Oritani Financial Corp. (the “Company” or “Oritani”) (NASDAQ:
ORIT), the holding company for Oritani Bank (the “Bank”), reported
net income of $12.8 million, or $0.30 per basic (and $0.29 diluted)
common share, for the three months ended June 30, 2019, and $52.1
million, or $1.19 per basic (and $1.18 diluted) common share, for
the twelve months ended June 30, 2019. Net income was $13.5
million, or $0.30 per basic and diluted common share, for the three
months ended June 30, 2018, and $42.9 million, or $0.97 per basic
(and $0.95 diluted) common share, for the twelve months ended June
30, 2018.
The Company also reported that its Board of
Directors declared a $0.25 quarterly cash dividend on the Company’s
common stock. The record date for the dividend will be August
2, 2019 and the payment date will be August 16, 2019.
On June 26, 2019, the Company announced that it
had entered into a merger agreement with Valley National Bancorp
(“Valley”). Common shareholders of Oritani will receive 1.60
shares of Valley common stock for each Oritani common stock they
hold. The transaction is expected to close in the fourth
quarter of 2019, subject to standard regulatory approvals,
shareholder approvals from Valley and Oritani, as well as other
customary conditions. Any quarterly dividends declared by
Oritani subsequent to the one described in the paragraph above will
be limited to the current rate paid by Valley, exchange adjusted,
or $0.18 per common share, until the close of the merger.
“As we look forward to our pending partnership
with Valley, I am pleased to report the close of another strong
fiscal year for Oritani,” said Kevin J. Lynch, the Company’s
Chairman, President and CEO. “The results for fiscal 2019 once
again demonstrate our peak efficiency and robust earnings
capacity. We anticipate weaving these strengths into the
fabric of Valley’s culture.”
Comparison of Operating Results for the Periods
Ended June 30, 2019 and 2018
Net Income. Net income
decreased $720,000 to $12.8 million for the quarter ended June 30,
2019, from $13.5 million for the corresponding 2018 quarter.
Net income increased $9.2 million to $52.1 million for the twelve
months ended June 30, 2019, from $42.9 million for the
corresponding 2018 period. The most significant factor
contributing to the decreased quarterly income was increased
interest expense partially offset by decreased taxes. The
most significant factor resulting in the increased income in the
annual period is changes in income tax expense. Results for
the twelve months ended June 30, 2018 were impacted by the Tax Cuts
and Jobs Act (the “Act”). The Act required the Company to
revalue its deferred tax assets and deferred tax liabilities to
account for the future impact of lower corporate tax rates on these
deferred amounts. The revaluation resulted in a one-time charge of
$10.2 million.
Total Interest Income.
The components of interest income for the three months ended June
30, 2019 and 2018, changed as follows:
|
Three Months Ended June 30, |
Increase / (decrease) |
|
|
2019 |
|
2018 |
|
Average |
|
|
Income |
Yield |
Income |
Yield |
Income |
Balance |
Yield |
Interest Income on: |
(Dollars in thousands) |
Loans |
$ |
37,097 |
4.24% |
$ |
36,925 |
4.15% |
$ |
172 |
|
$ |
(61,604) |
0.09% |
Dividends on FHLB stock |
|
421 |
6.58% |
|
420 |
6.30% |
|
1 |
|
|
(1,053) |
0.28% |
Equity securities |
|
11 |
3.20% |
|
9 |
2.37% |
|
2 |
|
|
(140) |
0.83% |
Debt securities AFS |
|
195 |
2.28% |
|
258 |
2.27% |
|
(63) |
|
|
(11,255) |
0.01% |
Debt securities HTM |
|
2,080 |
2.45% |
|
1,665 |
2.16% |
|
415 |
|
|
30,532 |
0.29% |
Federal funds sold and |
|
|
|
|
|
|
|
short term investments |
|
45 |
2.25% |
|
16 |
1.49% |
|
29 |
|
|
3,724 |
0.76% |
Total interest income |
$ |
39,849 |
4.08% |
$ |
39,293 |
3.98% |
$ |
556 |
|
$ |
(39,796) |
0.10% |
|
|
|
|
|
|
|
|
As discussed in recent public releases, the
market to originate multifamily and commercial real estate loans
has been exceptionally challenging in recent periods.
Proposed changes to rent regulations in New York and their
potentially negative impact on rent regulated multifamily
properties depressed sales volume in calendar 2019. Such
legislation was passed in June 2019 and contained many tenant
friendly provisions. Activity is likely to remain sluggish as
the impact of the changes is fully digested by the markets.
In addition, the decreased external interest rate environment has
lowered the market rates on new multifamily and commercial real
estate loan originations.
