Oritani Financial Corp - FORM 10-Q - November 9, 2017

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EX-32 - EXHIBIT 32 - Oritani Financial Corpexhibit32.htm
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________

FORM 10-Q
______________________________

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 2017
 
OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from   to
Commission File No. 001-34786
   
Oritani Financial Corp.
(Exact name of registrant as specified in its charter)
   

Delaware
 
30-0628335
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification Number)
 
370 Pascack Road, Township of Washington, New Jersey 07676
(Address of Principal Executive Offices) (Zip Code)
 
(201) 664-5400
(Registrant's telephone number, including area code)
 
N/A
(Former name, former address, and former fiscal year, if changed since last report)
   
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such requirements for the past 90 days.
 
    YES      NO  
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
 
    YES      NO  
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.  See definitions of "large accelerated filer," "accelerated filer", "smaller reporting company", and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer
 
☒
 
Accelerated filer
 
☐
Non-accelerated filer
 
  (Do not check if a smaller reporting company)
 
Smaller Reporting company
 
 
 
  
 
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 pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 
    YES      NO  
 
As of November 9, 2017, there were 56,245,065 shares of the Registrant's common stock, par value $0.01 per share, issued and 46,279,865 shares outstanding.



Oritani Financial Corp.
FORM 10-Q
 
Index

 
 
  
 
Part I. Financial Information
  Page
 
 
 
Item 1.
Financial Statements
3
 
 
 
 
3
 
 
 
 
4
 
 
 
 
5
 
 
 
 
6
 
 
 
 
7
 
 
 
 
8
 
 
 
Item 2.
35
 
 
 
Item 3.
45
 
 
 
Item 4.
47
 
 
 
 
Part II. Other Information
 
 
 
 
Item 1.
47
 
 
 
Item 1A.
47
 
 
 
Item 2.
47
 
 
 
Item 3.
47
 
 
 
Item 4.
47
 
 
 
Item 5.
47
 
 
 
Item 6.
48
 
 
 
 
49
 
Part I. Financial Information
Item 1. Financial Statements
 
Oritani Financial Corp. and Subsidiaries
Consolidated Balance Sheets
(In thousands, except share data)

 
  
September 30, 2017
    
June 30, 2017
  
 
  
(unaudited)
    
(audited)
  
Assets
            
Cash on hand and in banks
  
$
30,701
    
$
33,252
  
Federal funds sold and short term investments
    
403
      
326
  
Cash and cash equivalents
    
31,104
      
33,578
  
Loans, net
    
3,561,902
      
3,566,703
  
Securities available for sale, at fair value
    
90,348
      
97,930
  
Securities held to maturity, fair value of $236,711 and $237,204, respectively
    
238,770
      
239,631
  
Bank Owned Life Insurance (at cash surrender value)
    
96,592
      
95,946
  
Federal Home Loan Bank of New York ("FHLB") stock , at cost
    
27,813
      
32,504
  
Accrued interest receivable
    
11,371
      
10,620
  
Real estate owned
    
—
      
140
  
Office properties and equipment, net
    
13,713
      
13,909
  
Deferred tax assets, net
    
38,888
      
37,693
  
Other assets
    
9,107
      
9,030
  
Total Assets
  
$
4,119,608
    
$
4,137,684
  
Liabilities
                
Deposits
  
$
2,920,046
    
$
2,856,478
  
Borrowings
    
546,277
      
642,059
  
Advance payments by borrowers for taxes and insurance
    
23,383
      
23,496
  
Other liabilities
    
63,509
      
56,428
  
Total Liabilities
    
3,553,215
      
3,578,461
  
Stockholders' Equity
                
Common stock, $0.01 par value; 150,000,000 shares authorized; 56,245,065 shares issued;
46,176,504 shares outstanding at September 30, 2017 and 45,992,366 shares outstanding at June 30, 2017.
    
562
      
562
  
Additional paid-in capital
    
512,693
      
512,337
  
Non-vested restricted stock awards
    
(347
)
    
(458
)
Treasury stock, at cost; 10,068,561 shares at September 30, 2017 and 10,252,699 shares at June 30, 2017.
    
(134,061
)
    
(136,517
)
Unallocated common stock held by the employee stock ownership plan
    
(18,061
)
    
(18,407
)
Retained earnings
    
202,196
      
198,186
  
Accumulated other comprehensive income, net of tax
    
3,411
      
3,520
  
Total Stockholders' Equity
    
566,393
      
559,223
  
Total Liabilities and Stockholders' Equity
  
$
4,119,608
    
$
4,137,684
  

See accompanying notes to unaudited consolidated financial statements.
3

Oritani Financial Corp. and Subsidiaries
Consolidated Statements of Income
(In thousands, except per share data)

   
Three months ended September 30,
  
   
2017
    
2016
  
   
(unaudited)
  
Interest income:
            
Interest on loans
  
$
35,837
    
$
31,973
  
Dividends on FHLB stock
    
485
      
457
  
Interest on securities available for sale
    
496
      
826
  
Interest on securities held to maturity
    
1,099
      
803
  
Interest on federal funds sold and short term investments
    
3
      
1
  
Total interest income
    
37,920
      
34,060
  
Interest expense:
                
Deposits
    
7,353
      
5,739
  
Borrowings
    
2,923
      
3,021
  
Total interest expense
    
10,276
      
8,760
  
Net interest income before provision for loan losses
    
27,644
      
25,300
  
Provision for loan losses
    
—
      
—
  
Net interest income after provision for loan losses
    
27,644
      
25,300
  
Other income:
                
Service charges
    
228
      
182
  
Income from investments in real estate joint ventures
    
—
      
316
  
Bank-owned life insurance
    
646
      
679
  
Net loss on sale of assets
    
(2
)
    
—
  
Other income
    
71
      
81
  
Total other income
    
943
      
1,258
  
Other expenses:
                
