Oritani Financial Corp. (the “Company” or “Oritani”) (NASDAQ:
ORIT), the holding company for Oritani Bank (the “Bank”), reported
net income of $12.5 million, or $0.29 per basic (and $0.28 diluted)
common share, for the three months ended March 31, 2019, and $39.3
million, or $0.90 per basic (and $0.89 diluted) common share, for
the nine months ended March 31, 2019. Net income was $13.4
million, or $0.30 per basic and diluted common share, for the three
months ended March 31, 2018, and $29.4 million, or $0.67 per basic
(and $0.65 diluted) common share, for the nine months ended March
31, 2018.
The Company also reported that its Board of
Directors has declared a $0.25 quarterly cash dividend on the
Company’s common stock. The record date for the dividend will
be May 3, 2019 and the payment date will be May 17, 2019.
“I am pleased to report the results for the quarter
ended March 31, 2019,” said Kevin J. Lynch, the Company’s Chairman,
President and CEO. “Oritani continues to navigate the
challenges presented by today’s operating environment, and still
deliver strong results and profitability.” Mr. Lynch continued:
“While I would have preferred growth consistent with historical
levels for Oritani, we remain mindful of the risks of aggressive
expansion in this economy. I would prefer muted increases and
solid profitability over robust growth at levels we may soon
regret.”
Comparison of Operating Results for the Periods
Ended March 31, 2019 and 2018
Net Income. Net income
decreased $975,000 to $12.5 million for the quarter ended March 31,
2019, from $13.4 million for the corresponding 2018 quarter.
Net income increased $9.9 million to $39.3 million for the nine
months ended March 31, 2019, from $29.4 million for the
corresponding 2018 period. The most significant factor
contributing to the decreased quarterly income was increased
interest expense. The most significant factor resulting in
the increased income in the nine-month period is changes in income
tax expense. Results for the nine months ended March 31, 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 March 31,
2019 and 2018, changed as follows:
| |
|
|
Three Months Ended March 31, |
Increase / (decrease) |
| |
|
|
|
2019 |
|
|
2018 |
|
|
Average |
|
| |
|
|
Income |
Yield |
Income |
Yield |
Income |
Balance |
Yield |
| Interest
Income on: |
|
(Dollars in thousands) |
| Loans |
|
$ |
35,323 |
4.07 |
% |
$ |
35,398 |
3.97 |
% |
$ |
(75 |
) |
$ |
(95,890 |
) |
0.10 |
% |
| Dividends
on FHLB stock |
|
|
467 |
6.95 |
% |
|
432 |
6.59 |
% |
|
35 |
|
|
644 |
|
0.36 |
% |
| Equity
securities |
|
|
15 |
4.35 |
% |
|
10 |
2.64 |
% |
|
5 |
|
|
(138 |
) |
1.71 |
% |
| Debt
securities AFS |
|
|
211 |
2.31 |
% |
|
274 |
2.21 |
% |
|
(63 |
) |
|
(13,051 |
) |
0.10 |
% |
| Debt
securities HTM |
|
|
2,178 |
2.51 |
% |
|
1,419 |
2.01 |
% |
|
759 |
|
|
65,689 |
|
0.50 |
% |
| Federal
funds sold and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| short term investments |
|
|
29 |
2.28 |
% |
|
28 |
1.58 |
% |
|
1 |
|
|
(2,028 |
) |
0.70 |
% |
| |
Total
interest income |
|
$ |
38,223 |
3.93 |
% |
$ |
37,561 |
3.82 |
% |
$ |
662 |
|
$ |
(44,774 |
) |
0.11 |
% |
| |
|
|
|
|
|
|
|
|
|
The Company’s primary strategic business objective
remains the organic growth of multifamily and commercial real
estate loans. As discussed in recent public releases, the
market to originate such loans has been particularly challenging in
recent periods. These market conditions have persisted and,
arguably, worsened. The multifamily market in New York is
concerned about proposed changes to rent regulations and their
potentially negative impact on future revenue. The sales
volume of multifamily properties in the New York metropolitan area
were down in the first calendar quarter of 2019 as compared to
recent quarterly periods. In addition, the competitive
environment and the decreased external interest rate environment
have decreased the market rates on new multifamily and commercial
real estate loan originations.
