Oritani Financial Corp. (the “Company” or “Oritani”) (NASDAQ:ORIT),
the holding company for Oritani Bank (the “Bank”), reported net
income of $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. Net income was $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.
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
3, 2018 and the payment date will be August 17, 2018.
“I am pleased to report the close of another
favorable fiscal year for Oritani,” said Kevin J. Lynch, the
Company’s Chairman, President and CEO. “The year presented acute
challenges regarding growth and we did not achieve results that
comport to our historical level of loan and deposit balance
expansion.” Mr. Lynch continued: “However, our income remains
exceptionally strong and we are poised to continue to deliver
outstanding results.”
Comparison of Operating Results for the Periods
Ended June 30, 2018 and 2017
Net Income. Net income
increased $10.6 million to $13.5 million for the quarter ended June
30, 2018, from $2.9 million for the quarter ended June 30,
2017. Net income decreased $6.3 million to $42.9 million for
the twelve months ended June 30, 2018, from $49.1 million for the
corresponding 2017 period. Results for the twelve months
ended June 30, 2018 were impacted by the “Tax Cuts and Jobs Act”
(the “Act”) that was signed into law on December 22, 2017.
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. This
revaluation, in addition to other factors, resulted in a net charge
of $8.9 million that was recognized as of December 31, 2017 and
included in the results for the twelve months ended June 30,
2018. Results for the quarter ended June 30, 2017 were
negatively impacted by a balance sheet restructure with an after
tax cost of $13.9 million. Results for the twelve months
ended June 30, 2017 were also impacted by the balance sheet
restructure cost as well as the sale of the Company’s last
remaining investment in real estate joint ventures. The
resulting pretax gain on this sale was $20.9 million.
Total Interest Income.
The components of interest income for the three months ended June
30, 2018 and 2017, changed as follows:
|
|
|
Three Months Ended June 30, |
|
Increase / (decrease) |
|
|
|
|
2018 |
|
|
|
2017 |
|
|
|
|
Average |
|
|
|
|
|
Income |
|
Yield |
|
Income |
|
Yield |
|
Income |
|
Balance |
|
Yield |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands) |
Interest on
loans |
|
$ |
36,925 |
|
4.15 |
% |
|
$ |
34,452 |
|
3.90 |
% |
|
$ |
2,473 |
|
|
$ |
23,838 |
|
|
0.25 |
% |
Dividends
on FHLB stock |
|
|
420 |
|
6.30 |
% |
|
|
491 |
|
5.55 |
% |
|
|
(71 |
) |
|
|
(8,749 |
) |
|
0.75 |
% |
Interest on
securities AFS |
|
|
267 |
|
2.28 |
% |
|
|
703 |
|
1.79 |
% |
|
|
(436 |
) |
|
|
(109,808 |
) |
|
0.49 |
% |
Interest on
securities HTM |
|
|
1,665 |
|
2.16 |
% |
|
|
917 |
|
1.88 |
% |
|
|
748 |
|
|
|
113,341 |
|
|
0.28 |
% |
Interest on
federal funds sold |
|
|
|
|
|
|
|
|
|
|
|
|
|
and short
term investments |
|
|
16 |
|
1.49 |
% |
|
|
2 |
|
1.04 |
% |
|
|
14 |
|
|
|
3,513 |
|
|
0.45 |
% |
|
Total interest
income |
|
$ |
39,293 |
|
3.98 |
% |
|
$ |
36,565 |
|
3.73 |
% |
|
$ |
2,728 |
|
|
$ |
22,135 |
|
|
0.25 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company’s primary strategic business
objective remains the organic growth of multifamily and commercial
real estate loans. However, the Company encountered
significant obstacles in the execution of this strategy in fiscal
2018. The most noteworthy hindrance was, and remains,
competitor loan terms and pricing. This factor directly
influenced the Company’s lower level of loan volume and elevated
level of prepayments. While Oritani has historically not been
particularly competitive on loan structures with a fixed period
greater than five years, Oritani has been very competitive on loan
structures with a fixed period of five years or less. In
fiscal 2018, Oritani’s metrics for pricing such loans resulted in
rates that were higher than those of some competitors. The
Board and management ultimately determined that matching competitor
rates presented undue risk to our future profitability and were
willing to accept lower originations and higher prepayments.
