CSBK Clifton Bancorp Inc. (MM)

Clifton Bancorp Inc. (NasdaqGS:CSBK), the holding company for Clifton Savings Bank, today announced results for the second quarter ended September 30, 2014. Net income for the second quarter was $1.48 million ($0.06 per diluted share). This compares to net income of $1.41 million ($0.05 per diluted share) for the quarter ended September 30, 2013. Net income for the six months ended September 30, 2014 was $3.10 million ($0.12 per diluted share) as compared to $3.15 million ($0.12 per diluted share) for the same period in 2013.

Notable Items

• We achieved steady earnings in tandem with increased investment in our core business;
• Nonperforming loans to total gross loans decreased to 0.73% at September 30, 2014, our lowest level since December 31, 2011;
• Net loans increased 1.0% and 5.6% for the three and six month periods ended September 30, 2014, respectively.

Paul M. Aguggia, Chairman, President, and Chief Executive Officer, stated, “We achieved steady earnings during a time of ongoing strategic investments in our core business and intense competition. Despite competitive pressures, we continue to grow our loan portfolio, especially multi-family and commercial real estate loans. We are also pleased to announce the completion of our core system conversion on October 14, 2014. As a result of this major initiative, we are poised to offer additional products and services to customers and potential customers. We anticipate the expenses incurred to complete the conversion will continue into the third quarter but come in close to the previously disclosed estimated expense of $600,000, as our team made cost control an important priority from the onset. We believe that leveraging our capital prudently, and investing in our core business, while maintaining pristine asset quality and expense discipline, are the cornerstones of building stockholder value.”

Review of Balance Sheet and Credit Quality

Clifton Bancorp’s total assets decreased $54.5 million, or 4.3%, to $1.21 billion at September 30, 2014, from $1.27 billion at March 31, 2014. The decrease in total assets was primarily due to the decision to use excess liquidity to pay down borrowings and manage its cost of funds and deposits by allowing certain promotional rates to expire. In addition, the stock subscription deposits received in connection with the second-step conversion were reflected in total assets at March 31, 2014.

Net loans increased $32.5 million, or 5.6%, to $617.0 million at September 30, 2014 from $584.5 million at March 31, 2014. One- to four-family loans increased $12.1 million, or 2.3%, while multi-family and commercial real estate loans increased $20.8 million, or 44.4%, for the period. Securities, including both available for sale and held to maturity issues, increased $32.3 million, or 7.6%, to $454.6 million at September 30, 2014 from $422.3 million at March 31, 2014, primarily as a result of deployment of cash received in the second step conversion. Cash and cash equivalents decreased $117.6 million, or 61.1%, to $75.0 million at September 30, 2014 from $192.6 million at March 31, 2014, because of the inclusion of stock subscription deposits of $154.3 million at March 31, 2014. Cash and cash equivalents were redeployed into higher- yielding assets following the completion of the second-step conversion.

Deposits decreased $32.8 million, or 4.3%, to $731.1 million at September 30, 2014 from $763.9 million at March 31, 2014, mainly due to the withdrawal of monies previously received from a promotional rate passbook account. In addition, $5.9 million in deposits outstanding on March 31, 2014 were used to purchase stock in the second-step conversion. Borrowed funds decreased $30.0 million, or 21.1%, to $112.5 million at September 30, 2014 from $142.5 million at March 31, 2014, as two borrowings were repaid in accordance with their original terms during the period. The average rate of outstanding borrowings as of September 30, 2014 was 2.01% at an average term of 24 months. All outstanding borrowings are with the Federal Home Loan Bank of New York.

Total stockholders’ equity increased $163.6 million, or 84.2%, to $357.7 million at September 30, 2014 from $194.1 million at March 31, 2014. The increase resulted primarily from net proceeds from the second-step conversion of $163.2 million, and net income of $3.1 million, partially offset by cash dividends paid of $4.5 million.

