U.S. Markets closed
  • S&P Futures

    4,381.50
    -93.25 (-2.08%)
     
  • Dow Futures

    33,992.00
    -261.00 (-0.76%)
     
  • Nasdaq Futures

    14,308.00
    -193.00 (-1.33%)
     
  • Russell 2000 Futures

    2,008.40
    -23.30 (-1.15%)
     
  • Crude Oil

    0 (0)
     
  • Gold

    1,841.10
    -0.60 (-0.03%)
     
  • Silver

    24.34
    -0.37 (-1.50%)
     
  • EUR/USD

    1.1348
    +0.0031 (+0.2724%)
     
  • 10-Yr Bond

    1.7350
    -0.0120 (-0.69%)
     
  • Vix

    28.85
    +3.26 (+12.74%)
     
  • GBP/USD

    1.3555
    -0.0045 (-0.3321%)
     
  • USD/JPY

    113.6500
    -0.4500 (-0.3944%)
     
  • BTC-USD

    36,262.23
    +925.40 (+2.62%)
     
  • CMC Crypto 200

    823.79
    +13.18 (+1.63%)
     
  • FTSE 100

    7,494.13
    -90.88 (-1.20%)
     
  • Nikkei 225

    27,522.26
    -250.64 (-0.90%)
     

Kearny Financial Corp. Reports Fourth Quarter and Fiscal Year End 2019 Operating Results

  • Oops!
    Something went wrong.
    Please try again later.
In this article:
  • Oops!
    Something went wrong.
    Please try again later.
  • KRNY

FAIRFIELD, N.J., July 30, 2019 (GLOBE NEWSWIRE) -- 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, 2019 of $8.8 million, or $0.10 per basic and diluted share, as compared to net income of $11.4 million, or $0.13 per basic and diluted share, for the quarter ended March 31, 2019. For the fiscal year ended June 30, 2019, the Company reported net income of $42.1 million, or $0.46 per basic and diluted share. The results represent an increase of $22.5 million compared to net income of $19.6 million, or $0.24 per basic and diluted share, for the fiscal year ended June 30, 2018.

Net income for the quarter and year ended June 30, 2019 was impacted by $1.7 million of non-recurring expenses which were recognized in conjunction with the Company’s previously announced consolidation of seven retail branches located in northern and central New Jersey. The Company anticipates that additional non-recurring charges of approximately $950,000 will be recognized in conjunction with the noted branch consolidations during the quarter ending September 30, 2019. Adjusting for the impact of such charges, net of tax benefit, the Company’s net income would have been $10.0 million or $0.11 per basic and diluted share for the quarter ended June 30, 2019 and $43.4 million or $0.47 per basic and diluted share for the fiscal year ended June 30, 2019.

Craig L. Montanaro, President and Chief Executive Officer, commented, “Looking back on fiscal 2019 we are very pleased with the progress that we have made which included vastly improved earnings performance compared to prior years, a seamless integration of the Clifton Bancorp, Inc. (“CSBK”) acquisition and the return of over $175 million in capital to shareholders via dividends and share repurchases. Looking forward to fiscal 2020, our focus remains on the continued execution of our long-term strategic plan which emphasizes the growth of our core deposit franchise, the evolution of our digital banking platform and the deployment of our capital in a prudent and profitable manner. In support of these goals, we will be enhancing our digital delivery channels with online deposit account opening capabilities during the first quarter of fiscal 2020 with additional best-of-breed digital products and services to follow throughout the remainder of the year.”

Balance Sheet Highlights

  • Loans receivable increased by $19.1 million to $4.68 billion, or 70.5% of total assets, at June 30, 2019 from $4.66 billion, or 70.0% of total assets, at March 31, 2019. For the year ended June 30, 2019, the Company’s aggregate loan portfolio increased by $177.6 million, or 3.9%, from $4.50 billion, or 68.4% of total assets, at June 30, 2018.

  • Deposits increased by $10.0 million to $4.15 billion at June 30, 2019 from $4.14 billion at March 31, 2019. For the year ended June 30, 2019, total deposits increased by $74.0 million from $4.07 billion at June 30, 2018. The net increase in deposits for the quarter ended June 30, 2019 was attributable to an increase of $38.7 million in retail deposits that was partially offset by a decline of $28.6 million in wholesale deposits. For the year ended June 30, 2019 the net increase in deposits was attributable to an increase of $171.5 million in retail deposits that was partially offset by $97.5 million decrease in wholesale deposits. The net growth and reallocation of the Company’s deposits for both the quarter and year ended June 30, 2019 reflected its continuing effort to relocate its funding mix in favor of retail deposits.

