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Section 1: 8-K (8-K)

8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): October 30, 2018

 

 

KEARNY FINANCIAL CORP.

(Exact Name of Registrant as Specified in its Charter)

 

 

 

Maryland   001-37399   30-0870244

(State or Other Jurisdiction

of Incorporation)

 

(Commission

File No.)

 

(I.R.S. Employer

Identification No.)

 

120 Passaic Avenue, Fairfield, New Jersey   07004
(Address of Principal Executive Offices)   (Zip Code)

Registrant’s telephone number, including area code: (973) 244-4500

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

 

 


Item 2.02

Results of Operation and Financial Condition

On October 30, 2018, Kearny Financial Corp. (the “Company”), the holding company for Kearny Bank, issued a press release reporting its financial results for the first quarter ended September 30, 2018.

A copy of the press release announcing the results is included as Exhibit 99.1 to this Current Report on Form 8-K and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933.

 

Item 9.01

Financial Statements and Exhibits

 

  (a)

Financial Statements of Businesses Acquired. Not applicable.

 

  (b)

Pro Forma Financial Information. Not applicable.

 

  (c)

Shell Company Transactions. Not applicable.

(d)     Exhibits.

 

Exhibit No.

  

Description

99.1    Press release dated October 30, 2018.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

 

      KEARNY FINANCIAL CORP.
DATE: October 31, 2018     By:  

/s/ Craig L. Montanaro

      Craig L. Montanaro
      President and Chief Executive Officer
(Back To Top)

Section 2: EX-99.1 (EX-99.1)

EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE

October 30, 2018

For further information contact:

Craig L. Montanaro, President and Chief Executive Officer, or

Keith Suchodolski, Executive Vice President and Chief Financial Officer

Kearny Financial Corp.

(973) 244-4500

KEARNY FINANCIAL CORP.

REPORTS FIRST QUARTER 2019 OPERATING RESULTS

Fairfield, New Jersey, October 30, 2018 – Kearny Financial Corp. (NASDAQ GS: KRNY) (the “Company”), the holding company of Kearny Bank (the “Bank”), today reported net income for the quarter ended September 30, 2018 of $11.1 million, or $0.12 per basic and diluted share. The results represent an increase of $3.4 million compared to net income of $7.7 million, or $0.08 per basic and diluted share, for the quarter ended June 30, 2018.

Craig L. Montanaro, President and Chief Executive Officer, commented, “We are pleased with how we have continued to build on our positive momentum from fiscal 2018 by executing on a number of strategic priorities during the quarter including the strong growth within our commercial mortgage loan portfolio and the ongoing integration of the Clifton Bancorp, Inc. (“CSBK”) acquisition which, subsequent to quarter end, culminated in the full system integration of CSBK’s banking products and services.”

Balance Sheet Highlights

 

   

The Company’s aggregate loan portfolio, excluding loans held for sale and the allowance for loan losses, increased by $159.2 million to $4.66 billion, or 70.0% of total assets, at September 30, 2018 from $4.50 billion, or 68.4% of total assets, at June 30, 2018. Commercial mortgage loans represented $152.6 million of this increase, totaling 69.0% of total loans at September 30, 2018.

 

   

The balance of cash and cash equivalents decreased by $84.4 million to $44.5 million at September 30, 2018 from $128.9 million at June 30, 2018. The decrease for the quarter ended September 30, 2018 reflected the reinvestment of excess cash balances into the loan portfolio. The Company generally seeks to limit the balance of cash and cash equivalents held to the levels needed to meet its day-to-day funding obligations and overall liquidity risk management objectives.

 

   

The Company’s total deposits decreased by $118.8 million to $3.95 billion at September 30, 2018, from $4.07 billion at June 30, 2018. The net decline in deposits primarily reflected a $210.8 million decrease in wholesale deposits attributable to the scheduled maturity and termination of the Company’s participation in Promontory Interfinancial Network’s (“Promontory”) Insured Network Deposits (“IND”) program. Partially offsetting this decrease was an increase of $92.0 million in other deposits comprising increases of $35.7 million and $56.3 million in retail and other wholesale deposits, respectively.

 

   

Total borrowings increased by $220.8 million to $1.42 billion at September 30, 2018, from $1.20 billion at June 30, 2018. The increase in borrowings for the quarter ended September 30, 2018 reflected an additional $200.0 million 90-day Federal Home Loan Bank (“FHLB”) term advance that was drawn to replace the maturing Promontory IND funding noted above coupled with an increase of $60.0 million in overnight borrowings drawn for liquidity management purposes. The Company had entered into a forward-starting interest rate swap contract in July 2016 to extend the effective duration of the new 90-day FHLB advance thereby effectively fixing its cost for a longer period of time. These increases were partially offset by decreases of $35.0 million in long-term FHLB advances resulting from the scheduled maturity of such advances coupled with a $4.9 million decrease in depositor sweep account balances representing normal day-to-day fluctuations in such balances.

 

1


Earnings Highlights

The noted balance sheet growth, reinvestment and reallocation achievements muted the adverse effects of the continuing increases in market interest rates and the flattening yield curve on the Company’s net interest margin:

 

   

The Company’s net interest income totaled $40.2 million for the quarter ended September 30, 2018 as compared to $40.6 million for the quarter ended June 30, 2018.

 

   

The Company’s net interest margin decreased four basis points to 2.68% for the quarter ended September 30, 2018 from 2.72% for the quarter ended June 30, 2018 while the net interest rate spread decreased by four basis points to 2.44% from 2.48% for those same comparative periods, respectively.

The Company’s mortgage banking, SBA lending and commercial mortgage lending strategies continued to supplement and diversify its sources of non-interest income:

 

   

Aggregate loan sale gains totaled $132,000 for the quarter ended September 30, 2018 compared to $127,000 for the quarter ended June 30, 2018. The modest increase in gains on sale reflected an increase in the average net gain recognized per loan sold that was partially offset by a decrease in the volume of such loans between comparative periods.

 

   

Fees and service charges remained stable, totaling $1.2 million for the quarters ended September 30, 2018 and June 30, 2018.

The Company continues to evaluate and implement tactics and strategies designed to improve operating practices, policies and procedures while making more efficient and effective use of its supporting infrastructure, including human resources, facilities and information technology systems.