Despite present conditions, the Company’s loan
balances increased slightly ($12.2 million) over the quarter ended
March 31, 2019. While originations were somewhat below expectations
($89.0 million), principal repayment decreased significantly (to
$73.9 million) versus the levels realized in recent periods.
In addition, there were $4.6 million of loan participations
purchased and an $8.1 million loan (which was 60-89 days past due),
was sold at par plus accrued interest.
The average balance of the loan portfolio increased
$44.3 million for the three months ended March 31, 2019 versus the
three months ended December 31, 2018. Activity totals for the
March 2019 quarter are above. Loan originations, purchases
and principal payments totaled $107.6 million, $114.4 million and
$241.7 million, respectively, for the three months ended December
31, 2018. The Company’s loan pipeline was $167.1 million at
March 31, 2019 versus $106.3 million as of December 31, 2018.
The average balance of the loan portfolio decreased
$95.9 million for the three months ended March 31, 2019 versus the
comparable 2018 period. Loan originations and principal
payments totaled $92.2 million and $112.2 million, respectively,
for the three months ended March 31, 2018. There were no loan
purchases in that period.
The yield on the loan portfolio increased 10 basis
points for the quarter ended March 31, 2019 versus the comparable
2018 period. On a linked quarter basis (March 31, 2019 versus
December 31, 2018), the yield on the loan portfolio decreased 14
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
March 31, 2018 and 3 basis points versus the December 31, 2018
quarter. Prepayment penalties totaled $275,000, $1.7 million
and $553,000 for the quarters ended March 31, 2019, December 31,
2018 and March 31, 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 $438,000, $687,000
and $543,000 for the quarters ended March 31, 2019, December 31,
2018 and March 31, 2018, respectively.
The average balance of debt securities available
for sale decreased $13.1 million for the three months ended March
31, 2019 versus the comparable 2018 period, while the average
balance of debt securities held to maturity increased $65.7 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 nine
months ended March 31, 2019 and 2018, changed as follows:
| |
|
|
Nine Months Ended March 31, |
Increase / (decrease) |
| |
|
|
|
2019 |
|
|
2018 |
|
|
Average |
|
| |
|
|
Income |
Yield |
Income |
Yield |
Income |
Balance |
Yield |
| Interest
Income on: |
|
(Dollars in thousands) |
| Loans |
|
$ |
107,360 |
4.12 |
% |
$ |
107,126 |
4.01 |
% |
$ |
234 |
|
$ |
(82,982 |
) |
0.11 |
% |
| Dividends
on FHLB stock |
|
|
1,396 |
6.86 |
% |
|
1,368 |
6.63 |
% |
|
28 |
|
|
(404 |
) |
0.23 |
% |
| Equity
securities |
|
|
37 |
3.43 |
% |
|
34 |
2.96 |
% |
|
3 |
|
|
(89 |
) |
0.47 |
% |
| Debt
securities AFS |
|
|
673 |
2.30 |
% |
|
1,203 |
2.10 |
% |
|
(530 |
) |
|
(37,243 |
) |
0.20 |
% |
| Debt
securities HTM |
|
|
6,109 |
2.40 |
% |
|
3,663 |
1.93 |
% |
|
2,446 |
|
|
85,909 |
|
0.47 |
% |
| Federal
funds sold and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| short term investments |
|
|
331 |
2.26 |
% |
|
139 |
1.33 |
% |
|
192 |
|
|
5,576 |
|
0.93 |
% |
| |
Total interest
income |
|
$ |
115,906 |
3.96 |
% |
$ |
113,533 |
3.85 |
% |
$ |
2,373 |
|
$ |
(29,233 |
) |
0.11 |
% |
| |
|
|
|
|
|
|
|
|
|
The explanations for changes described above for
the three month period are also applicable to the nine month
period. Loan originations, purchases, sales and principal
payments for the nine months ended March 31, 2019 totaled $278.7
million, $119.1 million, $8.1 million and $439.0 million,
respectively. Loan originations, purchases and principal
payments for the nine months ended March 31, 2018 totaled $349.0
million, $52.8 million and $403.5 million, respectively.