Non-accrual loans decreased $623,000, or 12.1%, to $4.5 million at September 30, 2014 from $5.1 million at March 31, 2014. Included in non-accrual loans at September 30, 2014 were nine loans totaling $1.8 million that were current or less than 90 days delinquent but which were previously 90 days or more delinquent and on a non-accrual status until there is a sustained period of repayment performance (generally six months). The percentage of nonperforming loans to total loans decreased to 0.73% at September 30, 2014, from 0.88% at March 31, 2014. This percentage is the lowest since December 31, 2011. The percentage of allowance for loan losses to nonperforming loans increased to 72.08% at September 30, 2014 from 59.84% at March 31, 2014.

During the six months ended September 30, 2014, net charge-offs totaled $260,000 as compared to $86,000 during the six months ended September 30, 2013. For the six months ended September 30, 2014, there were charge-offs on four one- to four-family residential real estate loans. For the 2013 period, the charge-offs related to two one- to four-family residential real estate loans, net of a partial recovery from a private mortgage insurance claim on a loan charged-off in a previous quarter.

Income Statement Review

Net interest income increased $786,000, or 13.6%, for the three months ended September 30, 2014, to $6.58 million, as compared to $5.80 million for three months ended September 30, 2013, reflecting an increase of $131.6 million in average net interest-earning assets coupled with an increase of 1 basis point in net interest margin. Average interest-earning assets increased $128.8 million, or 12.9%, during the three months ended September 30, 2014, as compared to the three months ended September 30, 2013, which consisted of increases of $91.9 million in loans, $19.1 million in investment securities, and $33.5 million in other interest-earning assets, partially offset by a decrease of $15.7 million in mortgage-backed securities. The average balance of loans increased as the Bank continues to emphasize the growth of its loan portfolio (through originations, as supplemented by purchases) while repayment levels declined as fewer borrowers sought to refinance. Investment securities increased with the deployment of second-step conversion proceeds into higher-yielding agency and municipal securities. Other interest-earning assets increased as some funds received from the second-step conversion remained in cash and cash equivalents. Mortgage-backed securities decreased due to principal repayments of securities exceeding purchases as funds were redeployed into loans and other investment securities. Average interest-bearing liabilities decreased $2.8 million, or 0.3%, during the three months ended September 30, 2014, primarily as a result of a decrease of $51.5 million in deposits partially offset by an increase of $48.7 million in borrowings, mostly originated in late 2013, which were used primarily to fund loan growth.

Net interest income increased $1.5 million, or 13.2%, for the six months ended September 30, 2014, to $12.98 million, as compared to $11.47 million for six months ended September 30, 2013, reflecting an increase of $106.2 million in average net interest-earning assets coupled with an increase of 1 basis point in net interest margin. Average interest-earning assets increased $127.9 million, or 13.1%, during the six months ended September 30, 2014, as compared to the six months ended September 30, 2013, which consisted of increases of $107.0 million in loans, $14.5 million in investment securities, and $31.9 million in other interest-earning assets, partially offset by a decrease of $25.5 million in mortgage-backed securities. The average balance of loans increased as the Bank continues to emphasize the growth of its loan portfolio (through loan originations, as supplemented by purchased loans) while repayment levels declined as fewer borrowers sought to refinance. Investment securities increased with the deployment of second step conversion proceeds into higher-yielding agency and municipal securities. Other interest-earning assets increased as some funds received from the second-step conversion remained in cash and cash equivalents. Mortgage-backed securities decreased due to principal repayments of securities exceeding purchases as funds were redeployed into loans and other investment securities. Average interest-bearing liabilities increased $21.7 million, or 2.6%, during the six months ended September 30, 2014, primarily as a result of an increase of $62.1 million in borrowings, mostly originated in late 2013, which were used primarily to fund loan growth, partially offset by a decrease of $40.4 million in deposits.