The Company is poised to return to historical levels when market
conditions improve. As a result, the average balance of the
loan portfolio only increased $23.8 million for the three months
ended June 30, 2018 versus the comparable 2017 period. Loan
originations, purchases and payments totaled $121.7 million, $16.5
million and $163.3 million, respectively, for the three months
ended June 30, 2018. This compares to loan originations and
payments of $108.1 million and $73.1 million, respectively, for the
comparable 2017 period. There were no loan purchases in the
2017 period.
The yield on the loan portfolio increased 25
basis points (including prepayment penalties) and 7 basis points
(excluding prepayment penalties) for the quarter ended June 30,
2018 versus the comparable 2017 period. Prepayment penalties
totaled $1.8 million for the quarter ended June 30, 2018 versus
$236,000 for the quarter ended June 30, 2017. Prepayment
penalties boosted annualized loan yield by 21 basis points in the
2018 period versus 3 basis points in the 2017 period.
The level of investment in FHLB stock is
predicated on several factors and administered by FHLB. The
yield on this asset has increased as their dividend rate
increased. The average balance of securities available for
sale decreased $109.8 million for the three months ended June 30,
2018 versus the comparable 2017 period, while the average balance
of securities held to maturity increased $113.3 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.
The components of interest income for the twelve
months ended June 30, 2018 and 2017, changed as follows:
|
|
|
Twelve Months Ended June 30, |
|
Increase / (decrease) |
|
|
|
|
2018 |
|
|
|
2017 |
|
|
|
|
Average |
|
|
|
|
|
Income |
|
Yield |
|
Income |
|
Yield |
|
Income |
|
Balance |
|
Yield |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands) |
Interest on
loans |
|
$ |
144,051 |
|
4.05 |
% |
|
$ |
133,967 |
|
3.99 |
% |
|
$ |
10,084 |
|
|
$ |
201,405 |
|
|
0.06 |
% |
Dividends
on FHLB stock |
|
|
1,788 |
|
6.55 |
% |
|
|
1,834 |
|
5.19 |
% |
|
|
(46 |
) |
|
|
(8,021 |
) |
|
1.36 |
% |
Interest on
securities AFS |
|
|
1,504 |
|
2.14 |
% |
|
|
3,154 |
|
1.85 |
% |
|
|
(1,650 |
) |
|
|
(100,278 |
) |
|
0.29 |
% |
Interest on
securities HTM |
|
|
5,328 |
|
2.00 |
% |
|
|
3,500 |
|
1.86 |
% |
|
|
1,828 |
|
|
|
78,458 |
|
|
0.14 |
% |
Interest on
federal funds sold |
|
|
|
|
|
|
|
|
|
|
|
|
|
and short
term investments |
|
|
155 |
|
1.34 |
% |
|
|
7 |
|
0.73 |
% |
|
|
148 |
|
|
|
10,600 |
|
|
0.61 |
% |
|
Total interest
income |
|
$ |
152,826 |
|
3.88 |
% |
|
$ |
142,462 |
|
3.80 |
% |
|
$ |
10,364 |
|
|
$ |
182,164 |
|
|
0.08 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The explanations for changes described above for
the three-month period are also largely applicable to the
twelve-month period. However, the average balance of the loan
portfolio increased $201.4 million, or 6.0%, for the twelve months
ended June 30, 2018 versus the comparable 2017 period. The
growth is more pronounced when measured on a 12 month basis because
of the nature of the calculation. When period end balances
are utilized, loans, net decreased $25.8 million to $3.54 billion
at June 30, 2018, from $3.57 billion at June 30, 2017. Loan
originations, purchases and payments for the twelve months ended
June 30, 2018 totaled $470.7 million, $69.2 million and $566.8
million, respectively. Loan originations, purchases and
payments for the twelve months ended June 30, 2017 totaled $732.0
million, $65.9 million and $365.4 million, respectively.
Prepayment penalties totaled $5.3 million for the twelve months
ended June 30, 2018 and $2.9 million for the twelve months ended
June 30, 2017. Prepayment penalties boosted annualized loan
yield by 15 basis points in the 2018 period versus 9 basis points
in the 2017 period.