There were no sales in the 2018 period. Prepayment penalties
totaled $3.2 million for the nine months ended March 31, 2019 and
$3.5 million for the nine months ended March 31, 2018.
Prepayment penalties boosted annualized loan yield by 12 basis
points in the 2019 period versus 13 basis points in the 2018
period.
Total Interest Expense. The
components of interest expense for the three months ended March 31,
2019 and 2018, changed as follows:
| |
|
|
Three Months Ended March 31, |
Increase / (decrease) |
| |
|
|
2019 |
2018 |
|
Average |
|
| |
|
|
Expense |
Cost |
Expense |
Cost |
Expense |
Balance |
Cost |
| Interest
Expense on: |
|
(Dollars in thousands) |
| Savings
deposits |
|
$ |
965 |
1.11 |
% |
$ |
119 |
0.26 |
% |
$ |
846 |
|
$ |
161,460 |
|
0.85 |
% |
| Money
market |
|
|
1,745 |
1.10 |
% |
|
2,209 |
1.09 |
% |
|
(464 |
) |
|
(177,718 |
) |
0.01 |
% |
| Checking
accounts |
|
|
2,440 |
1.38 |
% |
|
1,292 |
0.66 |
% |
|
1,148 |
|
|
(79,064 |
) |
0.72 |
% |
| Time
deposits |
|
|
5,677 |
1.86 |
% |
|
4,267 |
1.45 |
% |
|
1,410 |
|
|
47,488 |
|
0.41 |
% |
| Total
deposits |
|
|
10,827 |
1.49 |
% |
|
7,887 |
1.07 |
% |
|
2,940 |
|
|
(47,834 |
) |
0.42 |
% |
|
Borrowings |
|
|
3,287 |
2.44 |
% |
|
2,721 |
2.07 |
% |
|
566 |
|
|
13,651 |
|
0.37 |
% |
| |
Total interest
expense |
|
$ |
14,114 |
1.64 |
% |
$ |
10,608 |
1.22 |
% |
$ |
3,506 |
|
$ |
(34,183 |
) |
0.42 |
% |
| |
|
|
|
|
|
|
|
|
|
Deposit growth remains a strategic objective of the
Company. As discussed in recent public releases, growth has
been particularly 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. However, the Company has remained cognizant of the
cost of alternative sources of funds, and has been unwilling to
increase the interest rates on deposit products above these
levels. The Company has been largely successful in minimizing
the outflow of deposits however, sizeable growth was not
obtained. As compared to the quarter ended December 31, 2018,
the average balance of deposits decreased $10.6 million, period end
balances decreased $4.6 million and the cost of deposits increased
13 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 $47.8 million for the quarter ended March 31, 2019 versus
the comparable 2018 period. The average balance of brokered
deposits decreased $52.2 million between the periods. The
average balance of municipal deposits, which can be subject to
significant fluctuation, decreased $34.5 million between the
periods. The overall cost of deposits increased 42 basis
points for the quarter ended March 31, 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
Company’s highest yielding core deposit account is currently a
savings account. Many money market accounts have shifted to
the higher yielding savings account. The decreased checking
account balances are partially attributable to decreased municipal
account balances as well as customer migration.
The average balance of borrowings increased $13.7
million for the three months ended March 31, 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 certain lower cost
borrowings.
