Kearny Financial Corp. - FORM 8-K - EX-99.1

Attached files

file	filename
8-K - FORM 8-K - Kearny Financial Corp.	d585587d8k.htm

Exhibit 99.1

FOR IMMEDIATE RELEASE

July 30, 2018

For further information contact:

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

Eric B. Heyer, Senior Executive Vice President and Chief Operating Officer

Kearny Financial Corp.

(973) 244-4500

KEARNY FINANCIAL CORP.

REPORTS FOURTH QUARTER AND YEAR END 2018 OPERATING RESULTS

Fairfield, New Jersey, July 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 June 30, 2018 of $7.7 million, or $0.08 per basic and diluted share. The results represent an increase of $2.3 million compared to net income of $5.4 million, or $0.07 per basic and diluted share, for the quarter ended March 31, 2018.

Net income for the quarters ended June 30, 2018 and March 31, 2018 reflected merger-related expenses recognized in conjunction with the Company’s acquisition of Clifton Bancorp, Inc. (“CSBK”), the holding company for Clifton Savings Bank (“Clifton”), which closed on April 2, 2018. Excluding the effects of merger-related expenses on an after-tax basis, the Company’s net income would have been $11.4 million or $0.12 per basic and diluted share for the quarter ended June 30, 2018 compared to $5.8 million or $0.08 per basic and diluted share for the quarter ended March 31, 2018.

For the fiscal year ended June 30, 2018, the Company reported net income of $19.6 million, or $0.24 per basic and diluted share. The results represent an increase of $993,000 compared to net income of $18.6 million, or $0.22 per basic and diluted share, for the fiscal year ended June 30, 2017.

As above, net income for the year ended June 30, 2018 included $6.7 million in merger-related expenses associated with the Company’s acquisition of CSBK. The Company estimates that such expenses adversely impacted net income by approximately $5.1 million for the year ended June 30, 2018.

Net income for the year ended June 30, 2018 also reflected the effects of federal income tax reform that was codified through the passage of the Tax Cuts and Jobs Act (the “Act”) during the quarter ended December 31, 2017. The Act permanently reduced the Company’s federal income tax rate from 35% to 21% while also including other provisions that altered the deductibility of certain recurring expenses recognized by the Company. The provisions of the Act positively impacted the Company’s earnings during the second half of fiscal 2018. However, the passage of the Act resulted in a $3.5 million net reduction in the carrying value of the Company’s deferred income tax assets and liabilities with an equal and offsetting charge to income tax expense during the quarter ended December 31, 2017.

The net charge of $3.5 million attributable to the changes in the carrying value of deferred income tax items was partially offset by a $769,000 reduction in current-year income tax expense attributable to the noted reduction in the Company’s income tax rate. For the “transition” year ended June 30, 2018, the Company’s statutory federal income tax rate was reduced to 28%, reflecting effective statutory rates of 35% and 21% for the first and second halves of the year, respectively. For the fiscal year ending June 30, 2019 and thereafter, the Company’s statutory federal income tax rate will be reduced to 21%.

Acquisition Highlights

The increase in the Company’s net income for the quarter ended June 30, 2018 exemplified the beneficial impact of the $1.6 billion, or 33.4%, of growth in total assets that resulted from the Company’s acquisition of CSBK. The growth arising from the acquisition reflected:

•

Loans acquired with aggregate fair values totaling $1.12 billion primarily comprising residential and commercial mortgage loans. Acquired loans included $5.4 million of nonperforming loans whose fair values at acquisition reflected negligible levels of impairment;

•

Deposits assumed with aggregate fair values totaling $949.8 million housed across a retail banking network consisting of 12 branches located in New Jersey’s Passaic, Bergen, Hudson and Essex counties;

•

Securities acquired with aggregate fair values of $326.9 million primarily comprising U.S. agency and other high-quality debt securities;

•

Borrowings assumed with fair values of $414.1 million comprised entirely of outstanding advances from the Federal Home Loan Bank of New York;

•

Merger consideration primarily comprising 25.4 million shares of the Company’s common stock issued to CSBK stockholders reflecting an exchange of 1.191 of Company shares for each outstanding share of CSBK common stock at the time of closing as well as cash distributed to CSBK stockholders and eligible option holders for the settlement of fractional shares and the value of outstanding options to purchase CSBK stock, respectively.

As required by applicable accounting standards, the Company recorded purchase accounting adjustments to the carrying value of all assets acquired and liabilities assumed from CSBK to reflect their fair values at the time of acquisition. With specific regard to the interest-earning assets acquired and interest-bearing liabilities assumed, such adjustments generally accrete or amortize into interest income and interest expense, respectively, on a level-yield/cost basis over their estimated remaining lives. As a result, the “post-acquisition” yield or cost recognized by the Company on the assets and liabilities acquired generally reflect the comparable market interest rates for such instruments at the time of their acquisition.

The CSBK acquisition was the primary factor contributing to the reported increase in net income for the quarter ended June 30, 2018 compared to the prior quarter ended March 31, 2018. As discussed in greater detail below, the increase in net income between comparative periods included the following highlights:

•

Net interest income increased by $13.5 million, or 50.0%, to $40.6 million from $27.1 million;

•

Net interest margin increased by 31 basis points to 2.72% from 2.41%;

•

Excluding the impact of non-recurring, merger-related expenses recognized during both comparative periods:

•

Non-interest expense increased by $4.0 million, or 17.9%, to $26.1 million from $22.1 million;

•

The non-interest expense ratio decreased by 23 basis points to 1.59% from 1.82%.

•

The efficiency ratio decreased by 13.0% to 59.4% from 72.4%;

•

Return on average on average assets ratio increased by 22 basis points to 0.69% from 0.47%.

Overview of Financial Performance

In addition to completing the CSBK acquisition, the Company continued to execute other strategies throughout fiscal 2018 intended to organically grow and diversify its balance sheet while increasing its core earnings and prudently managing capital to promote long-term growth in shareholder value. Together, the Company’s organic growth and acquisition strategies combined to result in several balance sheet growth and diversification achievements that are included among the following highlights for the quarter and year ended June 30, 2018:

•

The Company’s aggregate loan portfolio, excluding loans held for sale and the allowance for loan losses, increased by $1.15 billion to $4.50 billion, or 68.4% of total assets, at June 30, 2018 from $3.35 billion, or 67.9% of total assets, at March 31, 2018. For the year ended June 30, 2018, the Company’s aggregate loan portfolio increased by $1.26 billion, or 38.7%, from $3.25 billion, or 67.4% of total assets, at June 30, 2017.

•

The outstanding balance of the Company’s commercial mortgage loans increased by $476.6 million to $3.06 billion at June 30, 2018 from $2.58 billion at March 31, 2018. For the year ended June 30, 2018, commercial mortgage loans grew $563.9 million from $2.50 billion at June 30, 2017. The organic growth in commercial mortgage loans during the quarter and year ended June 30, 2018 continued to reflect the impact of an accelerated rate of loan prepayments compared to prior years that partially offset the increase in loans arising from loan origination volume. In addition to the growth arising from the CSBK acquisition, the Company continues to execute organic strategies designed to increase the origination volume of commercial mortgage loans to compensate for the challenges presented by the noted increase in prepayments. Toward that end, the Company’s pipeline of commercial mortgage loans in the underwriting process increased during the quarter ended June 30, 2018.

•

The outstanding balance of residential mortgage loans held in the portfolio, including home equity loans and lines of credit, increased by $744.9 million to $1.39 billion at June 30, 2018 from $643.3 million at March 31, 2018. For the year ended June 30, 2018, residential mortgage loans grew $738.1 million from $650.1 million at June 30, 2017. The increase in residential mortgage loans during the quarter and year ended June 30, 2018 primarily reflected the impact of the CSBK acquisition as the Company continued emphasizing its mortgage banking strategy through which most residential mortgage loans originated are sold into the secondary market.