  • Investment securities decreased by $28.2 million to $1.29 billion, or 19.5% of total assets, at June 30, 2019 from $1.32 billion at March 31, 2019. For the year ended June 30, 2019, the securities portfolio decreased by $23.9 million, or 1.8%, from $1.31 billion, or 20.0% of total assets, at June 30, 2018.

  • Borrowings decreased by $4.2 million to $1.32 billion at June 30, 2019, from $1.33 billion at March 31, 2019. For the year ended June 30, 2019, total borrowings increased by $123.3 million from $1.20 billion at June 30, 2018. The net increase in borrowings for the quarter ended June 30, 2019 reflected an increase of $30.0 million in overnight borrowings partially offset by a $28.2 million decrease in depositor sweep account balances coupled with the repayment of a $6.5 million Federal Home Loan Bank (“FHLB”) advance that matured during the period. The increase in borrowings for the year ended June 30, 2019 partly reflected new FHLB advances totaling $227.0 million coupled with the increase of $30.0 million in overnight borrowings, noted above. These increases were partially offset by a $19.7 million decrease in depositor sweep account balances coupled with the repayment of $116.0 million in FHLB advances that matured during the period.

Earnings Highlights

Net Interest Income, Spread and Margin

  • Net interest income decreased by $1.5 million to $37.1 million for the quarter ended June 30, 2019, from $38.6 million for the quarter ended March 31, 2019. The decrease in net interest income was the result of a $1.3 million increase in interest expense coupled with a $200,000 decrease in interest income between comparative periods. For the year ended June 30, 2019, net interest income increased by $34.0 million to $155.3 million from $121.3 million for the year ended June 30, 2018. The increase in net interest income between comparative periods largely reflected the impact of the Company’s acquisition of CSBK during the fourth quarter of the prior fiscal year ended June 30, 2018.

  • The Company’s net interest rate spread decreased ten basis points to 2.18% for the quarter ended June 30, 2019 from 2.28% for the quarter ended March 31, 2019. The decrease in spread primarily reflected an eleven basis point increase in the average cost of interest-bearing liabilities to 1.74% for the quarter ended June 30, 2019 from 1.63% for the quarter ended March 31, 2019 while the average yield on interest-earning assets increased by one basis point to 3.92% from 3.91% for those same comparative periods. For the year ended June 30, 2019, the net interest rate spread increased by six basis points to 2.31% from 2.25% for the year ended June 30, 2018.

  • The factors that contributed to the quarterly change in interest rate spread also contributed to an eight basis point decrease in the Company’s net interest margin to 2.45% for the quarter ended June 30, 2019 from 2.53% for the quarter ended March 31, 2019. For the year ended June 30, 2019, the net interest margin increased by six basis points to 2.56% from 2.50% for the year ended June 30, 2018.

Non-Interest Income

  • Fees and service charges decreased by $334,000, or 20.0%, to $1.3 million for the quarter ended June 30, 2019 compared to $1.7 million for the quarter ended March 31, 2019. This decrease largely reflected a decline in pre-payment fee income on commercial real estate loans related to an elevated level of pre-payment activity during the earlier comparative period. For the years ended June 30, 2019 and June 30, 2018 fees and service charges remained stable at $5.4 million.

  • Aggregate loan sale gains increased by $45,000, or 29.8%, to $196,000 for the quarter ended June 30, 2019 as compared to $151,000 for the quarter ended March 31, 2019. Such gains totaled $580,000 and $1.0 million for the years ended June 30, 2019 and June 30, 2018 respectively. Variances in loan sale gains largely reflected fluctuations in the volume of loans sold.

Non-Interest Expense

  • Non-interest expense increased by $2.0 million to $28.7 million for the quarter ended June 30, 2019 compared to $26.8 million for the quarter ended March 31, 2019. The increase was largely attributable to $1.7 million of non-recurring branch consolidation expenses, recognized during the quarter ended June 30, 2019, as discussed earlier. Other, less noteworthy, increases in salaries and employee benefits and marketing expense were partially offset by a decrease in net occupancy expense of premises. For the year ended June 30, 2019, non-interest expense increased by $11.3 million to $109.2 million from $97.9 for the year ended June 30, 2018. In addition to reflecting the impact of the $1.7 million of non-recurring branch consolidation expenses noted above, the increase in non-interest expense between comparative periods reflected the larger effects of Company’s acquisition of CSBK in April 2018 whose impact on the Company’s ongoing operating expenses was fully reflected throughout the fiscal year ended June 30, 2019. These noted increases in non-interest expense were partially offset by the $6.7 million of non-recurring merger-related expenses attributable to the CSBK acquisition that were recorded during the year ended June 30, 2018 for which no comparable expenses were recorded during the year ending June 30, 2019.