The Company’s loan balances decreased slightly
($4.1 million) during the quarter ended June 30, 2019.
Originations for the quarter ended June 30, 2019, were $135.7
million and an additional $19.5 million of loans were purchased,
however, principal repayments were elevated and totaled $160.0
million.
The average balance of the loan portfolio
increased $23.8 million for the three months ended June 30, 2019
versus the three months ended March 31, 2019. Activity totals
for the June 2019 quarter are above. Loan originations,
purchases and principal payments totaled $89.0 million, $4.6
million and $73.9 million, respectively, for the three months ended
March 31, 2019. The Company’s loan pipeline was $177.3
million at June 30, 2019 versus $167.1 million as of March 31,
2019.
The average balance of the loan portfolio
decreased $61.6 million for the three months ended June 30, 2019
versus the comparable 2018 period. Loan originations,
purchases and principal payments totaled $121.7 million, $16.5
million and $163.3 million, respectively, for the three months
ended June 30, 2018.
The yield on the loan portfolio increased 9
basis points for the quarter ended June 30, 2019 versus the
comparable 2018 period. On a linked quarter basis (June 30,
2019 versus March 31, 2019), the yield on the loan portfolio
increased 17 basis points. The level of prepayment income
impacted these results. Exclusive of prepayment penalties,
the yield on the loan portfolio increased 13 basis points versus
the quarter ended June 30, 2018 and 4 basis points versus the March
31, 2019 quarter. Prepayment penalties totaled $1.4 million,
$275,000 and $1.8 million for the quarters ended June 30, 2019,
March 31, 2019 and June 30, 2018, respectively. In addition
to prepayment penalties, the prepayment level also effects the loan
yield through the realization of deferred loan fees. While
loan fees are regularly amortized into income, loan prepayments
accelerate the recognition of these fees as income. Deferred
loan fees recognized as interest income totaled $620,000, $438,000
and $729,000 for the quarters ended June 30, 2019, March 31, 2019
and June 30, 2018, respectively.
The average balance of debt securities available
for sale decreased $11.3 million for the three months ended June
30, 2019 versus the comparable 2018 period, while the average
balance of debt securities held to maturity increased $30.5 million
over the same period. The Company has been classifying the
majority of new purchases as held to maturity.
The components of interest income for the twelve
months ended June 30, 2019 and 2018, changed as follows:
|
Twelve Months Ended June 30, |
Increase / (decrease) |
|
|
2019 |
|
|
2018 |
|
|
Average |
|
|
Income |
Yield |
Income |
Yield |
Income |
Balance |
Yield |
Interest Income on: |
(Dollars in thousands) |
Loans |
$ |
144,457 |
4.15% |
$ |
144,051 |
4.05% |
$ |
406 |
|
$ |
(77,652) |
0.10% |
Dividends on FHLB stock |
|
1,817 |
6.79% |
|
1,788 |
6.55% |
|
29 |
|
|
(566) |
0.24% |
Equity securities |
|
48 |
3.37% |
|
43 |
2.81% |
|
5 |
|
|
(105) |
0.56% |
Debt securities AFS |
|
868 |
2.29% |
|
1,461 |
2.13% |
|
(593) |
|
|
(30,761) |
0.16% |
Debt securities HTM |
|
8,189 |
2.41% |
|
5,328 |
2.00% |
|
2,861 |
|
|
72,102 |
0.41% |
Federal funds sold and |
|
|
|
|
|
|
|
short term investments |
|
376 |
2.26% |
|
155 |
1.34% |
|
221 |
|
|
5,115 |
0.92% |
Total interest income |
$ |
155,755 |
3.99% |
$ |
152,826 |
3.88% |
$ |
2,929 |
|
$ |
(31,867) |
0.11% |
|
|
|
|
|
|
|
|
The explanations for changes described above for
the quarterly period are also largely applicable to the twelve
month period. Loan originations, purchases, sales and
principal payments for the twelve months ended June 30, 2019
totaled $414.4 million, $138.5 million, $8.1 million and $599.0
million, respectively. Loan originations, purchases and
principal payments for the twelve months ended June 30, 2018
totaled $470.7 million, $69.2 million and $566.8 million,
respectively. There were no sales in the 2018 period.
Prepayment penalties totaled $4.6 million for the twelve months
ended June 30, 2019 and $5.3 million for the twelve months ended
June 30, 2018. Prepayment penalties boosted annualized loan
yield by 13 basis points in the 2019 period versus 15 basis points
in the 2018 period.
