write-down of land held for sale. Gain on sales of securities totaled $566,000 and $647,000, respectively, for the six months ended September 30, 2013 and 2012. The gains on the sales of securities in the 2013 period resulted primarily from the sale of certain mortgage-backed securities which had principal balances remaining of less than 15% of the principal balance purchased. In the 2012 period, advances totaling $16.2 million which had a weighted average rate of 3.67% were extinguished. This was funded by the sale of $8.2 million of mortgage-backed securities and by cash and resulted in the recording of a $527,000 loss. No such transactions occurred during the six months ended September 30, 2013. The write-down of land held for sale was on a property which was sold in July 2012. There were no such write-downs for the six months ended September 30, 2013.

Non-interest expense increased $494,000, or 7.3%, to $7.3 million for the six months ended September 30, 2013 as compared to $6.8 million for the six months ended September 30, 2012. The increase was primarily the result of increases of $377,000, or 10.2%, in salaries and employee benefits, $68,000, or 18.3%, in directors’ compensation, $38,000, or 33.6%, in advertising expense, $58,000, or 8.1%, in occupancy expense of premises and $52,000, or 9.3%, in equipment expense, partially offset by a $67,000, or 6.8 %, decrease in other expense. The increase in salaries and employee benefits was mainly due to an increase in costs associated with the hiring of two commercial loan officers in December 2012 and April 2013, along with normal annual salary increases. The increase in directors’ compensation was due to an increase in directors’ fees in 2013, and the resulting increase in the directors’ retirement plan expense. The increase in advertising was mostly due to a campaign associated with increasing deposits at one of the Bank’s branches. Occupancy expense of premises and equipment expense increased due to normal annual increases as well as the additional expense associated with the Bank’s loan department being moved to a new leased location in September 2012. Other expense decreased mainly because of a decrease of $46,000 in real estate owned operating expense.

Income taxes totaled $1.69 million and $1.93 million during the six months ended September 30, 2013 and 2012, respectively. The decrease of $247,000, or 12.8%, during the 2013 period resulted from lower pre-tax income, coupled with an overall decrease in the effective income tax rate which was 34.9% in the 2013 period compared with 35.2% for 2012.

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 $19.0 million, or 1.8% of total assets at September 30, 2013, as compared to $41.3 million, or 4.1% of total assets at March 31, 2013.

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CLIFTON SAVINGS BANCORP, INC. AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Liquidity and Capital Resources (Cont’d)

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 on a stand-alone basis is responsible for paying any dividends declared to its shareholders. The Company also may repurchase shares of its common stock. The Company’s 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 OCC but with prior notice to the OCC, cannot exceed net income for that year to date plus retained net income (as defined) for the preceding two calendar years. On a stand-alone basis, at September 30, 2013, the Company had liquid assets of $17.0 million.

Cash was generated by operating and financing activities and used by investing activities during the six months ended September 30, 2013. The primary sources of cash were net income, an increase in deposits, an increase in borrowings, and proceeds from principal repayments, maturities, calls and sales of securities. The primary uses of funds were purchases of securities and loans and net loan originations. Dividends declared and paid totaled $3.1 million during the six months ended September 30, 2013.

The Company’s primary investing activities are the origination and purchases of loans and the purchases of securities. Net loans amounted to $554.5 million and $456.8 million at September 30, 2013 and March 31, 2013, respectively. Securities, including available for sale and held to maturity issues, totaled $456.0 million and $478.1 million at September 30, 2013 and March 31, 2013, 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, the Bank can borrow overnight funds from 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 September 30, 2013, advances from the FHLB amounted to $92.5 million at a weighted average rate of 2.27%. Additionally, the Bank has the ability to borrow funds of up to an aggregate of $88.0 million at two financial institutions under established unsecured overnight lines of credit at a daily adjustable rate.

The Bank anticipates that it will have sufficient funds available to meet its current commitments. At September 30, 2013, the Bank had outstanding commitments to originate loans totaling approximately $4.1 million for fixed-rate one- to four-family mortgage loans with interest rates ranging from 2.75% to 4.5%, and $4.2 million for adjustable rate loans with initial rates ranging from 3.00% to 3.75%.

In addition, at September 30, 2013, the Bank had outstanding commitments to originate adjustable rate commercial real estate loans totaling approximately $7.3 million with initial rates ranging from 4.00% to 4.50% and a $148,000 fixed rate commercial real estate loan with a rate of 4.5%.