Total Interest Expense. The
components of interest expense for the three months ended June 30,
2018 and 2017, changed as follows:
|
|
|
Three Months Ended June 30, |
Increase / (decrease) |
|
|
|
|
2018 |
|
|
2017 |
|
|
Average |
|
|
|
|
Expense |
Cost |
Expense |
Cost |
Expense |
Balance |
Cost |
|
|
|
(Dollars in thousands) |
Savings
deposits |
|
$ |
131 |
0.28 |
% |
$ |
100 |
0.23 |
% |
$ |
31 |
|
$ |
12,578 |
|
0.05 |
% |
Money
market |
|
|
2,093 |
1.08 |
% |
|
2,094 |
1.11 |
% |
|
(1) |
|
|
17,843 |
|
(0.03) |
% |
Checking
accounts |
|
|
1,580 |
0.83 |
% |
|
926 |
0.51 |
% |
|
654 |
|
|
28,168 |
|
0.32 |
% |
Time
deposits |
|
|
4,792 |
1.56 |
% |
|
3,604 |
1.33 |
% |
|
1,188 |
|
|
139,690 |
|
0.23 |
% |
Total
deposits |
|
|
8,596 |
1.17 |
% |
|
6,724 |
0.98 |
% |
|
1,872 |
|
|
198,279 |
|
0.19 |
% |
Borrowings |
|
|
2,976 |
2.20 |
% |
|
3,554 |
2.00 |
% |
|
(578) |
|
|
(170,008) |
|
0.20 |
% |
|
Total interest
expense |
|
$ |
11,572 |
1.33 |
% |
$ |
10,278 |
1.19 |
% |
$ |
1,294 |
|
$ |
28,271 |
|
0.14 |
% |
|
|
|
|
|
|
|
|
|
|
Strong deposit growth remains a strategic
objective of the Company. As detailed above, the average
balance of deposits increased $198.3 million, or 7.2%, for the
quarter ended June 30, 2018 versus the comparable 2017
period. Recently, achieving deposit growth has been more
challenging as illustrated by a linked quarter comparison.
The balance of deposits decreased $39.3 million and $8.4 million
when measured versus the period end and quarterly average balances
at March 31, 2018, respectively. The overall cost of deposits
increased 19 basis points for the quarter ended June 30, 2018
versus the comparable 2017 period. The increase is primarily
due to market pressures. The cost of checking accounts
increased significantly over the quarter ended June 30, 2018.
This category includes the majority of our municipal
deposits. It was necessary to adjust the rates paid on these
funds in order to maintain balances. On a linked quarter
basis, the cost of deposits increased 10 basis points. Market
pressures are expected to continue to increase the cost of
deposits.
The average balance of borrowings decreased
$170.0 million for the three months ended June 30, 2018 versus the
comparable 2017 period, while the cost increased 20 basis
points. The increase in the average balance of deposits
allowed the Company to reduce borrowings. The cost of
borrowings has been impacted by the increased cost of overnight and
short-term borrowings. The cost of overnight borrowings has
increased as the federal discount rate has increased. Despite
the increased cost of such borrowings, they remain a lower cost of
funding than longer term borrowings. The Company has
decreased its usage of overnight borrowings, which has
contributed to the overall increase in cost of borrowings. In
addition, the increased cost of new longer term borrowings also
contributed to the cost increase. On a linked quarter basis,
the average balance of borrowings increased $15.6 million and the
cost of borrowings increased 13 basis points.
The components of interest expense for the
twelve months ended June 30, 2018 and 2017, changed as follows:
|
|
|
Twelve Months Ended June 30, |
Increase / (decrease) |
|
|
|
|
2018 |
|
|
2017 |
|
|
Average |
|
|
|
|
Expense |
Cost |
Expense |
Cost |
Expense |
Balance |
Cost |
|
|
|
(Dollars in thousands) |
Savings
deposits |
|
$ |
455 |
0.25 |
% |
$ |
391 |
0.23 |
% |
$ |
64 |
|
$ |
11,003 |
|
0.02 |
% |
Money
market |
|
|
9,038 |
1.10 |
% |
|
7,742 |
1.05 |
% |
|
1,296 |
|
|
81,235 |
|
0.05 |
% |
Checking
accounts |
|
|
4,955 |
0.66 |
% |
|
3,015 |
0.46 |
% |
|
1,940 |
|
|
91,486 |
|
0.20 |
% |
Time
deposits |
|
|
17,176 |
1.45 |
% |
|
13,523 |
1.33 |
% |
|
3,653 |
|
|
165,307 |
|
0.12 |
% |
Total
deposits |
|
|
31,624 |
1.08 |
% |
|
24,671 |
0.95 |
% |
|
6,953 |
|
|
349,031 |
|
0.13 |
% |
Borrowings |
|
|
11,276 |
2.08 |
% |
|
13,180 |
1.83 |
% |
|
(1,904) |
|
|
(176,357) |
|
0.25 |
% |
|
Total interest
expense |
|
$ |
42,900 |
1.23 |
% |
$ |
37,851 |
1.14 |
% |
$ |
5,049 |
|
$ |
172,674 |
|
0.09 |
% |
|
|
|
|
|
|
|
|
|
|
The explanations for changes described above for
the three-month period regarding deposits and borrowings are also
applicable to the twelve-month period.