Total Interest Expense. The
components of interest expense for the three months ended June 30,
2019 and 2018, changed as follows:
|
Three Months Ended June 30, |
Increase / (decrease) |
|
|
2019 |
|
2018 |
|
|
Average |
|
|
Expense |
Cost |
Expense |
Cost |
Expense |
Balance |
Cost |
Interest Expense on: |
(Dollars in thousands) |
Savings deposits |
$ |
1,190 |
1.23% |
$ |
131 |
0.28% |
$ |
1,059 |
|
$ |
196,168 |
0.95% |
Money market |
|
1,732 |
1.13% |
|
2,093 |
1.08% |
|
(361) |
|
|
(160,495) |
0.05% |
Checking accounts |
|
2,341 |
1.41% |
|
1,580 |
0.83% |
|
761 |
|
|
(93,921) |
0.58% |
Time deposits |
|
6,572 |
2.07% |
|
4,792 |
1.56% |
|
1,780 |
|
|
40,220 |
0.51% |
Total deposits |
|
11,835 |
1.61% |
|
8,596 |
1.17% |
|
3,239 |
|
|
(18,028) |
0.44% |
Borrowings |
|
3,357 |
2.57% |
|
2,976 |
2.20% |
|
381 |
|
|
(18,276) |
0.37% |
Total interest expense |
$ |
15,192 |
1.76% |
$ |
11,572 |
1.33% |
$ |
3,620 |
|
$ |
(36,304) |
0.43% |
|
|
|
|
|
|
|
|
As discussed in recent public releases, deposit
growth has been difficult to attain in the current
environment. The Company has increased the rate of interest
offered on various deposit products in order to maintain
balances. Recently, the Company offered new, high-rate, money
market and savings products to attract deposits. The Company
has been largely successful in minimizing the outflow of deposits
however, sizeable growth was not obtained. As compared to the
quarter ended March 31, 2019, the average balance of deposits
increased $21.4 million, period end balances increased $24.6
million and the cost of deposits increased 12 basis points.
The increase in deposit cost is due to the increased interest rates
offered on various deposit products and customer migration toward
products with a greater return.
As detailed above, the average balance of
deposits decreased $18.0 million for the quarter ended June 30,
2019 versus the comparable 2018 period. The average balance
of brokered deposits increased $30.7 million between the
periods. The average balance of municipal deposits, which can
be subject to significant fluctuation, decreased $53.2 million
between the periods. The overall cost of deposits increased
44 basis points for the quarter ended June 30, 2019 versus the
comparable 2018 period. The increased costs are primarily due
to the impact of market pressures as described above.
Customer migration is largely responsible for some of the
significant shifts in the average balance of products detailed
above.
The average balance of borrowings decreased
$18.3 million for the three months ended June 30, 2019 versus the
comparable 2018 period, while the cost increased 37 basis
points. The cost of borrowings has been impacted by the
overall increase in interest rates, particularly overnight and
short term borrowings, and the maturities of lower cost
borrowings.
The components of interest expense for the
twelve months ended June 30, 2019 and 2018, changed as follows:
|
Twelve Months Ended June 30, |
Increase / (decrease) |
|
|
2019 |
|
2018 |
|
Average |
|
|
Expense |
Cost |
Expense |
Cost |
Expense |
Balance |
Cost |
Interest Expense on: |
(Dollars in thousands) |
Savings deposits |
$ |
2,986 |
0.98% |
$ |
455 |
0.25% |
$ |
2,531 |
|
$ |
121,059 |
0.73% |
Money market |
|
7,397 |
1.10% |
|
9,038 |
1.10% |
|
(1,641) |
|
|
(149,906) |
0.00% |
Checking accounts |
|
8,556 |
1.21% |
|
4,955 |
0.66% |
|
3,601 |
|
|
(44,554) |
0.55% |
Time deposits |
|
22,699 |
1.84% |
|
17,176 |
1.45% |
|
5,523 |
|
|
52,936 |
0.39% |
Total deposits |
|
41,638 |
1.43% |
|
31,624 |
1.08% |
|
10,014 |
|
|
(20,465) |
0.35% |
Borrowings |
|
13,029 |
2.42% |
|
11,276 |
2.08% |
|
1,753 |
|
|
(5,810) |
0.34% |
Total interest expense |
$ |
54,667 |
1.58% |
$ |
42,900 |
1.23% |
$ |
11,767 |
|
$ |
(26,275) |
0.35% |
The explanations for changes described above for
the three month period regarding deposits and borrowings are also
largely applicable to the twelve month period.