 

   

The Company’s ratio of non-interest expense to average assets totaled 1.61% for the quarter ended September 30, 2018 compared to 1.90% for the prior quarter ended June 30, 2018. For those same comparative periods, the Company’s operating efficiency ratio decreased to 61.0% from 71.1%, respectively. The decrease in the Company’s non-interest expense ratio and efficiency ratio largely reflected the Company’s recognition of $5.1 million of non-recurring, merger-related charges during the quarter ended June 30, 2018.

Finally, the State of New Jersey enacted changes to its income tax laws that become effective on July 1, 2018. Such changes included provisions that imposed a surtax on Corporation Business Tax taxpayers whose allocated New Jersey net income exceeds $1.0 million. The surtax was imposed at an initial rate of 2.5% which became effective for the Company for its current tax year which began on July 1, 2018 and will continue through its next tax year beginning July 1, 2019. The surtax will decrease to 1.5% for the Company’s tax year beginning July 1, 2020 and will continue at that reduced rate through its tax year beginning July 1, 2021. The surtax will be discontinued for the Company’s tax year beginning on July 1, 2022.

Collectively, the factors noted above resulted in an increase in net income for the quarter ended September 30, 2018 compared to the prior quarter ended June 30, 2018. The increase in net income had a favorable impact on the Company’s earnings-based performance ratios as highlighted below:

 

   

The Company’s return on average assets for the quarter ended September 30, 2018 totaled 0.68% compared to 0.47% for the prior quarter ended June 30, 2018.

 

2


   

The Company’s return on average equity for the quarter ended September 30, 2018 totaled 3.55% compared to 2.39% for the prior quarter ended June 30, 2018.

Asset Quality Highlights

 

   

Asset quality remained strong throughout the quarter ended September 30, 2018. The outstanding balance of nonperforming loans totaled $20.5 million, or 0.44% of total loans, at September 30, 2018 as compared to $16.9 million, or 0.37% of total loans, at June 30, 2018. The allowance for loan losses increased to $32.7 million at September 30, 2018 from $30.9 million at June 30, 2018, resulting in a “total loan coverage ratio”, representing the balance of the allowance for loan losses as a percentage of total loans, of 0.69% and 0.68%, respectively.

 

   

The Company recognized net charge offs totaling approximately $234,000 for the quarter ended September 30, 2018, reflecting an annualized net charge off rate of 0.02% on the average balance of total loans for the period. By comparison, the Company’s net charge offs totaled approximately $101,000 for the quarter ended June 30, 2018, reflecting an annualized net charge off rate of 0.01%.

 

   

The Company’s provision for loan losses increased by $1.4 million to $2.1 million for the quarter ended September 30, 2018 compared to $717,000 for the quarter ended June 30, 2018. The increase in provision expense was largely attributable to the effects of comparatively greater growth during the quarter ended September 30, 2018 in the performing portion of the loan portfolio that is collectively evaluated for impairment.

Capital Highlights

 

   

The Company maintained its regular quarterly cash dividend payable to stockholders of $0.04 per share declared and paid during the quarter September 30, 2018. Additionally, the Company declared a special cash dividend of $0.16 during the quarter ended September 30, 2018. The Company continues to evaluate its dividend policies and practices in relation to its capital management and shareholder value objectives.

 

   

During the quarter ended September 30, 2018, the Company repurchased 1,957,600 shares of its capital stock at a total cost of $26.9 million and at an average cost of $13.75 per share. Such shares were repurchased in conjunction with the Company’s third share repurchase program announced in May 2018, through which it authorized the repurchase of 10,238,557 shares, or 10% its outstanding shares. Through September 30, 2018, the Company repurchased a total of 4,653,060 shares, or 45.4% of the shares authorized for repurchase under this third program, at a total cost of $65.3 million and at an average cost of $14.03 per share.

 

   

The Company’s and Bank’s regulatory capital ratios at September 30, 2018 were well in excess of the levels required by federal banking regulators to be classified as “well-capitalized” under regulatory guidelines.

The exhibits that follow this narrative begin with the presentation of the Linked-Quarter Comparative Financial Analysis that supports the discussion above by presenting the Company’s financial condition and operating results for the quarter ended September 30, 2018 compared to those for the prior linked-quarter ended June 30, 2018. This analysis is followed by a tabular Five-Quarter Financial Trend Analysis that presents similar financial information, together with other financial highlights and performance metrics, over a consecutive five quarter look-back period that is intended to reflect the Company’s financial performance and strategic achievements over this extended period of time. The exhibits conclude with the presentation of the Reconciliation of GAAP to Non-GAAP financial data included in this news release.

Statements contained in this news release that are not historical facts are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties which could cause actual results to differ materially from those currently

 

3


anticipated due to a number of factors, which include, but are not limited to, factors discussed in documents filed by the Company with the Securities and Exchange Commission from time to time. The Company does not undertake and specifically disclaims any obligation to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Company.

 

4


Linked-Quarter Comparative Financial Analysis

 

Summary Balance Sheet
(Dollars and Shares in Thousands,
Except Per Share Data, Unaudited)

   At     Variance
or Change
    Variance
or Change
Pct.
 
   September 30,     June 30,  
   2018     2018  

Assets

        

Cash and cash equivalents

   $ 44,486     $ 128,864     $ (84,378     -65.5

Securities available for sale

     706,240       725,085       (18,845     -2.6

Securities held to maturity

     602,838       589,730       13,108       2.2

Loans held-for-sale

     1,503       863       640       74.2

Loans receivable, including yield adjustments

     4,660,507       4,501,348       159,159       3.5

Less allowance for loan losses

     (32,731     (30,865     (1,866     6.0
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loans receivable

     4,627,776       4,470,483       157,293       3.5

Premises and equipment

     57,635       56,240       1,395       2.5

Federal Home Loan Bank stock

     66,428       59,004       7,424       12.6

Accrued interest receivable

     19,455       18,510       945       5.1

Goodwill

     210,895       210,895             0.0

Core deposit intangible

     6,018       6,295       (277     -4.4

Bank owned life insurance

     251,410       249,816       1,594       0.6

Deferred income taxes, net

     22,136       23,754       (1,618     -6.8

Other real estate owned

     674       725       (51     -7.0

Other assets

     38,717       39,610       (893     -2.3
  

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

   $ 6,656,211     $ 6,579,874     $ 76,337       1.2
  

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities

        

