Oritani Financial Corp. (the “Company” or “Oritani”) (NASDAQ:ORIT),
the holding company for Oritani Bank (the “Bank”), reported net
income of $2.9 million, or $0.07 per basic (and $0.06 diluted)
common share, for the three months ended June 30, 2017, and
$49.1 million, or $1.14 per basic (and $1.10 diluted) common share,
for the twelve months ended June 30, 2017. This compares to
net income of $11.1 million, or $0.26 per basic (and $0.25 diluted)
common share for the three months ended June 30, 2016 and net
income of $52.3 million, or $1.25 per basic (and $1.21 diluted)
common share for the twelve months ended June 30, 2016.
The Company also reported that its Board of
Directors declared a $0.175 quarterly cash dividend on the
Company’s common stock. The record date for the dividend will
be August 7, 2017 and the payment date will be August 21,
2017.
“I am pleased to report the results of another
year of hard work resulting in the level of exceptional results
that you have come to expect from Oritani,” said Kevin J. Lynch,
the Company’s Chairman, President and CEO. “We sought growth
in quality loans and deposits and achieved substantial increases in
both. At June 30, our loan to deposit ratio was down to
125%.” Mr. Lynch continued: “Our ROA for the year was 1.24%
and our ROE was 8.98%. In addition, we executed a balance
sheet restructure that enhanced our ability to deliver future
stellar results.”
Comparison of Operating Results for the Periods
Ended June 30, 2017 and 2016
Net Income. Net income
decreased $8.2 million to $2.9 million for the quarter ended June
30, 2017, from $11.1 million for the corresponding 2016
quarter. Net income decreased $3.2 million to $49.1 million
for the twelve months ended June 30, 2017, from $52.3 million for
the corresponding 2016 period. The primary causes of the
fluctuations in net income in the 2017 periods were due to atypical
items. Changes in net gains on sales of assets, FHLB
prepayment penalties and derivative termination costs, net of their
tax effect, accounted for the majority of the periodic
disparities. Several of these items pertain to a
balance sheet restructure. Further details regarding the
restructure are provided below.
Balance Sheet restructure. During the
quarter ended June 30, 2017, the Company undertook a “balance sheet
restructure” to improve its net interest income and interest rate
risk position. The pretax costs associated with the execution
of the restructure transaction totaled $13.9 million. The
Company realized a pretax gain of $20.6 million on the sale of an
investment in real estate joint ventures during the quarter ended
March 31, 2017. Management utilized a portion of this gain to
restructure the balance sheet and offset the costs associated with
the restructure transaction. The restructure transaction is
expected to positively impact prospective net interest
income. Similar restructure transactions were executed during
the quarters ended June 30, 2016 and December 31, 2015. The
steps taken in conjunction with the current period restructure are
detailed below:
- The Company prepaid a total of $117.9 million of FHLB advances
with a weighted average effective cost of 2.74%. In
conjunction with the prepayments, the Company incurred costs
totaling $5.2 million.
- The Company terminated $100.0 million notional of existing
interest rate swaps with a weighted average pay rate obligation of
3.12%. In conjunction with the prepayments, the Company
incurred costs totaling $7.9 million. The Company also
terminated a related interest rate swap for a gain of $156,000,
bringing the net cost of the derivative termination transactions to
$7.7 million.
- The Company executed $195.0 million of additional swaps.
The swaps have a weighted average life of 5.5 years, a weighted
average rate of 1.72% and a weighted average total cost of
1.82%.
- The Company incurred fees totaling $270,000 in conjunction with
the restructure transaction.
- The Company obtained $95 million of brokered deposits to hedge
the incremental amount of new swaps. In addition, the costs
associated with its existing brokered deposit portfolio of
approximately $340 million were reduced by 2.3 basis
points.
- The Company committed to a new FHLB advance in the amount of
$22.9 million at a rate of 1.72%.
- The Company sold $57.0 million of securities with a book yield
of 1.35%. The Company incurred a loss of $826,000 on this
sale.
- The Company purchased $58.9 million of mortgage backed
securities with a projected book yield of 1.95%.
- The restructure took place toward the end of the June 30, 2017
quarter and had minimal impact on the net interest spread and
margin for that period. The Company anticipates that the
restructure transaction will improve margin by approximately 8
basis points prospectively. The Company cautions that
numerous other factors also impact margin.
Excluding the $13.9 million of costs associated
with the restructure, net income for the three and twelve months
ended June 30, 2017 would have been approximately $12.0 million (or
$0.27 basic and diluted common share) and $58.2 million (or $1.35
basic and $1.31 diluted common share), respectively.
The Company does not anticipate any additional
restructure transactions for the foreseeable future.
Total Interest Income.