•

Asset quality remained strong throughout the quarter and year ended June 30, 2018. The outstanding balance of nonperforming loans increased by $2.6 million to $16.9 million, or 0.37% of total loans, at June 30, 2018 from $14.2 million, or 0.42% of total loans, at March 31, 2018. For the year ended June 30, 2018, nonperforming loans decreased by $2.0 million from $18.9 million, or 0.58% of total loans, at June 30, 2017. As noted earlier, the increase in the outstanding balance of nonperforming loans at June 30, 2018 included a nominal balance of loans acquired from CSBK which was partially offset by a net decrease in the remaining balance of nonperforming loans during the reported periods.

•

The allowance for loan losses increased to $30.9 million at June 30, 2018 from $30.2 million at March 31, 2018, resulting in a “total loan coverage ratio”, representing the balance of the allowance for loan losses as a percentage of total loans, of 0.68% and 0.90%, respectively. For the year ended June 30, 2018, the allowance for loan losses increased by $1.6 million from $29.3 million, or 0.90% of total loans, at June 30, 2017. The decrease in the “total loan coverage ratio” for both the quarter and year ended June 30, 2018 largely reflects the impact of the CSBK acquisition and the related accounting standards which generally preclude acquired loan balances from being considered in the balance of the allowance for loan losses at the time of their acquisition. In lieu thereof, an accretable “credit mark” is established as a component of the purchase accounting fair value adjustments which directly reduces the carrying value of the acquired loan portfolio.

•

The Company’s securities portfolio increased by $170.7 million to $1.31 billion, or 20.0% of total assets, at June 30, 2018 from $1.14 billion, or 23.2% of total assets, at March 31, 2018. For the year ended June 30, 2018, the securities portfolio increased by $207.7 million, or 18.8%, from $1.11 billion, or 23.0% of total assets at June 30, 2017. The increase in the securities portfolio for the quarter and year ended June 30, 2018 largely reflected the impact of securities acquired from CSBK. The Company sold a significant portion of the securities originally acquired from CSBK with a portion of the sale proceeds reinvested into shorter-duration, higher-yielding securities and the remainder reinvested into loans.

•

The balance of cash and cash equivalents increased by $90.6 million to $128.9 million at June 30, 2018 from $38.3 million at March 31, 2018. For the year ended June 30, 2018, cash and cash equivalents increased by $50.6 million from $78.2 million at June 30, 2017. The increase for the quarter and year ended June 30, 2018 partly reflected day-to-day operating fluctuations in the Company’s balance of short-term liquidity coupled with the acquisition of cash and cash equivalents balances acquired from CSBK. Notwithstanding the increase in their overall balance, the Company generally endeavors to limit the balance of cash and cash equivalents held to the minimum levels needed to meet its short-term funding obligations and overall liquidity risk management objectives. As such, the excess balance of cash and cash equivalents held at June 30, 2018 is generally expected to be redeployed into higher-yielding assets during the quarter ending September 30, 2018.

•

The Company’s total deposits increased by $1.01 billion to $4.07 billion at June 30, 2018, from $3.07 billion at March 31, 2018. For the year ended June 30, 2018, total deposits increased by $1.14 billion from $2.93 billion at June 30, 2017. The increase in deposits for the quarter and year ended June 30, 2018 largely reflected the impact of deposits acquired from CSBK while also reflecting the continuing effects of product, pricing and marketing strategies implemented during fiscal 2018.

•

Total borrowings increased by $346.6 million to $1.20 billion at June 30, 2018, from $852.0 million at March 31, 2018. For the year ended June 30, 2018, total borrowings increased by $392.4 million from $806.2 million at June 30, 2017. The increase in borrowings for the quarter and year ended June 30, 2018 partly reflected the impact of borrowings acquired from CSBK. The increase attributable to the CSBK acquisition was partly offset by the repayment of maturing FHLB term and overnight advances coupled with changes in depositor sweep account balances representing normal day-to-day fluctuations in such balances.

•

The Company’s stockholders’ equity increased by $277.5 million to $1.27 billion at June 30, 2018 from $991.2 million at March 31, 2018. The increase in stockholders’ equity for the quarter ended June 30, 2018 partly reflected $330.7 million of capital stock issued by the Company in conjunction with the acquisition of CSBK. The increase also reflected net income earned during the period coupled with a decrease in unearned ESOP shares and a net increase in accumulated other comprehensive income primarily reflecting changes in the fair value of the Company’s derivatives and available for sale securities portfolios. The noted increases in stockholders’ equity were partially offset by the Company’s repurchase of 4.5 million shares of its capital stock during the quarter ended June 30, 2018 at a total cost of $62.5 million and at an average cost of $13.85 per share, coupled with cash dividends paid to stockholders of $3.9 million during the period. For the year ended June 30, 2018, stockholders’ equity increased by $211.6 million from $1.06 billion at June 30, 2017. The net increase for the year was generally attributable to the cumulative effects of the same factors that contributed to the net change in stockholders’ equity for the quarter ended June 30, 2018.

•

At June 30, 2018, the Company’s total consolidated equity to assets ratio was 19.28% while the Bank’s total consolidated equity to assets ratio was 18.19%. The Company’s and Bank’s regulatory capital ratios at June 30, 2018 were well in excess of the levels required by federal banking regulators to be classified as “well-capitalized” under regulatory guidelines.

As highlighted below, the acquisition of CSBK coupled with the organic balance sheet growth, reinvestment and reallocation achievements helped to offset the adverse effects of an increase in market interest rates and a flattening yield curve on the Company’s net interest margin:

•

The Company’s net interest income increased by $13.5 million to $40.6 million for the quarter ended June 30, 2018 from $27.1 million for the quarter ended March 31, 2018. For the year ended June 30, 2018, net interest income increased by $18.7 million to $121.3 million from $102.6 million for the year ended June 30, 2017.

•

The Company’s net interest margin increased 31 basis points to 2.72% for the quarter ended June 30, 2018 from 2.41% for the quarter ended March 31, 2018 while the net interest rate spread increased by 33 basis points to 2.48% from 2.15% for those same comparative periods, respectively. For the year ended June 30, 2018, the net interest margin increased by nine basis points to 2.50% from 2.41% for the year ended June 30, 2017 while the net interest rate spread increased by 11 basis points to 2.25% from 2.14% for those same comparative periods, respectively.

The level of the Company’s charge offs and provision for loan losses continued to reflect strong asset quality metrics:

•

The Company recognized net charge offs totaling approximately $101,000 for the quarter ended June 30, 2018, reflecting an annualized net charge off rate of 0.01% on the average balance of total loans for the period. By comparison, the Company’s net charge offs totaled approximately $241,000 for the quarter ended March 31, 2018, reflecting an annualized net charge off rate of 0.03%.

For the year ended June 30, 2018, the Company recognized net charge offs totaling $1.1 million reflecting an annualized charge off rate of 0.03% on the average balance of total loans for fiscal 2018. By comparison, the Company’s net charge offs totaled approximately $324,000 for the year ended June 30, 2017 reflecting an annualized charge off rate of 0.01% on the average balance of total loans for fiscal 2017.

•

The Company’s provision for loan losses increased by $294,000 to $717,000 for the quarter ended June 30, 2018 compared to $423,000 for the quarter ended March 31, 2018. The increase in the provision largely reflected the net effect of updates to historical and environmental loss factors that increased the level of provision expense between comparative periods. The increase in the provision expense was partially offset by a decrease in net charge offs between the two comparative periods, as discussed above, as well as the effects of comparatively lower growth during the quarter ended June 30, 2018 in the performing portion of the non-acquired loan portfolio that is collectively evaluated for impairment using historical and environmental loss factors.

•

For the year ended June 30, 2018, the provision for loan losses decreased by $2.7 million to $2.7 million from $5.4 million for the year ended June 30, 2017. The decrease in the provision was partly attributable to the effects of comparatively lower growth during fiscal 2018 in the performing portion of the non-acquired loan portfolio that is collectively evaluated for impairment using historical and environmental loss factors while also reflecting the effects of updates to such factors between comparative periods. This decrease was partially offset by an increase in net charge offs recognized between the two comparative periods, as discussed above.