Compensation, payroll taxes and fringe benefits
    
6,556
      
7,358
  
Advertising
    
142
      
90
  
Office occupancy and equipment expense
    
749
      
800
  
Data processing service fees
    
544
      
544
  
Federal insurance premiums
    
300
      
450
  
Net expense from real estate operations
    
1
      
55
  
Other expenses
    
1,192
      
971
  
Total operating expenses
    
9,484
      
10,268
  
Income before income tax expense
    
19,103
      
16,290
  
Income tax expense
    
7,107
      
5,679
  
Net income
  
$
11,996
    
$
10,611
  
Earnings per basic common share
  
$
0.27
    
$
0.25
  
Earnings per diluted common share
  
$
0.27
    
$
0.24
  

See accompanying notes to unaudited consolidated financial statements.
4

Oritani Financial Corp. and Subsidiaries
Consolidated Statements of Comprehensive Income
(In thousands)

   
Three months ended September 30,
  
   
2017
    
2016
  
   
(unaudited)
  
Net of tax:
            
Net income
  
$
11,996
    
$
10,611
  
Other comprehensive (loss) income
                
Change in unrealized holding loss on securities available for sale
    
(4
)
    
(392
)
Amortization related to post-retirement obligations
    
5
      
72
  
Net change in unrealized (loss) gain on interest rate swaps
    
(110
)
    
1,300
  
Total other comprehensive (loss) income
    
(109
)
    
980
  
Total comprehensive income
  
$
11,887
    
$
11,591
  

See accompanying notes to unaudited consolidated financial statements.
5

Oritani Financial Corp. and Subsidiaries
Consolidated Statements of Stockholders' Equity
Three months ended September 30, 2017 and 2016 (unaudited)
(In thousands, except share data)

 
  
Shares Outstanding
    
Common stock
    
Additional paid-in capital
    
Non-vested restricted stock awards
    
Treasury stock
    
Unallocated common stock held by ESOP
    
Retained earnings
    
Accumulated other comprehensive income (loss), net of tax
    
Total stockholders' equity
  
Balance at June 30, 2016
    
45,247,420
    
$
562
    
$
513,177
    
$
(4,242
)
  
$
(146,173
)
  
$
(20,481
)
  
$
202,429
    
$
(10,072
)
  
$
535,200
  
Net income
    
—
      
—
      
—
      
—
      
—
      
—
      
10,611
      
—
      
10,611
  
Other comprehensive income, net of tax
    
—
      
—
      
—
      
—
      
—
      
—
      
—
      
980
      
980
  
Cash dividends declared ($0.175 per share)
    
—
      
—
      
—
      
—
      
—
      
—
      
(7,480
)
    
—
      
(7,480
)
Purchase of treasury stock
    
(94,953
)
    
—
      
—
      
—
      
(1,508
)
    
—
      
—
      
—
      
(1,508
)
Compensation cost for stock options and restricted stock
    
—
      
—
      
775
      
—
      
—
      
—
      
—
      
—
      
775
  
ESOP shares allocated or committed to be released
    
—
      
—
      
314
      
—
      
—
      
339
      
—
      
—
      
653
  
Exercise of stock options
    
35,672
      
—
      
—
      
—
      
474
      
—
      
(47
)
    
—
      
427
  
Vesting of restricted stock awards
    
—
      
—
      
(3,718
)
    
3,762
      
—
      
—
      
(44
)
    
—
      
—
  
Balance at September 30, 2016
    
45,188,139
    
$
562
    
$
510,548
    
$
(480
)
  
$
(147,207
)
  
$
(20,142
)
  
$
205,469
    
$
(9,092
)
  
$
539,658
  
 
                                                                        
Balance at June 30, 2017
    
45,992,366
    
$
562
    
$
512,337
    
$
(458
)
  
$
(136,517
)
  
$
(18,407
)
  
$
198,186
    
$
3,520
    
$
559,223
  
Net income
    
—
      
—
      
—
      
—
      
—
      
—
      
11,996
      
—
      
11,996
  
Other comprehensive loss, net of tax
    
—
      
—
      
—
      
—
      
—
      
—
      
—
      
(109
)
    
(109
)
Cash dividends declared ($0.175 per share)
    
—
      
—
      
—
      
—
      
—
      
—
      
(7,657
)
    
—
      
(7,657
)
Purchase of treasury stock
    
(763
)
    
—
      
—
      
—
      
(13
)
    
—
      
—
      
—
      
(13
)
Compensation cost for stock options and restricted stock
    
—
      
—
      
51
      
—
      
—
      
—
      
—
      
—
      
51
  
ESOP shares allocated or committed to be released
    
—
      
—
      
337
      
—
      
—
      
346
      
—
      
—
      
683
  
Exercise of stock options
    
191,901
      
—
      
—
      
—
      
2,556
      
—
      
(337
)
    
—
      
2,219
  
Vesting of restricted stock awards
    
—
      
—
      
(32
)
    
24
      
—
      
—
      
8
      
—
      
—
  
Forfeiture of restricted stock awards
    
(7,000
)
    
—
      
—
      
87
      
(87
)
    
—
      
—
      
—
      
—
  
Balance at September 30, 2017
    
46,176,504
    
$
562
    
$
512,693
    
$
(347
)
  
$
(134,061
)
  
$
(18,061
)
  
$
202,196
    
$
3,411
    
$
566,393
  
 
See accompanying notes to unaudited consolidated financial statements.
6

Oritani Financial Corp. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)

 
  
Three months ended September 30,
  
 
  
2017
    
2016
  
 
  
(unaudited)
  
Cash flows from operating activities:
      
Net income
  
$
11,996
    
$
10,611
  
Adjustments to reconcile net income to net cash provided by operating activities:
                
ESOP and stock-based compensation expense
    
734
      
1,428
  
Tax benefit from stock-based compensation
    
3
      
350
  
Depreciation of premises and equipment
    
196
      
232
  
Net amortization and accretion of premiums and discounts on securities
    
297
      
269
  
Provision for loan losses
    
—
      
—
  
Amortization and accretion of deferred loan fees, net
    
(661
)
    
(550
)
(Increase) decrease in deferred taxes
    
(756
)
    
97
  
Loss on sale of real estate owned
    
2
      
—
  
Writedown of real estate owned
    
—
      
38
  
Increase in cash surrender value of bank owned life insurance
    
(646
)
    
(679
)
Increase in accrued interest receivable
    
(751
)
    
(47
)
(Increase) decrease in other assets
    
(617
)
    
1,509
  
Increase in other liabilities
    
7,091
      
213
  
Net cash provided by operating activities
    
16,888
      
13,471
  
Cash flows from investing activities:
                