The components of interest income for the three
months ended June 30, 2017 and 2016, changed as follows:
|
|
Three Months Ended June 30, |
Increase / (decrease) |
|
|
|
2017 |
|
|
2016 |
|
|
Average |
|
|
|
Income |
Yield |
Income |
Yield |
Income |
Balance |
Yield |
|
|
(Dollars in thousands) |
Interest on
loans |
$ |
34,452 |
3.90 |
% |
$ |
32,429 |
4.24 |
% |
$ |
2,023 |
|
$ |
474,091 |
|
-0.34 |
% |
Dividends
on FHLB stock |
|
491 |
5.55 |
% |
|
395 |
4.08 |
% |
|
96 |
|
|
(3,295 |
) |
1.47 |
% |
Interest on
securities AFS |
|
703 |
1.79 |
% |
|
1,063 |
2.03 |
% |
|
(360 |
) |
|
(53,044 |
) |
-0.24 |
% |
Interest on
securities HTM |
|
917 |
1.88 |
% |
|
765 |
1.94 |
% |
|
152 |
|
|
37,473 |
|
-0.06 |
% |
Interest on
federal funds sold |
|
|
|
|
|
|
|
and short
term investments |
|
2 |
1.04 |
% |
|
2 |
0.50 |
% |
|
- |
|
|
(843 |
) |
0.54 |
% |
|
Total
interest income |
$ |
36,565 |
3.73 |
% |
$ |
34,654 |
4.00 |
% |
$ |
1,911 |
|
$ |
454,382 |
|
-0.27 |
% |
|
|
|
|
|
|
|
|
|
The Company’s primary strategic business
objective is the organic growth of multifamily and commercial real
estate loans. The average balance of the loan portfolio
increased $474.1 million, or 15.5%, for the three months ended June
30, 2017 versus the comparable 2016 period. On a linked
quarter basis (June 30, 2017 versus March 31, 2017), the average
balance of the loan portfolio increased $49.9 million, for an
annualized growth rate of 5.7%. Loan originations totaled
$108.1 million for the quarter ended June 30, 2017 (there were no
purchases in that period). Loan principal payments totaled
$73.1 million for the quarter ended June 30, 2017. Loan
originations, purchases and prepayments totaled $187.4 million,
$35.8 million and $109.7 million, respectively, for the three
months ended June 30, 2016.
The yield on the loan portfolio decreased 34
basis points for the quarter ended June 30, 2017 versus the
comparable 2016 period. However, this result was impacted by
the level of prepayment penalties. Prepayment penalties
totaled $236,000 for the quarter ended June 30, 2017 versus $1.5
million for the quarter ended June 30, 2016. Absent
prepayment penalties, the yield on the loan portfolio decreased 17
basis points over the periods. Prepayment penalties increased
annualized loan yield by 3 basis points in the 2017 period versus
20 basis points in the 2016 period. On a linked quarter
basis, absent prepayment penalties, the yield on the loan portfolio
increased 2 basis points. Prepayment penalties totaled
$821,000 for the quarter ended March 31, 2017. While there
has been an extended period of downward pressure on loan yields,
recent results show the trend to be ebbing. This is occurring
primarily because the yield on new loan originations has
approximated the yield on the existing loan portfolio. The
Company has not adjusted its underwriting in order to boost yields
on new originations. The Company continues to minimize the
fixed period of its loan originations in order to limit the
interest rate risk associated with the loan portfolio. The
majority of the Company’s loan originations typically have a reset
of five years or less. Market rates for new loan originations
will have a material impact on the Company’s ability to generate
new originations that approximate or exceed the yield on the
existing loan portfolio.
The average balance of securities available for
sale decreased $53.0 million for the three months ended June 30,
2017 versus the comparable 2016 period, while the average balance
of securities held to maturity increased $37.5 million over the
same period. The Company has been classifying the majority of
new purchases as held to maturity. These balances were also
impacted by purchases and sales made in conjunction with balance
sheet restructures.
The components of interest income for the twelve
months ended June 30, 2017 and 2016, changed as follows:
|
|
Twelve Months Ended June
30, |
Increase / (decrease) |
|
|
|
2017 |
|
|
2016 |
|
|
Average |
|
|
|
Income |
Yield |
Income |
Yield |
Income |
Balance |
Yield |
|
|
(Dollars in thousands) |
Interest on
loans |
$ |
133,967 |
3.99 |
% |
$ |
125,427 |
4.34 |
% |
$ |
8,540 |
|
$ |
468,991 |
|
-0.35 |
% |
Dividends
on FHLB stock |
|
1,834 |
5.19 |
% |
|
1,588 |
4.35 |
% |
|
246 |
|
|
(1,173 |
) |
0.84 |
% |
Interest on
securities AFS |
|
3,154 |
1.85 |
% |
|
4,566 |
1.99 |
% |
|
(1,412 |
) |
|
(58,744 |
) |
-0.14 |
% |
Interest on
securities HTM |
|
3,500 |
1.86 |
% |
|
2,737 |
1.95 |
% |
|
763 |
|
|
48,147 |
|
-0.09 |
% |
Interest on
federal funds sold |
|
|
|
|
|
|
|
and short
term investments |
|
7 |
0.73 |
% |
|
6 |
0.36 |
% |
|
1 |
|
|
(717 |
) |
0.37 |
% |
|
Total
interest income |
$ |
142,462 |
3.80 |
% |
$ |
134,324 |
4.08 |
% |
$ |
8,138 |
|
$ |
456,504 |
|
-0.28 |
% |
|
|
|
|
|
|
|
|
|
The explanations for changes described above for
the three month period are also applicable to the twelve month
period. The average balance of the loan portfolio increased
$469.0 million, or 16.2%, for the twelve months ended June 30, 2017
versus the comparable 2016 period. Loan originations,
purchases and prepayments totaled $732.0 million, $65.9 million and
$365.4 million, respectively, for the fiscal year ended June 30,
2017. Loan originations, purchases and prepayments totaled
$710.1 million, $98.8 million and $436.3 million, respectively, for
the fiscal year ended June 30, 2016. The yield on the loan
portfolio decreased 35 basis points for the fiscal year ended June
30, 2017 versus the comparable 2016 period. This result was
also impacted by the level of prepayment penalties.