The Company’s mortgage banking and SBA lending strategies continued to supplement and diversify its sources of non-interest income while the benefits of its commercial mortgage lending strategies were also reflected in non-interest income:

•

Aggregate loan sale gains totaled $127,000 for the quarter ended June 30, 2018 compared to $346,000 for the quarter ended March 31, 2018 while such gains totaled $1.0 million and $1.5 million for the years ended June 30, 2018 and June 30, 2017, respectively. The decrease in gains recognized was partly attributable to an overall increase in market interest rates that has reduced rate refinancing incentives for residential mortgage borrowers. A decrease in SBA sale gains between both sets of comparative periods generally reflected fluctuations in loan origination volume and timing that generally characterizes the Company’s SBA lending activities.

•

Fees and service charges totaled $1.2 million for the quarter ended June 30, 2018 compared to $1.5 million for the quarter ended March 31, 2018. For the year ended June 30, 2018, fees and service charges increased to $5.4 million from $3.3 million for the year ended June 30, 2017. The increased level of fees and service charges for the year ended June 30, 2018 was largely attributable to increased recognition of commercial loan prepayment fees while their inherent variability was the largest contributor to the decrease in fees and charges between the linked quarters ended June 30, 2018 and March 31, 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 1.90% for the quarter ended June 30, 2018 compared to 1.85% for the prior quarter ended March 31, 2018. For those same comparative periods, the Company’s operating efficiency ratio decreased to 71.1% from 73.7%, respectively. As noted earlier, excluding the impact of merger-related expenses, the Company’s non-interest expense to average assets ratios would have been 1.59% and 1.82% for the quarters ended June 30, 2018 and March 31, 2018, respectively, while the Company’s operating efficiency ratios would have been 59.4% and 72.4% for those same periods, respectively.

For the year ended June 30, 2018, the Company’s ratio of non-interest expense to average assets totaled 1.86% compared to 1.76% for the year ended June 30, 2017. For those same comparative periods, the Company’s operating efficiency ratio increased to 72.7% from 71.2%, respectively. For the year ended June 30, 2018, the Company’s ratio of non-interest expense to average assets and operating efficiency ratio included the impacts arising from merger-related expenses, as discussed above.

Collectively, the factors noted above contributed to the increases in net income for the quarter and year ended June 30, 2018 noted earlier. The increases 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 June 30, 2018 totaled 0.47% compared to 0.44% for the prior quarter ended March 31, 2018. Excluding the impacts on net income arising from the non-recurring effects of merger-related expenses, as discussed above, the Company’s return on average assets would have been 0.70% and 0.47% for the quarters ended June 30, 2018 and March 31, 2018, respectively.

For the year ended June 30, 2018, the return on average assets totaled 0.37% compared to 0.40% for the prior year ended June 30, 2017. The Company’s return on average assets for the year ended June 30, 2018 reflected the impacts arising from federal income tax reform and merger-related expenses, as discussed above.

The Company continued to execute key capital management strategies during the quarter ended June 30, 2018 to further support shareholder value:

•

The Company increased its regular quarterly cash dividend payable to stockholders by $0.01 from $0.03 per share declared and paid during the quarters ended September 30, 2017, December 31, 2017 and March 31, 2018, to $0.04 per share declared and paid during the quarter ended June 30, 2018. The Company continues to evaluate its dividend policies and practices in relation to its capital management and shareholder value objectives.

•

In April 2018, the Company completed the repurchase of its shares of capital stock under its second share repurchase program announced in May 2017 through which it authorized the repurchase of 8,559,084 shares, or 10%, of the Company’s outstanding shares. The shares associated with this second program were repurchased at a total cost of $122.0 million and at an average cost of $14.25 per share.

•

In May 2018, the Company announced a third share repurchase program through which it authorized the repurchase of 10,238,557 shares, or 10%, of the Company’s outstanding shares. Through June 30, 2018, the Company repurchased a total of 2,695,460 shares, or 26.3% of the shares authorized for repurchase under this third program, at a total cost of $38.4 million and at an average cost of $14.23 per share.

The exhibits that follow this narrative begin with the presentation of the Linked-Quarter Comparative Financial Analysis and Year-to-Year Comparative Financial Analysis. These tabular presentations support the discussion above by presenting the Company’s financial condition and operating results for the quarter and fiscal year ended June 30, 2018 compared to those for the prior linked-quarter ended March 31, 2018 and prior fiscal year ended June 30, 2017, respectively. 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 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.

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.
	June 30,			March 31,
	2018			2018
Assets
Cash and cash equivalents	$	128,864		$	38,283		$	90,581			236.6	%
Securities available for sale		725,085			684,771			40,314			5.9	%
Securities held to maturity		589,730			459,380			130,350			28.4	%
Loans held-for-sale		863			2,377			(1,514	)		-63.7	%
Loans receivable, including yield adjustments		4,501,348			3,351,369			1,149,979			34.3	%
Less allowance for loan losses		(30,865	)		(30,248	)		(617	)		2.0	%

Net loans receivable		4,470,483			3,321,121			1,149,362			34.6	%
Premises and equipment		56,240			42,856			13,384			31.2	%
Federal Home Loan Bank stock		59,004			39,112			19,892			50.9	%
Accrued interest receivable		18,510			13,926			4,584			32.9	%
Goodwill		210,895			108,591			102,304			94.2	%
Bank owned life insurance		249,816			184,981			64,835			35.0	%
Deferred income taxes, net		23,754			3,898			19,856			509.4	%
Other assets		46,630			34,404			12,226			35.5	%

Total assets	$	6,579,874		$	4,933,700		$	1,646,174			33.4	%

Liabilities
Deposits	$	4,073,604		$	3,067,102		$	1,006,502			32.8	%
Borrowings		1,198,646			852,009			346,637			40.7	%
Advance payments by borrowers for taxes		18,088			8,969			9,119			101.7	%
Other liabilities		20,788			14,419			6,369			44.2	%

Total liabilities		5,311,126			3,942,499			1,368,627			34.7	%
Stockholders’ Equity
Common stock		996			788			208			26.4	%
Paid-in capital		922,711			653,045			269,666			41.3	%
Retained earnings		359,096			355,270			3,826			1.1	%
Unearned ESOP shares		(32,590	)		(33,076	)		486			-1.5	%
Accumulated other comprehensive income, net		18,535			15,174			3,361			22.1	%

Total stockholders’ equity		1,268,748			991,201			277,547			28.0	%

Total liabilities and stockholders’ equity	$	6,579,874		$	4,933,700		$	1,646,174			33.4	%

Consolidated capital ratios
Equity to assets		19.28	%		20.09	%		-0.81	%
Tangible equity to tangible assets		16.53	%		18.29	%		-1.76	%
Share data
Outstanding shares		99,626			78,765			20,861			26.5	%
Equity per share	$	12.74		$	12.58		$	0.16			1.3	%
Tangible equity per share⁽¹⁾	$	10.56		$	11.20		$	(0.64	)		-5.7	%

⁽¹⁾	Tangible equity equals total stockholders’ equity reduced by goodwill and core deposit intangible assets.