The provision for loan losses decreased $55,000, or 15.5%, to $301,000 for the three months ended September 30, 2014 as compared to $356,000 for the three months ended September 30, 2013, and $97,000, or 18.1%, to $439,000 for the six months ended September 30, 2014 as compared to $536,000 for the six months ended September 30, 2013. The decreases in the provision for loan losses for the three- and six-month periods ended September 30, 2014 were mainly the result of more favorable trends in qualitative factors for delinquencies included in the periodic review of the general valuation allowance. During the periods ended September 30, 2014 and 2013, there also were normal recurring adjustments made to the historical loss and other qualitative factor components of the Bank’s general valuation allowance.

Non-interest income increased $153,000, or 47.7%, to $474,000 for the three months ended September 30, 2014, as compared to $321,000 for the three months ended September 30, 2013. The increase was mainly due to a $102,000 gain on sale of available for sale securities being included in the 2014 period. Non-interest income decreased $382,000, or 31.7%, to $822,000 for the six months ended September 30, 2014, as compared to $1.20 million for the six months ended September 30, 2013. The decrease was mainly due to the inclusion of $464,000 of additional gains on sale of securities being included in the 2013 period.

Non-interest expenses increased $908,000, or 25.1%, to $4.53 million for the three months ended September 30, 2014, as compared to $3.62 million for the three months ended September 30, 2013, and $1.37 million, or 18.8%, to $8.67 million for the six months ended September 30, 2014 as compared to $7.30 million for the same 2013 period. The increases for the three- and six-month periods were primarily the result of increases of $385,000, or 18.9%, and $761,000, or 18.6%, respectively, in salaries and employee benefits, $150,000, or 49.2%, and $146,000, or 23.9%, respectively, in equipment expense, $162,000, or 76.8%, and $146,000, or 33.3%, respectively, in directors compensation, and $209,000, or 45.2%, and $280,000, or 30.7%, respectively, in other miscellaneous expenses. The increases in salaries and employee benefits in the 2014 periods were mainly due to an increase in costs associated with the transition and expansion of our management team, along with normal annual salary and benefit expense increases, including an increase of $172,000 and $329,000, respectively, in employee stock ownership plan expense for the three- and six-month periods ended September 30, 2014. The increases in equipment expense for the three and six-month periods ended September 30, 2014 were related to $166,000 in expenditures associated with a core processor change, while the increases in directors’ compensation related to a charge recorded as a result of a lump sum payment from the directors’ retirement plan. Miscellaneous expenses include typical annual increases in operational expenses, as well as expenses associated with consultants and new investments in the Bank’s core business, and $140,000 in core processor change related expenses for the three- and six-month periods ended September 30, 2014.

About Clifton Bancorp Inc.

Clifton Bancorp Inc. is the holding company of Clifton Savings Bank, a federally chartered savings bank headquartered in Clifton, New Jersey, which currently operates a total of 12 full-service banking offices in northeast New Jersey.

Forward-Looking Statements

Clifton Bancorp makes forward-looking statements in this news release. These forward-looking statements may include: statements of goals, intentions, earnings expectations, and other expectations; estimates of risks and of future costs and benefits; assessments of probable loan and lease losses; assessments of market risk; and statements of the ability to achieve financial and other goals.

Forward-looking statements are typically identified by words such as “believe,” “expect,” “anticipate,” “intend,” “outlook,” “estimate,” “forecast,” “project” and other similar words and expressions. Forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Forward-looking statements speak only as of the date they are made. Clifton Bancorp does not assume any duty and does not undertake to update its forward-looking statements. Because forward-looking statements are subject to assumptions and uncertainties, actual results or future events could differ, possibly materially, from those that Clifton Bancorp anticipated in its forward-looking statements and future results could differ materially from historical performance.