Prepayment penalties totaled $2.9 million for the twelve months
ended June 30, 2017 versus $5.7 million for the twelve months ended
June 30, 2016. Prepayment penalties boosted annualized
loan yield by 9 basis points in the 2017 period versus 19 basis
points in the 2016 period.
Total Interest Expense.
The components of interest expense for the three
months ended June 30, 2017 and 2016, changed as follows:
|
|
Three Months Ended June 30, |
Increase / (decrease) |
|
|
|
2017 |
|
|
2016 |
|
|
Average |
|
|
|
Expense |
Cost |
Expense |
Cost |
Expense |
Balance |
Cost |
|
|
(Dollars in thousands) |
Savings
deposits |
$ |
100 |
0.23 |
% |
$ |
97 |
0.23 |
% |
$ |
3 |
|
$ |
11,801 |
|
- |
% |
Money
market |
|
2,094 |
1.11 |
% |
|
1,580 |
0.95 |
% |
|
514 |
|
|
92,184 |
|
0.16 |
% |
Checking
accounts |
|
926 |
0.51 |
% |
|
435 |
0.38 |
% |
|
491 |
|
|
269,696 |
|
0.13 |
% |
Time
deposits |
|
3,604 |
1.33 |
% |
|
3,026 |
1.29 |
% |
|
578 |
|
|
148,887 |
|
0.04 |
% |
Total
deposits |
|
6,724 |
0.98 |
% |
|
5,138 |
0.92 |
% |
|
1,586 |
|
|
522,568 |
|
0.06 |
% |
Borrowings |
|
3,554 |
2.00 |
% |
|
3,809 |
1.91 |
% |
|
(255 |
) |
|
(86,274 |
) |
0.09 |
% |
|
Total interest
expense |
$ |
10,278 |
1.19 |
% |
$ |
8,947 |
1.18 |
% |
$ |
1,331 |
|
$ |
436,294 |
|
0.01 |
% |
|
|
|
|
|
|
|
|
|
Strong deposit growth remains a critical
objective for the Company. As detailed above, the average
balance of deposits increased $522.6 million for the quarter ended
June 30, 2017 versus the comparable 2016 period, representing
growth of 23.4%. On a linked quarter comparison basis, the
average balance of deposits increased $109.1 million, representing
an annualized growth rate of 16.5%. The growth percentages
above include the impact of brokered deposits. As discussed
under “Balance Sheet Restructure,” additional brokered money market
deposits were obtained during the latter part of the quarter ended
June 30, 2017. Prior balance sheet restructures also impacted
the average balance of brokered deposits. Absent the impact
of brokered funds, the average balance of deposits increased $371.7
million (growth rate of 16.7%) and $87.1 million (annualized growth
rate of 13.2%) versus the quarters ended June 30, 2016, and March
31, 2017, respectively. The overall cost of deposits
increased 6 basis points for the quarter ended June 30, 2017 versus
the comparable 2016 period. The increased cost of money
market accounts and checking accounts are primarily attributable to
the costs of interest rate swaps that are being reflected as
interest expense on these accounts. The situation occurred as
result of the balance sheet restructures. The increase in the
cost of time deposits is primarily due to the impact of market
pressures. On a linked quarter basis, deposit costs increased
3 basis points.
As detailed in the table above, the average
balance of borrowings decreased $86.3 million for the three months
ended June 30, 2017 versus the comparable 2016 period, and the cost
increased 9 basis points. The increase in the average balance
of deposits allowed the Company to fund asset growth with deposits
and reduce borrowing levels. The cost of borrowings was
significantly impacted by market rates, particularly overnight
borrowings. The cost of borrowings will be impacted
prospectively by the balance sheet restructure, which is discussed
later in this press release. On a linked quarter basis, the
average balance of borrowings decreased $113.8 million and the cost
increased 28 basis points. Despite the increase in the
absolute cost of overnight borrowings, such borrowings remained the
lowest cost of borrowed funds. The decrease in the average
balance of borrowings was principally in overnight funds.
This action was taken primarily to reduce interest rate risk.
However, this action also caused the average cost of the remaining
portfolio to increase.
The components of interest expense for the
twelve months ended June 30, 2017 and 2016, changed as follows:
|
|
Twelve Months Ended June
30, |
Increase / (decrease) |
|
|
|
2017 |
|
|
2016 |
|
|
Average |
|
|
|
Expense |
Cost |
Expense |
Cost |
Expense |
Balance |
Cost |
|
|
(Dollars in thousands) |
Savings
deposits |
$ |
391 |
0.23 |
% |
$ |
380 |
0.24 |
% |
$ |
11 |
|
$ |
11,751 |
|
-0.01 |
% |
Money
market |
|
7,742 |
1.05 |
% |
|
5,034 |
0.77 |
% |
|
2,708 |
|
|
84,851 |
|
0.28 |
% |
Checking
accounts |
|
3,015 |
0.46 |
% |
|
1,666 |
0.37 |
% |
|
1,349 |
|
|
211,039 |
|
0.09 |
% |
Time
deposits |
|
13,523 |
1.33 |
% |
|
10,804 |
1.24 |
% |
|
2,719 |
|
|
145,801 |
|
0.09 |
% |
Total
deposits |
|
24,671 |
0.95 |
% |
|
17,884 |
0.84 |
% |
|
6,787 |
|
|
453,442 |
|
0.11 |
% |
Borrowings |
|
13,180 |
1.83 |
% |
|
16,139 |
2.21 |
% |
|
(2,959 |
) |
|
(11,431 |
) |
-0.38 |
% |
|
Total interest
expense |
$ |
37,851 |
1.14 |
% |
$ |
34,023 |
1.19 |
% |
$ |
3,828 |
|
$ |
442,011 |
|
-0.05 |
% |
|
|
|
|
|
|
|
|
|
The explanations for changes described above for
the three month period regarding deposits and borrowings are
largely applicable to the twelve month period. However, the cost of
borrowings was much higher for the twelve months ended June 30,
2016 versus the three months ended June 30, 2016. The balance
sheet restructures executed during the quarters ended June 30, 2016
and December 31, 2015 had a greater impact on the cost of funds for
the three month period ended June 30, 2016.