Deposits

   $ 3,954,821     $ 4,073,604     $ (118,783     -2.9

Borrowings

     1,419,424       1,198,646       220,778       18.4

Advance payments by borrowers for taxes

     10,687       18,088       (7,401     -40.9

Other liabilities

     35,198       20,788       14,410       69.3
  

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

     5,420,130       5,311,126       109,004       2.1

Stockholders’ Equity

        

Common stock

     978       996       (18     -1.8

Paid-in capital

     897,551       922,711       (25,160     -2.7

Retained earnings

     350,838       359,096       (8,258     -2.3

Unearned ESOP shares

     (32,104     (32,590     486       -1.5

Accumulated other comprehensive income, net

     18,818       18,535       283       1.5
  

 

 

   

 

 

   

 

 

   

 

 

 

Total stockholders’ equity

     1,236,081       1,268,748       (32,667     -2.6
  

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 6,656,211     $ 6,579,874     $ 76,337       1.2
  

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated capital ratios

        

Equity to assets

     18.57     19.28     -0.71  

Tangible equity to tangible assets

     15.83     16.53     -0.70  

Share data

        

Outstanding shares

     97,754       99,626       (1,872     -1.9

Equity per share

   $ 12.64     $ 12.74     $ (0.10     -0.7

Tangible equity per share (1)

   $ 10.43     $ 10.56     $ (0.13     -1.2

 

(1)

Tangible equity equals total stockholders’ equity reduced by goodwill and core deposit intangible assets.

 

5


Summary Income Statement
(Dollars and Shares in Thousands,
Except Per Share Data, Unaudited)

   For the three months ended     Variance
or Change
    Variance
or Change
Pct.
 
   September 30,     June 30,  
   2018     2018  

Interest income

        

Loans

   $ 47,437     $ 46,615     $ 822       1.8

Taxable investment securities

     8,879       8,670       209       2.4

Tax-exempt investment securities

     716       702       14       2.0

Other interest-earning assets

     1,174       1,275       (101     -7.9
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Interest Income

     58,206       57,262       944       1.6

Interest expense

        

Deposits

     10,539       9,755       784       8.0

Borrowings

     7,487       6,916       571       8.3
  

 

 

   

 

 

   

 

 

   

 

 

 

Total interest expense

     18,026       16,671       1,355       8.1
  

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

     40,180       40,591       (411     -1.0

Provision for loan losses

     2,100       717       1,383       192.9
  

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income after provision for loan losses

     38,080       39,874       (1,794     -4.5
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-interest income

        

Fees and service charges

     1,173       1,205       (32     -2.7

Gain on sale and call of securities

     —         9       (9     -100.0

Gain on sale of loans

     132       127       5       3.9

(Loss) gain on sale of real estate owned

     (50     60       (110     -183.3

Income from bank owned life insurance

     1,594       1,604       (10     -0.6

Electronic banking fees and charges

     250       278       (28     -10.1

Miscellaneous

     83       75       8       10.7
  

 

 

   

 

 

   

 

 

   

 

 

 

Total non-interest income

     3,182       3,358       (176     -5.2

Non-interest expense

        

Salaries and employee benefits

     15,642       15,353       289       1.9

Net occupancy expense of premises

     2,736       2,716       20       0.7

Equipment and systems

     2,926       2,776       150       5.4

Advertising and marketing

     577       757       (180     -23.8

Federal deposit insurance premium

     465       463       2       0.4

Directors’ compensation

     758       754       4       0.5

Merger-related expenses

     —         5,149       (5,149     -100.0

Miscellaneous

     3,353       3,289       64       1.9
  

 

 

   

 

 

   

 

 

   

 

 

 

Total non-interest expense

     26,457       31,257       (4,800     -15.4
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     14,805       11,975       2,830       23.6

Income taxes

     3,659       4,257       (598     -14.0
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 11,146     $ 7,718     $ 3,428       44.4
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income per common share (EPS)

        

Basic

   $ 0.12     $ 0.08     $ 0.04    

Diluted

   $ 0.12     $ 0.08     $ 0.04    

Dividends declared (1)

        

Cash dividends declared per common share

   $ 0.20     $ 0.04     $ 0.16    

Cash dividends declared

   $  19,404     $ 3,892     $  15,512    

Dividend payout ratio

     174.1     50.4     123.7  

Weighted average number of common shares outstanding

        

Basic

     95,127       98,046       (2,919  

Diluted

     95,181       98,100       (2,919  

 

(1) 

Dividends declared during the quarter ended September 30, 2018 include a $0.16 special dividend representing a supplemental distribution of net income to stockholders from the fiscal year ended June 30, 2018.

 

6


Average Balance Sheet Data
(Dollars in Thousands, Unaudited)

   For the three months ended     Variance
or Change
    Variance
or Change
Pct.
 
   September 30,     June 30,  
   2018     2018  

Assets

        

Interest-earning assets:

        

Loans receivable, including loans held for sale

   $ 4,562,375     $ 4,507,336     $ 55,039       1.2

Taxable investment securities

     1,180,655       1,192,066       (11,411     -1.0

Tax-exempt investment securities

     136,056       134,683       1,373       1.0

Other interest-earning assets

     112,629       142,591       (29,962     -21.0
  

 

 

   

 

 

   

 

 

   

 

 

 

Total interest-earning assets

     5,991,715       5,976,676       15,039       0.3

Non-interest-earning assets

     596,006       586,976       9,030       1.5
  

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

   $ 6,587,721     $ 6,563,652     $ 24,069       0.4
  

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities and Stockholders’ Equity

        

Interest-bearing liabilities:

        

Deposits:

        

Interest-bearing demand

   $ 788,148     $ 1,004,445     $ (216,297     -21.5

Savings and club

     747,743       724,430       23,313       3.2

Certificates of deposit

     2,046,997       1,983,372       63,625       3.2
  

 

 

   

 

 