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.
	June 30,			March 31,
	2018			2018
Interest income
Loans	$	46,615		$	30,728		$	15,887			51.7	%
Taxable investment securities		8,670			6,450			2,220			34.4	%
Tax-exempt investment securities		702			652			50			7.7	%
Other interest-earning assets		1,275			715			560			78.3	%

Total Interest Income		57,262			38,545			18,717			48.6	%
Interest expense
Deposits		9,755			7,026			2,729			38.8	%
Borrowings		6,916			4,462			2,454			55.0	%

Total interest expense		16,671			11,488			5,183			45.1	%

Net interest income		40,591			27,057			13,534			50.0	%
Provision for loan losses		717			423			294			69.5	%

Net interest income after provision for loan losses		39,874			26,634			13,240			49.7	%

Non-interest income
Fees and service charges		1,205			1,537			(332	)		-21.6	%
Gain (loss) on sale and call of securities		9			(1	)		10			-1000.0	%
Gain on sale of loans		127			346			(219	)		-63.3	%
Gain on sale of real estate owned		60			7			53			757.1	%
Income from bank owned life insurance		1,604			1,227			377			30.7	%
Electronic banking fees and charges		278			243			35			14.4	%
Miscellaneous		75			189			(114	)		-60.3	%

Total non-interest income		3,358			3,548			(190	)		-5.4	%
Non-interest expense
Salaries and employee benefits		15,353			12,888			2,465			19.1	%
Net occupancy expense of premises		2,716			2,359			357			15.1	%
Equipment and systems		2,776			2,323			453			19.5	%
Advertising and marketing		757			745			12			1.6	%
Federal deposit insurance premium		463			350			113			32.3	%
Directors’ compensation		754			689			65			9.4	%
Merger-related expenses		5,149			401			4,748			1184.0	%
Miscellaneous		3,289			2,788			501			18.0	%

Total non-interest expense		31,257			22,543			8,714			38.7	%

Income before income taxes		11,975			7,639			4,336			56.8	%
Income taxes		4,257			2,262			1,995			88.2	%

Net income	$	7,718		$	5,377		$	2,341			43.5	%

Net income per common share (EPS)
Basic	$	0.08		$	0.07		$	0.01
Diluted	$	0.08		$	0.07		$	0.01
Dividends declared
Cash dividends declared per common share	$	0.04		$	0.03		$	0.01
Cash dividends declared	$	3,892		$	2,262		$	1,630
Dividend payout ratio		50.4	%		42.1	%		8.3	%
Weighted average number of common shares outstanding
Basic		98,046			75,492			22,554
Diluted		98,100			75,539			22,561


Average Balance Sheet Data (Dollars in Thousands, Unaudited)	For the three months ended						Variance or Change			Variance or Change Pct.
	June 30,			March 31,
	2018			2018
Assets
Interest-earning assets:
Loans receivable, including loans held for sale	$	4,507,336		$	3,293,664		$	1,213,672			36.8	%
Taxable investment securities		1,192,066			1,003,600			188,466			18.8	%
Tax-exempt investment securities		134,683			127,605			7,078			5.5	%
Other interest-earning assets		142,591			67,770			74,821			110.4	%

Total interest-earning assets		5,976,676			4,492,639			1,484,037			33.0	%
Non-interest-earning assets		586,976			369,299			217,677			58.9	%

Total assets	$	6,563,652		$	4,861,938		$	1,701,714			35.0	%

Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Deposits:
Interest-bearing demand	$	1,004,445		$	870,762		$	133,683			15.4	%
Savings and club		724,430			513,948			210,482			41.0	%
Certificates of deposit		1,983,372			1,385,151			598,221			43.2	%

Total interest-bearing deposits		3,712,247			2,769,861			942,386			34.0	%
Borrowings:
Federal Home Loan Bank Advances		1,179,147			777,721			401,426			51.6	%
Other borrowings		34,636			33,529			1,107			3.3	%

Total borrowings		1,213,783			811,250			402,533			49.6	%

Total interest-bearing liabilities		4,926,030			3,581,111			1,344,919			37.6	%
Non-interest-bearing liabilities:
Non-interest-bearing deposits		305,763			267,152			38,611			14.5	%
Other non-interest-bearing liabilities		39,340			24,953			14,387			57.7	%

Total non-interest-bearing liabilities		345,103			292,105			52,998			18.1	%

Total liabilities		5,271,133			3,873,216			1,397,917			36.1	%
Stockholders’ equity		1,292,519			988,722			303,797			30.7	%

Total liabilities and stockholders’ equity	$	6,563,652		$	4,861,938		$	1,701,714			35.0	%

Average interest-earning assets to average interest-bearing liabilities		121.33	%		125.45	%		-4.13	%		-3.3	%


Performance Ratio Highlights	For the three months ended						Variance or Change
	June 30,			March 31,
	2018			2018
Average yield on interest-earning assets:
Loans receivable, including loans held for sale		4.14	%		3.73	%		0.41	%
Taxable investment securities		2.91	%		2.57	%		0.34	%
Tax-exempt investment securities ⁽¹⁾		2.09	%		2.04	%		0.05	%
Other interest-earning assets		3.58	%		4.22	%		-0.64	%

Total interest-earning assets		3.83	%		3.43	%		0.40	%
Average cost of interest-bearing liabilities:
Deposits:
Interest-bearing demand		0.89	%		0.84	%		0.05	%
Savings and club		0.29	%		0.12	%		0.17	%
Certificates of deposit		1.41	%		1.46	%		-0.05	%

Total interest-bearing deposits		1.05	%		1.01	%		0.04	%
Borrowings:
Federal Home Loan Bank Advances		2.34	%		2.27	%		0.07	%
Other borrowings		0.34	%		0.56	%		-0.22	%

Total borrowings		2.28	%		2.20	%		0.08	%

Total interest-bearing liabilities		1.35	%		1.28	%		0.07	%
Interest rate spread⁽²⁾		2.48	%		2.15	%		0.33	%
Net interest margin⁽³⁾		2.72	%		2.41	%		0.31	%
Non-interest income to average assets (annualized)		0.20	%		0.29	%		-0.09	%
Non-interest expense to average assets (annualized)		1.90	%		1.85	%		0.05	%
Efficiency ratio⁽⁴⁾		71.12	%		73.66	%		-2.54	%
Return on average assets (annualized)		0.47	%		0.44	%		0.03	%
Return on average equity (annualized)		2.39	%		2.18	%		0.21	%

⁽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.

Year-to-Year Comparative Financial Analysis


Summary Balance Sheet (Dollars in Thousands, Except Per Share Data, Unaudited)	At						Variance or Change			Variance or Change Pct.
	June 30,			June 30,
	2018			2017
Assets
Cash and cash equivalents	$	128,864		$	78,237		$	50,627			64.7	%
Securities available for sale		725,085			613,760			111,325			18.1	%
Securities held to maturity		589,730			493,321			96,409			19.5	%
Loans held-for-sale		863			4,692			(3,829	)		-81.6	%
Loans receivable, including yield adjustments		4,501,348			3,245,261			1,256,087			38.7	%
Less allowance for loan losses		(30,865	)		(29,286	)		(1,579	)		5.4	%

Net loans receivable		4,470,483			3,215,975			1,254,508			39.0	%
Premises and equipment		56,240			39,585			16,655			42.1	%
Federal Home Loan Bank stock		59,004			39,958			19,046			47.7	%
Accrued interest receivable		18,510			12,493			6,017			48.2	%
Goodwill		210,895			108,591			102,304			94.2	%
Bank owned life insurance		249,816			181,223			68,593			37.9	%
Deferred income taxes, net		23,754			15,454			8,300			53.7	%
Other assets		46,630			14,838			31,792			214.3	%

Total assets	$	6,579,874		$	4,818,127		$	1,761,747			36.6	%

Liabilities
Deposits	$	4,073,604		$	2,929,745		$	1,143,859			39.0	%
Borrowings		1,198,646			806,228			392,418			48.7	%
Advance payments by borrowers for taxes		18,088			8,711			9,377			107.6	%
Other liabilities		20,788			16,262			4,526			27.8	%

Total liabilities		5,311,126			3,760,946			1,550,180			41.2	%
Stockholders’ Equity
Common stock	$	996			844			152			18.0	%
Paid-in capital		922,711			728,790			193,921			26.6	%
Retained earnings		359,096			361,039			(1,943	)		-0.5	%
Unearned ESOP shares		(32,590	)		(34,536	)		1,946			-5.6	%
Accumulated other comprehensive income, net		18,535			1,044			17,491			1675.4	%

Total stockholders’ equity		1,268,748			1,057,181			211,567			20.0	%

Total liabilities and stockholders’ equity	$	6,579,874		$	4,818,127		$	1,761,747			36.6	%

Consolidated capital ratios
Equity to assets		19.28	%		21.94	%		-2.66	%
Tangible equity to tangible assets		16.53	%		20.14	%		-3.61	%
Share data
Outstanding shares (period end)		99,626			84,351			15,275			18.1	%
Equity per share	$	12.74		$	12.53		$	0.21			1.7	%
Tangible equity per share⁽¹⁾	$	10.56		$	11.24		$	(0.68	)		-6.0	%

⁽¹⁾	Tangible equity equals total stockholders’ equity reduced by goodwill and core deposit intangible assets.