Net Interest Income Before Provision for
Loan Losses. Net interest income increased $580,000 to
$26.3 million for the three months ended June 30, 2017, from $25.7
million for the three months ended June 30, 2016. Net
interest income increased $4.3 million to $104.6 million for the
twelve months ended June 30, 2017, from $100.3 million for the
twelve months ended June 30, 2016. These results were
impacted by the decreased level of prepayment penalty income in the
2017 periods. The Company’s net interest income, spread and
margin over the period are detailed in the table below.
|
|
|
Net Interest Income Before
Provision Excluding Prepayment Penalties |
|
|
|
|
|
|
|
Including Prepayment Penalties |
Excluding Prepayment Penalties |
|
Net Interest |
Prepayment |
|
Income Before |
Penalty |
Quarter Ended |
Provision |
Income |
Spread |
Margin |
Spread |
Margin |
|
(dollars in thousands) |
|
|
|
|
June 30, 2017 |
$ |
26,287 |
$ |
236 |
$ |
26,051 |
2.54 |
% |
2.68 |
% |
2.52 |
% |
2.66 |
% |
March 31, 2017 |
|
26,795 |
|
821 |
|
25,974 |
2.63 |
% |
2.75 |
% |
2.54 |
% |
2.67 |
% |
December 31, 2016 |
|
26,229 |
|
1,199 |
|
25,030 |
2.72 |
% |
2.86 |
% |
2.59 |
% |
2.73 |
% |
September 30, 2016 |
|
25,300 |
|
631 |
|
24,669 |
2.73 |
% |
2.87 |
% |
2.65 |
% |
2.80 |
% |
June 30, 2016 |
|
25,707 |
|
1,538 |
|
24,169 |
2.82 |
% |
2.97 |
% |
2.64 |
% |
2.79 |
% |
The Company’s spread and margin have been
significantly impacted by prepayment penalties. Due to this
situation, the chart above details results with and without the
impact of prepayment penalties. Net interest income before
provision for loan losses, excluding prepayment penalties, is a
non-GAAP financial measure since it excludes a component
(prepayment penalty income) of net interest income and therefore
differs from the most directly comparable measure calculated in
accordance with GAAP. The Company believes the presentation of this
non-GAAP financial measure is useful because it provides
information to assess the underlying performance of the loan
portfolio since prepayment penalty income can be expected to change
as interest rates change. While prepayment penalty income is
expected to continue, fluctuations in the level of prepayment
income are also expected. The level of prepayment income is
generally expected to decrease as external interest rates increase
since borrowers would have less of an incentive to refinance
existing loans.
The Company’s spread and margin remain under
pressure due to several factors, including: the relatively flat
treasury yield curve; modifications of loans within the existing
loan portfolio; prepayments of higher yielding loans and
investments; increased funding costs pertaining to the increases in
the federal funds target rate and interest costs necessary to
attract deposit balances. The increases in the discount rate and
federal funds target rate by the Federal Open Market Committee in
December 2015, December 2016, March 2017 and June 2017 have
increased the cost of the Company’s short term borrowings and
indirectly increased the cost of time deposits. These
increases may also negatively impact the cost of deposits
prospectively. Longer term rates had generally risen due to
market conditions since October, 2016. However, the increases
in longer term rates began to abate in March, 2017 and have
generally decreased since that time. Despite these pressures,
excluding prepayment penalties, the rate of spread and margin
compression has been decreasing and the Company’s net interest
income has continued to expand.
The Company’s net interest income and net
interest rate spread were both negatively impacted in all periods
due to the reversal of accrued interest income on loans delinquent
more than 90 days. The total of such income reversed was
$19,000 and $283,000 for the three and twelve months ended June 30,
2017, respectively, and $136,000 and $555,000 for the three and
twelve months ended June 30, 2016, respectively.