At September 30, 2013 the Bank also had commitments outstanding to purchase $10.9 million in adjustable interest rate one- to four-family mortgage loans with initial interest rates ranging from 2.75% to 3.75%, and $4.7 million in fixed rate one- to four-family mortgage loans with interest rates ranging from 3.00% to 4.75%.

At September 30, 2013, undisbursed funds from customer approved unused lines of credit under a homeowners’ equity lending program amounted to approximately $5.0 million. Unless they are specifically cancelled by notice from the Bank, these funds represent firm commitments available to the respective borrowers on demand. The Bank also had commitments for $162,000 for fixed rate home equity loans with rates ranging from 3.75% to 4.25%.

- 36 -

CLIFTON SAVINGS BANCORP, INC. AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Liquidity and Capital Resources (Cont’d)

Certificates of deposit due within one year at September 30, 2013, totaled $318.7 million, or 57.2% of our 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. There was one FHLB advance totaling $15.0 million due within one year at September 30, 2013.

Under applicable federal regulations, three separate measurements of capital adequacy (the “Capital Rule”) are required. The Capital Rule requires each savings institution to maintain tangible capital equal of at least 1.5% and core capital equal of at least 4.0% of its adjusted total assets. The Capital Rule further requires each savings institution to maintain total capital equal of at least 8.0% of its risk-weighted assets.

The following table sets forth the Bank’s capital position at September 30 and March 31, 2013, as compared to the minimum regulatory capital requirements:


						Regulatory Capital Requirements
	Actual					Minimum Capital Adequacy					For Classification as Well-Capitalized
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars In Thousands)
As of September 30, 2013:
Total risk-based capital (to risk-weighted assets)	$	168,275		36.29	%	$	37,091		8.00	%	$	46,364		10.00	%
Tier 1 capital (to risk-weighted assets)		165,325		35.66			18,546		4.00			27,819		6.00
Core (tier 1) capital (to adjusted total assets)		165,325		15.29			43,262		4.00			54,078		5.00
Tier 1 risk-based capital (to adjusted tangible assets)		165,325		15.29			16,223		1.50			—		—
As of March 31, 2013:
Total risk-based capital (to risk-weighted assets)	$	168,986		40.52	%	$	33,366		8.00	%	$	41,708		10.00	%
Tier 1 capital (to risk-weighted assets)		166,486		39.92			16,683		4.00			25,025		6.00
Core (tier 1) capital (to adjusted total assets)		166,486		16.41			40,591		4.00			50,738		5.00
Tier 1 risk-based capital (to adjusted tangible assets)		166,486		16.41			15,222		1.50			—		—

Savings and loan holding companies are not currently subject to specific regulatory capital requirements. The Dodd-Frank Act, however, required the Federal Reserve Board to promulgate consolidated capital requirements for depository institution holding companies, including savings and loan holding companies, that are no less stringent, both quantitatively and in terms of components of capital, than those applicable to institutions themselves. In July 2013, the OCC, the Federal Reserve Board and the other federal bank regulatory agencies issued a final rule, which will be effective for Clifton Savings Bancorp and Clifton Savings Bank on January 1, 2015, that will revise their leverage and risk-based capital requirements and the method for calculating risk-weighted assets to make them consistent with agreements that were reached by the Basel Committee on Banking Supervision and certain provisions of the Dodd-Frank Act. Among other things, the rule establishes for Clifton Savings Bancorp and Clifton Savings Bank a new common equity Tier 1 minimum capital requirement (4.5% of risk-weighted assets), increases the minimum Tier 1 capital to risk based assets requirement (from 4% to 6% of risk-weighted assets) and assigns a higher risk weight (150%) to exposures that are more than 90 days

- 37 -

CLIFTON SAVINGS BANCORP, INC. AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Liquidity and Capital Resources (Cont’d)

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 final rule also requires unrealized gains and losses on certain “available-for-sale” securities holdings to be included for purposes of calculating regulatory capital unless a one-time opt-out is exercised. Additional constraints will also be imposed on the inclusion in regulatory capital of mortgage-servicing assets, defined tax assets and minority interests. The rule limits a banking organization’s capital distributions and certain discretionary bonus payments if the banking organization does not hold a “capital conservation buffer” consisting of 2.5% of common equity Tier 1 capital to risk-weighted assets in addition to the amount necessary to meet its minimum risk-based capital requirements. The final rule becomes effective for the Bank on January 1, 2015. The capital conservation buffer requirement will be phased in beginning January 1, 2016 and ending January 1, 2019, when the full capital conservation buffer requirement will be effective. Based on our capital levels and statement of financial condition composition at September 30, 2013, we believe implementation of the new rule will have no material impact on our capital needs.