Net Interest Income Before Provision for
Loan Losses. Net interest income decreased by $3.1 million
to $24.7 million for the three months ended June 30, 2019, from
$27.7 million for the three months ended June 30, 2018. Net
interest income decreased by $8.8 million to $101.1 million for the
twelve months ended June 30, 2019, from $109.9 million for the
twelve months ended June 30, 2018. The Company’s net interest
income, spread and margin over the period are detailed in the chart
below.
|
|
|
|
|
Net Interest |
|
|
|
|
|
|
|
|
|
Income |
|
|
|
|
|
|
|
|
|
Before |
|
|
|
|
|
|
|
|
|
Provision |
|
|
|
|
|
|
Net Interest |
|
Prepayment |
|
Excluding |
Including Prepayment |
Excluding Prepayment |
|
|
Income Before |
|
Penalty |
|
Prepayment |
Penalties |
Penalties |
Quarter Ended |
|
Provision |
|
Income |
|
Penalties |
Spread |
Margin |
Spread |
Margin |
|
|
(dollars in thousands) |
June 30, 2019 |
|
$ |
24,657 |
|
$ |
1,444 |
|
$ |
23,213 |
2.32% |
2.53% |
2.17% |
2.38% |
March 31, 2019 |
|
|
24,109 |
|
|
275 |
|
|
23,834 |
2.29% |
2.48% |
2.26% |
2.45% |
December 31, 2018 |
|
|
26,027 |
|
|
1,727 |
|
|
24,300 |
2.51% |
2.68% |
2.33% |
2.51% |
September 30, 2018 |
|
|
26,295 |
|
|
1,154 |
|
|
25,141 |
2.51% |
2.67% |
2.40% |
2.55% |
June 30, 2018 |
|
|
27,721 |
|
|
1,836 |
|
|
25,885 |
2.65% |
2.81% |
2.47% |
2.63% |
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. However, the time period when these events
could occur may not align, and the specific behavior of borrowers
is difficult to predict. Borrowers can be driven to prepay
their loans based on factors other than interest rates.
The Company’s spread and margin have been under
pressure due to several factors, including an inverted treasury
yield curve, modifications of loans within the existing loan
portfolio, prepayments of higher yielding loans and investments,
and increased funding costs. While spread and margin have been
under pressure for an extended period, the competitive market for
deposits increased substantially in fiscal 2019. Although the
Company has realized increases in both the cost of funds and the
yield on interest earning assets, the increase in cost of funds has
outpaced the increase in yield on assets. The cost increase
incurred in the most recent quarter is largely due to
competition. The Company offered several high rate deposit
products in order to retain deposit accounts and attain
growth. While these products were successful in maintaining
balances, significant growth was not realized and the cost of funds
increased. Subsequent to June 30, 2019, the Company reduced
the interest rate paid on these products though the reduced rate is
still higher than the Company’s cost of deposits. The Company
did realize growth in higher cost certificates of deposits.
The rates associated with these products were also reduced
subsequent to June 30, 2019. In addition, several lower cost
borrowings and interest rate swaps matured during the quarter ended
June 30, 2019.
The Company’s net interest income and net
interest rate spread were both negatively impacted in most periods
due to the reversal of accrued interest income on loans delinquent
more than 90 days. The total of such income reversed was
$105,000 and $340,000 for the three and twelve months ended June
30, 2019, respectively, and $198,000 for the twelve months ended
June 30, 2018. Net interest income and spread were positively
impacted by the net recognition of $11,000 of interest income on
nonaccrual loans for the three months ended June 30, 2018.