Provision for Loan
Losses. The Company recorded no provision for loan
losses for either the three or twelve months ended June 30, 2017 or
the three or twelve months ended June 30, 2016. A rollforward
of the allowance for loan losses for the three and twelve months
ended June 30, 2017 and 2016 is presented below:
|
Three months ended |
|
Twelve months ended |
|
June 30, |
|
June 30, |
|
|
2017 |
|
|
|
2016 |
|
|
|
2017 |
|
|
|
2016 |
|
|
(Dollars in thousands) |
Balance at beginning of
period |
$ |
29,877 |
|
|
$ |
29,948 |
|
|
$ |
29,951 |
|
|
$ |
30,889 |
|
Provisions charged to
operations |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Recoveries of loans
previously charged off |
|
407 |
|
|
|
3 |
|
|
|
409 |
|
|
|
9 |
|
Loans charged off |
|
12 |
|
|
|
- |
|
|
|
88 |
|
|
|
947 |
|
Balance at end of
period |
$ |
30,272 |
|
|
$ |
29,951 |
|
|
$ |
30,272 |
|
|
$ |
29,951 |
|
|
|
|
|
|
|
|
|
Allowance for loan
losses to total loans |
|
0.84 |
% |
|
|
0.94 |
% |
|
|
0.84 |
% |
|
|
0.94 |
% |
Annualized net
charge-offs (recoveries) to |
|
|
|
|
|
|
|
average loans
outstanding |
|
(0.05 |
)% |
|
|
- |
% |
|
|
(0.01 |
)% |
|
|
0.03 |
% |
|
|
|
|
|
|
|
|
Delinquency and non performing asset information
is provided below:
|
6/30/2017 |
3/31/2017 |
12/31/2016 |
9/30/2016 |
6/30/2016 |
|
(Dollars in thousands) |
Delinquency Totals |
|
|
|
|
|
30 - 59
days past due |
$ |
1,374 |
|
$ |
1,266 |
|
$ |
3,133 |
|
$ |
1,686 |
|
$ |
8,912 |
|
60 - 89
days past due |
|
1,571 |
|
|
371 |
|
|
1,196 |
|
|
1,060 |
|
|
1,698 |
|
Nonaccrual |
|
10,223 |
|
|
10,310 |
|
|
10,393 |
|
|
10,537 |
|
|
9,968 |
|
Total |
$ |
13,168 |
|
$ |
11,947 |
|
$ |
14,722 |
|
$ |
13,283 |
|
$ |
20,578 |
|
|
|
|
|
|
|
Non
Performing Asset Totals |
|
|
|
|
|
Nonaccrual
loans, per above |
$ |
10,223 |
|
$ |
10,310 |
|
$ |
10,393 |
|
$ |
10,537 |
|
$ |
9,968 |
|
Real Estate
Owned |
|
140 |
|
|
140 |
|
|
266 |
|
|
449 |
|
|
487 |
|
Total |
$ |
10,363 |
|
$ |
10,450 |
|
$ |
10,659 |
|
$ |
10,986 |
|
$ |
10,455 |
|
|
|
|
|
|
|
Nonaccrual
loans to total loans |
|
0.29 |
% |
|
0.29 |
% |
|
0.30 |
% |
|
0.32 |
% |
|
0.31 |
% |
Delinquent
loans to total loans |
|
0.37 |
% |
|
0.33 |
% |
|
0.43 |
% |
|
0.41 |
% |
|
0.65 |
% |
Non
performing assets to total assets |
|
0.25 |
% |
|
0.25 |
% |
|
0.27 |
% |
|
0.29 |
% |
|
0.28 |
% |
Delinquent loan and non performing asset totals
continue to illustrate minimal credit issues at the Company.
Further, of the $10.2 million in loans classified as nonaccrual at
June 30, 2017, $6.8 million were fully current.
Total Other Income. Total
other income decreased $14.9 million to a net loss of $7.3 million
for the three months ended June 30, 2017, from income of $7.6
million for the three months ended June 30, 2016. The
results for both periods were impacted by infrequent items.
Net loss on termination of derivatives of $7.7 million and a
loss on the sale of securities of $826,000 were incurred in the
2017 period in conjunction with the balance sheet
restructure. In the 2016 period, the Company realized a gain
of $386,000 on the sale of securities available for sale and had no
derivative termination costs. Also in the 2016 period, a gain
of $6.0 million was realized on the dispositions of its investments
in real estate joint ventures and real estate held for investment
portfolios. Since all assets in the investments in real
estate joint ventures and real estate held for investment
portfolios have been sold, recurring income from those sources was
zero for the three months ended June 30, 2017, versus $199,000 for
the three months ended June 30, 2016.
Total other income decreased $27.4 million to
$16.8 million for the twelve months ended June 30, 2017 from $44.2
million for the twelve months ended June 30, 2016. The twelve
month period was also impacted by the issues described above for
the three month period; however, the magnitude was greater in the
twelve month period of comparison. Both the 2017 and 2016
periods realized gains from sales of investments in real estate
joint ventures and real estate held for investment, though gains
were $17.0 million more in the 2016 period. Net income from
investments in real estate joint ventures and income from real
estate operations, net decreased by a combined $709,000 for the
twelve months ended June 30, 2017 as compared to the twelve months
ended June 30, 2016. As detailed above, a loss of $826,000
was incurred on the sale of securities in the 2017 period.
This compares to a gain of $990,000 for the twelve months ended
June 30, 2016. Also as detailed above, net loss on
termination of derivatives of $7.7 million had a material
impact on the 2017 period.
Total Other Expenses.
Total other expenses decreased $988,000 to $14.7 million for the
three months ended June 30, 2017, from $15.7 million for the three
months ended June 30, 2016. Expenses for both periods were
elevated as both periods included costs associated with balance
sheet restructures. The Company incurred $5.2 million of
prepayment penalties regarding the prepayment of FHLB advances in
connection with the 2017 balance sheet restructure. The
Company incurred $4.1 million of FHLB prepayment penalties in
connection with the 2016 balance sheet restructure. In
addition, there was a decrease of $1.9 million in compensation,
payroll taxes and fringe benefits. This decrease primarily
pertained to the amortization cost associated with the Company’s
2011 Equity Plan. The majority of the stock awards and stock
options granted in conjunction with this plan fully amortized in
August 2016. The expenses associated with this plan decreased
$1.4 million between the two periods. Also, there was a net
decrease in costs associated with nonqualified benefit
plans.