   

 

 

   

 

 

 

Total interest-bearing deposits

     3,582,888       3,712,247       (129,359     -3.5

Borrowings:

        

Federal Home Loan Bank Advances

     1,350,113       1,179,147       170,966       14.5

Other borrowings

     40,981       34,636       6,345       18.3
  

 

 

   

 

 

   

 

 

   

 

 

 

Total borrowings

     1,391,094       1,213,783       177,311       14.6
  

 

 

   

 

 

   

 

 

   

 

 

 

Total interest-bearing liabilities

     4,973,982       4,926,030       47,952       1.0

Non-interest-bearing liabilities:

        

Non-interest-bearing deposits

     314,114       305,763       8,351       2.7

Other non-interest-bearing liabilities

     43,533       39,340       4,193       10.7
  

 

 

   

 

 

   

 

 

   

 

 

 

Total non-interest-bearing liabilities

     357,647       345,103       12,544       3.6
  

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

     5,331,629       5,271,133       60,496       1.1

Stockholders’ equity

     1,256,092       1,292,519       (36,427     -2.8
  

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 6,587,721     $ 6,563,652     $ 24,069       0.4
  

 

 

   

 

 

   

 

 

   

 

 

 

Average interest-earning assets to average interest-bearing liabilities

     120.46     121.33     -0.87     -0.7

 

7


Performance Ratio Highlights

   For the three months ended     Variance
or Change
 
   September 30,     June 30,  
   2018     2018  

Average yield on interest-earning assets:

      

Loans receivable, including loans held for sale

     4.16     4.14     0.02

Taxable investment securities

     3.01     2.91     0.10

Tax-exempt investment securities (1)

     2.10     2.09     0.01

Other interest-earning assets

     4.17     3.58     0.59
  

 

 

   

 

 

   

 

 

 

Total interest-earning assets

     3.89     3.83     0.06

Average cost of interest-bearing liabilities:

      

Deposits:

      

Interest-bearing demand

     0.86     0.89     -0.03

Savings and club

     0.41     0.29     0.12

Certificates of deposit

     1.58     1.41     0.17
  

 

 

   

 

 

   

 

 

 

Total interest-bearing deposits

     1.18     1.05     0.13

Borrowings:

      

Federal Home Loan Bank Advances

     2.19     2.34     -0.15

Other borrowings

     0.94     0.34     0.60
  

 

 

   

 

 

   

 

 

 

Total borrowings

     2.15     2.28     -0.13
  

 

 

   

 

 

   

 

 

 

Total interest-bearing liabilities

     1.45     1.35     0.10

Interest rate spread (2)

     2.44     2.48     -0.04

Net interest margin (3)

     2.68     2.72     -0.04

Non-interest income to average assets (annualized)

     0.19     0.20     -0.01

Non-interest expense to average assets (annualized)

     1.61     1.90     -0.30

Efficiency ratio (4)

     61.01     71.12     -10.11

Return on average assets (annualized)

     0.68     0.47     0.21

Return on average equity (annualized)

     3.55     2.39     1.16

 

(1)

The yield on tax-exempt investment securities has not been adjusted to reflect their tax-effective yield.

(2)

Interest income divided by average interest-earning assets less interest expense divided by average interest-bearing liabilities.

(3)

Net interest income divided by average interest-earning assets.

(4)

Non-interest expense divided by the sum of net interest income and non-interest income.

 

8


Five-Quarter Financial Trend Analysis

 

Summary Balance Sheet
(Dollars and Shares in Thousands,
Except Per Share Data, Unaudited)

   At  
   September 30,     June 30,     March 31,     December 31,     September 30,  
   2018     2018     2018     2017     2017  

Assets

          

Cash and cash equivalents

   $ 44,486     $ 128,864     $ 38,283     $ 50,685     $ 38,823  

Securities available for sale

     706,240       725,085       684,771       637,671       636,600  

Securities held to maturity

     602,838       589,730       459,380       471,452       482,926  

Loans held-for-sale

     1,503       863       2,377       3,490       3,808  

Loans receivable, including yield adjustments

     4,660,507       4,501,348       3,351,369       3,291,516       3,260,328  

Less allowance for loan losses

     (32,731     (30,865     (30,248     (30,066     (29,445
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loans receivable

     4,627,776       4,470,483       3,321,121       3,261,450       3,230,883  

Premises and equipment

     57,635       56,240       42,856       41,829       40,132  

Federal Home Loan Bank stock

     66,428       59,004       39,112       39,113       39,115  

Accrued interest receivable

     19,455       18,510       13,926       13,524       13,268  

Goodwill

     210,895       210,895       108,591       108,591       108,591  

Core deposit intangible

     6,018       6,295       206       233       261  

Bank owned life insurance

     251,410       249,816       184,981       183,754       182,489  

Deferred income taxes, net

     22,136       23,754       3,898       6,941       13,230  

Other real estate owned

     674       725       1,094       1,693       2,424  

Other assets

     38,717       39,610       33,104       23,421       15,600  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

   $ 6,656,211     $ 6,579,874     $ 4,933,700     $ 4,843,847     $ 4,808,150  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities

          

Deposits

   $  3,954,821     $  4,073,604     $  3,067,102     $  3,033,231     $  2,952,887  

Borrowings

     1,419,424       1,198,646       852,009       798,864       808,554  

Advance payments by borrowers for taxes

     10,687       18,088       8,969       8,511       9,787  

Other liabilities

     35,198       20,788       14,419       13,968       22,689  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

     5,420,130       5,311,126       3,942,499       3,854,574       3,793,917  

Stockholders’ Equity

          

Common stock

     978       996       788       795       815  

Paid-in capital

     897,551       922,711       653,045       662,093       690,204  

Retained earnings

     350,838       359,096       355,270       353,536       354,123  

Unearned ESOP shares

     (32,104     (32,590     (33,076     (33,563     (34,049

Accumulated other comprehensive income, net

     18,818       18,535       15,174       6,412       3,140  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total stockholders’ equity

     1,236,081       1,268,748       991,201       989,273       1,014,233  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 6,656,211     $ 6,579,874     $ 4,933,700     $ 4,843,847     $ 4,808,150  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated capital ratios

          

Equity to assets

     18.57     19.28     20.09     20.42     21.09

Tangible equity to tangible assets

     15.83     16.53     18.29     18.59     19.27

Share data

          

Outstanding shares

     97,754       99,626       78,765       79,527       81,548  

Equity per share

   $ 12.64     $ 12.74     $ 12.58     $ 12.44     $ 12.44  

Tangible equity per share (1)

   $ 10.43     $ 10.56     $ 11.20     $ 11.07     $ 11.10  

 

 

(1)

Tangible equity equals total stockholders’ equity reduced by goodwill and core deposit intangible assets.    