Net decrease (increase) in loans receivable
    
5,462
      
(49,939
)
Purchase of mortgage loans
    
—
      
(26,657
)
Purchase of securities available for sale
    
—
      
(46,000
)
Purchase of securities held to maturity
    
(10,623
)
    
(17,615
)
   Purchase of Federal Home Loan Bank stock
    
(10,736
)
    
(11,421
)
Proceeds from payments, calls and maturities of securities available for sale
    
7,500
      
10,775
  
Proceeds from payments, calls and maturities of securities held to maturity
    
11,261
      
7,729
  
Proceeds from redemption of Federal Home Loan Bank stock
    
15,427
      
16,543
  
   Proceeds from sale of real estate owned
    
138
      
—
  
Net decrease in real estate joint ventures
    
—
      
94
  
Purchase of fixed assets
    
—
      
(12
)
Net cash provided by (used in) investing activities
    
18,429
      
(116,503
)
Cash flows from financing activities:
                
Net increase in deposits
    
63,568
      
236,277
  
Purchase of treasury stock
    
(13
)
    
(1,508
)
Dividends paid to shareholders
    
(7,657
)
    
(7,480
)
Exercise of stock options
    
2,219
      
427
  
Decrease in advance payments by borrowers for taxes and insurance
    
(113
)
    
(455
)
Proceeds from borrowed funds
    
32,870
      
12,000
  
Repayment of borrowed funds
    
(128,652
)
    
(126,031
)
Payment of employee taxes withheld from shared-based awards
    
(13
)
    
(1,508
)
Net cash (used in) provided by financing activities
    
(37,791
)
    
111,722
  
Net (decrease) increase in cash and cash equivalents
    
(2,474
)
    
8,690
  
Cash and cash equivalents at beginning of period
    
33,578
      
16,571
  
Cash and cash equivalents at end of period
  
$
31,104
    
$
25,261
  
Supplemental cash flow information:
                
Cash paid during the period for:
                
Interest
  
$
10,255
    
$
8,731
  
Income taxes
  
$
755
    
$
7,249
  

See accompanying notes to unaudited consolidated financial statements.

7
Oritani Financial Corp. and subsidiaries
Notes to Unaudited Consolidated Financial Statements
 
1. Basis of Presentation

The consolidated financial statements are composed of the accounts of Oritani Financial Corp., its wholly owned subsidiary, Oritani Bank (the "Bank") and the wholly owned subsidiaries of Oritani Bank; Oritani Finance Company, Ormon LLC ("Ormon"), and Oritani Investment Corp., as well as its wholly owned subsidiary, Oritani Asset Corporation (a real estate investment trust), (collectively, the "Company").  Intercompany balances and transactions have been eliminated in consolidation.

In the opinion of management, all of the adjustments (consisting of normal and recurring adjustments) necessary for the fair presentation of the consolidated financial condition and the consolidated results of operations for the unaudited periods presented have been included.  The results of operations and other data presented for the three month period ended September 30, 2017 are not necessarily indicative of the results of operations that may be expected for the fiscal year ending June 30, 2018.

Certain information and note disclosures usually included in financial statements prepared in accordance with U.S. generally accepted accounting principles ("GAAP") have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") for the preparation of the Form 10-Q.  The consolidated financial statements presented should be read in conjunction with the Company's audited consolidated financial statements and notes to consolidated financial statements included in the Company's June 30, 2017 Annual Report on Form 10-K, filed with the SEC on August 29, 2017.

The consolidated financial statements have been prepared in conformity with GAAP. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities presented in the Consolidated Balance Sheets at September 30, 2017 and June 30, 2017 and in the Consolidated Statements of Income for the three months ended September 30, 2017 and 2016.  Actual results could differ significantly from those estimates.

A material estimate that is particularly susceptible to significant changes relates to the determination of the allowance for loan losses. The allowance for loan losses represents management's best estimate of losses known and inherent in the portfolio that are both probable and reasonable to estimate. While management uses the most current information available to estimate losses on loans, actual losses are dependent on future events and, as such, increases in the allowance for loan losses may be necessary.

In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Bank's allowance for loan losses. Such agencies may require the Bank to recognize additions to the allowance based on their judgments about information available to them at the time of their examination.
8
Oritani Financial Corp. and subsidiaries
Notes to Unaudited Consolidated Financial Statements


2. Earnings Per Share ("EPS")

Basic earnings per share is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period. The weighted average common shares outstanding includes the average number of shares of common stock outstanding and allocated or committed to be released Employee Stock Ownership Plan shares.
 
Diluted earnings per share is computed using the same method as basic earnings per share, but reflects the potential dilution that could occur if stock options were exercised and converted into common stock.  These potentially dilutive shares would then be included in the weighted average number of shares outstanding for the period using the treasury stock method.  When applying the treasury stock method, we add the assumed proceeds from option exercises and the average unamortized compensation costs related to stock options.  We then divide this sum by our average stock price to calculate shares assumed to be repurchased.  The excess of the number of shares issuable over the number of shares assumed to be repurchased is added to basic weighted average common shares to calculate diluted EPS.

The following is a summary of the Company's earnings per share calculations and reconciliation of basic to diluted earnings per share.

   
Three months ended September 30,
  
   
2017
    
2016
  
   
(In thousands, except per share data)
  
Net income
  
$
11,996
    
$
10,611
  
Weighted average common shares outstanding—basic
    
43,897
      
42,775
  
Effect of dilutive stock options outstanding
    
1,043
      
1,233
  
Weighted average common shares outstanding—diluted
    
44,940
      
44,008
  
Earnings per share-basic
  
$
0.27
    
$
0.25
  
Earnings per share-diluted
  
$
0.27
    
$
0.24
  

For the three months ended September 30, 2017 and 2016 there were 1,322 and 4,438 option shares, respectively, that could potentially dilute basic earnings per share in the future that were not included in the computation of diluted earnings per share because to do so would have been anti-dilutive for those periods. 