Total other expenses decreased $17.8 million to
$45.9 million for the twelve months ended June 30, 2017, from $63.7
million for the twelve months ended June 30, 2016. Similar to
the quarterly comparison above, the results for both periods were
impacted by costs incurred in conjunction with balance sheet
restructures. However, there were two balance sheet
restructures in the 2016 period. Total FHLB prepayment
penalties in the 2016 period were $18.0 million. There
was one restructure in the 2017 with FHLB prepayment penalties of
$5.2 million noted in the quarterly comparison above.
Compensation, payroll taxes and fringe benefits decreased $4.9
million to $28.9 million for the twelve months ended June 30, 2017,
from $33.8 million for the twelve months ended June 30, 2016.
The explanation described above for the quarterly comparison
regarding the Company’s 2011 Equity Plan is also applicable to the
fiscal year comparison. The 2016 period included the full
cost of the amortization of the 2011 Equity Plan while the 2017
period included only a portion of these costs. The expenses
associated with this plan decreased $5.0 million between the two
periods. In addition, increases in salary expense and health
insurance costs were partially offset by a decrease in ESOP expense
and a net decrease in costs associated with nonqualified benefit
plans.
Income Tax Expense.
Income tax expense for the three months ended June 30, 2017 was
$1.3 million on pre-tax income of $4.2 million, resulting in an
effective tax rate of 31.8%. Income tax expense for the
three months ended June 30, 2016 was $6.5 million on pre-tax income
of $17.6 million, resulting in an effective tax rate of
37.1%. Income tax expense for the twelve months ended June
30, 2017, was $26.4 million, on pre-tax income of $75.5 million,
resulting in an effective tax rate of 34.9%. Income tax
expense for the twelve months ended June 30, 2016, was $28.5
million, on pre-tax income of $80.8 million, resulting in an
effective tax rate of 35.3%. The effective tax rates for all
periods were impacted by the amount of excess tax benefit
associated with the exercise or vesting of stock awards that
occurred during the period.
Comparison of Financial
Condition at June 30, 2017 and June 30, 2016
Total Assets. Total
assets increased $468.3 million to $4.14 billion at June 30, 2017,
from $3.67 billion at June 30, 2016. The asset growth rate
for fiscal 2017 was 12.7%.
Cash and Cash Equivalents. Cash
and cash equivalents (which include fed funds and short term
investments) increased $17.0 million to $33.6 million at June 30,
2017, from $16.6 million at June 30, 2016.
Net Loans. Loans, net
increased $434.7 million to $3.57 billion at June 30, 2017, from
$3.13 billion at June 30, 2016. The growth rate was
13.9%. See “Interest Income” for discussion regarding loans
balances.
Securities available for
sale. Securities AFS decreased $43.9 million to
$97.9 million at June 30, 2017, from $141.9 million at June 30,
2016. The majority of the securities sold in conjunction with
the balance sheet restructure were securities available for
sale.
Securities held to
maturity. Securities HTM increased $71.5 million to
$239.6 million at June 30, 2017, from $168.1 million at June 30,
2016. The majority of the securities purchased during the
year, including those purchased in conjunction with the balance
sheet restructure were classified as held to maturity.
Deposits. Deposits
increased $596.5 million to $2.86 billion at June 30, 2017, from
$2.26 billion at June 30, 2016. See “Interest Expense” for
discussion regarding deposit balances.
Borrowings. Borrowings
decreased $139.6 million to $642.1 million at June 30, 2017, from
$781.6 million at June 30, 2016. See “Interest Expense” for
discussion regarding borrowing amounts.
Stockholders’ Equity.
Stockholders’ equity increased $24.0 million to $559.2 million at
June 30, 2017, from $535.2 million at June 30, 2016. The
increase was primarily due to net income, the release of treasury
shares in conjunction with stock option exercises, the net impact
of the amortization of stock based compensation plans and a
decrease in other comprehensive loss, partially offset by dividends
and repurchases. The balance sheet restructure had a
significant impact on other comprehensive loss, resulting in other
comprehensive income. The dividends paid include regular
quarterly dividends of $0.175 per share paid on August 19, 2016,
November 18, 2016, February 17, 2017 and May 19, 2017, as well as a
special dividend of $0.50 per share paid on December 23,
2016. During the twelve months ended June 30, 2017, 98,655
shares of stock were repurchased at a total cost of $1.6 million
and an average cost of $15.95 per share. The shares
repurchased were shares redeemed by employees, in lieu of payroll
taxes due, in conjunction with the vesting of stock awards from the
Company’s Equity Plans. Based on our June 30, 2017 closing
price of $17.05 per share, the Company stock was trading at 140.2%
of book value.
About the CompanyOritani
Financial Corp. is the holding company for Oritani Bank, a New
Jersey state chartered bank offering a full range of retail and
commercial loan and deposit products. Oritani Bank is
dedicated to providing exceptional personal service to its
individual and business customers. The Bank currently
operates its main office and 25 full service branches in the New
Jersey Counties of Bergen, Hudson, Essex and Passaic. For
additional information about Oritani Bank, please visit
www.oritani.com.