Provision for Loan
Losses. The Company recorded no provision for loan
losses for the three months ended June 30, 2019 and the three and
twelve months ended June 30, 2018. The Company recorded a
reversal of provision for loan losses of $2.0 million for the
twelve months ended June 30, 2019. A rollforward of the
allowance for loan losses for the three and twelve months ended
June 30, 2019 and 2018 is presented below:
|
Three months ended |
|
Twelve months ended |
|
June 30, |
|
June 30, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|
(Dollars in thousands) |
Balance at beginning of
period |
$28,590 |
|
$30,473 |
|
$30,562 |
|
$30,272 |
Reversal of provision for loan
losses |
- |
|
- |
|
(2,000) |
|
- |
Recoveries of loans previously
charged off |
6 |
|
89 |
|
99 |
|
407 |
Loans charged off |
- |
|
- |
|
65 |
|
117 |
Balance at end of period |
$28,596 |
|
$30,562 |
|
$28,596 |
|
$30,562 |
|
|
|
|
|
|
|
|
Allowance for loan losses to
total loans |
0.81% |
|
0.85% |
|
0.81% |
|
0.85% |
Net charge-offs (annualized)
to average |
|
|
|
|
|
|
|
loans outstanding |
-% |
|
(0.01)% |
|
-% |
|
(0.01)% |
Delinquency and non performing asset information
is provided below:
|
6/30/2019 |
3/31/2019 |
12/31/2018 |
9/30/2018 |
6/30/2018 |
|
Dollars in thousands |
Delinquency
Totals |
|
|
|
|
|
30 - 59 days past due |
$ |
3,146 |
|
$ |
1,648 |
|
$ |
2,890 |
|
$ |
15,261 |
|
$ |
5,253 |
60 - 89 days past due |
|
641 |
|
|
975 |
|
|
8,431 |
|
|
356 |
|
|
171 |
Nonaccrual |
|
10,053 |
|
|
10,184 |
|
|
10,706 |
|
|
9,083 |
|
|
7,877 |
Total |
$ |
13,840 |
|
$ |
12,807 |
|
$ |
22,027 |
|
$ |
24,700 |
|
$ |
13,301 |
|
|
|
|
|
|
Non Performing Asset
Totals |
|
|
|
|
|
Nonaccrual loans, per
above |
$ |
10,053 |
|
$ |
10,184 |
|
$ |
10,706 |
|
$ |
9,083 |
|
$ |
7,877 |
Real Estate Owned |
|
557 |
|
|
636 |
|
|
636 |
|
|
1,564 |
|
|
1,564 |
Total |
$ |
10,610 |
|
$ |
10,820 |
|
$ |
11,342 |
|
$ |
10,647 |
|
$ |
9,441 |
|
|
|
|
|
|
Nonaccrual loans to total
loans |
|
0.28% |
|
|
0.29% |
|
|
0.30% |
|
|
0.26% |
|
|
0.22% |
Delinquent loans to total
loans |
|
0.39% |
|
|
0.36% |
|
|
0.63% |
|
|
0.70% |
|
|
0.37% |
Non performing assets to total
assets |
|
0.26% |
|
|
0.27% |
|
|
0.28% |
|
|
0.26% |
|
|
0.23% |
The $2.0 million reversal of provision for loan
losses recorded for the twelve month period ended June 30, 2019 was
due primarily to loan portfolio contraction and reduced qualitative
factors within the allowance calculation as determined as part of
our quarterly reassessment. Overall, non-performing asset
totals and charge-offs continue to illustrate minimal credit issues
at the Company.
Non-interest Income.
Non-interest income increased $185,000 to $1.2 million for the
three months ended June 30, 2019, from $1.0 million for the three
months ended June 30, 2018. The increase is primarily
due to a $211,000 increase in fees and service charges. The
Company recognizes late fees on loans only when they are paid, and
a large late fee penalty was collected in connection with a loan
extension.
Non-interest income increased $1.2 million to
$4.8 million for the twelve months ended June 30, 2019 from $3.6
million for the twelve months ended June 30, 2018. The
increase is primarily due to a gain of $855,000 on the sale of a
foreclosed property as well as the increase in fees and service
charges discussed above. In addition, results for the 2018
period were reduced by a loss of $324,000 on the sale of certain
AFS investment securities. There were no sales of securities
in the 2019 period. These increases were partially offset by
a $208,000 decrease in fair value of equity securities held by the
Company that occurred in the 2019 period.
Non-interest Expense.
Non-interest expenses decreased $750,000 to $9.3 million for the
three months ended June 30, 2019, from $10.0 million for the three
months ended June 30, 2018. The decrease was primarily due to
other expenses, which decreased $1.4 million to $1.4 million for
the three months ended June 30, 2019, from $2.7 million for the
three months ended June 30, 2018. The reduction is
primarily due to decreased professional fees associated with the
remediation of Bank Secrecy Act and Anti-Money Laundering
compliance matters (discussed in previous public releases) and the
recovery of problem loan expenses that were expensed in a prior
period. The Company had no professional fees related to the
remediation of the compliance matters in the quarter ended June 30,
2019, and incurred such expenses totaling $1.0 million in the three
months ended June 30, 2018. This decrease was partially offset by
an increase in compensation, payroll taxes and fringe benefits,
which increased $745,000 to $6.2 million for the three months ended
June 30, 2019, from $5.5 million for the three months ended June
30, 2018. The increase was largely due to the cost
associated with a non-qualified SERP plan. There were
significant changes in the accruals necessary for this plan that
were predominantly caused by changes in the external rate
environment. A higher interest rate environment in 2018
necessitated a reduction to the expense in that period, while lower
interest rates in 2019 required an additional expense in the
current period. The resulting change in expense between the
two periods was $866,000.