  • The Company’s non-interest expense ratio totaled 1.73% for the quarter ended June 30, 2019 compared to 1.60% for the prior quarter ended March 31, 2019. For the year ended June 30, 2019, the Company’s non-interest expense ratio totaled 1.64% compared to 1.86% for the prior year ended June 30, 2018. Adjusting for the impact of the branch consolidation expenses noted earlier, the Company’s non-interest expense ratios would have been 1.63% for the quarter ended June 30, 2019. Similarly, adjusting for the both impact of the branch consolidation expenses and merger-related expenses noted earlier, the Company’s non-interest expense ratios would have been 1.61% and 1.73% for the years ended June 30, 2019 and June 30, 2018, respectively.

  • The Company’s efficiency ratio was 70.9% for the quarter ended June 30, 2019 compared to 63.3% for the prior quarter ended March 31, 2019. For the year ended June 30, 2019, the Company’s efficiency ratio totaled 64.7% compared to 72.7% for the prior year ended June 30, 2018. Adjusting for the impact of the branch consolidation expenses noted earlier, the Company’s efficiency ratio would have been 66.6% for the quarter ended June 30, 2019. Similarly, adjusting for both the impact of the branch consolidation expenses and merger-related expenses noted earlier, the Company’s efficiency ratios would have been 63.7% and 67.7% for the years ended June 30, 2019 and June 30, 2018, respectively.

Income Taxes

  • Income tax expense totaled $2.3 million for the quarter ended June 30, 2019 compared to $4.3 million for the quarter ended March 31, 2019 resulting in effective tax rates of 20.8% and 27.4%, respectively. The decrease in income tax expense, and corresponding effective tax rate, for the current period largely reflected a lower level of pre-tax net income as compared to the prior period coupled with adjustments to deferred income taxes arising from updates to state income tax apportionment levels. For the year ended June 30, 2019, income tax expense was $13.9 million compared to $14.4 million for the year ended June 30, 2018 resulting in effective tax rates of 24.8% and 42.4%, respectively. The effective tax rate for the year ended June 30, 2018 reflected the impact of federal income tax reform and certain non-deductible merger-related expenses whose effects collectively increased the effective tax rate during the prior comparative period. The effective tax rate for the year ended June 30, 2019 reflects the Company’s current statutory federal income tax rate of 21%.

Performance Ratios

  • The Company’s return on average assets for the quarter ended June 30, 2019 decreased to 0.53% from 0.68% for the quarter ended March 31, 2019. For the year ended June 30, 2019, the return on average assets increased to 0.63% from 0.37% for the prior year ended June 30, 2018. Adjusting for the impact of the branch consolidation expenses noted earlier, the Company’s return on average assets would have been 0.60% for the quarter ended June 30, 2019. Adjusting for the impact of the branch consolidation expenses, merger-related expenses and tax reform noted earlier, the Company’s return on average assets would have been 0.65% and 0.52% for the years ended June 30, 2019 and June 30, 2018.

  • The Company’s return on average equity decreased to 3.08% for the quarter ended June 30, 2019 from 3.89% for the quarter ended March 31, 2019. For the year ended June 30, 2019, the return on average equity increased to 3.52% from 1.81% for the prior year ended June 30, 2018. Adjusting for the impact of the branch consolidation expenses noted earlier, the Company’s return on average equity would have been 3.50% for the quarter ended June 30, 2019. Adjusting for the impact of the branch consolidation expenses, merger-related expenses and tax reform noted earlier, the Company’s return on average equity would have been and 3.62% and 2.53% for the years ended June 30, 2019 and June 30, 2018.

  • The Company’s return on average tangible equity decreased to 3.80% for the quarter ended June 30, 2019 from 4.78% for the quarter ended March 31, 2019. For the year ended June 30, 2019, the return on average tangible equity increased to 4.30% from 2.08% for the prior year ended June 30, 2018. Adjusting for the impact of the branch consolidation expenses noted earlier, the Company’s return on average tangible equity would have been 4.32% for the quarter ended June 30, 2019. Adjusting for the impact of the branch consolidation expenses, merger-related expenses and tax reform noted earlier, the Company’s return on average tangible equity would have been 4.42% and 2.91% for the years ended June 30, 2019 and June 30, 2018.