Net Interest Income Before Provision for
Loan Losses. Net interest income increased by $1.4 million
to $27.7 million for the three months ended June 30, 2018, from
$26.3 million for the three months ended June 30, 2017. Net
interest income increased by $5.3 million to $109.9 million for the
twelve months ended June 30, 2018, from $104.6 million for the
twelve months ended June 30, 2017. The Company’s net interest
income, spread and margin over the period are detailed in the chart
below.
|
Net Interest Income Before |
Prepayment Penalty |
|
Net Interest Income Before Provision Excluding
Prepayment |
Including Prepayment Penalties |
Excluding Prepayment Penalties |
Quarter Ended |
Provision |
Income |
|
Penalties |
Spread |
Margin |
Spread |
Margin |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands) |
June 30, 2018 |
$ |
27,721 |
$ |
1,836 |
|
$ |
25,885 |
2.65 |
% |
2.81 |
% |
2.47 |
% |
2.63 |
% |
March 31, 2018 |
|
26,953 |
|
553 |
|
|
26,400 |
2.60 |
% |
2.74 |
% |
2.54 |
% |
2.68 |
% |
December 31, 2017 |
|
27,608 |
|
1,638 |
|
|
25,970 |
2.67 |
% |
2.81 |
% |
2.50 |
% |
2.64 |
% |
September 30, 2017 |
|
27,644 |
|
1,289 |
|
|
26,355 |
2.68 |
% |
2.82 |
% |
2.55 |
% |
2.68 |
% |
June 30, 2017 |
|
26,287 |
|
236 |
|
|
26,051 |
2.54 |
% |
2.68 |
% |
2.52 |
% |
2.66 |
% |
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. The level of loan prepayments and
prepayment income increased during fiscal 2018 despite a period of
generally increasing interest rates.
The Company’s spread and margin have been under
pressure due to several factors including: the flattening treasury
yield curve, modifications of loans within the existing loan
portfolio, prepayments of higher yielding loans and investments,
and increased funding costs. The Company executed a balance
sheet restructuring partially to counter a portion of the spread
and margin compression resulting from these factors.
Expansion of spread and margin was realized during the quarter
ended June 30, 2018 but the expansion is due to increased
prepayment penalty income. Absent prepayment penalties,
spread and margin compressed during the period. This was
primarily attributable to the increased cost of liabilities.
The yield on the loan portfolio, absent prepayment penalties,
increased 4 basis points on a linked quarter basis.
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
$198,000 for the twelve months ended June 30, 2018, and $19,000 and
$283,000 for the three and twelve months ended June 30, 2017,
respectively. 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 and twelve months ended June 30, 2018 and June
30, 2017. A rollforward of the allowance for loan losses for
the three and twelve months ended June 30, 2018 and 2017 is
presented below:
|
Three months ended |
|
Twelve months ended |
|
June 30, |
|
June 30, |
|
|
2018 |
|
|
|
2017 |
|
|
|
2018 |
|
|
|
2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands) |
Balance at beginning of
period |
$30,473 |
|
|
$29,877 |
|
|
$30,272 |
|
|
$29,951 |
|
Provisions charged to
operations |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Recoveries of loans
previously charged off |
|
89 |
|
|
|
407 |
|
|
|
407 |
|
|
|
409 |
|
Loans charged off |
|
- |
|
|
|
12 |
|
|
|
117 |
|
|
|
88 |
|
Balance at end of
period |
$30,562 |
|
|
$30,272 |
|
|
$30,562 |
|
|
$30,272 |
|
|
|
|
|
|
|
|
|
Allowance for loan
losses to total loans |
|
0.85% |
|
|
|
0.84% |
|
|
|
0.85% |
|
|
|
0.84% |
|
Net charge-offs
(annualized) to average |
|
|
|
|
|
|
|
loans outstanding |
|
(0.01)% |
|
|
|
(0.05)% |
|
|
|
(0.01)% |
|
|
|
(0.01)% |
|
Delinquency and non-performing asset information
is provided below:
|
6/30/2018 |
|
3/31/2018 |
|
12/31/2017 |