Summary Income Statement (Dollars and Shares in Thousands, Except Per Share Data, Unaudited)	For the year ended						Variance or Change			Variance or Change Pct.
	June 30,			June 30,
	2018			2017
Interest income
Loans	$	138,426		$	111,181		$	27,245			24.5	%
Taxable investment securities		27,053			23,543			3,510			14.9	%
Tax-exempt investment securities		2,616			2,300			316			13.7	%
Other interest-earning assets		3,336			2,069			1,267			61.2	%

Total Interest Income		171,431			139,093			32,338			23.2	%
Interest expense
Deposits		29,649			22,100			7,549			34.2	%
Borrowings		20,489			14,419			6,070			42.1	%

Total interest expense		50,138			36,519			13,619			37.3	%

Net interest income		121,293			102,574			18,719			18.2	%
Provision for loan losses		2,706			5,381			(2,675	)		-49.7	%

Net interest income after provision for loan losses		118,587			97,193			21,394			22.0	%

Non-interest income
Fees and service charges		5,412			3,289			2,123			64.5	%
Gain (Loss) on sale and call of securities		8			(1	)		9			-900.0	%
Gain on sale of loans		1,004			1,535			(531	)		-34.6	%
Loss on sale of real estate owned		(19	)		(106	)		87			-82.1	%
Income from bank owned life insurance		5,362			5,207			155			3.0	%
Electronic banking fees and charges		1,101			1,080			21			1.9	%
Miscellaneous		395			344			51			14.8	%

Total non-interest income		13,263			11,348			1,915			16.9	%
Non-interest expense
Salaries and employee benefits		54,034			47,818			6,216			13.0	%
Net occupancy expense of premises		9,178			8,018			1,160			14.5	%
Equipment and systems		9,482			8,350			1,132			13.6	%
Advertising and marketing		2,960			2,626			334			12.7	%
Federal deposit insurance premium		1,516			1,334			182			13.6	%
Directors’ compensation		2,820			1,982			838			42.3	%
Merger-related expenses		6,743			—			—			0.0	%
Miscellaneous		11,117			10,990			127			1.2	%

Total non-interest expense		97,850			81,118			16,732			20.6	%

Income before income taxes		34,000			27,423			6,577			24.0	%
Income taxes		14,404			8,820			5,584			63.3	%

Net income	$	19,596		$	18,603		$	993			5.3	%

Net income per common share (EPS)
Basic	$	0.24		$	0.22		$	0.02
Diluted	$	0.24		$	0.22		$	0.02
Dividends declared
Cash dividends declared per common share	$	0.25		$	0.10		$	0.15
Cash dividends declared	$	20,158		$	8,370		$	11,788
Dividend payout ratio		102.9	%		45.0	%		57.88	%
Weighted average number of common shares outstanding
Basic		82,587			84,590			(2,003	)
Diluted		82,643			84,661			(2,018	)


Average Balance Sheet Data (Dollars in Thousands, Unaudited)	For the year ended						Variance or Change			Variance or Change Pct.
	June 30,			June 30,
	2018			2017
Assets
Interest-earning assets:
Loans receivable, including loans held for sale	$	3,577,598		$	2,955,686		$	621,912			21.0	%
Taxable investment securities		1,048,163			1,066,508			(18,345	)		-1.7	%
Tax-exempt investment securities		127,779			114,545			13,234			11.6	%
Other interest-earning assets		93,209			114,121			(20,912	)		-18.3	%

Total interest-earning assets		4,846,749			4,250,860			595,889			14.0	%
Non-interest-earning assets		420,219			355,554			64,665			18.2	%

Total assets	$	5,266,968		$	4,606,414		$	660,554			14.3	%

Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Deposits:
Interest-bearing demand	$	896,695		$	769,767		$	126,928			16.5	%
Savings and club		569,777			519,506			50,271			9.7	%
Certificates of deposit		1,496,743			1,241,958			254,785			20.5	%

Total interest-bearing deposits		2,963,215			2,531,231			431,984			17.1	%
Borrowings:
Federal Home Loan Bank Advances		876,253			647,360			228,893			35.4	%
Other borrowings		34,274			38,412			(4,138	)		-10.8	%

Total borrowings		910,527			685,772			224,755			32.8	%

Total interest-bearing liabilities		3,873,742			3,217,003			656,739			20.4	%
Non-interest-bearing liabilities:
Non-interest-bearing deposits		281,262			249,693			31,569			12.6	%
Other non-interest-bearing liabilities		30,298			33,416			(3,118	)		-9.3	%

Total non-interest-bearing liabilities		311,560			283,109			28,451			10.0	%

Total liabilities		4,185,302			3,500,112			685,190			19.6	%
Stockholders’ equity		1,081,666			1,106,302			(24,636	)		-2.2	%

Total liabilities and stockholders’ equity	$	5,266,968		$	4,606,414		$	660,554			14.3	%

Average interest-earning assets to average interest-bearing liabilities		125.12	%		132.14	%		-7.02	%		-5.3	%


Performance Ratio Highlights	For the year ended						Variance or Change
	June 30,			June 30,
	2018			2017
Average yield on interest-earning assets:
Loans receivable, including loans held for sale		3.87	%		3.76	%		0.11	%
Taxable investment securities		2.58	%		2.21	%		0.37	%
Tax-exempt investment securities ⁽¹⁾		2.05	%		2.01	%		0.04	%
Other interest-earning assets		3.58	%		1.81	%		1.77	%

Total interest-earning assets		3.54	%		3.27	%		0.27	%
Average cost of interest-bearing liabilities:
Deposits:
Interest-bearing demand		0.82	%		0.66	%		0.16	%
Savings and club		0.17	%		0.13	%		0.04	%
Certificates of deposit		1.42	%		1.32	%		0.10	%

Total interest-bearing deposits		1.00	%		0.87	%		0.13	%
Borrowings:
Federal Home Loan Bank Advances		2.32	%		2.21	%		0.11	%
Other borrowings		0.40	%		0.33	%		0.07	%

Total borrowings		2.25	%		2.10	%		0.15	%

Total interest-bearing liabilities		1.29	%		1.13	%		0.16	%
Interest rate spread⁽²⁾		2.25	%		2.14	%		0.11	%
Net interest margin⁽³⁾		2.50	%		2.41	%		0.09	%
Non-interest income to average assets		0.25	%		0.25	%		0.01	%
Non-interest expense to average assets		1.86	%		1.76	%		0.10	%
Efficiency ratio⁽⁴⁾		72.72	%		71.20	%		1.52	%
Return on average assets (annualized)		0.37	%		0.40	%		-0.03	%
Return on average equity (annualized)		1.81	%		1.68	%		0.13	%

⁽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.