The components of interest expense for the nine
months ended March 31, 2019 and 2018, changed as follows:
| |
|
|
Nine Months Ended March 31, |
Increase / (decrease) |
| |
|
|
2019 |
2018 |
|
Average |
|
| |
|
|
Expense |
Cost |
Expense |
Cost |
Expense |
Balance |
Cost |
| Interest
Expense on: |
|
(Dollars in thousands) |
| Savings
deposits |
|
$ |
1,796 |
0.86 |
% |
$ |
324 |
0.24 |
% |
$ |
1,472 |
|
$ |
96,113 |
|
0.62 |
% |
| Money
market |
|
|
5,665 |
1.09 |
% |
|
6,944 |
1.11 |
% |
|
(1,279 |
) |
|
(146,390 |
) |
(0.02 |
)% |
| Checking
accounts |
|
|
6,215 |
1.15 |
% |
|
3,376 |
0.60 |
% |
|
2,839 |
|
|
(28,157 |
) |
0.55 |
% |
| Time
deposits |
|
|
16,127 |
1.76 |
% |
|
12,384 |
1.42 |
% |
|
3,743 |
|
|
57,159 |
|
0.34 |
% |
| Total
deposits |
|
|
29,803 |
1.36 |
% |
|
23,028 |
1.05 |
% |
|
6,775 |
|
|
(21,275 |
) |
0.31 |
% |
|
Borrowings |
|
|
9,672 |
2.38 |
% |
|
8,300 |
2.03 |
% |
|
1,372 |
|
|
(1,670 |
) |
0.35 |
% |
| |
Total interest
expense |
|
$ |
39,475 |
1.52 |
% |
$ |
31,328 |
1.20 |
% |
$ |
8,147 |
|
$ |
(22,945 |
) |
0.32 |
% |
| |
|
|
|
|
|
|
|
|
|
The explanations for changes described above for
the three month period regarding deposits and borrowings are also
largely applicable to the nine month period.
Net Interest Income Before Provision for
Loan Losses. Net interest income decreased by $2.8 million
to $24.1 million for the three months ended March 31, 2019, from
$27.0 million for the three months ended March 31, 2018. Net
interest income decreased by $5.8 million to $76.4 million for the
nine months ended March 31, 2019, from $82.2 million for the nine
months ended March 31, 2018. The Company’s net interest
income, spread and margin over the period are detailed in the chart
below.
| |
|
|
|
Net Interest Income Before
Provision Excluding Prepayment Penalties |
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
Net Interest |
Prepayment |
Including Prepayment Penalties |
Excluding Prepayment Penalties |
|
|
|
Income Before |
Penalty |
|
Quarter Ended |
|
Provision |
Income |
Spread |
Margin |
Spread |
Margin |
| |
|
(dollars in thousands) |
| 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 |
% |
| March 31, 2018 |
|
|
26,953 |
|
553 |
|
26,400 |
2.60 |
% |
2.74 |
% |
2.54 |
% |
2.68 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
level of loan prepayments and prepayment income experienced by the
Company has been elevated (versus historical levels) despite
generally increased interest rates during the majority of the
period.
The Company’s spread and margin have been under
pressure due to several factors, including a flat and partially
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 existing customers transferring to higher yielding accounts
from lower yielding accounts, and the opening of new higher
yielding accounts. The Company has not increased its deposit
rates on any consequential account offering in over four
months. While the above trend regarding customer behavior can
be expected to continue, the impact on the rate of increase in the
cost of deposits can be expected to subside assuming rates remain
stable (or decrease).
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 $100,000 and
$235,000 for the three and nine months ended March 31, 2019,
respectively, and $4,000 and $210,000 for the three and nine months
ended March 31, 2018, respectively.
Provision for Loan Losses.