3. Stock Repurchase Program

On March 4, 2015, the Board of Directors of the Company authorized a fourth stock repurchase plan pursuant to which the Company is authorized to repurchase up to 5% of the outstanding shares, or 2,205,451 shares.   At September 30, 2017, there are 1,888,088 shares yet to be purchased under the current plan.   At  September 30, 2017, a total of  13,278,444  shares had been acquired under repurchase programs at a weighted average cost of  $13.30 per share.  The timing of the repurchases depend on certain factors, including but not limited to, market conditions and prices, the Company's liquidity and capital requirements, and alternative uses of capital.  Repurchased shares will be held as treasury stock and will be available for general corporate purposes.  The Company may conduct repurchases in accordance with a Rule 10b5-1 trading plan. 
9
Oritani Financial Corp. and subsidiaries
Notes to Unaudited Consolidated Financial Statements

4. Equity Incentive Plans
 
The 2007 Equity Incentive Plan ("the 2007 Equity Plan") was approved by the Company's stockholders on April 22, 2008, which authorized the issuance of up to 4,172,817 shares of Company common stock pursuant to grants of incentive and non-statutory stock options, stock appreciation rights, and restricted stock awards.  The 2011 Equity Incentive Plan ("2011 Equity Plan") was approved by the Company's stockholders on July 26, 2011.  The 2011 Equity Plan authorized the issuance of up to 5,790,849 shares of the Company's common stock pursuant to grants of stock options, restricted stock awards and restricted stock units, with no more than 1,654,528 of the shares issued as restricted stock awards or restricted stock units.  Employees and outside directors of the Company or Oritani Bank are eligible to receive awards under the Equity Plans.
 
Stock options are granted at an exercise price equal to the market price of our common stock on the grant date, based on quoted market prices. Stock options generally vest over a five-year service period and expire ten years from issuance.  The vesting of the options accelerate upon death or disability, retirement or a change in control and expire 90 days after termination of service, excluding disability or retirement.  The Company recognizes compensation expense for all option grants over the awards' respective requisite service periods.  Management estimated the fair values of all option grants using the Black-Scholes option-pricing model.   Management estimated the expected life of the options using the simplified method.  The Treasury yield in effect at the time of the grant provides the risk-free rate for periods within the contractual life of the option.  The Company classified share-based compensation for employees and outside directors within "compensation, payroll taxes and fringe benefits" in the consolidated statements of income to correspond with the same line item as the cash compensation paid.

There were no options granted during the three months ended September 30, 2017 and 2016.

The following is a summary of the Company's stock option activity and related information as of September 30, 2017 and changes therein during the three months then ended:

 
  
Number of Stock Options
    
Weighted Average Grant Date Fair Value
    
Weighted Average Exercise Price
    
Weighted Average Remaining Contractual Life (years)
  
Outstanding at June 30, 2017
    
3,729,033
    
$
2.59
    
$
11.70
      
3.4
  
Exercised
    
(191,901
)
    
2.60
      
11.56
      
3.2
  
Forfeited
    
(12,000
)
    
1.64
      
15.89
      
7.8
  
Outstanding at September 30, 2017
    
3,525,132
    
$
2.59
    
$
11.69
      
3.2
  
Exercisable at September 30, 2017
    
3,469,259
    
$
2.60
    
$
11.63
      
3.1
  
 
The Company recorded $11,000 and $266,000 of share based compensation expense related to options for the three months ended September 30, 2017 and 2016, respectively. Expected future expense related to the non-vested options outstanding at September 30, 2017 is $61,000 over a weighted average period of 2.0 years.  Upon exercise of vested options, management expects to draw on treasury stock as the source of the shares.



10
Oritani Financial Corp. and subsidiaries
Notes to Unaudited Consolidated Financial Statements
Restricted stock shares vest over a five-year service period on the anniversary date of the grant. Vesting of the restricted stock shares accelerate upon death or disability, retirement or a change in control. The product of the number of shares granted and the grant date market price of the Company's common stock determines the fair value of restricted shares under the Company's restricted stock plan. The Company recognizes compensation expense for the fair value of restricted shares on a straight-line basis over the requisite service period.
 
The following is a summary of the status of the Company's restricted stock shares as of September 30, 2017 and changes therein during the three months then ended:

 
  
Number of Shares Awarded
    
Weighted Average Grant Date Fair Value
  
Non-vested at June 30, 2017
    
35,934
    
$
15.60
  
Vested
    
(2,000
)
    
15.89
  
Forfeited
    
(6,000
)
    
15.89
  
Non-vested at September 30, 2017
    
27,934
    
$
15.51
  
 
The Company recorded $40,000 and $509,000 of share based compensation expense related to the restricted stock shares for the three months ended September 30, 2017 and 2016, respectively.  Expected future expense related to the non-vested restricted shares at September 30, 2017 is $254,000 over a weighted average period of 2.0 years.

5. Post-retirement Benefits
 
The Company provides several post-retirement benefit plans to directors and to certain active and retired employees. The Company has a nonqualified Directors' Retirement Plan ("Retirement Plan"), a nonqualified Benefit Equalization Plan ("BEP Plan"), which provides benefits to employees who are disallowed certain benefits under the Company's qualified benefit plans, and a Post Retirement Medical Plan ("Medical Plan") for directors and certain eligible employees.

Net periodic benefit costs for the three months ended September 30, 2017 and 2016 are presented in the following table.

 
Retirement Plan
    
BEP Plan
    
Medical Plan
  
 
Three months ended September 30,
  
 
2017
    
2016
    
2017
    
2016
    
2017
    
2016
  
 
(In thousands)
  
Service cost
  
$
33
    
$
38
    
$
—
    
$
—
    
$
15
    
$
14
  
Interest cost
    
52
      
45
      
11
      
10
      
52
      
59
  
Amortization of unrecognized:
                                                
Net loss
    
—
      
—
      
9
      
13
      
—
      
87
  
Total
  
$
85
    
$
83
    
$
20
    
$
23
    
$
67
    
$
160
  


11
Oritani Financial Corp. and subsidiaries
Notes to Unaudited Consolidated Financial Statements
6. Loans, net
 
Loans, net are summarized as follows:

 
  
September 30, 2017
    
June 30, 2017
  
 
  
(In thousands)
  
Residential
  
$
254,973
    
$
253,310
  
Residential commercial real estate
    
1,914,088
      
1,945,297
  
Grocery/credit retail commercial real estate
    
544,209
      
535,567
  
Other commercial real estate
    
881,808
      
866,826
  
Construction and land loans
    
5,177
      
4,210
  
Total loans
    
3,600,255
      
3,605,210
  
Less:
                
Deferred loan fees, net
    
7,951
      
8,235
  
Allowance for loan losses
    
30,402
      
30,272
  
Loans, net
  
$
3,561,902
    
$
3,566,703
  
 
The Company's allowance for loan losses is analyzed quarterly and many factors are considered, including changes in the portfolio, delinquencies, nonaccrual loan levels, and other environmental factors.  There have been no material changes to the allowance for loan loss methodology as disclosed in the Company's Annual Report on Form 10-K, filed with the Securities and Exchange Commission on August 29, 2017.