Asset Quality Highlights

  • Asset quality remained strong throughout the quarter ended June 30, 2019. The outstanding balance of nonperforming loans totaled $20.3 million, or 0.43% of total loans, at June 30, 2019 as compared to $21.3 million, or 0.46% of total loans, at March 31, 2019. For the year ended June 30, 2019, nonperforming loans increased by $3.4 million from $16.9 million, or 0.37% of total loans, at June 30, 2018.

  • The allowance for loan losses increased to $33.3 million at June 30, 2019 from $33.1 million at March 31, 2019, resulting in a total loan coverage ratio, representing the balance of the allowance for loan losses as a percentage of total loans, excluding loans held for sale, of 0.70% for both comparative periods. The total loan coverage ratio for both periods reflects the impact of purchase accounting which generally precludes acquired loan balances from being considered in the balance of the allowance for loan losses at the time of their acquisition. For the year ended June 30, 2019, the allowance for loan losses increased by $2.4 million from $30.9 million, or 0.68% of total loans, at June 30, 2018.

  • The Company recognized net charge offs totaling approximately $495,000 for the quarter ended June 30, 2019, reflecting an annualized net charge off rate of 0.04% on the average balance of total loans for the period. By comparison, the Company’s net charge offs totaled approximately $242,000 for the quarter ended March 31, 2019, reflecting an annualized net charge off rate of 0.02%. For the year ended June 30, 2019, the Company recognized net charge offs totaling $1.1 million reflecting an annualized charge off rate of 0.02% on the average balance of total loans for fiscal 2019. By comparison, the Company’s net charge offs totaled approximately $1.1 million for the year ended June 30, 2018 reflecting an annualized charge off rate of 0.03% on the average balance of total loans for fiscal 2018.

  • The Company recorded a loan loss provision of $664,000 for the quarter ended June 30, 2019 compared to a loan loss provision reversal of $179,000 for the quarter ended March 31, 2019. The increase in provision for loan losses was largely attributable to a net increase during the quarter ended June 30, 2019 in the balance of the performing portion of the loan portfolio that was collectively evaluated for impairment compared to a decline in such balances during the prior quarter ending March 31, 2019 while also reflecting an increase in net charge-offs between the comparative periods. For the year ended June 30, 2019, the provision for loan losses increased by $850,000 to $3.6 million from $2.7 million for the year ended June 30, 2018. The increase in the provision partly reflected the effects of greater growth during the year ended June 30, 2019 in the balance of the performing portion of the loan portfolio that was collectively evaluated for impairment compared to that of the prior year ended June 30, 2018. Additionally, the increase reflected the effects of updates to environmental loss factors that increased the applicable portion of the allowance and the associated provision expense between comparative periods.

Capital Highlights

  • The Company maintained its regular quarterly cash dividend paid to stockholders of $0.06 per share for both quarters ended June 30, 2019, and March 31, 2019. For the year ended June 30, 2019, total cash dividends paid to stockholders, including both regular and special dividends, increased by $0.12 to $0.37 per share compared to $0.25 per share for the year ended June 30, 2018. The Company continually evaluates its dividend policies and practices in relation to its overall capital management and shareholder value objectives.

  • In March 2019, the Company completed the repurchase of its shares of common stock under its third share repurchase program announced in April 2018 through which it authorized the repurchase of 10,238,557 shares, or 10%, of the Company’s outstanding shares as of that date. The shares associated with this third program were repurchased at a total cost of $138.8 million and at an average cost of $13.55 per share. Concurrently, the Company announced its fourth share repurchase program through which it authorized the repurchase of 9,218,324 shares, or 10%, of the Company’s outstanding shares as of that date. During the quarter ended June 30, 2019, the Company repurchased 2,393,626 shares of its common stock at a total cost of $32.2 million and an average cost of $13.46 per share.

  • The Company’s and Bank’s regulatory capital ratios at June 30, 2019 were in excess of the levels required by federal banking regulators to be classified as “well-capitalized” under regulatory guidelines.

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

At

Variance

(Dollars and Shares in Thousands,

June 30,

March 31,

Variance

or Change

Except Per Share Data, Unaudited)

2019

2019

or Change

Pct.