The Company recorded no provision for loan losses for the three
months ended March 31, 2019 and the three and nine months ended
March 31, 2018. The Company recorded a reversal of provision
for loan losses of $2.0 million for the nine months ended March 31,
2019. A rollforward of the allowance for loan losses for the
three and nine months ended March 31, 2019 and 2018 is presented
below:
| |
Three months ended |
|
Nine months ended |
| |
March 31, |
|
March 31, |
| |
|
2019 |
|
|
|
2018 |
|
|
|
2019 |
|
|
|
2018 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
(Dollars in thousands) |
| Balance at beginning of
period |
$ |
28,639 |
|
|
$ |
30,402 |
|
|
$ |
30,562 |
|
|
$ |
30,272 |
|
| Reversal of provision
for loan losses |
|
- |
|
|
|
- |
|
|
|
(2,000 |
) |
|
|
- |
|
| Recoveries of loans
previously charged off |
|
16 |
|
|
|
166 |
|
|
|
93 |
|
|
|
318 |
|
| Loans charged off |
|
65 |
|
|
|
95 |
|
|
|
65 |
|
|
|
117 |
|
| Balance at end of
period |
$ |
28,590 |
|
|
$ |
30,473 |
|
|
$ |
28,590 |
|
|
$ |
30,473 |
|
| |
|
|
|
|
|
|
|
| Allowance for loan
losses to total loans |
|
0.81 |
% |
|
|
0.85 |
% |
|
|
0.81 |
% |
|
|
0.85 |
% |
| Annualized net
charge-offs (recoveries) to |
|
|
|
|
|
|
|
| average loans
outstanding |
|
0.01 |
% |
|
|
-0.01 |
% |
|
|
- |
% |
|
|
-0.01 |
% |
Delinquency and non performing asset information
is provided below:
| |
3/31/2019 |
12/31/2018 |
9/30/2018 |
6/30/2018 |
3/31/2018 |
| |
Dollars in thousands |
| Delinquency
Totals |
|
|
|
|
|
| 30 - 59 days past
due |
$ |
1,648 |
|
$ |
2,890 |
|
$ |
15,261 |
|
$ |
5,253 |
|
$ |
9,772 |
|
| 60 - 89 days past
due |
|
975 |
|
|
8,431 |
|
|
356 |
|
|
171 |
|
|
472 |
|
| Nonaccrual |
|
10,184 |
|
|
10,706 |
|
|
9,083 |
|
|
7,877 |
|
|
11,887 |
|
| Total |
$ |
12,807 |
|
$ |
22,027 |
|
$ |
24,700 |
|
$ |
13,301 |
|
$ |
22,131 |
|
| |
|
|
|
|
|
| Non Performing
Asset Totals |
|
|
|
|
|
| Nonaccrual loans, per
above |
$ |
10,184 |
|
$ |
10,706 |
|
$ |
9,083 |
|
$ |
7,877 |
|
$ |
11,887 |
|
| Real Estate Owned |
|
636 |
|
|
636 |
|
|
1,564 |
|
|
1,564 |
|
|
636 |
|
| Total |
$ |
10,820 |
|
$ |
11,342 |
|
$ |
10,647 |
|
$ |
9,441 |
|
$ |
12,523 |
|
| |
|
|
|
|
|
| Nonaccrual loans to
total loans |
|
0.29 |
% |
|
0.30 |
% |
|
0.26 |
% |
|
0.22 |
% |
|
0.33 |
% |
| Delinquent loans to
total loans |
|
0.36 |
% |
|
0.63 |
% |
|
0.70 |
% |
|
0.37 |
% |
|
0.61 |
% |
| Non performing assets
to total assets |
|
0.27 |
% |
|
0.28 |
% |
|
0.26 |
% |
|
0.23 |
% |
|
0.30 |
% |
The $2.0 million reversal of provision for loan
losses recorded for the nine month period ended March 31, 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. During the quarter ended March 31, 2019, an
$8.1 million loan was sold at par plus accrued interest. This
loan was included in the 60-89 days past due total at December 31,
2018.
Non-interest Income.
Non-interest income increased $114,000 to $1.1 million for the
three months ended March 31, 2019, from $980,000 for the three
months ended March 31, 2018. The increase is primarily
due to a $87,000 increase in fair value of equity securities held
by the Company.
Non-interest income increased $979,000 to $3.6
million for the nine months ended March 31, 2019 from $2.6 million
for the nine months ended March 31, 2018. The increase is
primarily due to a gain of $855,000 on the sale of a foreclosed
property. This increase was partially offset by a $187,000
decrease in fair value of equity securities held by the
Company. Despite the increase in value detailed above for the
three month period, there was an overall decrease in value in the
nine month period. 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.
Non-interest Expense.
Non-interest expenses decreased $621,000 to $9.1 million for the
three months ended March 31, 2019, from $9.8 million for the three
months ended March 31, 2018. The decrease was primarily due to
compensation, payroll taxes and fringe benefits, which decreased
$319,000 to $6.0 million for the three months ended March 31, 2019,
from $6.3 million for the three months ended March 31, 2018.