|
9/30/2017 |
|
6/30/2017 |
|
Dollars in thousands |
Delinquency Totals |
|
|
|
|
|
|
|
|
|
30 - 59 days past
due |
$ |
5,253 |
|
|
$ |
9,772 |
|
|
$ |
3,166 |
|
|
$ |
987 |
|
|
$ |
1,374 |
|
60 - 89 days past
due |
|
171 |
|
|
|
472 |
|
|
|
142 |
|
|
|
1,656 |
|
|
|
1,571 |
|
Nonaccrual |
|
7,877 |
|
|
|
11,887 |
|
|
|
14,489 |
|
|
|
9,906 |
|
|
|
10,223 |
|
Total |
$ |
13,301 |
|
|
$ |
22,131 |
|
|
$ |
17,797 |
|
|
$ |
12,549 |
|
|
$ |
13,168 |
|
|
|
|
|
|
|
|
|
|
|
Non Performing Asset
Totals |
|
|
|
|
|
|
|
|
|
Nonaccrual loans, per
above |
$ |
7,877 |
|
|
$ |
11,887 |
|
|
$ |
14,489 |
|
|
$ |
9,906 |
|
|
$ |
10,223 |
|
Real Estate Owned |
|
1,564 |
|
|
|
636 |
|
|
|
- |
|
|
|
- |
|
|
|
140 |
|
Total |
$ |
9,441 |
|
|
$ |
12,523 |
|
|
$ |
14,489 |
|
|
$ |
9,906 |
|
|
$ |
10,363 |
|
|
|
|
|
|
|
|
|
|
|
Nonaccrual loans to
total loans |
|
0.22% |
|
|
|
0.33% |
|
|
|
0.40% |
|
|
|
0.28% |
|
|
|
0.28% |
|
Delinquent loans to
total loans |
|
0.37% |
|
|
|
0.61% |
|
|
|
0.49% |
|
|
|
0.35% |
|
|
|
0.37% |
|
Non performing assets
to total assets |
|
0.23% |
|
|
|
0.30% |
|
|
|
0.35% |
|
|
|
0.24% |
|
|
|
0.25% |
|
Delinquent loan and non-performing asset totals
continue to illustrate minimal credit issues at the Company.
Other Income. Other
income increased $8.3 million to $1.0 million for the three months
ended June 30, 2018, from a net loss of $7.3 million for the three
months ended June 30, 2017. A 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.
Other income decreased $13.4 million to $3.6
million for the twelve months ended June 30, 2018 from $17.0
million for the twelve months ended June 30, 2017. While the
2017 period included the losses mentioned above, it also included a
$20.9 million gain on the sale of a real estate joint venture.
Other Expenses. Other
expenses decreased $4.7 million to $10.0 million for the three
months ended June 30, 2018, from $14.7 million for the three months
ended June 30, 2017. Expenses for the 2017 period were
elevated as the Company incurred $5.2 million of prepayment
penalties regarding the prepayment of FHLB advances in connection
with a balance sheet restructure. Compensation, payroll taxes
and fringe benefits decreased $630,000 to $5.9 million for the
three months ended June 30, 2018, from $6.5 million for the three
months ended June 30, 2017. The decrease was primarily
due to decreased benefit expenses partially offset by increased
health insurance costs. The accrual costs associated with
several benefit plans decreased, including costs associated with
the ESOP. The decreased cost associated with the ESOP was
primarily due to a decreased trading price of the Company’s common
stock.
Other expenses decreased $6.5 million to $39.5
million for the twelve months ended June 30, 2018, from $46.0
million for the twelve months ended June 30, 2017. The 2017
period was also impacted by the $5.2 million of prepayment
penalties described above. Compensation, payroll taxes and
fringe benefits decreased $2.3 million to $26.5 million for the
twelve months ended June 30, 2018, from $28.9 million for the
twelve months ended June 30, 2017. Compensation,
payroll taxes and fringe benefits were also affected in the
twelve-month period by the items described above for the
three-month period. The decrease was more pronounced in the
twelve-month period. In addition to the above items, the 2017
period included a portion of the amortization expense related to
the Company’s 2011 Equity Plan. The cost for the majority of
the stock awards and stock options granted in conjunction with this
plan fully amortized in August 2016. The 2018 period had
significantly less expenses related to the amortization of this
plan.