Five-Quarter Financial Trend Analysis

Summary Balance Sheet (Dollars and Shares in Thousands, Except Per Share Data, Unaudited)	At
	June 30,			March 31,			December 31,			September 30,			June 30,
	2018			2018			2017			2017			2017
Assets
Cash and cash equivalents	$	128,864		$	38,283		$	50,685		$	38,823		$	78,237
Securities available for sale		725,085			684,771			637,671			636,600			613,760
Securities held to maturity		589,730			459,380			471,452			482,926			493,321
Loans held-for-sale		863			2,377			3,490			3,808			4,692
Loans receivable, including yield adjustments		4,501,348			3,351,369			3,291,516			3,260,328			3,245,261
Less allowance for loan losses		(30,865	)		(30,248	)		(30,066	)		(29,445	)		(29,286	)

Net loans receivable		4,470,483			3,321,121			3,261,450			3,230,883			3,215,975
Premises and equipment		56,240			42,856			41,829			40,132			39,585
Federal Home Loan Bank stock		59,004			39,112			39,113			39,115			39,958
Accrued interest receivable		18,510			13,926			13,524			13,268			12,493
Goodwill		210,895			108,591			108,591			108,591			108,591
Bank owned life insurance		249,816			184,981			183,754			182,489			181,223
Deferred income taxes, net		23,754			3,898			6,941			13,230			15,454
Other assets		46,630			34,404			25,347			18,285			14,838

Total assets	$	6,579,874		$	4,933,700		$	4,843,847		$	4,808,150		$	4,818,127

Liabilities
Deposits	$	4,073,604		$	3,067,102		$	3,033,231		$	2,952,887		$	2,929,745
Borrowings		1,198,646			852,009			798,864			808,554			806,228
Advance payments by borrowers for taxes		18,088			8,969			8,511			9,787			8,711
Other liabilities		20,788			14,419			13,968			22,689			16,262

Total liabilities		5,311,126			3,942,499			3,854,574			3,793,917			3,760,946
Stockholders’ Equity
Common stock		996			788			795			815			844
Paid-in capital		922,711			653,045			662,093			690,204			728,790
Retained earnings		359,096			355,270			353,536			354,123			361,039
Unearned ESOP shares		(32,590	)		(33,076	)		(33,563	)		(34,049	)		(34,536	)
Accumulated other comprehensive income, net		18,535			15,174			6,412			3,140			1,044

Total stockholders’ equity		1,268,748			991,201			989,273			1,014,233			1,057,181

Total liabilities and stockholders’ equity	$	6,579,874		$	4,933,700		$	4,843,847		$	4,808,150		$	4,818,127

Consolidated capital ratios
Equity to assets		19.28	%		20.09	%		20.42	%		21.09	%		21.94	%
Tangible equity to tangible assets		16.53	%		18.29	%		18.59	%		19.27	%		20.14	%
Share data
Outstanding shares		99,626			78,765			79,527			81,548			84,351
Equity per share	$	12.74		$	12.58		$	12.44		$	12.44		$	12.53
Tangible equity per share⁽¹⁾	$	10.56		$	11.20		$	11.07		$	11.10		$	11.24

⁽¹⁾	Tangible equity equals total stockholders’ equity reduced by goodwill and core deposit intangible assets.


Supplemental Balance Sheet Highlights (Dollars in Thousands, Unaudited)	At
	June 30,		March 31,		December 31,		September 30,		June 30,
	2018		2018		2017		2017		2017
Cash and cash equivalents
Cash and due from depository institutions	$	26,199	$	18,229	$	17,899	$	17,972	$	18,889
Interest-bearing deposits in other banks		102,665		20,054		32,786		20,851		59,348

Total cash and cash equivalents	$	128,864	$	38,283	$	50,685	$	38,823	$	78,237
Securities available for sale
Debt securities:
U.S. agency securities	$	4,411	$	4,667	$	4,810	$	5,063	$	5,316
Municipal and state obligations		26,088		26,733		27,428		27,725		27,740
Asset-backed securities		182,620		182,066		169,484		163,615		162,429
Collateralized loan obligations		226,066		178,342		133,341		128,383		98,154
Corporate bonds		147,594		142,202		142,397		142,489		142,318
Trust preferred securities		3,783		8,485		8,494		8,544		8,540

Debt securities available for sale		590,562		542,495		485,954		475,819		444,497
Mortgage-backed securities:
Collateralized mortgage obligations		24,292		25,601		27,187		28,790		30,536
Residential pass-through securities		102,359		108,736		116,496		123,868		130,550
Commercial pass-through securities		7,872		7,939		8,034		8,123		8,177

Mortgage-backed securities		134,523		142,276		151,717		160,781		169,263

Total securities available for sale	$	725,085	$	684,771	$	637,671	$	636,600	$	613,760
Securities held to maturity
Debt securities:
U.S. agency securities	$	—	$	—	$	—	$	35,000	$	35,000
Municipal and state obligations		109,483		98,011		100,671		95,954		94,713
Subordinated debt		46,294		30,000		25,000		15,000		15,000

Debt securities held to maturity		155,777		128,011		125,671		145,954		144,713
Mortgage-backed securities:
Collateralized mortgage obligations		56,886		34,309		35,861		16,600		17,854
Residential pass-through securities		200,622		151,605		160,487		169,257		178,813
Commercial pass-through securities		176,445		145,455		149,433		151,115		151,941

Mortgage-backed securities		433,953		331,369		345,781		336,972		348,608

Total securities held to maturity	$	589,730	$	459,380	$	471,452	$	482,926	$	493,321

Total securities	$	1,314,815	$	1,144,151	$	1,109,123	$	1,119,526	$	1,107,081


Supplemental Balance Sheet Highlights (Dollars in Thousands, Unaudited)	At
	June 30,			March 31,			December 31,			September 30,			June 30,
	2018			2018			2017			2017			2017
Loan portfolio composition:
Residential first mortgage loans	$	1,297,453		$	563,807		$	574,322		$	559,593		$	567,323
Home equity loans and lines of credit		90,761			79,522			80,961			80,746			82,822

Residential mortgage loans		1,388,214			643,329			655,283			640,339			650,145
Multifamily mortgage loans		1,758,584			1,471,573			1,438,386			1,427,840			1,412,575
Nonresidential and mixed use mortgage loans		1,302,961			1,113,385			1,069,254			1,085,983			1,085,064

Commercial mortgage loans		3,061,545			2,584,958			2,507,640			2,513,823			2,497,639
Commercial business loans		85,825			88,216			92,442			81,676			74,471
Construction loans		23,271			22,963			22,205			8,320			3,815
Account loans		3,283			3,038			2,996			2,800			2,863
Other consumer loans		5,777			7,186			8,951			10,988			13,520

Consumer loans		9,060			10,224			11,947			13,788			16,383

Total loans, excluding yield adjustments		4,567,915			3,349,690			3,289,517			3,257,946			3,242,453
Unamortized yield adjustments		(66,567	)		1,679			1,999			2,382			2,808

Loans receivable, including yield adjustments		4,501,348			3,351,369			3,291,516			3,260,328			3,245,261
Less allowance for loan losses		(30,865	)		(30,248	)		(30,066	)		(29,445	)		(29,286	)

Net loans receivable	$	4,470,483		$	3,321,121		$	3,261,450		$	3,230,883		$	3,215,975
Loan portfolio allocation:
Residential first mortgage loans		28.4	%		16.8	%		17.5	%		17.2	%		17.5	%
Home equity loans and lines of credit		2.0	%		2.4	%		2.5	%		2.5	%		2.6	%

Residential mortgage loans		30.4	%		19.2	%		20.0	%		19.7	%		20.1	%
Multifamily mortgage loans		38.5	%		43.9	%		43.7	%		43.8	%		43.6	%
Nonresidential and mixed use mortgage loans		28.5	%		33.2	%		32.5	%		33.3	%		33.4	%

Commercial mortgage loans		67.0	%		77.1	%		76.2	%		77.1	%		77.0	%
Commercial business loans		1.9	%		2.6	%		2.8	%		2.5	%		2.3	%
Construction loans		0.5	%		0.7	%		0.7	%		0.3	%		0.1	%
Account loans		0.1	%		0.1	%		0.1	%		0.1	%		0.1	%
Other consumer loans		0.1	%		0.3	%		0.2	%		0.3	%		0.4	%

Consumer loans		0.2	%		0.4	%		0.3	%		0.4	%		0.5	%

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	$	60		$	45		$	31		$	105		$	74
Nonaccrual loans		16,799			14,190			16,315			18,006			18,798