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CLIFTON SAVINGS 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, which have longer maturities than the Bank’s liabilities, which consists 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 changes 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 outside directors, 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 who 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 (“EVE”) 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.

The table below sets forth the estimated changes in the Bank’s NPV and net interest income that would result from the designated changes in interest rates as of June 30, 2013, the most recent date the Bank’s interest rate risk was measured. Given the current economic environment, the Bank expects that these changes as of September 30, 2013 do not materially differ from the results presented. This data is for the Bank and its subsidiary only and does not include any other assets of the Company. 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 did not estimate changes in NPV or net interest income for an interest rate decrease of greater than 100 basis points or increase of greater than 200 basis points.

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CLIFTON SAVINGS BANCORP, INC. AND SUBSIDIARIES

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Quantitative Analysis (Cont’d)


											Net Interest Income
			Net Portfolio Value (2)								Estimated Net Interest Income (3)		(Decrease) in Estimated Net Interest Income
Change in Interest Rates Basis Point (bp) (1)			Estimated NPV		Estimated Increase (Decrease)								(Decrease) in Estimated Net Interest Income
Change in Interest Rates Basis Point (bp) (1)			Estimated NPV		Amount			Percent					Amount			Percent
			(Dollars in Thousands)
	+200 bp		$	123,636	($	47,293	)		(27.66	)%	$	22,699	($	196	)		(0.86	)%
	0			170,929		—			—			22,895		—			—
	(100	)		188,491		17,562			10.27			22,744		(151	)		(0.66	)

(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 at June 30, 2013, in the event of a 200 basis point increase in interest rates, we would be expected to experience a 27.66% decrease in NPV and a $196,000, or 0.86%, decrease in net interest income. In the event of a 100 basis point decrease in interest rates, we would be expected to experience a 10.27% increase in NPV and a $151,000, or 0.66%, decrease in net interest income. NPV is a theoretical liquidation calculation which 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, such as changing the mix of assets and liabilities, which could change the results of the NPV and net interest income calculations.

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. 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 SAVINGS 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 September 30, 2013 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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CLIFTON SAVINGS 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, 2013, as filed with the SEC on June 6, 2013, which could materially affect our business, financial condition and/or operating results. As of September 30, 2013, 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 September 30, 2013.

(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 September 30, 2013.


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

July 1 - July 31, 2013		—	$	—		—		278,600
August 1 - August 31, 2013		—		—		—		278,600
September 1 - September 30, 2013		—		—		—		278,600

Total		—	$	—		—

(1)	On November 29, 2012, the Company announced that the Board of Directors had approved its tenth stock repurchase program authorizing the Company to repurchase up to 280,000 shares of the Company’s common stock.

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CLIFTON SAVINGS BANCORP, INC. AND SUBSIDIARIES

PART II

ITEM 3. Defaults Upon Senior Securities

None.

ITEM 4. Mine Safety Disclosures

Not applicable.

ITEM 5. Other Information

None.

ITEM 6. Exhibits

The following Exhibits are filed as part of this report.


3.1		Charter of Clifton Savings Bancorp, Inc. (1)

3.2		By-Laws of Clifton Savings Bancorp, Inc. (2)

4.1		Specimen Stock Certificate of Clifton Savings Bancorp, Inc. (1)

31.1		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

31.2		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

32.0		Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).

101.0		The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2013, 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 Cash Flows and (v) the Notes to the Consolidated Financial Statements (detail tagged).

(1)	Incorporated herein by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2004, filed with the Securities and Exchange Commission on June 29, 2004 (File No. 000-50358).

(2)	Incorporated herein by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 26, 2007.

- 43 -

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 SAVINGS BANCORP, INC.

Date:	November 8, 2013	By:	/s/ John A. Celentano, Jr.
			John A. Celentano, Jr.
			Chairman of the Board and Chief Executive Officer
			(Principal Executive Officer)

Date:	November 8, 2013	By:	/s/ Christine R. Piano
			Christine R. Piano
			Chief Financial Officer and Treasurer
			(Principal Financial and Chief Accounting Officer)