Clifton Bancorp’s forward-looking statements are subject to the following principal risks and uncertainties: general economic conditions and trends, either nationally or locally; conditions in the securities markets; changes in interest rates; changes in deposit flows, and in the demand for deposit, loan, and investment products and other financial services; changes in real estate values; changes in the quality or composition of the loan or investment portfolios; changes in competitive pressures among financial institutions or from non-financial institutions; the ability to retain key members of management; changes in legislation, regulations, and policies; and a variety of other matters which, by their nature, are subject to significant uncertainties. Clifton Bancorp provides greater detail regarding some of these factors in its Annual Report on Form 10-K filed on June 6, 2014 in the Risk Factors section. Clifton Bancorp’s forward-looking statements may also be subject to other risks and uncertainties, including those that it may discuss elsewhere in this news release or in its filings with the SEC, accessible on the SEC’s website at www.sec.gov.

          Selected Consolidated Financial Condition Data  

At September 30,

   At March 31,   

2014     2014 (In thousands) Financial Condition Data: Total assets $ 1,211,527 $ 1,265,990 Loans receivable, net 617,024 584,507 Cash and cash equivalents 74,979 192,581 Securities 454,595 422,295 Deposits 731,070 763,912 FHLB advances 112,500 142,500 Stock subscription deposits - 154,345 Total stockholders' equity 357,693 194,137                   Selected Consolidated Operating Data Three Months Ended Six Months Ended September 30, September 30, 2014 2013 2014 2013 (In thousands, except (In thousands, except share and per share data) share and per share data) Operating Data: Interest income $ 8,899 $ 8,310 $ 17,611 $ 16,497 Interest expense   2,317   2,514   4,628   5,028 Net interest income 6,582 5,796 12,983 11,469 Provision for loan losses   301   356   439   536

Net interest income after provision for

loan losses 6,281 5,440 12,544 10,933 Non-interest income 474 321 822 1,204 Non-interest expenses   4,532   3,624   8,669   7,297 Income before income taxes 2,223 2,137 4,697 4,840 Income taxes   744   732   1,596   1,687 Net income $ 1,479 $ 1,405 $ 3,101 $ 3,153 Basic earnings per share $ 0.06 $ 0.06 $ 0.12 $ 0.12 Diluted earnings per share $ 0.06 $ 0.05 $ 0.12 $ 0.12   Average shares outstanding - basic 25,333 25,309 25,289 25,294 Average shares outstanding - diluted 25,521 25,555 25,467 25,532                           Average Balance Table Three Months Ended September 30, 2014       2013 Interest Interest Average and Yield/ Average and Yield/ Balance Dividends Cost Balance Dividends Cost Assets: (Dollars in thousands) Interest-earning assets: Loans receivable $ 613,604 $ 5,799 3.78 % $ 521,682 $ 5,150 3.95 % Mortgage-backed securities 303,938 2,339 3.08 % 319,670 2,546 3.19 % Investment securities 155,274 666 1.72 % 136,191 573 1.68 % Other interest-earning assets   52,979   95 0.72 %   19,459     41 0.84 % Total interest-earning assets 1,125,795   8,899 3.16 % 997,002 8,310 3.33 %   Non-interest-earning assets   101,666   70,792 Total assets $ 1,227,461 $ 1,067,794   Liabilities and stockholders' equity: Interest-bearing liabilities: Demand accounts $ 55,643 19 0.14 % $ 58,127 20 0.14 % Savings and Club accounts 139,394 61 0.18 % 154,660 112 0.29 % Certificates of deposit   528,996   1,645 1.24 %   562,805   1,868 1.33 % Total interest-bearing deposits 724,033 1,725 0.95 % 775,592 2,000 1.03 % FHLB Advances   123,750   592 1.91 %   75,000   514 2.74 % Total interest-bearing liabilities 847,783   2,317 1.09 % 850,592   2,514 1.18 %   Non-interest-bearing liabilities: Non-interest-bearing deposits 11,180 15,219 Other non-interest-bearing liabilities   11,412   13,988 Total non-interest-bearing liabilities 22,592 29,207   Total liabilities 870,375 879,799 Stockholders' equity   357,086   187,995 Total liabilities and stockholders' equity $ 1,227,461 $ 1,067,794   Net interest income $ 6,582 $ 5,796 Interest rate spread 2.07 % 2.15 % Net interest margin 2.34 % 2.33 % Average interest-earning assets to average interest-bearing liabilities 1.33