Assets

Cash and cash equivalents

$

38,935

$

54,160

$

(15,225

)

-28.1

%

Securities available for sale

714,263

726,920

(12,657

)

-1.7

%

Securities held to maturity

576,652

592,199

(15,547

)

-2.6

%

Loans held-for-sale

12,267

997

11,270

1130.4

%

Loans receivable, including yield adjustments

4,678,928

4,659,804

19,124

0.4

%

Less allowance for loan losses

(33,274

)

(33,105

)

(169

)

0.5

%

Net loans receivable

4,645,654

4,626,699

18,955

0.4

%

Premises and equipment

56,854

58,274

(1,420

)

-2.4

%

Federal Home Loan Bank stock

64,190

64,288

(98

)

-0.2

%

Accrued interest receivable

19,360

20,326

(966

)

-4.8

%

Goodwill

210,895

210,895

-

0.0

%

Core deposit intangible

5,160

5,470

(310

)

-5.7

%

Bank owned life insurance

256,155

254,569

1,586

0.6

%

Deferred income taxes, net

25,367

24,182

1,185

4.9

%

Other real estate owned

-

209

(209

)

-100.0

%

Other assets

9,077

19,563

(10,486

)

-53.6

%

Total assets

$

6,634,829

$

6,658,751

$

(23,922

)

-0.4

%

Liabilities

Deposits

$

4,147,610

$

4,137,573

$

10,037

0.2

%

Borrowings

1,321,982

1,326,216

(4,234

)

-0.3

%

Advance payments by borrowers for taxes

16,887

17,208

(321

)

-1.9

%

Other liabilities

21,191

19,643

1,548

7.9

%

Total liabilities

5,507,670

5,500,640

7,030

0.1

%

Stockholders' Equity

Common stock

891

915

(24

)

-2.6

%

Paid-in capital

787,394

817,675

(30,281

)

-3.7

%

Retained earnings

366,679

363,072

3,607

1.0

%

Unearned ESOP shares

(30,644

)

(31,130

)

486

-1.6

%

Accumulated other comprehensive income, net

2,839

7,579

(4,740

)

-62.5

%

Total stockholders' equity

1,127,159

1,158,111

(30,952

)

-2.7

%

Total liabilities and stockholders' equity

$

6,634,829

$

6,658,751

$

(23,922

)

-0.4

%

Consolidated capital ratios

Equity to assets

16.99

%

17.39

%

-0.40

%

Tangible equity to tangible assets

14.19

%

14.62

%

-0.43

%

Share data

Outstanding shares

89,126

91,495

(2,369

)

-2.6

%

Equity per share

$

12.65

$

12.66

$

(0.01

)

-0.1

%

Tangible equity per share (1)

$

10.22

$

10.29

$

(0.07

)

-0.7

%

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


Summary Income Statement

For the three months ended

Variance

(Dollars and Shares in Thousands,

June 30,

March 31,

Variance

or Change

Except Per Share Data, Unaudited)

2019

2019

or Change

Pct.

Interest income

Loans

$

47,818

$

48,116

$

(298

)

-0.6

%

Taxable investment securities

9,772

9,511

261

2.7

%

Tax-exempt investment securities

700

710

(10

)

-1.4

%

Other interest-earning assets

1,158

1,320

(162

)

-12.3

%

Total Interest Income

59,448

59,657

(209

)

-0.4

%

Interest expense

Deposits

15,131

14,114

1,017

7.2

%

Borrowings

7,171

6,905

266

3.9

%

Total interest expense

22,302

21,019

1,283

6.1

%

Net interest income

37,146

38,638

(1,492

)

-3.9

%

Provision for loan losses (provision reversal)

664

(179

)

843

470.9

%

Net interest income after provision
(provision reversal) for loan losses

36,482

38,817

(2,335

)

-6.0

%

Non-interest income

Fees and service charges

1,340

1,674

(334

)

-20.0

%

Loss on sale and call of securities

(141

)

(182

)

41

22.5

%

Gain on sale of loans

196

151

45

29.8

%

Gain (loss) on sale and write down of other real estate owned

9

(6

)

15

250.0

%

Income from bank owned life insurance

1,586

1,560

26

1.7

%

Electronic banking fees and charges

270

253

17

6.7

%

Miscellaneous

128

226

(98

)

-43.4

%

Total non-interest income

3,388

3,676

(288

)

-7.8

%

Non-interest expense

Salaries and employee benefits

16,338

15,350

988

6.4

%

Net occupancy expense of premises

2,744

2,979

(235

)

-7.9

%

Equipment and systems

2,917

3,053

(136

)

-4.5

%

Advertising and marketing

948

739

209

28.3

%

Federal deposit insurance premium

438

455

(17

)

-3.7

%

Directors' compensation

770

770

-

0.0

%

Miscellaneous

4,590

3,425

1,165

34.0

%

Total non-interest expense

28,745

26,771

1,974

7.4

%

Income before income taxes

11,125

15,722

(4,597

)

-29.2

%

Income taxes

2,314

4,305

(1,991

)

-46.2

%

Net income

$

8,811

$

11,417

$

(2,606

)

-22.8

%

Net income per common share (EPS)

Basic

$

0.10

$

0.13

$

(0.03

)

Diluted

$

0.10

$

0.13

$

(0.03

)

Dividends declared

Cash dividends declared per common share

$

0.06

$

0.06

$

-

Cash dividends declared

$

5,204

$

5,338

$

(134

)

Dividend payout ratio

59.1

%

46.8

%

12.3

%

Weighted average number of common
shares outstanding

Basic

87,090

89,488

(2,398

)

Diluted

87,132

89,532

(2,400

)


For the three months ended

Variance

Average Balance Sheet Data

June 30,

March 31,

Variance

or Change

(Dollars in Thousands, Unaudited)

2019

2019

or Change

Pct.