The decrease was largely due to decreased accrual costs associated
with non-qualified benefit plans. Other expenses decreased
$258,000 to $1.4 million for the three months ended March 31, 2019,
from $1.7 million for the three months ended March 31,
2018. The decrease 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 March 31, 2019, and incurred such
expenses totaling $156,000 in the three months ended March 31,
2018.
Non-interest expenses were essentially stable at
$29.5 million for both the nine months ended March 31, 2019 and
2018, though there were fluctuations within the various
categories. Compensation, payroll taxes and fringe benefits
decreased $2.1 million to $17.5 million for the nine months ended
March 31, 2019, from $19.6 million for the nine months ended March
31, 2018. The decrease was primarily due to decreased ESOP related
expenses as well as decreased costs associated with the incentive
and non-qualified benefit plans. Other expenses increased
$2.2 million to $6.9 million for the nine months ended March 31,
2019, from $4.7 million for the nine months ended March 31,
2018. The increase is primarily due to professional
fees associated with the remediation of compliance matters.
Such fees totaled $1.5 million for the 2019 period versus $269,000
for the 2018 period. The Company believes that significant
progress has been made regarding the remediation of these matters
and that the majority of the associated costs have been expended
and expensed. The nine month period comparison was also
impacted by an additional pension contribution that was expensed in
fiscal 2019.
Income Tax Expense. Income
tax expense for the three months ended March 31, 2019 was $3.6
million on pre-tax income of $16.1 million, resulting in an
effective tax rate of 22.5%. Income tax expense for the
nine months ended March 31, 2019, was $13.2 million on pre-tax
income of $52.5 million, resulting in an effective tax rate of
25.2%. The Company’s estimated effective tax rate for the
fiscal year ending June 30, 2019 is 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 nine
month periods ending March 31, 2019, were also affected by a refund
of an item that was expensed in a prior period and the exercise of
nonqualified stock options. In addition, the nine month
period ending March 31, 2019 was also impacted by New Jersey (“NJ”)
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
nine months ended March 31, 2019. Income tax expense for the
three and nine month periods ended March 31, 2018 was $4.7 million
and $25.9 million, respectively. Income tax expense for the
nine month period ended March 31, 2018 was significantly impacted
by the Act, as previously discussed in “Comparison of Operating
Results, Net Income.”
Comparison of Financial Condition
at March 31, 2019 and June 30, 2018
Total Assets. Total assets
decreased $92.3 million to $4.07 billion at March 31, 2019, from
$4.17 billion at June 30, 2018. The primary contributor to
the decreased asset level was the contraction in loan balances,
cash and other assets.
Cash and Cash Equivalents. Cash
and cash equivalents (which include fed funds and short term
investments) decreased $17.4 million to $17.5 million at March 31,
2019, from $34.8 million at June 30, 2018.
Net Loans. Loans, net
decreased $45.5 million to $3.50 billion at March 31, 2019, from
$3.54 billion at June 30, 2018. Loans, net increased $12.2
million over the quarter ended March 31, 2019. 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 $8.1 million to
$35.0 million at March 31, 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 were essentially
stable at $335.6 million at March 31, 2019 and $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 $4.3 million to $26.1
million at March 31, 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.
Deposits. Deposits decreased
$16.5 million to $2.90 billion at March 31, 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 120.6% at March 31, 2019.
Borrowings. Borrowings
decreased $47.6 million to $548.8 million at March 31, 2019, from
$596.4 million at June 30, 2018. See “Total Interest Expense”
for discussion regarding borrowing amounts.
Stockholders’ Equity.
Stockholders’ equity decreased $28.6 million to $530.7 million at
March 31, 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 March 31, 2019.
Based on our March 31, 2019 closing price of $16.63 per share, the
Company stock was trading at 141.3% 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.