The activity in the allowance for loan losses for the three months ended September 30, 2017 and 2016 is summarized as follows:

 
Three months ended September 30,
  
 
(In thousands)
  
 
2017
  
2016
  
Balance at beginning of period
  
$
30,272
    
$
29,951
  
Provisions for loan losses
    
—
      
—
  
Recoveries of loans previously charged off
    
152
      
2
  
Loans charged off
    
(22
)
    
(75
)
Balance at end of period
  
$
30,402
    
$
29,878
  

12
Oritani Financial Corp. and subsidiaries
Notes to Unaudited Consolidated Financial Statements

The following table provides the three month activity in the allowance for loan losses allocated by loan category at September 30, 2017 and 2016. The allowance for loan losses allocated to each category is not necessarily indicative of future losses in any particular category and does not restrict the use of the allowance to absorb losses in other categories.

 
Three months ended September 30, 2017
  
 
Residential
  
Residential commercial real estate
  
Grocery/credit retail commercial real estate
  
Other commercial real estate
  
Construction
and land
loans
  
Total
  
 
(In thousands)
  
Allowance for loan losses:
                        
Beginning balance
  
$
1,261
    
$
15,794
    
$
3,000
    
$
10,017
    
$
200
    
$
30,272
  
Charge-offs
    
(22
)
    
—
      
—
      
—
      
—
      
(22
)
Recoveries
    
120
      
—
      
—
      
—
      
32
      
152
  
Provisions
    
(73
)
    
(32
)
    
196
      
(80
)
    
(11
)
    
—
  
Ending balance
  
$
1,286
    
$
15,762
    
$
3,196
    
$
9,937
    
$
221
    
$
30,402
  
                                                 

   
Three months ended September 30, 2016
  
   
Residential
    
Residential commercial real estate
    
Grocery/credit retail commercial real estate
    
Other commercial real estate
    
Construction
and land
loans
    
Total
  
   
(In thousands)
  
Allowance for loan losses:
                                    
Beginning balance
  
$
1,300
    
$
12,837
    
$
3,646
    
$
11,850
    
$
318
    
$
29,951
  
Charge-offs
    
(75
)
    
—
      
—
      
—
      
—
      
(75
)
Recoveries
    
—
      
—
      
—
      
2
      
—
      
2
  
Provisions
    
569
      
773
      
(174
)
    
(1,009
)
    
(159
)
    
—
  
Ending balance
  
$
1,794
    
$
13,610
    
$
3,472
    
$
10,843
    
$
159
    
$
29,878
  
13
Oritani Financial Corp. and subsidiaries
Notes to Unaudited Consolidated Financial Statements

The following table details the amount of loans receivables that are evaluated individually, and collectively, for impairment, and the related portion of allowance for loan loss that is allocated to each loan portfolio segment at September 30, 2017 and June 30, 2017.

   
At September 30, 2017
  
 
  
Residential
    
Residential commercial real estate
    
Grocery/credit retail commercial real estate
    
Other commercial real estate
    
Construction and land loans
    
Total
  
   
(In thousands)
  
Allowance for loan losses:
                                    
Individually evaluated for impairment
  
$
—
    
$
—
    
$
—
    
$
8
    
$
—
    
$
8
  
Collectively evaluated for impairment
    
1,286
      
15,762
      
3,196
      
9,929
      
221
      
30,394
  
Total
  
$
1,286
    
$
15,762
    
$
3,196
    
$
9,937
    
$
221
    
$
30,402
  
Loans receivable:
                                                
Individually evaluated for impairment
  
$
3,624
    
$
—
    
$
—
    
$
9,909
    
$
—
    
$
13,533
  
Collectively evaluated for impairment
    
251,349
      
1,914,088
      
544,209
      
871,899
      
5,177
      
3,586,722
  
Total
  
$
254,973
    
$
1,914,088
    
$
544,209
    
$
881,808
    
$
5,177
    
$
3,600,255
  
 
                                                

   
At June 30, 2017
  
 
  
Residential
    
Residential commercial real estate
    
Grocery/credit retail commercial real estate
    
Other commercial real estate
    
Construction
and land loans
    
Total
  
   
(In thousands)
  
Allowance for loan losses:
                                    
Individually evaluated for impairment
  
$
—
    
$
—
    
$
—
    
$
43
    
$
—
    
$
43
  
Collectively evaluated for impairment
    
1,261
      
15,794
      
3,000
      
9,974
      
200
      
30,229
  
Total
  
$
1,261
    
$
15,794
    
$
3,000
    
$
10,017
    
$
200
    
$
30,272
  
Loans receivable:
                                                
Individually evaluated for impairment
  
$
3,684
    
$
—
    
$
—
    
$
10,173
    
$
—
    
$
13,857
  
Collectively evaluated for impairment
    
249,626
      
1,945,297
      
535,567
      
856,653
      
4,210
      
3,591,353
  
Total
  
$
253,310
    
$
1,945,297
    
$
535,567
    
$
866,826
    
$
4,210
    
$
3,605,210
  
 
14
Oritani Financial Corp. and subsidiaries
Notes to Unaudited Consolidated Financial Statements

The Company continuously monitors the credit quality of its loan portfolio.  In addition to internal staff, the Company utilizes the services of a third party loan review firm to evaluate the credit quality ratings of its loan receivables.  Credit quality is monitored by reviewing certain credit quality indicators.  Assets classified as "Satisfactory" are deemed to possess average to superior credit quality, requiring no more than normal attention.  Assets classified as "Pass/Watch" have generally acceptable asset quality yet possess higher risk characteristics/circumstances than satisfactory assets.  Such characteristics may include strained liquidity, slow pay, stale financial statements or other circumstances requiring greater attention from bank staff.  We classify an asset as "Special Mention" if the asset has a potential weakness that warrants management's close attention.  Such weaknesses, if left uncorrected, may result in the deterioration of the repayment prospects of the asset.  An asset is considered "Substandard" if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any.  Substandard assets include those characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected.  Assets classified as "Doubtful" have all of the weaknesses inherent in those classified substandard, with the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.  Included in the Substandard caption are all loans that were past due 90 days (or more) and all impaired loans.