Assets

Interest-earning assets:

Loans receivable, including loans held for sale

$

4,648,362

$

4,709,052

$

(60,690

)

-1.3

%

Taxable investment securities

1,184,401

1,161,492

22,909

2.0

%

Tax-exempt investment securities

132,110

134,309

(2,199

)

-1.6

%

Other interest-earning assets

98,374

107,554

(9,180

)

-8.5

%

Total interest-earning assets

6,063,247

6,112,407

(49,160

)

-0.8

%

Non-interest-earning assets

572,218

574,921

(2,703

)

-0.5

%

Total assets

$

6,635,465

$

6,687,328

$

(51,863

)

-0.8

%

Liabilities and Stockholders' Equity

Interest-bearing liabilities:

Deposits:

Interest-bearing demand

$

815,624

$

790,567

$

25,057

3.2

%

Savings and club

780,558

773,308

7,250

0.9

%

Certificates of deposit

2,229,723

2,288,836

(59,113

)

-2.6

%

Total interest-bearing deposits

3,825,905

3,852,711

(26,806

)

-0.7

%

Borrowings:

Federal Home Loan Bank advances

1,284,427

1,292,168

(7,741

)

-0.6

%

Other borrowings

29,439

26,037

3,402

13.1

%

Total borrowings

1,313,866

1,318,205

(4,339

)

-0.3

%

Total interest-bearing liabilities

5,139,771

5,170,916

(31,145

)

-0.6

%

Non-interest-bearing liabilities:

Non-interest-bearing deposits

311,648

307,645

4,003

1.3

%

Other non-interest-bearing liabilities

39,294

35,930

3,364

9.4

%

Total non-interest-bearing liabilities

350,942

343,575

7,367

2.1

%

Total liabilities

5,490,713

5,514,491

(23,778

)

-0.4

%

Stockholders' equity

1,144,752

1,172,837

(28,085

)

-2.4

%

Total liabilities and stockholders' equity

$

6,635,465

$

6,687,328

$

(51,863

)

-0.8

%

Average interest-earning assets to average
interest-bearing liabilities

117.97

%

118.21

%

-0.24

%

-0.2

%


For the three months ended

June 30,

March 31,

Variance

Performance Ratio Highlights

2019

2019

or Change

Average yield on interest-earning assets:

Loans receivable, including loans held for sale

4.11

%

4.09

%

0.02

%

Taxable investment securities

3.30

%

3.28

%

0.02

%

Tax-exempt investment securities (1)

2.12

%

2.12

%

0.00

%

Other interest-earning assets

4.71

%

4.91

%

-0.20

%

Total interest-earning assets

3.92

%

3.91

%

0.01

%

Average cost of interest-bearing liabilities:

Deposits:

Interest-bearing demand

1.19

%

1.06

%

0.13

%

Savings and club

0.68

%

0.60

%

0.08

%

Certificates of deposit

2.04

%

1.90

%

0.14

%

Total interest-bearing deposits

1.58

%

1.47

%

0.11

%

Borrowings:

Federal Home Loan Bank advances

2.21

%

2.13

%

0.08

%

Other borrowings

0.99

%

0.35

%

0.64

%

Total borrowings

2.18

%

2.10

%

0.08

%

Total interest-bearing liabilities

1.74

%

1.63

%

0.11

%

Interest rate spread (2)

2.18

%

2.28

%

-0.10

%

Net interest margin (3)

2.45

%

2.53

%

-0.08

%

Non-interest income to average assets
(annualized)

0.20

%

0.22

%

-0.02

%

Non-interest expense to average assets
(annualized)

1.73

%

1.60

%

0.13

%

Efficiency ratio (4)

70.91

%

63.27

%

7.64

%

Return on average assets (annualized)

0.53

%

0.68

%

-0.15

%

Return on average equity (annualized)

3.08

%

3.89

%

-0.81

%

Return on average tangible equity (annualized) (5)

3.80

%

4.78

%

-0.98

%

____________________
(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.
(5) Average tangible equity equals total average stockholders’ equity reduced by average goodwill and average core deposit intangible assets.