 

x

1.17 x         Six Months Ended September 30, 2014       2013   Interest             Interest     Average and Yield/ Average and Yield/ Balance Dividends Cost Balance Dividends Cost Assets: (Dollars in thousands) Interest-earning assets: Loans receivable $ 604,559 $ 11,475 3.80 % $ 497,604 $ 9,962 4.00 % Mortgage-backed securities 304,918 4,704 3.09 % 330,413 5,330 3.23 % Investment securities 146,552 1,256 1.71 % 132,076 1,123 1.70 % Other interest-earning assets   50,454   176 0.70 %   18,528   82 0.89 % Total interest-earning assets 1,106,483   17,611 3.18 % 978,621 16,497 3.37 %   Non-interest-earning assets   130,394   71,294 Total assets $ 1,236,877 $ 1,049,915   Liabilities and stockholders' equity: Interest-bearing liabilities: Demand accounts $ 56,243 37 0.13 % $ 57,865 43 0.15 % Savings and Club accounts 141,447 124 0.18 % 146,688 203 0.28 % Certificates of deposit   531,409   3,281 1.23 %   564,993   3,796 1.34 % Total interest-bearing deposits 729,099 3,442 0.94 % 769,546 4,042 1.05 % FHLB Advances   127,500   1,186 1.86 %   65,357   986 3.02 % Total interest-bearing liabilities 856,599   4,628 1.08 % 834,903   5,028 1.20 %   Non-interest-bearing liabilities: Non-interest-bearing deposits 11,967 14,415 Other non-interest-bearing liabilities   12,513   12,701 Total non-interest-bearing liabilities 24,480 27,116   Total liabilities 881,079 862,019 Stockholders' equity   355,798   187,896 Total liabilities and stockholders' equity $ 1,236,877 $ 1,049,915   Net interest income $ 12,983 $ 11,469 Interest rate spread 2.10 % 2.17 % Net interest margin 2.35 % 2.34 % Average interest-earning assets to average interest-bearing liabilities 1.29 x 1.17 x               Asset Quality Data Six Months Year Ended Ended September 30, March 31, 2014 2014 (Dollars in thousands) Allowance for loan losses: Allowance at beginning of period $ 3,071 $ 2,500 Provision for loan losses 439 777   Charge-offs (260 ) (222 ) Recoveries   -     16   Net charge-offs (260 ) (206 )     Allowance at end of period $ 3,250   $ 3,071     Allowance for loan losses to total gross loans 0.53 % 0.52 % Allowance for loan losses to nonperforming loans 72.08 % 59.84 %     At September 30, At March 31, 2014 2014 (Dollars in thousands) Nonperforming Assets: Nonaccrual loans: One- to four-family real estate $ 4,029 $ 4,848 Commercial real estate 443 247 Consumer real estate   37     37   Total nonaccrual loans 4,509 5,132 Real estate owned   -     -   Total nonperforming assets $ 4,509   $ 5,132     Total nonperforming loans to total gross loans 0.73 % 0.88 % Total nonperforming assets to total assets 0.37 % 0.41 %                       Selected Consolidated Financial Ratios Three Months Ended Six Months Ended September 30, September 30,

Selected Performance Ratios (1):

2014 2013 2014 2013 Return on average assets 0.48% 0.53% 0.50% 0.60% Return on average equity 1.66% 2.99% 1.74% 3.36% Interest rate spread 2.07% 2.15% 2.10% 2.17% Net interest margin 2.34% 2.33% 2.35% 2.34% Non-interest expenses to average assets 1.48% 1.36% 1.40% 1.39% Efficiency ratio (2) 64.23% 59.24% 62.80% 57.58% Average interest-earning assets to average interest-bearing liabilities 1.33x 1.17x 1.29x 1.17x Average equity to average assets 29.09% 17.61% 28.77% 17.90% Dividend payout ratio 102.64% 110.25% 146.53% 98.26%  