 

9


Supplemental Balance Sheet Highlights
(Dollars in Thousands, Unaudited)

   At  
   September 30,      June 30,      March 31,      December 31,      September 30,  
   2018      2018      2018      2017      2017  

Cash and cash equivalents

              

Cash and due from depository institutions

   $ 21,973      $ 26,199      $ 18,229      $ 17,899      $ 17,972  

Interest-bearing deposits in other banks

     22,513        102,665        20,054        32,786        20,851  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total cash and cash equivalents

   $ 44,486      $ 128,864      $ 38,283      $ 50,685      $ 38,823  

Securities available for sale

              

Debt securities:

              

U.S. agency securities

   $ 4,070      $ 4,411      $ 4,667      $ 4,810      $ 5,063  

Municipal and state obligations

     25,907        26,088        26,733        27,428        27,725  

Asset-backed securities

     182,390        182,620        182,066        169,484        163,615  

Collateralized loan obligations

     215,569        226,066        178,342        133,341        128,383  

Corporate bonds

     147,811        147,594        142,202        142,397        142,489  

Trust preferred securities

     3,794        3,783        8,485        8,494        8,544  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Debt securities available for sale

     579,541        590,562        542,495        485,954        475,819  

Mortgage-backed securities:

              

Collateralized mortgage obligations

     23,097        24,292        25,601        27,187        28,790  

Residential pass-through securities

     95,795        102,359        108,736        116,496        123,868  

Commercial pass-through securities

     7,807        7,872        7,939        8,034        8,123  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Mortgage-backed securities

     126,699        134,523        142,276        151,717        160,781  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total securities available for sale

   $ 706,240      $ 725,085      $ 684,771      $ 637,671      $ 636,600  

Securities held to maturity

              

Debt securities:

              

U.S. agency securities

   $ —        $ —        $ —        $ —        $ 35,000  

Municipal and state obligations

     109,061        109,483        98,011        100,671        95,954  

Subordinated debt

     46,275        46,294        30,000        25,000        15,000  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Debt securities held to maturity

     155,336        155,777        128,011        125,671        145,954  

Mortgage-backed securities:

              

Collateralized mortgage obligations

     54,130        56,886        34,309        35,861        16,600  

Residential pass-through securities

     190,812        200,622        151,605        160,487        169,257  

Commercial pass-through securities

     202,560        176,445        145,455        149,433        151,115  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Mortgage-backed securities

     447,502        433,953        331,369        345,781        336,972  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total securities held to maturity

   $ 602,838      $ 589,730      $ 459,380      $ 471,452      $ 482,926  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total securities

   $ 1,309,078      $ 1,314,815      $ 1,144,151      $ 1,109,123      $ 1,119,526  

 

10


Supplemental Balance Sheet Highlights
(Dollars in Thousands, Unaudited)

   At  
   September 30,     June 30,     March 31,     December 31,     September 30,  
   2018     2018     2018     2017     2017  

Loan portfolio composition:

          

Residential first mortgage loans

   $ 1,303,249     $ 1,297,453     $ 563,807     $ 574,322     $ 559,593  

Home equity loans and lines of credit

     93,473       90,761       79,522       80,961       80,746  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Residential mortgage loans

     1,396,722       1,388,214       643,329       655,283       640,339  

Multifamily mortgage loans

     1,898,831       1,758,584       1,471,573       1,438,386       1,427,840  

Nonresidential and mixed use mortgage loans

     1,315,279       1,302,961       1,113,385       1,069,254       1,085,983  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Commercial mortgage loans

     3,214,110       3,061,545       2,584,958       2,507,640       2,513,823  

Commercial business loans

     78,317       85,825       88,216       92,442       81,676  

Construction loans

     26,581       23,271       22,963       22,205       8,320  

Account loans

     3,133       3,283       3,038       2,996       2,800  

Other consumer loans

     4,427       5,777       7,186       8,951       10,988  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Consumer loans

     7,560       9,060       10,224       11,947       13,788  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total loans, excluding yield adjustments

     4,723,290       4,567,915       3,349,690       3,289,517       3,257,946  

Unamortized yield adjustments

     (62,783     (66,567     1,679       1,999       2,382  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loans receivable, including yield adjustments

     4,660,507       4,501,348       3,351,369       3,291,516       3,260,328  

Less allowance for loan losses

     (32,731     (30,865     (30,248     (30,066     (29,445
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loans receivable

   $  4,627,776     $  4,470,483     $  3,321,121     $  3,261,450     $  3,230,883  

Loan portfolio allocation:

          

Residential first mortgage loans

     27.6     28.4     16.8     17.5     17.2

Home equity loans and lines of credit

     2.0     2.0     2.4     2.5     2.5
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Residential mortgage loans

     29.6     30.4     19.2     20.0     19.7

Multifamily mortgage loans

     40.2     38.5     43.9     43.7     43.8

Nonresidential and mixed use mortgage loans

     27.8     28.5     33.2     32.5     33.3
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Commercial mortgage loans

     68.0     67.0     77.1     76.2     77.1

Commercial business loans

     1.6     1.9     2.6     2.8     2.5

Construction loans

     0.6     0.5     0.7     0.7     0.3

Account loans

     0.1     0.1     0.1     0.1     0.1

Other consumer loans

     0.1     0.1     0.3     0.2     0.3
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Consumer loans

     0.2     0.2     0.4     0.3     0.4
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total loans, excluding yield adjustments

     100.0     100.0     100.0     100.0     100.0

Asset quality:

          

Nonperforming assets:

          