As disclosed in the Company’s Form 10-Q for the
quarterly period ended December 31, 2017, the Company entered into
an informal agreement with regulators regarding Bank Secrecy Act
and Anti-Money Laundering compliance matters. The Company has
incurred expenses associated with the remediation of these matters
of $950,000 and $1.2 million for the three and twelve months ended
June 30, 2018, respectively. These costs are included in
other expenses and are primarily offset by decreases in the cost of
real estate owned operations. The Company continues to expect
that total costs associated with the remediation of these matters
will not exceed approximately $2.0 million. In addition,
there will be increases in compensation costs associated with
compliance matters.
Income Tax Expense.
Income tax expense for the 2018 periods was significantly impacted
by the Act. Income tax expense for the three and twelve-month
periods ended June 30, 2018 was $5.2 million and $31.1 million,
respectively, resulting in effective tax rates of 27.9% and 42.0%,
respectively. The effective rate for the twelve-month period
was elevated due to adjustments that were necessitated by the
Act. The effective federal tax rate prospectively is expected
to be approximately 21.0%. The effective state rate
prospectively is expected to increase due to recent legislation
regarding New Jersey corporate taxes. An analysis of the
legislative changes and the impact to the Company is being
performed and will effect the September 2018 quarter.
Income tax expense for the three and twelve-month periods ended
June 30, 2017 was $1.3 million (effective rate of 31.8%) and $26.4
million (effective rate of 34.9%), respectively. 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, 2018 and June 30, 2017
Total Assets. Total
assets were relatively flat, increasing $29.4 million to $4.17
billion at June 30, 2018, from $4.14 billion at June 30,
2017.
Cash and Cash Equivalents. Cash
and cash equivalents (which include fed funds and short-term
investments) increased $1.3 million to $34.8 million at June 30,
2018, from $33.6 million at June 30, 2017.
Net Loans. Loans, net
decreased $25.8 million to $3.54 billion at June 30, 2018, from
$3.57 billion at June 30, 2017. As discussed in “Comparison
of Operating Results, Total Interest Income,” loan growth has been
below expectations and historical levels.
Securities available for
sale. Securities AFS decreased $53.2 million to
$44.7 million at June 30, 2018, from $97.9 million at June 30,
2017. The decrease is primarily due to the sale of $29.5
million in December, 2017. The securities sold were in a loss
position and sold primarily to maximize the tax benefit associated
with the loss. Principal payments also contributed to the
decrease. No securities AFS were purchased in the 2018 fiscal
year.
Securities held to
maturity. Securities HTM increased $95.7 million to
$335.4 million at June 30, 2018, from $239.6 million at June 30,
2017. The increase is primarily due to purchases of $145.0
million exceeding principal payments.
Federal Home Loan Bank of New York
(“FHLB”) stock. FHLB stock decreased $2.1 million to
$30.4 million at June 30, 2018, from $32.5 million at June 30,
2017. 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.
Deferred Tax Assets.
Deferred tax assets decreased $11.8 million to $25.9 million at
June 30, 2018, from $37.7 million at June 30, 2017. The
reduction is primarily due to the revaluation of deferred tax
assets and deferred tax liabilities necessitated by the “Tax Cuts
and Jobs Act” in order to reflect the future impact of lower
corporate tax rates on these deferred amounts.
Other Assets. Other
assets increased $21.2 million to $30.3 million at June 30, 2018,
from $9.0 million at June 30, 2017. The increase is primarily
due to the increase in fair value of the derivative portfolio.
Deposits. Deposits
increased $58.7 million to $2.92 billion at June 30, 2018, from
$2.86 billion at June 30, 2017. See “Comparison of Operating
Results, Total Interest Expense” for discussion regarding deposit
balances.
Borrowings. Borrowings
decreased $45.7 million to $596.4 million at June 30, 2018, from
$642.1 million at June 30, 2017. See “Comparison of Operating
Results, Total Interest Expense” for discussion regarding borrowing
amounts.
Stockholders’ Equity.
Stockholders’ equity increased $123,000 to $559.3 million at June
30, 2018, from $559.2 million at June 30, 2017. The increase
was primarily due to net income, the release of treasury shares in
conjunction with stock option exercises and the release of ESOP
shares partially offset by dividends paid. The dividends paid
include regular quarterly dividends of $0.25 per share paid on May
18, 2018 and February 23, 2018 and $0.175 per share paid on August
21, 2017 and November 20, 2017; as well as a special dividend of
$0.45 per share paid on December 22, 2017. Based on our June
30, 2018 closing price of $16.20 per share, the Company stock was
trading at 135.0% 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,
2017 (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.