The following table provides information about the loan credit quality at September 30, 2017 and June 30, 2017:

 
  
At September 30, 2017
  
 
  
Satisfactory
    
Pass/Watch
    
Special Mention
    
Substandard
    
Doubtful
    
Total
  
 
  
(In thousands)
  
Residential
  
$
231,340
    
$
17,054
    
$
1,656
    
$
4,923
    
$
—
    
$
254,973
  
Residential commercial real estate
    
1,884,751
      
27,732
      
1,605
      
—
      
—
      
1,914,088
  
Grocery/credit retail commercial real estate
    
541,141
      
—
      
3,068
      
—
      
—
      
544,209
  
Other commercial real estate
    
727,844
      
122,600
      
13,378
      
17,986
      
—
      
881,808
  
Construction and land loans
    
5,177
      
—
      
—
      
—
      
—
      
5,177
  
Total
  
$
3,390,253
    
$
167,386
    
$
19,707
    
$
22,909
    
$
—
    
$
3,600,255
  

 
  
At June 30, 2017
  
 
  
Satisfactory
    
Pass/Watch
    
Special Mention
    
Substandard
    
Doubtful
    
Total
  
 
  
(In thousands)
  
Residential
  
$
229,481
    
$
17,256
    
$
1,571
    
$
5,002
    
$
—
    
$
253,310
  
Residential commercial real estate
    
1,915,526
      
27,778
      
1,753
      
240
      
—
      
1,945,297
  
Grocery/credit retail commercial real estate
    
532,472
      
—
      
3,095
      
—
      
—
      
535,567
  
Other commercial real estate
    
725,714
      
107,249
      
15,551
      
18,312
      
—
      
866,826
  
Construction and land loans
    
4,210
      
—
      
—
      
—
      
—
      
4,210
  
Total
  
$
3,407,403
    
$
152,283
    
$
21,970
    
$
23,554
    
$
—
    
$
3,605,210
  

15
Oritani Financial Corp. and subsidiaries
Notes to Unaudited Consolidated Financial Statements

The following table provides information about loans past due at September 30, 2017 and June 30, 2017:

 
  
At September 30, 2017
  
 
  
30-59 Days Past Due
    
60-89 Days Past Due
    
90 days or More Past Due
    
Total Past Due
    
Current
    
Total Loans
    
Nonaccrual (1)
  
 
  
(In thousands)
  
Residential
  
$
980
    
$
1,922
    
$
489
    
$
3,391
    
$
251,582
    
$
254,973
    
$
1,477
  
Residential commercial real estate
    
—
      
—
      
—
      
—
      
1,914,088
      
1,914,088
      
—
  
Grocery/credit retail commercial real estate
    
—
      
—
      
—
      
—
      
544,209
      
544,209
      
—
  
Other commercial real estate
    
1,704
      
1,052
      
1,797
      
4,553
      
877,255
      
881,808
      
8,429
  
Construction and land loans
    
—
      
—
      
—
      
—
      
5,177
      
5,177
      
—
  
Total
  
$
2,684
    
$
2,974
    
$
2,286
    
$
7,944
    
$
3,592,311
    
$
3,600,255
    
$
9,906
  

 
  
At June 30, 2017
  
 
  
30-59 Days Past Due
    
60-89 Days Past Due
    
90 days or More Past Due
    
Total Past Due
    
Current
    
Total Loans
    
Nonaccrual (2)
  
 
  
(In thousands)
  
Residential
  
$
1,243
    
$
1,776
    
$
614
    
$
3,633
    
$
249,677
    
$
253,310
    
$
1,556
  
Residential commercial real estate
    
240
      
—
      
—
      
240
      
1,945,057
      
1,945,297
      
—
  
Grocery/credit retail commercial real estate
    
—
      
—
      
—
      
—
      
535,567
      
535,567
      
—
  
Other commercial real estate
    
606
      
—
      
1,897
      
2,503
      
864,323
      
866,826
      
8,667
  
Construction and land loans
    
—
      
—
      
—
      
—
      
4,210
      
4,210
      
—
  
Total
  
$
2,089
    
$
1,776
    
$
2,511
    
$
6,376
    
$
3,598,834
    
$
3,605,210
    
$
10,223
  

(1)
Included in nonaccrual loans at September 30, 2017 are residential loans totaling $266,000 and other commercial real estate loans totaling $1.1 million that were 60-89 days past due; residential loans totaling $549,000 and other commercial real estate loans totaling $1.1 million that were 30-59 days past due; residential loans totaling $173,000 and other commercial real estate loans totaling $4.4 million that were less than 30 days past due.
(2)
Included in nonaccrual loans at June 30, 2017 are residential loans totaling $716,000 that were 30-59 days past due; residential loans totaling $205,000 that were 60-89 days past due; and residential loans totaling $21,000 and other commercial real estate loans totaling $6.8 million that were less than 30 days past due.
 

16
Oritani Financial Corp. and subsidiaries
Notes to Unaudited Consolidated Financial Statements

The Company defines an impaired loan as a loan for which it is probable, based on current information, that the Company will not collect all amounts due under the contractual terms of the loan agreement.  Loans we individually classify as impaired include multifamily, commercial mortgage and construction loans with balances of $1.0 million or more, unless a condition exists for loans less than $1.0 million that would increase the Bank's potential loss exposure.  At September 30, 2017 impaired loans were primarily collateral-dependent and totaled $13.5 million, of which $372,000 had a related allowance for credit losses of $8,000 and $13.2 million of impaired loans had no related allowance for credit losses.  At June 30, 2017 impaired loans were primarily collateral-dependent and totaled $13.9 million, of which $538,000  had a related allowance for credit losses of $43,000 and $13.3 million of impaired loans had no related allowance for credit losses.