Non-interest expenses decreased $725,000 to
$38.8 million for the twelve months ended June 30, 2019, from $39.5
million for the twelve months ended June 30, 2018.
Compensation, payroll taxes and fringe benefits decreased $1.4
million to $23.7 million for the twelve months ended June 30, 2019,
from $25.1 million for the twelve months ended June 30,
2018. This result was attained despite the cost of the
SERP referenced above, although the increase in the cost of the
SERP was less on an annual basis comparison. The decrease was
primarily due to decreased costs associated with the ESOP as well
as a non-qualified ESOP companion plan. A reduction in bonus
costs also contributed to the decrease. Other expenses
increased $844,000 to $8.3 million for the twelve months ended June
30, 2019, from $7.4 million for the twelve months ended June 30,
2018. The increase is primarily due to an additional
pension contribution that was expensed in fiscal 2019.
Professional fees associated with the remediation of compliance
matters also contributed to the increase. Such fees totaled
$1.5 million for the 2019 period versus $1.3 million for the 2018
period. These increases were partially offset by problem loan
expense recoveries.
Income Tax Expense.
Income tax expense for the three months ended June 30, 2019 was
$3.8 million on pre-tax income of $16.6 million, resulting in an
effective tax rate of 22.9%. Income tax expense for the
twelve months ended June 30, 2019, was $17.0 million on pre-tax
income of $69.1 million, resulting in an effective tax rate of
24.6%. The Company’s estimated effective tax rate for the
fiscal year ending June 30, 2019 was 25.0%. This estimated
effective rate is lower than prior fiscal years primarily as a
result of the Act. The actual expenses for the three and
twelve month periods ending June 30, 2019, were positively affected
by tax strategies regarding state tax liabilities and a refund of
an item that was expensed in a prior period. The twelve month
period was also positively affected by the exercise of nonqualified
stock options. Further, the twelve month period ending June
30, 2019 was negatively impacted by New Jersey tax legislation
enacted on July 1, 2018. The legislation required, among
other consequences, a revaluation of our deferred tax
assets/liabilities based on the rates at which they are expected to
reverse in the future. The revaluation of the Company's
deferred tax balances resulted in a one-time non-cash charge of
$477,000 which is included in income tax expense for the twelve
months ended June 30, 2019. Income tax expense for the three
and twelve month periods ended June 30, 2018 was $5.2 million and
$31.1 million, respectively. Income tax expense for the
twelve month period ended June 30, 2018 was significantly impacted
by the Act, as previously discussed in “Comparison of Operating
Results, Net Income.”
Comparison of Financial
Condition at June 30, 2019 and June 30, 2018
Total Assets. Total
assets decreased $96.5 million to $4.07 billion at June 30, 2019,
from $4.17 billion at June 30, 2018. The primary contributor
to the decreased asset level was the contraction in loan balances
and other assets.
Cash and Cash Equivalents. Cash and cash
equivalents (which include fed funds and short term investments)
decreased $8.3 million to $26.5 million at June 30, 2019, from
$34.8 million at June 30, 2018.
Net Loans. Loans, net
decreased $49.6 million to $3.49 billion at June 30, 2019, from
$3.54 billion at June 30, 2018. As discussed in “Total
Interest Income,” our origination volume is below historical levels
and loan principal payments have been elevated in fiscal
2019.
Debt securities available for
sale. Debt securities AFS decreased $10.4 million to
$32.8 million at June 30, 2019, from $43.1 million at June 30,
2018. The decrease is primarily due to principal
payments.
Debt securities held to
maturity. Debt securities HTM decreased $3.2 million
to $332.2 million at June 30, 2019, from $335.4 million at June 30,
2018. Purchases have been approximately equal to principal
payments.
Federal Home Loan Bank of New York
(“FHLB”) stock. FHLB stock decreased $4.4 million to
$25.9 million at June 30, 2019, from $30.4 million at June 30,
2018. FHLB stock holdings are required depending on several
factors, including the level of borrowings with the FHLB. As
FHLB borrowings decreased over the period, excess FHLB stock was
redeemed.
Other Assets. Other
assets decreased $27.2 million to $3.1 million at June 30, 2019,
from $30.3 million at June 30, 2018. The primary cause of the
decrease was the decline in the fair market value of the Company’s
interest rate swap portfolio.
Deposits. Deposits
increased $8.1 million to $2.92 billion at June 30, 2019, from
$2.92 billion at June 30, 2018. See “Total Interest Expense”
for discussion regarding deposit balances. The Company’s loan
to deposit ratio was 119.4% at June 30, 2019.
Borrowings. Borrowings
decreased $74.8 million to $521.6 million at June 30, 2019, from
$596.4 million at June 30, 2018. See “Total Interest Expense”
for discussion regarding borrowing amounts.