For further information contact:Kevin J. LynchChairman,
President and Chief Executive OfficerOritani Financial Corp.(201)
664-5400
|
Oritani Financial Corp. and
Subsidiaries |
Consolidated Balance Sheets |
(In thousands, except share data) |
|
|
|
|
|
|
|
June 30, |
|
June 30, |
Assets |
2018 |
|
2017 |
|
(unaudited) |
|
(audited) |
Cash on hand and in
banks |
$ |
23,613 |
|
|
$ |
33,252 |
|
Federal funds sold and
short term investments |
|
11,235 |
|
|
|
326 |
|
Cash and
cash equivalents |
|
34,848 |
|
|
|
33,578 |
|
|
|
|
|
|
|
Loans, net |
|
3,540,903 |
|
|
|
3,566,703 |
|
Securities available
for sale, at fair value |
|
44,691 |
|
|
|
97,930 |
|
Securities held to
maturity, |
|
|
|
|
|
fair
value of $326,511 and $237,204, respectively. |
|
335,374 |
|
|
|
239,631 |
|
Bank Owned Life
Insurance (at cash surrender value) |
|
98,438 |
|
|
|
95,946 |
|
Federal Home Loan Bank
of New York stock ("FHLB"), at cost |
|
30,365 |
|
|
|
32,504 |
|
Accrued interest
receivable |
|
11,261 |
|
|
|
10,620 |
|
Real estate owned |
|
1,564 |
|
|
|
140 |
|
Office properties and
equipment, net |
|
13,455 |
|
|
|
13,909 |
|
Deferred tax
assets |
|
25,864 |
|
|
|
37,693 |
|
Other assets |
|
30,276 |
|
|
|
9,030 |
|
Total
Assets |
$ |
4,167,039 |
|
|
$ |
4,137,684 |
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
Deposits |
$ |
2,915,128 |
|
|
$ |
2,856,478 |
|
Borrowings |
|
596,372 |
|
|
|
642,059 |
|
Advance payments by
borrowers for taxes and |
|
|
|
|
|
insurance |
|
24,169 |
|
|
|
23,496 |
|
Official checks
outstanding |
|
5,454 |
|
|
|
4,423 |
|
Other liabilities |
|
66,570 |
|
|
|
52,005 |
|
Total
liabilities |
|
3,607,693 |
|
|
|
3,578,461 |
|
|
|
|
|
|
|
Stockholders' Equity |
|
|
|
|
|
Common stock, $0.01 par
value; 150,000,000 shares authorized; |
|
|
|
|
|
56,245,065 shares issued; 46,616,646 shares outstanding at |
|
|
|
|
|
June 30,
2018 and 45,992,366 shares outstanding at |
|
|
|
|
|
June 30,
2017. |
|
562 |
|
|
|
562 |
|
Additional paid-in
capital |
|
514,002 |
|
|
|
512,337 |
|
Unallocated common
stock held by the employee stock |
|
|
|
|
|
ownership
plan |
|
(16,631) |
|
|
|
(18,407) |
|
Non-vested restricted
stock awards |
|
(176) |
|
|
|
(458) |
|
Treasury stock, at
cost; 9,628,419 shares at June 30, 2018 and |
|
|
|
|
|
10,252,699 shares at June 30, 2017. |
|
(129,433) |
|
|
|
(136,517) |
|
Retained earnings |
|
179,799 |
|
|
|
198,186 |
|
Accumulated other
comprehensive income, net of tax |
|
11,223 |
|
|
|
3,520 |
|
Total
stockholders' equity |
|
559,346 |
|
|
|
559,223 |
|
|
|
|
|
|
|
Total Liabilities and
Stockholders' Equity |
$ |
4,167,039 |
|
|
$ |
4,137,684 |
|
|
|
|
|
|
|
|
|
Oritani Financial Corp. and
Subsidiaries |
Consolidated Statements of Income |
Three and Twelve Months Ended June 30, 2018 and
2017 |
(In thousands, except share data) |
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Twelve months ended |
|
June 30, |
|
|
June 30, |
|
2018 |
|
2017 |
|
|
|
2018 |
|
|
2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
unaudited |
|
|
unaudited |
Interest income: |
|
|
|
|
|
|
|
|
|
|
Loans |
$ |
36,925 |
|
$ |
34,452 |
|
|
$ |
144,051 |