The following table provides information about the Company's impaired loans at September 30, 2017 and June 30, 2017:

   
At September 30, 2017
    
At June 30, 2017
  
   
Recorded Investment
    
Unpaid Principal Balance
    
Allowance
    
Recorded Investment
    
Unpaid Principal Balance
    
Allowance
  
   
(In thousands)
  
With no related allowance recorded:
                                    
Residential
  
$
3,634
    
$
3,624
    
$
—
    
$
3,684
    
$
3,684
    
$
—
  
Other commercial real estate
    
9,518
      
9,537
      
—
      
9,635
      
9,635
      
—
  
 
    
13,152
      
13,161
      
—
      
13,319
      
13,319
      
—
  
With an allowance recorded:
                                                
Other commercial real estate
    
372
      
372
      
8
      
495
      
538
      
43
  
 
    
372
      
372
      
8
      
495
      
538
      
43
  
Total:
                                                
Residential
    
3,634
      
3,624
      
—
      
3,684
      
3,684
      
—
  
Other commercial real estate
    
9,890
      
9,909
      
8
      
10,130
      
10,173
      
43
  
 
  
$
13,524
    
$
13,533
    
$
8
    
$
13,814
    
$
13,857
    
$
43
  
17
Oritani Financial Corp. and subsidiaries
Notes to Unaudited Consolidated Financial Statements
The following tables present the average recorded investment and interest income recognized on impaired loans for the three months ended September 30, 2017 and 2016:

   
Three months ended September 30,
  
   
2017
    
2016
  
   
Average Recorded Investment
    
Interest Income Recognized
    
Average Recorded Investment
    
Interest Income Recognized
  
   
(In thousands)
  
With no related allowance recorded:
                        
Residential
  
$
3,625
    
$
36
    
$
3,462
    
$
34
  
Other commercial real estate
    
9,664
      
115
      
9,089
      
121
  
 
    
13,289
      
151
      
12,551
      
155
  
With an allowance recorded:
                                
Residential
    
—
      
—
      
164
      
2
  
Other commercial real estate
    
363
      
—
      
196
      
—
  
Construction and land loans
    
—
      
—
      
9
      
—
  
 
    
363
      
—
      
369
      
2
  
Total:
                                
Residential
    
3,625
      
36
      
3,626
      
36
  
Other commercial real estate
    
10,027
      
115
      
9,285
      
121
  
Construction and land loans
    
—
      
—
      
9
      
—
  
 
  
$
13,652
    
$
151
    
$
12,920
    
$
157
  
Cash basis interest income
          
$
128
            
$
133
  

18
Oritani Financial Corp. and subsidiaries
Notes to Unaudited Consolidated Financial Statements

Troubled debt restructured loans ("TDRs") are those loans whose terms have been modified because of deterioration in the financial condition of the borrower.  The Company has selectively modified certain borrower's loans to enable the borrower to emerge from delinquency and keep their loans current.  The eligibility of a borrower for a TDR modification depends upon the facts and circumstances of each transaction, which may change from period to period, and involve judgment by management regarding the likelihood that the modification will result in the maximum recovery by the Company.  Modifications could include extension of the terms of the loan, reduced interest rates, and forgiveness of accrued interest and/or principal.  Once an obligation has been restructured because of such credit problems, it continues to be considered restructured until paid in full or, if the obligation yields a market rate (a rate equal to or greater than the rate the Company was willing to accept at the time of the restructuring for a new loan with comparable risk), until the year subsequent to the year in which the restructuring takes place, provided the borrower has performed under the modified terms for a six month period.  Management classifies all TDRs as impaired loans.  Included in impaired loans at September 30, 2017 and June 30, 2017, are $4.5 million and $4.6 million, respectively of loans which are deemed TDRs.


The following table presents additional information regarding the Company's TDRs as of September 30, 2017 and June 30, 2017:

 
Troubled Debt Restructurings at September 30, 2017
  
 
Performing
  
Nonperforming
  
Total
  
 
(In thousands)
  
Residential
  
$
—
    
$
177
    
$
177
  
Other commercial real estate
    
353
      
3,939
      
4,292
  
Total
  
$
353
    
$
4,116
    
$
4,469
  
Allowance
  
$
—
    
$
8
    
$
8
  
 
                        
 
Troubled Debt Restructurings at June 30, 2017
  
 
Performing
  
Nonperforming
  
Total
  
 
(In thousands)
  
Residential
  
$
—
    
$
178
    
$
178
  
Other commercial real estate
    
362
      
4,070
      
4,432
  
Total
  
$
362
    
$
4,248
    
$
4,610
  
Allowance
  
$
—
    
$
43
    
$
43
  
 
There were no loan relationships modified in a troubled debt restructuring during the three months ended September 30, 2017 and 2016, respectively.

There have been no loans that were modified as TDR during the last twelve months that have subsequently defaulted (90 days or more past due) during the current quarter ended September 30, 2017.
 
19
Oritani Financial Corp. and subsidiaries
Notes to Unaudited Consolidated Financial Statements

7. Investment Securities
 
Securities Held to Maturity
 
The following is a comparative summary of securities held to maturity at September 30, 2017 and June 30, 2017:

 
  
At September 30, 2017
  
 
  
Amortized cost
    
Gross
unrecognized gains
    
Gross
unrecognized losses
    
Fair value
  
 
  
(In thousands)
  
                         
U.S. Government and Federal agency obligations
                        
Due in one to five years
  
$
6,750
    
$
—
    
$
54
    
$
6,696
  
Mortgage-backed securities:
                                
Residential MBS
    
146,033
      
94
      
1,074
      
145,053
  
Commercial MBS
    
13,366
      
101
      
84
      
13,383
  
   CMO
    
72,621
      
—
      
1,042
      
71,579
  
 
  
$
238,770
    
$
195
    
$
2,254
    
$
236,711
  

 
  
At June 30, 2017
  
 
  
Amortized cost
    
Gross
unrecognized gains
    
Gross
unrecognized losses
    
Fair value
  
 
  
(In thousands)
  
U.S. Government and Federal agency obligations
                        
Due in one to five years
  
$
6,750
    
$
—
    
$
54
    
$
6,696
  
Mortgage-backed securities:
                                
Residential MBS
    
141,990
      
81
      
1,391
      
140,680
  
Commercial MBS
    
13,473
      
112
      
83
      
13,502
  
CMO
    
77,418
      
—
      
1,092
      
76,326
  
 
  
$
239,631
    
$
193
    
$
2,620
    
$
237,204
  
 
The contractual maturities of mortgage-backed securities held to maturity generally exceed 20 years; however, the effective lives are expected to be shorter due to anticipated prepayments and, in the case of CMOs, cash flow priorities.  Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties.
 