Total nonperforming loans		16,859			14,235			16,346			18,111			18,872
Other real estate owned		725			1,094			1,693			2,424			1,632

Total nonperforming assets	$	17,584		$	15,329		$	18,039		$	20,535		$	20,504
Nonperforming loans (% total loans)		0.37	%		0.42	%		0.50	%		0.56	%		0.58	%
Nonperforming assets (% total assets)		0.27	%		0.31	%		0.37	%		0.43	%		0.43	%
Allowance for loan losses (ALLL):
ALLL to total loans		0.68	%		0.90	%		0.91	%		0.90	%		0.90	%
ALLL to nonperforming loans		183.08	%		212.49	%		183.93	%		162.58	%		155.18	%
Net charge offs (recoveries)	$	101		$	241		$	315		$	471		$	(483	)
Average net charge off (recovery) rate (annualized)		0.01	%		0.03	%		0.04	%		0.06	%		-0.06	%


Supplemental Balance Sheet Highlights (Dollars in Thousands, Unaudited)	At
	June 30,			March 31,			December 31,			September 30,			June 30,
	2018			2018			2017			2017			2017
Funding by type:
Deposits
Non-interest-bearing deposits	$	311,938		$	270,217		$	275,065		$	279,263		$	267,412
Interest-bearing demand		1,000,989			871,425			879,385			855,822			847,400
Savings and club		744,039			515,805			517,400			519,037			523,981
Certificates of deposit		2,016,638			1,409,655			1,361,381			1,298,765			1,290,952

Interest-bearing deposits		3,761,666			2,796,885			2,758,166			2,673,624			2,662,333

Total deposits		4,073,604			3,067,102			3,033,231			2,952,887			2,929,745
Borrowings:
Federal Home Loan Bank advances		1,170,144			775,625			775,649			775,673			775,696
Overnight borrowings		—			42,000			—			—			—
Depositor sweep accounts		28,502			34,384			23,215			32,881			30,532

Total borrowings		1,198,646			852,009			798,864			808,554			806,228

Total funding	$	5,272,250		$	3,919,111		$	3,832,095		$	3,761,441		$	3,735,973

Loans as a % of deposits		109.8	%		108.4	%		107.6	%		109.5	%		109.9	%
Deposits as a % of total funding		77.3	%		78.3	%		79.2	%		78.5	%		78.4	%
Borrowings as a % of total funding		22.7	%		21.7	%		20.8	%		21.5	%		21.6	%
Funding by source:
Retail funding
Non-interest-bearing deposits	$	311,938		$	270,217		$	275,065		$	279,263		$	267,412
Interest-bearing demand		790,164			656,114			657,349			633,478			624,798
Savings and club		744,039			515,805			517,400			519,037			523,981
Certificates of deposit		1,828,039			1,247,900			1,210,428			1,175,329			1,167,894

Total retail deposits		3,674,180			2,690,036			2,660,242			2,607,107			2,584,085
Depositor sweep accounts		28,502			34,384			23,215			32,881			30,532

Total retail funding		3,702,682			2,724,420			2,683,457			2,639,988			2,614,617
Wholesale funding:
Interest-bearing demand	$	210,825		$	215,311		$	222,036		$	222,344		$	222,602
Certificates of deposit (listing service)		104,256			104,934			93,853			101,791			101,430
Certificates of deposit (brokered)		84,343			56,821			57,100			21,645			21,628

Total wholesale deposits		399,424			377,066			372,989			345,780			345,660
FHLB Advances		1,170,144			775,625			775,649			775,673			775,696
Overnight borrowings		—			42,000			—			—			—

Total wholesale funding		1,569,568			1,194,691			1,148,638			1,121,453			1,121,356

Total funding	$	5,272,250		$	3,919,111		$	3,832,095		$	3,761,441		$	3,735,973

Retail funding as a % of total funding		70.2	%		69.5	%		70.0	%		70.2	%		70.0	%
Wholesale funding as a % of total funding		29.8	%		30.5	%		30.0	%		29.8	%		30.0	%


Summary Income Statement (Dollars and Shares in Thousands, Except Per Share Data, Unaudited)	For the three months ended
	June 30,			March 31,			December 31,			September 30,			June 30,
	2018			2018			2017			2017			2017
Interest income
Loans	$	46,615		$	30,728		$	30,610		$	30,473		$	29,842
Taxable investment securities		8,670			6,450			6,077			5,856			5,931
Tax-exempt investment securities		702			652			641			621			605
Other interest-earning assets		1,275			715			704			642			586

Total interest income		57,262			38,545			38,032			37,592			36,964
Interest expense
Deposits		9,755			7,026			6,649			6,219			5,909
Borrowings		6,916			4,462			4,548			4,563			4,325

Total interest expense		16,671			11,488			11,197			10,782			10,234

Net interest income		40,591			27,057			26,835			26,810			26,730
Provision for loan losses		717			423			936			630			1,188

Net interest income after provision for loan losses		39,874			26,634			25,899			26,180			25,542

Non-interest income
Fees and service charges		1,205			1,537			1,409			1,261			839
Gain (loss) on sale and call of securities		9			(1	)		—			—			—
Gain on sale of loans		127			346			200			331			531
Gain (loss) on sale of real estate owned		60			7			23			(109	)		3
Income from bank owned life insurance		1,604			1,227			1,264			1,267			1,288
Electronic banking fees and charges		278			243			302			278			287
Miscellaneous		75			189			65			66			72

Total non-interest income		3,358			3,548			3,263			3,094			3,020
Non-interest expense
Salaries and employee benefits		15,353			12,888			12,926			12,867			12,887
Net occupancy expense of premises		2,716			2,359			2,122			1,981			2,013
Equipment and systems		2,776			2,323			2,193			2,190			2,204
Advertising and marketing		757			745			748			710			937
Federal deposit insurance premium		463			350			343			360			352
Directors’ compensation		754			689			688			689			689
Merger-related expenses		5,149			401			1,193			—			—
Miscellaneous		3,289			2,788			2,551			2,489			2,969

Total non-interest expense		31,257			22,543			22,764			21,286			22,051

Income before income taxes		11,975			7,639			6,398			7,988			6,511
Income taxes		4,257			2,262			5,129			2,756			2,107

Net income	$	7,718		$	5,377		$	1,269		$	5,232		$	4,404

Net income per common share (EPS)
Basic	$	0.08		$	0.07		$	0.02		$	0.07		$	0.05
Diluted	$	0.08		$	0.07		$	0.02		$	0.07		$	0.05
Dividends declared⁽¹⁾
Cash dividends declared per common share	$	0.04		$	0.03		$	0.03		$	0.15		$	0.03
Cash dividends declared	$	3,892		$	2,262		$	1,856		$	12,148		$	2,448
Dividend payout ratio		50.4	%		42.1	%		146.3	%		232.2	%		55.6	%
Weighted average number of common shares outstanding
Basic		98,046			75,492			77,174			79,649			82,372
Diluted		98,100			75,539			77,239			79,708			82,429

⁽¹⁾	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 prior fiscal year ended June 30, 2017.