|
$ |
133,967 |
|
Dividends
on FHLB stock |
|
420 |
|
|
491 |
|
|
|
1,788 |
|
|
1,834 |
|
Securities available for sale |
|
267 |
|
|
703 |
|
|
|
1,504 |
|
|
3,154 |
|
Securities held to maturity |
|
1,665 |
|
|
917 |
|
|
|
5,328 |
|
|
3,500 |
|
Federal
funds sold and short term investments |
|
16 |
|
|
2 |
|
|
|
155 |
|
|
7 |
|
Total
Interest Income |
|
39,293 |
|
|
36,565 |
|
|
|
152,826 |
|
|
142,462 |
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense: |
|
|
|
|
|
|
|
|
|
|
Deposits |
|
8,596 |
|
|
6,724 |
|
|
|
31,624 |
|
|
24,671 |
|
Borrowings |
|
2,976 |
|
|
3,554 |
|
|
|
11,276 |
|
|
13,180 |
|
Total
interest expense |
|
11,572 |
|
|
10,278 |
|
|
|
42,900 |
|
|
37,851 |
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income before provision for loan losses |
|
27,721 |
|
|
26,287 |
|
|
|
109,926 |
|
|
104,611 |
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan
losses |
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
Net
interest income after provision for loan losses |
|
27,721 |
|
|
26,287 |
|
|
|
109,926 |
|
|
104,611 |
|
|
|
|
|
|
|
|
|
|
|
|
Other income: |
|
|
|
|
|
|
|
|
|
|
Service
charges |
|
320 |
|
|
217 |
|
|
|
1,119 |
|
|
881 |
|
Net
income from investments in real estate joint ventures |
|
— |
|
|
— |
|
|
|
— |
|
|
769 |
|
Bank-owned life insurance |
|
613 |
|
|
639 |
|
|
|
2,492 |
|
|
2,618 |
|
Net
gain (loss) on sale of assets |
|
— |
|
|
235 |
|
|
|
(2) |
|
|
20,856 |
|
Net loss
on sale of securities |
|
— |
|
|
(826) |
|
|
|
(324) |
|
|
(826) |
|
Derivatives termination cost, net |
|
— |
|
|
(7,670) |
|
|
|
— |
|
|
(7,670) |
|
Other
income |
|
82 |
|
|
84 |
|
|
|
303 |
|
|
333 |
|
Total
other income |
|
1,015 |
|
|
(7,321) |
|
|
|
3,588 |
|
|
16,961 |
|
|
|
|
|
|
|
|
|
|
|
|
Other expenses: |
|
|
|
|
|
|
|
|
|
|
Compensation, payroll taxes and fringe benefits |
|
5,866 |
|
|
6,496 |
|
|
|
26,532 |
|
|
28,862 |
|
Advertising |
|
143 |
|
|
144 |
|
|
|
571 |
|
|
502 |
|
Office
occupancy and equipment expense |
|
804 |
|
|
763 |
|
|
|
3,195 |
|
|
3,178 |
|
Data
processing service fees |
|
566 |
|
|
572 |
|
|
|
2,029 |
|
|
2,213 |
|
Federal
insurance premiums |
|
300 |
|
|
300 |
|
|
|
1,200 |
|
|
1,350 |
|
FHLBNY
prepayment penalties |
|
— |
|
|
5,169 |
|
|
|
— |
|
|
5,169 |
|
Other
expenses |
|
2,340 |
|
|
1,283 |
|
|
|
5,977 |
|
|
4,772 |
|
Total
other expenses |
|
10,019 |
|
|
14,727 |
|
|
|
39,504 |
|
|
46,046 |
|
|
|
|
|
|
|
|
|
|
|
|
Income
before income tax expense |
|
18,717 |
|
|
4,239 |
|
|
|
74,010 |
|
|
75,526 |
|
Income tax
expense |
|
5,214 |
|
|
1,348 |
|
|
|
31,116 |
|
|
26,382 |
|
Net
income |
$ |
13,503 |
|
$ |
2,891 |
|
|
$ |
42,894 |
|
|
49,144 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income per basic
common share |
$ |
0.30 |
|
$ |
0.07 |
|
|
$ |
0.97 |
|
$ |
1.14 |
|
Income per diluted
common share |
$ |
0.30 |
|
$ |
0.06 |
|
|
$ |
0.95 |
|
$ |
1.10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For further information contact:Kevin J.
LynchChairman, President and Chief Executive OfficerOritani
Financial Corp.(201) 664-5400
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