The Company did not sell any securities held to maturity during the three months ended September 30, 2017 and 2016.  Securities with fair values of $25.7 million and $27.2 million at September 30, 2017 and June 30, 2017, respectively, were pledged for advances.  The fair value of securities held to maturity pledged for cash flow hedge interest rate swaps totaled $8.0 million and $8.5 million at September 30, 2017 and June 30, 2017, respectively.  Held to maturity securities with fair values of $126.5 million and $132.5 million were pledged for municipal deposits at September 30, 2017 and June 30, 2017, respectively. The Company did not record other-than-temporary impairment charges on securities held to maturity during the three months ended September 30, 2017 and 2016.

20
Oritani Financial Corp. and subsidiaries
Notes to Unaudited Consolidated Financial Statements
Gross unrecognized losses on securities held to maturity and the fair value of the related securities, aggregated by security category and length of time that individual securities have been in a continuous unrecognized loss position at September 30, 2017 and June 30, 2017 were as follows:

 
At September 30, 2017
  
 
Less than 12 months
    
Greater than 12 months
    
Total
  
 
Fair value
    
Gross
unrecognized
losses
    
Fair value
    
Gross
unrecognized
losses
    
Fair value
    
Gross
unrecognized
losses
  
 
(In thousands)
  
U.S. Government and federal agency obligations
                                    
Due in one to five years
  
$
—
    
$
—
    
$
6,696
    
$
54
    
$
6,696
    
$
54
  
Mortgage-backed securities:
                                                
Residential MBS
    
117,738
      
580
      
22,905
      
494
      
140,643
      
1,074
  
Commercial MBS
    
7,059
      
84
      
—
      
—
      
7,059
      
84
  
CMO
    
25,271
      
180
      
46,308
      
862
      
71,579
      
1,042
  
 
  
$
150,068
    
$
844
    
$
75,909
    
$
1,410
    
$
225,977
    
$
2,254
  

 
At June 30, 2017
  
 
Less than 12 months
    
Greater than 12 months
    
Total
  
 
Fair value
    
Gross
unrecognized
losses
    
Fair value
    
Gross
unrecognized
losses
    
Fair value
    
Gross
unrecognized
losses
  
 
(In thousands)
  
U.S. Government and federal agency obligations
                                    
Due in one to five years
  
$
1,737
    
$
13
    
$
4,959
    
$
41
    
$
6,696
    
$
54
  
Mortgage-backed securities:
                                                
Residential MBS
    
128,040
      
1,265
      
3,020
      
126
      
131,060
      
1,391
  
Commercial MBS
    
7,120
      
83
      
—
      
—
      
7,120
      
83
  
CMO
    
76,326
      
1,092
      
—
      
—
      
76,326
      
1,092
  
 
  
$
213,223
    
$
2,453
    
$
7,979
    
$
167
    
$
221,202
    
$
2,620
  

Management evaluated the securities in the above tables and concluded that none of the securities with losses has impairments that are other-than-temporary.  The unrecognized losses on investments in mortgage-backed securities were caused by interest rate changes and market conditions.  Because the decline in fair value is attributable to changes in interest rates and market conditions and not credit quality, and because the Company has no intent to sell and believes it is not more than likely than not that it will be required to sell these investments until a market price recovery or maturity, these investments are not considered other-than-temporarily impaired.

21
Oritani Financial Corp. and subsidiaries
Notes to Unaudited Consolidated Financial Statements
Securities Available for Sale

The following is a comparative summary of securities available for sale at September 30, 2017 and June 30, 2017:

 
  
At September 30, 2017
  
 
  
Amortized
cost
    
Gross
unrealized
gains
    
Gross
unrealized
losses
    
Fair value
  
 
  
(In thousands)
  
Equity securities
  
$
601
    
$
956
    
$
—
    
$
1,557
  
Mortgage-backed securities:
                                
Residential MBS
    
6,393
      
6
      
28
      
6,371
  
Commercial MBS
    
4,185
      
174
      
—
      
4,359
  
CMO
    
78,479
      
105
      
523
      
78,061
  
 
  
$
89,658
    
$
1,241
    
$
551
    
$
90,348
  

 
  
At June 30, 2017
  
 
  
Amortized
cost
    
Gross
unrealized
gains
    
Gross
unrealized
losses
    
Fair value
  
 
  
(In thousands)
  
Equity securities
  
$
601
    
$
897
    
$
—
    
$
1,498
  
Mortgage-backed securities:
                                
Residential MBS
    
6,974
      
9
      
62
      
6,921
  
Commercial MBS
    
4,220
      
186
      
—
      
4,406
  
CMO
    
85,437
      
152
      
484
      
85,105
  
 
  
$
97,232
    
$
1,244
    
$
546
    
$
97,930
  
 
The contractual maturities of mortgage-backed securities available for sale generally exceed 20 years; however, the effective lives are expected to be shorter due to anticipated prepayments and, in the case of CMOs, cash flow priorities. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties.
 
The Company did not sell any securities available for sale during the three months ended September 30, 2017 and 2016.   The Equity securities caption relates to holdings of shares in financial institutions common stock.  Available for sale securities with fair values of $30.0 million and $31.6 million at September 30, 2017 and June 30, 2017, respectively, were pledged for advances.  There were no securities available for sale pledged for cash flow hedge interest rate swaps at September 30, 2017 and June 30, 2017, respectively. Available for sale  securities with fair values of $54.3 million and $59.5 million were pledged for municipal deposits at September 30, 2017 and June 30, 2017, respectively. There were no other-than-temporary impairment charges on available for sale securities for the three months ended September 30, 2017 and 2016.