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) |
|
|
|
|
|
|
|
|
|
March 31, |
|
June 30, |
|
Assets |
2019 |
|
2018 |
| |
(unaudited) |
|
(audited) |
| Cash on hand and in
banks |
$ |
14,982 |
|
|
$ |
23,613 |
|
| Federal funds sold and
short term investments |
|
2,513 |
|
|
|
11,235 |
|
| Cash and
cash equivalents |
|
17,495 |
|
|
|
34,848 |
|
| |
|
|
|
|
|
| Loans, net |
|
3,495,388 |
|
|
|
3,540,903 |
|
| Equity securities |
|
1,378 |
|
|
|
1,565 |
|
| Debt securities
available for sale, at fair value |
|
35,013 |
|
|
|
43,126 |
|
| Debt securities held to
maturity, |
|
|
|
|
|
| fair
value of $333,066 and $326,511, respectively. |
|
335,579 |
|
|
|
335,374 |
|
| Bank Owned Life
Insurance (at cash surrender value) |
|
100,266 |
|
|
|
98,438 |
|
| Federal Home Loan Bank
of New York stock ("FHLB"), at cost |
|
26,074 |
|
|
|
30,365 |
|
| Accrued interest
receivable |
|
11,985 |
|
|
|
11,261 |
|
| Real estate owned |
|
636 |
|
|
|
1,564 |
|
| Office properties and
equipment, net |
|
13,039 |
|
|
|
13,455 |
|
| Deferred tax
assets |
|
28,952 |
|
|
|
25,864 |
|
| Other assets |
|
8,897 |
|
|
|
30,276 |
|
| Total
Assets |
$ |
4,074,702 |
|
|
$ |
4,167,039 |
|
| |
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
| Deposits |
$ |
2,898,638 |
|
|
$ |
2,915,128 |
|
| Borrowings |
|
548,775 |
|
|
|
596,372 |
|
| Advance payments by
borrowers for taxes and |
|
|
|
|
|
|
insurance |
|
28,095 |
|
|
|
24,169 |
|
| Official checks
outstanding |
|
5,640 |
|
|
|
5,454 |
|
| Other liabilities |
|
62,837 |
|
|
|
66,570 |
|
| Total
liabilities |
|
3,543,985 |
|
|
|
3,607,693 |
|
| |
|
|
|
|
|
|
Stockholders' Equity |
|
|
|
|
|
| Common stock, $0.01 par
value; 150,000,000 shares authorized; |
|
|
|
|
|
|
56,245,065 shares issued; 45,080,139 shares outstanding at |
|
|
|
|
|
| March 31,
2019 and 46,616,646 shares outstanding at |
|
|
|
|
|
| June 30,
2018. |
|
562 |
|
|
|
562 |
|
| Additional paid-in
capital |
|
515,138 |
|
|
|
514,002 |
|
| Unallocated common
stock held by the employee stock |
|
|
|
|
|
| ownership
plan |
|
(15,437 |
) |
|
|
(16,631 |
) |
| Non-vested restricted
stock awards |
|
(241 |
) |
|
|
(176 |
) |
| Treasury stock, at
cost; 11,164,926 shares at March 31, 2019 and |
|
|
|
|
|
| 9,628,419
shares at June 30, 2018. |
|
(153,324 |
) |
|
|
(129,433 |
) |
| Retained earnings |
|
180,007 |
|
|
|
179,799 |
|
| Accumulated other
comprehensive income, net of tax |
|
4,012 |
|
|
|
11,223 |
|
| Total
stockholders' equity |
|
530,717 |
|
|
|
559,346 |
|
| Total Liabilities and
Stockholders' Equity |
$ |
4,074,702 |
|
|
$ |
4,167,039 |
|
| |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
| Oritani Financial Corp. and
Subsidiaries |
| Consolidated Statements of Income |
| Three and Nine Months Ended March 31, 2019 and
2018 |
| (In thousands, except share data) |
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Three months ended |
|
|
Nine months ended |
| |
March 31, |
|
|
March 31, |
| |
2019 |
|
2018 |
|
|
2019 |
|
|
|
2018 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
unaudited |
|
|
unaudited |
| Interest income: |
|
|
|
|
|
|
|
|
|
|
|
| Loans |
$ |
35,323 |
|
$ |
35,398 |
|
$ |
107,360 |
|
|
$ |
107,126 |
|
| Dividends