Accruing loans > 90 days past due

   $ 19     $ 60     $ 45     $ 31     $ 105  

Nonaccrual loans

     20,473       16,799       14,190       16,315       18,006  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total nonperforming loans

     20,492       16,859       14,235       16,346       18,111  

Other real estate owned

     674       725       1,094       1,693       2,424  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total nonperforming assets

   $ 21,166     $ 17,584     $ 15,329     $ 18,039     $ 20,535  

Nonperforming loans (% total loans)

     0.44     0.37     0.42     0.50     0.56

Nonperforming assets (% total assets)

     0.32     0.27     0.31     0.37     0.43

Allowance for loan losses (ALLL):

          

ALLL to total loans

     0.69     0.68     0.90     0.91     0.90

ALLL to nonperforming loans

     159.73     183.08     212.49     183.93     162.58

Net charge offs

   $ 234     $ 101     $ 241     $ 315     $ 471  

Average net charge off rate (annualized)

     0.02     0.01     0.03     0.04     0.06

 

11


Supplemental Balance Sheet Highlights
(Dollars in Thousands, Unaudited)

   At  
   September 30,
2018
    June 30,
2018
    March 31,
2018
    December 31,
2017
    September 30,
2017
 

Funding by type:

          

Deposits

          

Non-interest-bearing deposits

   $ 308,631     $ 311,938     $ 270,217     $ 275,065     $ 279,263  

Interest-bearing demand

     786,069       1,000,989       871,425       879,385       855,822  

Savings and club

     743,289       744,039       515,805       517,400       519,037  

Certificates of deposit

     2,116,832       2,016,638       1,409,655       1,361,381       1,298,765  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Interest-bearing deposits

     3,646,190       3,761,666       2,796,885       2,758,166       2,673,624  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total deposits

     3,954,821       4,073,604       3,067,102       3,033,231       2,952,887  

Borrowings:

          

Federal Home Loan Bank advances

     1,335,844       1,170,144       775,625       775,649       775,673  

Overnight borrowings

     60,000       —         42,000       —         —    

Depositor sweep accounts

     23,580       28,502       34,384       23,215       32,881  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total borrowings

     1,419,424       1,198,646       852,009       798,864       808,554  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total funding

   $ 5,374,245     $ 5,272,250     $ 3,919,111     $ 3,832,095     $ 3,761,441  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loans as a % of deposits

     117.1     109.8     108.4     107.6     109.5

Deposits as a % of total funding

     73.6     77.3     78.3     79.2     78.5

Borrowings as a % of total funding

     26.4     22.7     21.7     20.8     21.5

Funding by source:

          

Retail funding

          

Non-interest-bearing deposits

   $ 308,631     $ 311,938     $ 270,217     $ 275,065     $ 279,263  

Interest-bearing demand

     786,069       790,164       656,114       657,349       633,478  

Savings and club

     743,289       744,039       515,805       517,400       519,037  

Certificates of deposit

     1,871,903       1,828,039       1,247,900       1,210,428       1,175,329  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total retail deposits

     3,709,892       3,674,180       2,690,036       2,660,242       2,607,107  

Depositor sweep accounts

     23,580       28,502       34,384       23,215       32,881  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total retail funding

     3,733,472       3,702,682       2,724,420       2,683,457       2,639,988  

Wholesale funding:

          

Interest-bearing demand

   $ —       $ 210,825     $ 215,311     $ 222,036     $ 222,344  

Certificates of deposit (listing service)

     104,990       104,256       104,934       93,853       101,791  

Certificates of deposit (brokered)

     139,939       84,343       56,821       57,100       21,645  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total wholesale deposits

     244,929       399,424       377,066       372,989       345,780  

FHLB Advances

     1,335,844       1,170,144       775,625       775,649       775,673  

Overnight borrowings

     60,000       —         42,000       —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total wholesale funding

     1,640,773       1,569,568       1,194,691       1,148,638       1,121,453  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total funding

   $ 5,374,245     $ 5,272,250     $ 3,919,111     $ 3,832,095     $ 3,761,441  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Retail funding as a % of total funding

     69.5     70.2     69.5     70.0     70.2

Wholesale funding as a % of total funding

     30.5     29.8     30.5     30.0     29.8

 

12


Summary Income Statement
(Dollars and Shares in Thousands,
Except Per Share Data, Unaudited)

   For the three months ended  
   September 30,     June 30,     March 31,     December 31,     September 30,  
   2018     2018     2018     2017     2017  

Interest income

          

Loans

   $ 47,437     $ 46,615     $ 30,728     $ 30,610     $ 30,473  

Taxable investment securities

     8,879       8,670       6,450       6,077       5,856  

Tax-exempt investment securities

     716       702       652       641       621  

Other interest-earning assets

     1,174       1,275       715       704       642  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total interest income

     58,206       57,262       38,545       38,032       37,592  

Interest expense

          

Deposits

     10,539       9,755       7,026       6,649       6,219  

Borrowings

     7,487       6,916       4,462       4,548       4,563  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total interest expense

     18,026       16,671       11,488       11,197       10,782  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

     40,180       40,591       27,057       26,835       26,810  

Provision for loan losses

     2,100       717       423       936       630  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income after provision for
loan losses

     38,080       39,874       26,634       25,899       26,180  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-interest income

          

Fees and service charges

     1,173       1,205       1,537       1,409       1,261  

Gain (loss) on sale and call of securities

     —         9       (1     —         —    

Gain on sale of loans

     132       127       346       200       331  

(Loss) gain on sale of real estate owned

     (50     60       7       23       (109

Income from bank owned life insurance

     1,594       1,604       1,227       1,264       1,267  

Electronic banking fees and charges

     250       278       243       302       278  

Miscellaneous

     83       75       189       65       66  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total non-interest income

     3,182       3,358       3,548       3,263       3,094  

Non-interest expense

          

Salaries and employee benefits

     15,642       15,353       12,888       12,926       12,793  

Net occupancy expense of premises

     2,736       2,716       2,359       2,122       1,981  

Equipment and systems

     2,926       2,776       2,323       2,193       2,190  

Advertising and marketing

     577       757       745       748       710  

Federal deposit insurance premium

     465       463       350       343       360  

Directors’ compensation

     758       754       689       688       689  

Merger-related expenses

     —         5,149       401       1,193       —    

Miscellaneous

     3,353       3,289       2,788       2,551       2,563  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total non-interest expense