Year-to-Year Comparative Financial Analysis

Summary Balance Sheet

At

Variance

(Dollars in Thousands,

June 30,

June 30,

Variance

or Change

Except Per Share Data, Unaudited)

2019

2018

or Change

Pct.

Assets

Cash and cash equivalents

$

38,935

$

128,864

$

(89,929

)

-69.8

%

Securities available for sale

714,263

725,085

(10,822

)

-1.5

%

Securities held to maturity

576,652

589,730

(13,078

)

-2.2

%

Loans held-for-sale

12,267

863

11,404

1321.4

%

Loans receivable, including yield adjustments

4,678,928

4,501,348

177,580

3.9

%

Less allowance for loan losses

(33,274

)

(30,865

)

(2,409

)

7.8

%

Net loans receivable

4,645,654

4,470,483

175,171

3.9

%

Premises and equipment

56,854

56,240

614

1.1

%

Federal Home Loan Bank of New York stock

64,190

59,004

5,186

8.8

%

Accrued interest receivable

19,360

18,510

850

4.6

%

Goodwill

210,895

210,895

-

0.0

%

Core deposit intangible

5,160

6,295

(1,135

)

-18.0

%

Bank owned life insurance

256,155

249,816

6,339

2.5

%

Deferred income tax assets, net

25,367

23,754

1,613

6.8

%

Other real estate owned

-

725

(725

)

-100.0

%

Other assets

9,077

39,610

(30,533

)

-77.1

%

Total assets

$

6,634,829

$

6,579,874

$

54,955

0.8

%

Liabilities

Deposits

$

4,147,610

$

4,073,604

$

74,006

1.8

%

Borrowings

1,321,982

1,198,646

123,336

10.3

%

Advance payments by borrowers for taxes

16,887

18,088

(1,201

)

-6.6

%

Other liabilities

21,191

20,788

403

1.9

%

Total liabilities

5,507,670

5,311,126

196,544

3.7

%

Stockholders' Equity

Common stock

$

891

996

(105

)

-10.5

%

Paid-in capital

787,394

922,711

(135,317

)

-14.7

%

Retained earnings

Securities held to maturity

Debt securities:

Municipal and state obligations

$

104,086

$

107,375

$

107,826

$

109,061

$

109,483

Subordinated debt

63,086

63,107

56,255

46,275

46,294

Debt securities

167,172

170,482

164,081

155,336

155,777

Mortgage-backed securities:

Collateralized mortgage obligations

46,381

49,368

51,540

54,130

56,886

Residential pass-through securities

166,283

174,338

182,335

190,812

200,622

Commercial pass-through securities

196,816

198,011

200,362

202,560

176,445

Mortgage-backed securities

409,480

421,717

434,237

447,502

433,953

Total securities held to maturity

$

576,652

$

592,199

$

598,318

$

602,838

$

589,730

Total securities

$

1,290,915

$

1,319,119

$

1,264,920

$

1,309,078

$

1,314,815


At

Supplemental Balance Sheet Highlights

June 30,

March 31,

December 31,

September 30,

June 30,

(Dollars in Thousands, Unaudited)

2019

2019

2018

2018

2018

Loan portfolio composition:

Residential first mortgage loans

$

1,344,044

$

1,325,105

$

1,334,284

$

1,303,249

$

1,297,453

Home equity loans and lines of credit

96,165

97,788

96,001

93,473

90,761

Residential mortgage loans

1,440,209

1,422,893

1,430,285

1,396,722

1,388,214

Multifamily mortgage loans

1,946,391

1,956,571

1,974,409

1,898,831

1,758,584

Nonresidential and mixed use mortgage loans

1,258,869

1,249,215

1,302,583

1,315,279

1,302,961

Commercial mortgage loans

3,205,260

3,205,786

3,276,992

3,214,110

3,061,545

Commercial business loans

65,763

66,476

70,059

78,317

85,825

Construction loans

13,907

14,377

28,405

26,581

23,271

Account loans

3,732

3,360

3,310

3,133

3,283

Other consumer loans

2,082

2,624

3,524

4,427

5,777

Consumer loans

5,814

5,984

6,834

7,560

9,060

Total loans, excluding yield adjustments

4,730,953

4,715,516

4,812,575

4,723,290

4,567,915

Unamortized yield adjustments

(52,025

)

(55,712

)

(59,183

)

(62,783

)

(66,567

)

Loans receivable, including yield adjustments

4,678,928

4,659,804

4,753,392

4,660,507

4,501,348

Less allowance for loan losses

(33,274

)