Capital Ratios (3):

Core (tier 1) capital 20.61% 15.29% 20.61% 15.29% Tier 1 risk-based capital 47.81% 35.66% 47.81% 35.66% Total risk-based capital 48.46% 36.29% 48.46% 36.29%     (1) Performance ratio are annualized. (2) Represents non-interest expense divided by the sum of net interest income and non-interest income including gains and losses on the sale of assets. (3) Ratios are for Clifton Savings Bank and subsidiary only.                         Quarterly Data Quarter Ended September 30, June 30, March 31, December 31, September 30, 2014 2014 2014 2013 2013 (In thousands except shares and per share data)

Operating Data

Interest income $ 8,899 $ 8,712 $ 8,657 $ 8,583 $ 8,310 Interest expense   2,317         2,311         2,343         2,491         2,514   Net interest income 6,582 6,401 6,314 6,092 5,796 Provision for loan losses   301         138         113         128         356   Net interest income after provision for loan losses 6,281 6,263 6,201 5,964 5,440 Non-interest income 474 348 352 311 321 Non-interest expenses   4,532         4,137         4,171         3,613         3,624   Income before income taxes 2,223 2,474 2,382 2,662 2,137 Income taxes   744         852         825         907         732   Net income $ 1,479       $ 1,622       $ 1,557       $ 1,755       $ 1,405    

Share Data

Basic earnings per share $ 0.06   $ 0.06   $ 0.06   $ 0.07   $ 0.06   Diluted earnings per share $ 0.06   $ 0.06   $ 0.06   $ 0.07   $ 0.05   Dividends per share $ 0.06   $ 0.12   $ -   $ 0.06   $ 0.06   Average shares outstanding - basic 25,333 25,244 25,590 25,387 25,309 Average shares outstanding - diluted 25,521 25,413 25,817 25,643 25,555 Shares outstanding at period end 26,676 26,596 26,529 26,470 26,248  

Financial Condition Data

Total assets $ 1,211,527 $ 1,231,730 $ 1,265,990 $ 1,099,073 $ 1,082,866 Loans receivable, net 617,024 610,950 584,507 577,388 554,450 Cash and cash equivalents 74,979 85,042 192,581 11,901 14,812 Securities 454,595 470,605 422,295 450,203 456,023 Deposits 731,070 736,557 763,912 774,529 791,387 FHLB advances 112,500 127,500 142,500 122,500 92,500 Stock subscription deposits - - 154,345 - - Total stockholders' equity 357,693 356,491 194,137 191,460 188,521  

Assets Quality:

Total nonperforming assets $ 4,509 $ 5,595 $ 5,132 $ 4,561 $ 5,149 Total nonperforming loans to total gross loans 0.73 % 0.89 % 0.88 % 0.79 % 0.85 % Total nonperforming assets to total assets 0.37 % 0.45 % 0.41 % 0.41 % 0.48 % Allowance for loan losses $ 3,250 $ 3,125 $ 3,071 $ 3,050 $ 2,950 Allowance for loan losses to total gross loans 0.53 % 0.51 % 0.52 % 0.53 % 0.53 % Allowance for loan losses to nonperforming loans 72.08 % 57.12 % 59.84 % 66.87 % 62.18 % Net charge-offs to average outstanding loans during the period 0.03 % 0.01 % 0.02 % 0.00 % 0.01 %  

As a result of the completion of the second-step conversion on April 1, 2014, share and per share data, as appropriate, was adjusted to reflect the 0.9791 exchange ratio for preceding periods.

Clifton Bancorp Inc.Bart D’Ambra, 973-473-2200CliftonBancorp.com