Stockholders’ Equity.
Stockholders’ equity decreased $30.2 million to $529.1 million at
June 30, 2019, from $559.3 million at June 30, 2018. The
decrease was primarily due to dividends and stock repurchases,
partially offset by net income and the release of treasury shares
in conjunction with stock option exercises. There were no
stock repurchases during the quarter ended June 30, 2019.
Based on our June 30, 2019 closing price of $17.74 per share, the
Company stock was trading at 151.2% 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,
2018 (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 |
2019 |
|
2018 |
|
|
(unaudited) |
|
|
(audited) |
Cash on hand and in banks |
$ |
19,145 |
|
|
$ |
23,613 |
|
Federal funds sold and short term
investments |
|
7,366 |
|
|
|
11,235 |
|
Cash and cash equivalents |
|
26,511 |
|
|
|
34,848 |
|
|
|
|
|
|
|
Loans, net |
|
3,491,322 |
|
|
|
3,540,903 |
|
Equity securities |
|
1,358 |
|
|
|
1,565 |
|
Debt securities available for
sale, at fair value |
|
32,752 |
|
|
|
43,126 |
|
Debt securities held to
maturity, |
|
|
|
|
|
fair value of $334,179 and $326,511, respectively. |
|
332,215 |
|
|
|
335,374 |
|
Bank Owned Life Insurance (at
cash surrender value) |
|
100,872 |
|
|
|
98,438 |
|
Federal Home Loan Bank of New
York stock ("FHLB"), at cost |
|
25,925 |
|
|
|
30,365 |
|
Accrued interest
receivable |
|
11,935 |
|
|
|
11,261 |
|
Real estate owned |
|
557 |
|
|
|
1,564 |
|
Office properties and
equipment, net |
|
12,904 |
|
|
|
13,455 |
|
Deferred tax assets |
|
31,045 |
|
|
|
25,864 |
|
Other assets |
|
3,120 |
|
|
|
30,276 |
|
Total Assets |
$ |
4,070,516 |
|
|
$ |
4,167,039 |
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
Deposits |
$ |
2,923,244 |
|
|
$ |
2,915,128 |
|
Borrowings |
|
521,555 |
|
|
|
596,372 |
|
Advance payments by borrowers
for taxes and |
|
|
|
|
|
insurance |
|
24,607 |
|
|
|
24,169 |
|
Accrued taxes payable |
|
692 |
|
|
|
— |
|
Official checks
outstanding |
|
2,936 |
|
|
|
5,454 |
|
Other liabilities |
|
68,335 |
|
|
|
66,570 |
|
Total liabilities |
|
3,541,369 |
|
|
|
3,607,693 |
|
|
|
|
|
|
|
Stockholders' Equity |
|
|
|
|
|
Common stock, $0.01 par value;
150,000,000 shares authorized; |
|
|
|
|
|
56,245,065 shares issued; 45,097,052 shares outstanding at |
|
|
|
|
|
June 30, 2019 and 46,616,646 shares outstanding at |
|
|
|
|
|
June 30, 2018. |
|
562 |
|
|
|
562 |
|
Additional paid-in
capital |
|
515,491 |
|
|
|
514,002 |
|
Unallocated common stock held
by the employee stock |
|
|
|
|
|
ownership plan |
|
(15,085 |
) |
|
|
(16,631 |
) |
Non-vested restricted stock
awards |
|
(216 |
) |
|
|
(176 |
) |
Treasury stock, at cost;
11,148,013 shares at June 30, 2019 and |
|
|
|
|
|
9,628,419 shares at June 30, 2018. |
|
(153,091 |
) |
|
|
(129,433 |
) |
Retained earnings |
|
182,032 |
|
|
|
179,799 |
|
Accumulated other
comprehensive income, net of tax |
|
(546 |
) |
|
|
11,223 |
|
Total stockholders' equity |
|
529,147 |
|
|
|
559,346 |
|
Total Liabilities and
Stockholders' Equity |
$ |
4,070,516 |
|
|
$ |
4,167,039 |
|
|
|
|
|
|
|
See accompanying notes to
unaudited consolidated financial statements. |
|
|
|
|
|
Oritani Financial Corp. and Subsidiaries |
Consolidated Statements of Income |
Three and Twelve Months Ended June 30, 2019 and 2018 |
(In thousands, except share data) |
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Twelve months ended |