     26,457       31,257       22,543       22,764       21,286  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     14,805       11,975       7,639       6,398       7,988  

Income taxes

     3,659       4,257       2,262       5,129       2,756  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 11,146     $ 7,718     $ 5,377     $ 1,269     $ 5,232  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income per common share (EPS)

          

Basic

   $ 0.12     $ 0.08     $ 0.07     $ 0.02     $ 0.07  

Diluted

   $ 0.12     $ 0.08     $ 0.07     $ 0.02     $ 0.07  

Dividends declared (1) (2)

          

Cash dividends declared per common share

   $ 0.20     $ 0.04     $ 0.03     $ 0.03     $ 0.15  

Cash dividends declared

   $ 19,404     $ 3,892     $ 2,262     $ 1,856     $ 12,148  

Dividend payout ratio

     174.1     50.4     42.1     146.3     232.2

Weighted average number of common
shares outstanding

          

Basic

     95,127       98,046       75,492       77,174       79,649  

Diluted

     95,181       98,100       75,539       77,239       79,708  

 

(1) 

Dividends declared during the quarter ended September 30, 2018 include a $0.16 special dividend representing a supplemental distribution of net income to stockholders from the fiscal year ended June 30, 2018.

(2) 

Dividends declared during the quarter ended September 30, 2017 include a $0.12 special dividend representing a supplemental distribution of net income to stockholders from the fiscal year ended June 30, 2017.

 

13


Average Balance Sheet Data
(Dollars in Thousands, Unaudited)

   For the three months ended  
   September 30,     June 30,     March 31,     December 31,     September 30,  
   2018     2018     2018     2017     2017  

Assets

          

Interest-earning assets:

          

Loans receivable, including loans held for sale

   $ 4,562,375     $ 4,507,336     $ 3,293,664     $ 3,255,862     $ 3,257,465  

Taxable investment securities

     1,180,655       1,192,066       1,003,600       996,397       1,001,183  

Tax-exempt investment securities

     136,056       134,683       127,605       126,214       122,685  

Other interest-earning assets

     112,629       142,591       67,770       82,539       79,920  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total interest-earning assets

     5,991,715       5,976,676       4,492,639       4,461,012       4,461,253  

Non-interest-earning assets

     596,006       586,976       369,299       364,015       361,259  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

   $ 6,587,721     $ 6,563,652     $ 4,861,938     $ 4,825,027     $ 4,822,512  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities and Stockholders’ Equity

          

Interest-bearing liabilities:

          

Deposits:

          

Interest-bearing demand

   $ 788,148     $ 1,004,445     $ 870,762     $ 854,142     $ 858,039  

Savings and club

     747,743       724,430       513,948       518,513       522,686  

Certificates of deposit

     2,046,997       1,983,372       1,385,151       1,336,466       1,284,847  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total interest-bearing deposits

     3,582,888       3,712,247       2,769,861       2,709,121       2,665,572  

Borrowings:

          

Federal Home Loan Bank Advances

     1,350,113       1,179,147       777,721       777,460       778,104  

Other borrowings

     40,981       34,636       33,529       30,606       32,041  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total borrowings

     1,391,094       1,213,783       811,250       808,066       810,145  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total interest-bearing liabilities

     4,973,982       4,926,030       3,581,111       3,517,187       3,475,717  

Non-interest-bearing liabilities:

          

Non-interest-bearing deposits

     314,114       305,763       267,152       277,236       274,858  

Other non-interest-bearing liabilities

     43,533       39,340       24,953       25,777       31,070  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total non-interest-bearing liabilities

     357,647       345,103       292,105       303,013       305,928  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

     5,331,629       5,271,133       3,873,216       3,820,200       3,781,645  

Stockholders’ equity

     1,256,092       1,292,519       988,722       1,004,827       1,040,867  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 6,587,721     $ 6,563,652     $ 4,861,938     $ 4,825,027     $ 4,822,512  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average interest-earning assets to average
interest-bearing liabilities

     120.46     121.33     125.45     126.83     128.35

 

14


Performance Ratio Highlights

   For the three months ended  
   September 30,     June 30,     March 31,     December 31,     September 30,  
   2018     2018     2018     2017     2017  

Average yield on interest-earning assets:

          

Loans receivable, including loans held for sale

     4.16     4.14     3.73     3.76     3.74

Taxable investment securities

     3.01     2.91     2.57     2.44     2.34

Tax-exempt investment securities (1)

     2.10     2.09     2.04     2.03     2.03

Other interest-earning assets

     4.17     3.58     4.22     3.42     3.21
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total interest-earning assets

     3.89     3.83     3.43     3.41     3.37

Average cost of interest-bearing liabilities:

          

Deposits:

          

Interest-bearing demand

     0.86     0.89     0.84     0.80     0.76

Savings and club

     0.41     0.29     0.12     0.12     0.12

Certificates of deposit

     1.58     1.41     1.46     1.43     1.38
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total interest-bearing deposits

     1.18     1.05     1.01     0.98     0.93

Borrowings:

          

Federal Home Loan Bank Advances

     2.19     2.34     2.27     2.33     2.33

Other borrowings

     0.94     0.34     0.56     0.27     0.27
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total borrowings

     2.15     2.28     2.20     2.25     2.25
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total interest-bearing liabilities

     1.45     1.35     1.28     1.27     1.24

Interest rate spread (2)

     2.44     2.48     2.15     2.14     2.13

Net interest margin (3)

     2.68     2.72     2.41     2.41     2.40

Non-interest income to average assets
(annualized)

     0.19     0.20     0.29     0.27     0.26

Non-interest expense to average assets
(annualized)

     1.61     1.90     1.85     1.89     1.77

Efficiency ratio (4)

     61.01     71.12     73.66     75.63     71.18

Return on average assets (annualized)

     0.68     0.47     0.44     0.11     0.43

Return on average equity (annualized)

     3.55     2.39     2.18     0.51     2.01

 

(1)

The yield on tax-exempt investment securities has not been adjusted to reflect their tax-effective yield.