Forward Looking StatementsCertain statements
contained herein are "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. Such
forward-looking statements may be identified by reference to a
future period or periods, or by the use of forward-looking
terminology, such as "may," "will,"
"believe," "expect," "estimate," "anticipate,"
"continue,” or similar terms or variations on those terms, or the
negative of those terms. Forward-looking statements are subject to
numerous risks and uncertainties, including those risk factors
disclosed in the Company’s Annual Report on Form 10-K for the year
ended June 30, 2016 (as supplemented by our quarterly reports), and
the following: those related to the economic environment,
particularly in the market areas in which the Company operates,
competitive products and pricing, fiscal and monetary policies of
the U.S. Government, changes in government regulations affecting
financial institutions, including regulatory fees and capital
requirements, changes in prevailing interest rates, credit risk
management, asset-liability management, the financial and
securities markets and the availability of and costs associated
with sources of liquidity.
The Company wishes to caution readers not to place undue
reliance on any such forward-looking statements, which speak only
as of the date made. The Company wishes to advise readers
that the factors listed above could affect the Company's financial
performance and could cause the Company's actual results for future
periods to differ materially from any opinions or statements
expressed with respect to future periods in any current
statements. The Company does not undertake and specifically
declines any obligation to publicly release the result of any
revisions, which may be made to any forward-looking statements to
reflect events or circumstances after the date of such statements
or to reflect the occurrence of anticipated or unanticipated
events.
Oritani Financial Corp. and
Subsidiaries |
Consolidated Balance Sheets |
(In thousands, except share data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
June 30, |
Assets |
|
2017 |
|
|
2016 |
|
|
|
|
|
|
(unaudited) |
|
|
(audited) |
Cash on
hand and in banks |
|
$ |
33,252 |
|
|
$ |
16,243 |
|
Federal
funds sold and short term investments |
|
|
326 |
|
|
|
328 |
|
Cash and cash equivalents |
|
|
33,578 |
|
|
|
16,571 |
|
|
|
|
|
|
|
|
|
|
Loans,
net |
|
|
|
3,566,703 |
|
|
|
3,131,957 |
|
Securities
available for sale, at fair value |
|
|
97,930 |
|
|
|
141,850 |
|
Securities
held to maturity, |
|
|
|
|
|
|
fair value of $237,204 and $170,706, respectively. |
|
|
239,631 |
|
|
|
168,107 |
|
Bank Owned
Life Insurance (at cash surrender value) |
|
|
95,946 |
|
|
|
93,327 |
|
Federal
Home Loan Bank of New York stock ("FHLB"), at cost |
|
|
32,504 |
|
|
|
38,003 |
|
Accrued
interest receivable |
|
|
10,620 |
|
|
|
9,943 |
|
Investments
in real estate joint ventures, net |
|
|
— |
|
|
|
4,307 |
|
Real estate
held for investment |
|
|
— |
|
|
|
— |
|
Real estate
owned |
|
|
140 |
|
|
|
487 |
|
Office
properties and equipment, net |
|
|
13,909 |
|
|
|
14,338 |
|
Deferred
tax assets |
|
|
37,693 |
|
|
|
47,360 |
|
Other
assets |
|
|
9,030 |
|
|
|
3,088 |
|
Total Assets |
|
$ |
4,137,684 |
|
|
$ |
3,669,338 |
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
Deposits |
|
|
$ |
2,856,478 |
|
|
$ |
2,260,003 |
|
Borrowings |
|
|
|
642,059 |
|
|
|
781,623 |
|
Advance
payments by borrowers for taxes and |
|
|
|
|
|
|
insurance |
|
|
23,496 |
|
|
|
21,415 |
|
Official
checks outstanding |
|
|
4,423 |
|
|
|
3,084 |
|
Other
liabilities |
|
|
52,005 |
|
|
|
68,013 |
|
Total liabilities |
|
|
3,578,461 |
|
|
|
3,134,138 |
|
|
|
|
|
|
|
|
|
|
Stockholders' Equity |
|
|
|
|
|
|
Common
stock, $0.01 par value; 150,000,000 shares authorized; |
|
|
|
|
|
|
56,245,065 shares issued; 45,992,366 shares outstanding at |
|
|
|
|
|
|
|
June 30, 2017 and 45,247,420 shares outstanding at |
|
|
|
|
|
|
June 30, 2016. |
|
|
562 |
|
|
|
562 |
|
Additional
paid-in capital |
|
|
512,337 |
|
|
|
513,177 |
|
Unallocated
common stock held by the employee stock |
|
|
|
|
|
|
ownership plan |
|
|
(18,407 |
) |
|
|
(20,481 |
) |
Non-vested
restricted stock awards |
|
|
(458 |
) |
|
|
(4,242 |
) |
Treasury stock, at
cost; 10,252,699 shares at June 30, 2017 and |
|
|
|
|
|
|
|
|
10,997,645 shares at June 30, 2016. |