|
June 30, |
|
|
June 30, |
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
|
|
unaudited |
|
|
unaudited |
Interest income: |
|
|
|
|
|
|
|
|
|
|
Loans |
$ |
37,097 |
|
|
$ |
36,925 |
|
$ |
144,457 |
|
$ |
144,051 |
|
Dividends on FHLB stock |
|
421 |
|
|
|
420 |
|
|
1,817 |
|
|
1,788 |
|
Dividends on equity securities |
|
11 |
|
|
|
9 |
|
|
48 |
|
|
43 |
|
Debt securities available for sale |
|
195 |
|
|
|
258 |
|
|
868 |
|
|
1,461 |
|
Debt securities held to maturity |
|
2,080 |
|
|
|
1,665 |
|
|
8,189 |
|
|
5,328 |
|
Federal funds sold and short term investments |
|
45 |
|
|
|
16 |
|
|
376 |
|
|
155 |
|
Total Interest Income |
|
39,849 |
|
|
|
39,293 |
|
|
155,755 |
|
|
152,826 |
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense: |
|
|
|
|
|
|
|
|
|
|
Deposits |
|
11,835 |
|
|
|
8,596 |
|
|
41,638 |
|
|
31,624 |
|
Borrowings |
|
3,357 |
|
|
|
2,976 |
|
|
13,029 |
|
|
11,276 |
|
Total interest expense |
|
15,192 |
|
|
|
11,572 |
|
|
54,667 |
|
|
42,900 |
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income before provision for loan losses |
|
24,657 |
|
|
|
27,721 |
|
|
101,088 |
|
|
109,926 |
|
Reversal of provision for loan
losses |
|
— |
|
|
|
— |
|
|
(2,000 |
) |
|
— |
|
Net interest income after provision for loan losses |
|
24,657 |
|
|
|
27,721 |
|
|
103,088 |
|
|
109,926 |
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest income: |
|
|
|
|
|
|
|
|
|
|
Fees and service charges for customer services |
|
611 |
|
|
|
400 |
|
|
1,655 |
|
|
1,410 |
|
Bank-owned life insurance |
|
606 |
|
|
|
613 |
|
|
2,434 |
|
|
2,492 |
|
Gains (losses) on sale of OREO |
|
— |
|
|
|
— |
|
|
855 |
|
|
(2 |
) |
Change in fair value of equity securities |
|
(21 |
) |
|
|
— |
|
|
(208 |
) |
|
— |
|
Net losses on sale of debt securities AFS |
|
— |
|
|
|
— |
|
|
— |
|
|
(324 |
) |
Other income |
|
4 |
|
|
|
2 |
|
|
22 |
|
|
18 |
|
Total non-interest income |
|
1,200 |
|
|
|
1,015 |
|
|
4,758 |
|
|
3,594 |
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest expense: |
|
|
|
|
|
|
|
|
|
|
Compensation, payroll taxes and fringe benefits |
|
6,208 |
|
|
|
5,463 |
|
|
23,678 |
|
|
25,082 |
|
Advertising |
|
142 |
|
|
|
143 |
|
|
570 |
|
|
571 |
|
Office occupancy and equipment expense |
|
734 |
|
|
|
804 |
|
|
3,049 |
|
|
3,195 |
|
Data processing service fees |
|
541 |
|
|
|
566 |
|
|
2,086 |
|
|
2,029 |
|
Federal insurance premiums |
|
270 |
|
|
|
300 |
|
|
1,125 |
|
|
1,200 |
|
Other expenses |
|
1,374 |
|
|
|
2,743 |
|
|
8,277 |
|
|
7,433 |
|
Total non-interest expense |
|
9,269 |
|
|
|
10,019 |
|
|
38,785 |
|
|
39,510 |
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax expense |
|
16,588 |
|
|
|
18,717 |
|
|
69,061 |
|
|
74,010 |
|
Income tax expense |
|
3,805 |
|
|
|
5,214 |
|
|
17,002 |
|
|
31,116 |
|
Net income |
$ |
12,783 |
|
|
$ |
13,503 |
|
$ |
52,059 |
|
|
42,894 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income per basic common
share |
$ |
0.30 |
|
|
$ |
0.30 |
|
$ |
1.19 |
|
$ |
0.97 |
|
Income per diluted common
share |
$ |
0.29 |
|
|
$ |
0.30 |
|
$ |
1.18 |
|
$ |
0.95 |
|
For further information contact:
Kevin J. Lynch
Chairman, President and Chief Executive Officer
Oritani Financial Corp.
(201) 664-5400
Oritani Financial (NASDAQ:ORIT)
Historical Stock Chart
From Aug 2024 to Sep 2024
Oritani Financial (NASDAQ:ORIT)
Historical Stock Chart
From Sep 2023 to Sep 2024