Average Balance Sheet Data (Dollars in Thousands, Unaudited)	For the three months ended
	June 30,			March 31,			December 31,			September 30,			June 30,
	2018			2018			2017			2017			2017
Assets
Interest-earning assets:
Loans receivable, including loans held for sale	$	4,507,336		$	3,293,664		$	3,255,862		$	3,257,465		$	3,200,968
Taxable investment securities		1,192,066			1,003,600			996,397			1,001,183			1,009,120
Tax-exempt investment securities		134,683			127,605			126,214			122,685			119,957
Other interest-earning assets		142,591			67,770			82,539			79,920			118,349

Total interest-earning assets		5,976,676			4,492,639			4,461,012			4,461,253			4,448,394
Non-interest-earning assets		586,976			369,299			364,015			361,259			358,791

Total assets	$	6,563,652		$	4,861,938		$	4,825,027		$	4,822,512		$	4,807,185

Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Deposits:
Interest-bearing demand	$	1,004,445		$	870,762		$	854,142		$	858,039		$	812,932
Savings and club		724,430			513,948			518,513			522,686			523,771
Certificates of deposit		1,983,372			1,385,151			1,336,466			1,284,847			1,288,537

Total interest-bearing deposits		3,712,247			2,769,861			2,709,121			2,665,572			2,625,240
Borrowings:
Federal Home Loan Bank Advances		1,179,147			777,721			777,460			778,104			775,703
Other borrowings		34,636			33,529			30,606			32,041			40,064

Total borrowings		1,213,783			811,250			808,066			810,145			815,767

Total interest-bearing liabilities		4,926,030			3,581,111			3,517,187			3,475,717			3,441,007
Non-interest-bearing liabilities:
Non-interest-bearing deposits		305,763			267,152			277,236			274,858			262,499
Other non-interest-bearing liabilities		39,340			24,953			25,777			31,070			26,322

Total non-interest-bearing liabilities		345,103			292,105			303,013			305,928			288,821

Total liabilities		5,271,133			3,873,216			3,820,200			3,781,645			3,729,828
Stockholders’ equity		1,292,519			988,722			1,004,827			1,040,867			1,077,357

Total liabilities and stockholders’ equity	$	6,563,652		$	4,861,938		$	4,825,027		$	4,822,512		$	4,807,185

Average interest-earning assets to average interest-bearing liabilities		121.33	%		125.45	%		126.83	%		128.35	%		129.28	%


Performance Ratio Highlights	For the three months ended
	June 30,			March 31,			December 31,			September 30,			June 30,
	2018			2018			2017			2017			2017
Average yield on interest-earning assets:
Loans receivable, including loans held for sale		4.14	%		3.73	%		3.76	%		3.74	%		3.73	%
Taxable investment securities		2.91	%		2.57	%		2.44	%		2.34	%		2.35	%
Tax-exempt investment securities ⁽¹⁾		2.09	%		2.04	%		2.03	%		2.03	%		2.02	%
Other interest-earning assets		3.58	%		4.22	%		3.42	%		3.21	%		1.98	%

Total interest-earning assets		3.83	%		3.43	%		3.41	%		3.37	%		3.32	%
Average cost of interest-bearing liabilities:
Deposits:
Interest-bearing demand		0.89	%		0.84	%		0.80	%		0.76	%		0.71	%
Savings and club		0.29	%		0.12	%		0.12	%		0.12	%		0.12	%
Certificates of deposit		1.41	%		1.46	%		1.43	%		1.38	%		1.34	%

Total interest-bearing deposits		1.05	%		1.01	%		0.98	%		0.93	%		0.90	%
Borrowings:
Federal Home Loan Bank Advances		2.34	%		2.27	%		2.33	%		2.33	%		2.21	%
Other borrowings		0.34	%		0.56	%		0.27	%		0.27	%		0.27	%

Total borrowings		2.28	%		2.20	%		2.25	%		2.25	%		2.12	%

Total interest-bearing liabilities		1.35	%		1.28	%		1.27	%		1.24	%		1.19	%
Interest rate spread⁽²⁾		2.48	%		2.15	%		2.14	%		2.13	%		2.13	%
Net interest margin⁽³⁾		2.72	%		2.41	%		2.41	%		2.40	%		2.40	%
Non-interest income to average assets (annualized)		0.20	%		0.29	%		0.27	%		0.26	%		0.25	%
Non-interest expense to average assets (annualized)		1.90	%		1.85	%		1.89	%		1.77	%		1.83	%
Efficiency ratio⁽⁴⁾		71.12	%		73.66	%		75.63	%		71.18	%		74.12	%
Return on average assets (annualized)		0.47	%		0.44	%		0.11	%		0.43	%		0.37	%
Return on average equity (annualized)		2.39	%		2.18	%		0.51	%		2.01	%		1.64	%

⁽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.

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
	June 30,			March 31,			December 31,			September 30,		June 30,
	2018			2018			2017			2017		2017
Adjusted Net Income
Net income (GAAP)	$	7,718		$	5,377		$	1,269		$	5,232	$	4,404
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)	$	11,416		$	5,756		$	5,014		$	5,232	$	4,404

Adjusted Net Income per Common Share (EPS)
Net income per common share Basic (GAAP)	$	0.08		$	0.07		$	0.02		$	0.07	$	0.05
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		$	0.08		$	0.06		$	0.07	$	0.05

Adjusted Net Income per Common Share (EPS)
Net income per common share Diluted (GAAP)	$	0.08		$	0.07		$	0.02		$	0.07	$	0.05
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		$	0.08		$	0.06		$	0.07	$	0.05


Reconciliation of GAAP to Non-GAAP (Unaudited)	For the three months ended
	June 30,			March 31,			December 31,			September 30,			June 30,
	2018			2018			2017			2017			2017
Adjusted Non-Interest Expense
Non-interest expense (GAAP)		31,257			22,543			22,764			21,286			22,051
Effect to adjust for:
Merger-related expenses		(5,149	)		(401	)		(1,193	)		—			—

Adjusted non-interest expense (non-GAAP)		26,108			22,142			21,571			21,286			22,051

Adjusted Non-Interest Expense Ratio
Non-interest expense to average assets (GAAP)		1.90	%		1.85	%		1.89	%		1.77	%		1.83	%
Effect to adjust for:
Merger-related expenses		-0.31	%		-0.03	%		-0.10	%		0.00	%		0.00	%

Adjusted non-interest expense ratio (non-GAAP)		1.59	%		1.82	%		1.79	%		1.77	%		1.83	%

Adjusted Efficiency Ratio
Non-interest expense / (Net interest income + non-interest income) (GAAP)		71.1	%		73.7	%		75.6	%		71.2	%		74.1	%
Effect to adjust for:
Merger-related expenses		-11.7	%		-1.3	%		-3.9	%		0.0	%		0.0	%

Adjusted efficiency ratio (non-GAAP)		59.4	%		72.4	%		71.7	%		71.2	%		74.1	%

Adjusted Return on Average Assets
Return on average assets (GAAP)		0.47	%		0.44	%		0.11	%		0.43	%		0.37	%
Effect to adjust for:
Merger-related expenses		0.31	%		0.03	%		0.09	%		0.00	%		0.00	%
Income tax benefit from merger-related expenses		-0.09	%		0.00	%		-0.01	%		0.00	%		0.00	%
Income tax expense for write-down of net deferred tax asset		0.00	%		0.00	%		0.40	%		0.00	%		0.00	%
Income tax benefit for write-down of net deferred tax liability		0.00	%		0.00	%		-0.11	%		0.00	%		0.00	%
Income tax benefit for reduction in current year income tax rate (from 35% to 28%)		0.00	%		0.00	%		-0.06	%		0.00	%		0.00	%

Adjusted return on average assets (non-GAAP)		0.69	%		0.47	%		0.42	%		0.43	%		0.37	%

Adjusted Return on Average Equity
Return on average equity (GAAP)		2.39	%		2.18	%		0.51	%		2.01	%		1.64	%
Effect to adjust for:
Merger-related expenses		1.59	%		0.16	%		0.48	%		0.00	%		0.00	%
Income tax benefit from merger-related expenses		-0.45	%		-0.01	%		-0.07	%		0.00	%		0.00	%
Income tax expense for write-down of net deferred tax asset		0.00	%		0.00	%		1.94	%		0.00	%		0.00	%
Income tax benefit for write-down of net deferred tax liability		0.00	%		0.00	%		-0.55	%		0.00	%		0.00	%
Income tax benefit for reduction in current year income tax rate (from 35% to 28%)		0.00	%		0.00	%		-0.31	%		0.00	%		0.00	%

Adjusted return on average equity (non-GAAP)		3.53	%		2.33	%		2.00	%		2.01	%		1.64	%

Attached files

Stock widget

Investing forum