(2)

Interest income divided by average interest-earning assets less interest expense divided by average interest-bearing liabilities.

(3)

Net interest income divided by average interest-earning assets.

(4)

Non-interest expense divided by the sum of net interest income and non-interest income.

 

15


This document contains certain non-GAAP financial measures in addition to results presented in accordance with Generally Accepted Accounting Principles (“GAAP”). These non-GAAP measures provide additional information which allow readers to evaluate the ongoing performance of the Company. They are not a substitute for GAAP measures; they should be read and used in conjunction with the Company’s GAAP financial information. A reconciliation of non-GAAP financial measures to GAAP measures is included below. In all cases, it should be understood that non-GAAP per share measures do not depict amounts that accrue directly to the benefit of shareholders.

 

Reconciliation of GAAP to Non-GAAP
(Dollars in Thousands,
Except Per Share Data, Unaudited)

   For the three months ended  
   September 30,      June 30,     March 31,     December 31,     September 30,  
   2018      2018     2018     2017     2017  

Adjusted Net Income

           

Net income (GAAP)

   $  11,146      $ 7,718     $  5,377     $ 1,269     $  5,232  

Effect to adjust for:

           

Merger-related expenses

     —          5,149       401       1,193       —    

Income tax benefit from merger-related
expenses

     —          (1,451     (22     (165     —    

Income tax expense for write-down of net
deferred tax asset

     —          —         —         4,867       —    

Income tax benefit for write-down of net
deferred tax liability

     —          —         —         (1,381     —    

Income tax benefit for reduction in current
year income tax rate (from 35% to 28%)

     —          —         —         (769     —    
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted net income (non-GAAP)

   $ 11,146      $  11,416     $ 5,756     $ 5,014     $ 5,232  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted Net Income per Common Share (EPS)

           

Net income per common share
Basic (GAAP)

   $ 0.12      $ 0.08     $ 0.07     $ 0.02     $ 0.07  

Effect to adjust for:

           

Merger-related expenses

     —          0.05       0.01       0.02       —    

Income tax benefit from merger-related
expenses

     —          (0.01     —         (0.01     —    

Income tax expense for write-down of net
deferred tax asset

     —          —         —         0.06       —    

Income tax benefit for write-down of net
deferred tax liability

     —          —         —         (0.02     —    

Income tax benefit for reduction in current
year income tax rate (from 35% to 28%)

     —          —         —         (0.01     —    
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted net income per common share
Basic (non-GAAP)

   $ 0.12      $ 0.12     $ 0.08     $ 0.06     $ 0.07  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted Net Income per Common Share (EPS)

           

Net income per common share
Diluted (GAAP)

   $ 0.12      $ 0.08     $ 0.07     $ 0.02     $ 0.07  

Effect to adjust for:

           

Merger-related expenses

     —          0.05       0.01       0.02       —    

Income tax benefit from merger-related
expenses

     —          (0.01     —         (0.01     —    

Income tax expense for write-down of net
deferred tax asset

     —          —         —         0.06       —    

Income tax benefit for write-down of net
deferred tax liability

     —          —         —         (0.02     —    

Income tax benefit for reduction in current
year income tax rate (from 35% to 28%)

     —          —         —         (0.01     —    
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted net income per common share
Diluted (non-GAAP)

   $ 0.12      $ 0.12     $ 0.08     $ 0.06     $ 0.07  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

16


Reconciliation of GAAP to Non-GAAP
(Unaudited)

   For the three months ended  
   September 30,     June 30,     March 31,     December 31,     September 30,  
   2018     2018     2018     2017     2017  

Adjusted Non-Interest Expense

          

Non-interest expense (GAAP)

     26,457       31,257       22,543       22,764       21,286  

Effect to adjust for:

          

Merger-related expenses

     —         (5,149     (401     (1,193     —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted non-interest expense (non-GAAP)

     26,457       26,108       22,142       21,571       21,286  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted Non-Interest Expense Ratio

          

Non-interest expense to average assets (GAAP)

     1.61     1.90     1.85     1.89     1.77

Effect to adjust for:

          

Merger-related expenses

     0.00     -0.31     -0.03     -0.10     0.00
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted non-interest expense ratio (non-GAAP)

     1.61     1.59     1.82     1.79     1.77
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted Efficiency Ratio

          

Non-interest expense / (Net interest income
+ non-interest income) (GAAP)

     61.0     71.1     73.7     75.6     71.2

Effect to adjust for:

          

Merger-related expenses

     0.0     -11.7     -1.3     -3.9     0.0
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted efficiency ratio (non-GAAP)

     61.0     59.4     72.4     71.7     71.2
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted Return on Average Assets

          

Return on average assets (GAAP)

     0.68     0.47     0.44     0.11     0.43

Effect to adjust for:

          

Merger-related expenses

     0.00     0.31     0.03     0.09     0.00

Income tax benefit from merger-related
expenses

     0.00     -0.09     0.00     -0.01     0.00

Income tax expense for write-down of net
deferred tax asset

     0.00     0.00     0.00     0.40     0.00

Income tax benefit for write-down of net
deferred tax liability

     0.00     0.00     0.00     -0.11     0.00

Income tax benefit for reduction in current
year income tax rate (from 35% to 28%)

     0.00     0.00     0.00     -0.06     0.00
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted return on average assets (non-GAAP)

     0.68     0.69     0.47     0.42     0.43
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted Return on Average Equity

          

Return on average equity (GAAP)

     3.55     2.39     2.18     0.51     2.01

Effect to adjust for:

          

Merger-related expenses

     0.00     1.59     0.16     0.48     0.00

Income tax benefit from merger-related
expenses

     0.00     -0.45     -0.01     -0.07     0.00

Income tax expense for write-down of net
deferred tax asset

     0.00     0.00     0.00     1.94     0.00

Income tax benefit for write-down of net
deferred tax liability

     0.00     0.00     0.00     -0.55     0.00

Income tax benefit for reduction in current
year income tax rate (from 35% to 28%)

     0.00     0.00     0.00     -0.31     0.00
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted return on average equity (non-GAAP)

     3.55     3.53     2.33     2.00     2.01
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

17

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