on FHLB stock |
|
467 |
|
|
432 |
|
|
1,396 |
|
|
|
1,368 |
|
| Equity
securities |
|
15 |
|
|
10 |
|
|
37 |
|
|
|
34 |
|
| Debt
securities available for sale |
|
211 |
|
|
274 |
|
|
673 |
|
|
|
1,203 |
|
| Debt
securities held to maturity |
|
2,178 |
|
|
1,419 |
|
|
6,109 |
|
|
|
3,663 |
|
| Federal
funds sold and short term investments |
|
29 |
|
|
28 |
|
|
331 |
|
|
|
139 |
|
| Total
Interest Income |
|
38,223 |
|
|
37,561 |
|
|
115,906 |
|
|
|
113,533 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| Interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
10,827 |
|
|
7,887 |
|
|
29,803 |
|
|
|
23,028 |
|
|
Borrowings |
|
3,287 |
|
|
2,721 |
|
|
9,672 |
|
|
|
8,300 |
|
| Total
interest expense |
|
14,114 |
|
|
10,608 |
|
|
39,475 |
|
|
|
31,328 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net
interest income before provision for loan losses |
|
24,109 |
|
|
26,953 |
|
|
76,431 |
|
|
|
82,205 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| Reversal of provision
for loan losses |
|
— |
|
|
— |
|
|
(2,000 |
) |
|
|
— |
|
| Net
interest income after provision for loan losses |
|
24,109 |
|
|
26,953 |
|
|
78,431 |
|
|
|
82,205 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| Non-interest
income: |
|
|
|
|
|
|
|
|
|
|
|
| Fees and
service charges for customer services |
|
405 |
|
|
371 |
|
|
1,044 |
|
|
|
1,010 |
|
|
Bank-owned life insurance |
|
594 |
|
|
603 |
|
|
1,828 |
|
|
|
1,879 |
|
| Gains on
sale of OREO |
|
— |
|
|
— |
|
|
855 |
|
|
|
— |
|
| Change in
fair value of equity securities |
|
87 |
|
|
— |
|
|
(187 |
) |
|
|
— |
|
| Net
losses on sale of debt securities AFS |
|
— |
|
|
— |
|
|
— |
|
|
|
(324 |
) |
| Other
income |
|
9 |
|
|
7 |
|
|
18 |
|
|
|
14 |
|
| Total
non-interest income |
|
1,095 |
|
|
981 |
|
|
3,558 |
|
|
|
2,579 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| Non-interest
expense: |
|
|
|
|
|
|
|
|
|
|
|
|
Compensation, payroll taxes and fringe benefits |
|
5,958 |
|
|
6,277 |
|
|
17,470 |
|
|
|
19,619 |
|
|
Advertising |
|
143 |
|
|
143 |
|
|
428 |
|
|
|
428 |
|
| Office
occupancy and equipment expense |
|
820 |
|
|
862 |
|
|
2,315 |
|
|
|
2,391 |
|
| Data
processing service fees |
|
527 |
|
|
499 |
|
|
1,545 |
|
|
|
1,463 |
|
| Federal
insurance premiums |
|
270 |
|
|
300 |
|
|
855 |
|
|
|
900 |
|
| Other
expenses |
|
1,423 |
|
|
1,681 |
|
|
6,903 |
|
|
|
4,690 |
|
| Total
non-interest expense |
|
9,141 |
|
|
9,762 |
|
|
29,516 |
|
|
|
29,491 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| Income
before income tax expense |
|
16,063 |
|
|
18,172 |
|
|
52,473 |
|
|
|
55,293 |
|
| Income tax
expense |
|
3,613 |
|
|
4,747 |
|
|
13,197 |
|
|
|
25,902 |
|
| Net
income |
$ |
12,450 |
|
$ |
13,425 |
|
$ |
39,276 |
|
|
|
29,391 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| Income per basic
common share |
$ |
0.29 |
|
$ |
0.30 |
|
$ |
0.90 |
|
|
$ |
0.67 |
|
| Income per diluted
common share |
$ |
0.28 |
|
$ |
0.30 |
|
$ |
0.89 |
|
|
$ |
0.65 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
For further information contact:Kevin J. LynchChairman,
President and Chief Executive OfficerOritani Financial Corp.(201)
664-5400
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