|
|
(136,517 |
) |
|
|
(146,173 |
) |
Retained
earnings |
|
|
198,186 |
|
|
|
202,429 |
|
Accumulated
other comprehensive income (loss), net of tax |
|
|
3,520 |
|
|
|
(10,072 |
) |
Total stockholders' equity |
|
|
559,223 |
|
|
|
535,200 |
|
Total
Liabilities and Stockholders' Equity |
|
$ |
4,137,684 |
|
|
$ |
3,669,338 |
|
|
|
|
|
|
|
|
|
|
Oritani Financial Corp. and
Subsidiaries |
Consolidated Statements of Income |
Three and Twelve Months Ended June 30, 2017 and
2016 |
(In thousands, except share data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Twelve months ended |
|
|
|
|
June 30, |
|
|
June 30, |
|
|
|
|
2017 |
|
|
2016 |
|
|
|
2017 |
|
|
2016 |
|
|
|
|
|
unaudited |
|
|
unaudited |
|
audited |
Interest
income: |
|
|
|
|
|
|
|
|
|
|
|
|
Loans |
|
$ |
34,452 |
|
|
$ |
32,429 |
|
|
$ |
133,967 |
|
$ |
125,427 |
|
Dividends
on FHLB stock |
|
491 |
|
|
|
395 |
|
|
|
1,834 |
|
|
1,588 |
|
Securities
available for sale |
|
703 |
|
|
|
1,063 |
|
|
|
3,154 |
|
|
4,566 |
|
Securities
held to maturity |
|
917 |
|
|
|
765 |
|
|
|
3,500 |
|
|
2,737 |
|
Federal
funds sold and short term investments |
|
2 |
|
|
|
2 |
|
|
|
7 |
|
|
6 |
|
|
Total
interest income |
|
36,565 |
|
|
|
34,654 |
|
|
|
142,462 |
|
|
134,324 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense: |
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
|
6,724 |
|
|
|
5,138 |
|
|
|
24,671 |
|
|
17,884 |
|
Borrowings |
|
|
3,554 |
|
|
|
3,809 |
|
|
|
13,180 |
|
|
16,139 |
|
|
Total
interest expense |
|
10,278 |
|
|
|
8,947 |
|
|
|
37,851 |
|
|
34,023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income before provision for loan losses |
|
26,287 |
|
|
|
25,707 |
|
|
|
104,611 |
|
|
100,301 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for loan losses |
|
— |
|
|
|
— |
|
|
|
— |
|
|
— |
|
|
Net
interest income after provision for loan losses |
|
26,287 |
|
|
|
25,707 |
|
|
|
104,611 |
|
|
100,301 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income: |
|
|
|
|
|
|
|
|
|
|
|
|
Service
charges |
|
|
200 |
|
|
|
245 |
|
|
|
764 |
|
|
862 |
|
Real estate
operations, net |
|
— |
|
|
|
7 |
|
|
|
— |
|
|
301 |
|
Net income
from investments in real estate joint ventures |
— |
|
|
|
192 |
|
|
|
769 |
|
|
1,177 |
|
Bank-owned
life insurance |
|
639 |
|
|
|
674 |
|
|
|
2,618 |
|
|
2,718 |
|
Net
gain on sale of assets |
|
235 |
|
|
|
5,997 |
|
|
|
20,856 |
|
|
37,872 |
|
Net gain on
sale of securities |
|
(826 |
) |
|
|
386 |
|
|
|
(826 |
) |
|
990 |
|
Net loss on
termination of derivatives |
|
(7,670 |
) |
|
|
— |
|
|
|
(7,670 |
) |
|
— |
|
Other
income |
|
|
84 |
|
|
|
86 |
|
|
|
333 |
|
|
324 |
|
|
Total other
income |
|
(7,338 |
) |
|
|
7,587 |
|
|
|
16,844 |
|
|
44,244 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Compensation, payroll taxes and fringe benefits |
|
6,496 |
|
|
|
8,442 |
|
|
|
28,862 |
|
|
33,774 |
|
Advertising |
|
|
144 |
|
|
|
90 |
|
|
|
502 |
|
|
361 |
|
Office
occupancy and equipment expense |
|
763 |
|
|
|
778 |
|
|
|
3,178 |
|
|
3,002 |
|
Data
processing service fees |
|
572 |
|
|
|
510 |
|
|
|
2,213 |
|
|
2,030 |
|
Federal
insurance premiums |
|
300 |
|
|
|
449 |
|
|
|
1,350 |
|
|
1,649 |
|
Real estate
owned operations |
|
2 |
|
|
|
(14 |
) |
|
|
307 |
|
|
342 |
|
FHLBNY
prepayment penalties |
|
5,169 |
|
|
|
4,115 |
|
|
|
5,169 |
|
|
17,988 |
|
Other
expenses |
|
|
1,264 |
|
|
|
1,328 |
|
|
|
4,348 |
|
|
4,570 |
|
|
Total other
expenses |
|
14,710 |
|
|
|
15,698 |
|
|
|
45,929 |
|
|
63,716 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
before income tax expense |
|
4,239 |
|
|
|
17,596 |
|
|
|
75,526 |
|
|
80,829 |
Income
tax expense |
|
|
1,348 |
|
|
|
6,533 |
|
|
|
26,382 |
|
|
28,534 |
|
|
Net income |
|
$ |
2,891 |
|
|
$ |
11,063 |
|
|
$ |
49,144 |
|
|
52,295 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income per
basic common share |
$ |
0.07 |
|
|
$ |
0.26 |
|
|
$ |
1.14 |
|
$ |
1.25 |
Income per
diluted common share |
$ |
0.06 |
|
|
$ |
0.25 |
|
|
$ |
1.10 |
|
$ |
1.21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For further information contact:
Kevin J. Lynch
Chairman, President and Chief Executive Officer
Oritani Financial Corp.
(201) 664-5400
Oritani Financial (NASDAQ:ORIT)
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Oritani Financial (NASDAQ:ORIT)
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From Apr 2023 to Apr 2024