(33,105

)

(33,526

)

(32,731

)

(30,865

)

Net loans receivable

$

4,645,654

$

4,626,699

$

4,719,866

$

4,627,776

$

4,470,483

Loan portfolio allocation:

Residential first mortgage loans

28.4

%

28.1

%

27.7

%

27.6

%

28.4

%

Home equity loans and lines of credit

2.0

%

2.1

%

2.0

%

2.0

%

2.0

%

Residential mortgage loans

30.4

%

30.2

%

29.7

%

29.6

%

30.4

%

Multifamily mortgage loans

41.2

%

41.5

%

41.0

%

40.2

%

38.5

%

Nonresidential and mixed use mortgage loans

26.6

%

26.5

%

27.1

%

27.8

%

28.5

%

Commercial mortgage loans

67.8

%

68.0

%

68.1

%

68.0

%

67.0

%

Commercial business loans

1.4

%

1.3

%

1.4

%

1.6

%

1.9

%

Construction loans

0.3

%

0.3

%

0.6

%

0.6

%

0.5

%

Account loans

0.1

%

0.1

%

0.1

%

0.1

%

0.1

%

Other consumer loans

0.0

%

0.1

%

0.1

%

0.1

%

0.1

%

Consumer loans

0.1

%

0.2

%

0.2

%

0.2

%

0.2

%

Total loans, excluding yield adjustments

100.0

%

100.0

%

100.0

%

100.0

%

100.0

%

Asset quality:

Nonperforming assets:

Accruing loans - 90 days and over past due

$

22

$

23

$

32

$

19

$

60

Nonaccrual loans

20,248

21,297

20,743

20,473

16,799

Total nonperforming loans

20,270

21,320

20,775

20,492

16,859

Other real estate owned

-

209

508

674

725

Total nonperforming assets

$

20,270

$

21,529

$

21,283

$

21,166

$

17,584

Nonperforming loans (% total loans)

0.43

%

0.46

%

0.44

%

0.44

%

0.37

%

Nonperforming assets (% total assets)

0.31

%

0.32

%

0.32

%

0.32

%

0.27

%

Allowance for loan losses (ALLL):

ALLL to total loans

0.70

%

0.70

%

0.70

%

0.69

%

0.68

%

ALLL to nonperforming loans

164.15

%

155.28

%

161.38

%

159.73

%

183.08

%

Net charge offs

$

495

$

242

$

176

$

234

$

101

Average net charge off rate (annualized)

0.04

%

0.02

%

0.01

%

0.02

%

0.01

%


At

Supplemental Balance Sheet Highlights

June 30,

March 31,

December 31,

September 30,

June 30,

(Dollars in Thousands, Unaudited)

2019

2019

2018

2018

2018

Funding by type:

Deposits:

Non-interest-bearing deposits

$

309,063

$

303,713

$

305,392

$

308,631

$

311,938

Interest-bearing demand

843,432

800,023

807,389

786,069

1,000,989

Savings and club

790,658

777,678

760,499

743,289

744,039

Certificates of deposit

2,204,457

2,256,159

2,300,154

2,116,832

2,016,638

Interest-bearing deposits

3,838,547

3,833,860

3,868,042

3,646,190

3,761,666

Total deposits

4,147,610

4,137,573

4,173,434

3,954,821

4,073,604

Borrowings:

Federal Home Loan Bank advances

1,283,211

1,289,285

1,293,845

1,335,844

1,170,144

Overnight borrowings

30,000

-

-

60,000

-

Depositor sweep accounts

8,771

36,931

16,702

23,580

28,502

Total borrowings

1,321,982

1,326,216

1,310,547

1,419,424

1,198,646

Total funding

$

5,469,592

$

5,463,789

$

5,483,981

$

5,374,245

$

5,272,250

Loans as a % of deposits

112.3

%

111.8

%

113.1

%

117.1

%

109.8

%

Deposits as a % of total funding

75.8

%

75.7

%

76.1

%

73.6

%

77.3

%

Borrowings as a % of total funding

24.2

%

24.3

%

23.9

%

26.4

%

22.7

%

Funding by source:

Retail funding:

Non-interest-bearing deposits

$

309,063

$

303,713

$

305,392

$

308,631

$

311,938

Interest-bearing demand

843,432

800,023

807,389

786,069

790,164

Savings and club

790,658

777,678

760,499

743,289

744,039

Certificates of deposit

1,902,542

1,925,630

1,922,287

1,871,903

1,828,039

Total retail deposits

3,845,695

3,807,044

3,795,567

3,709,892

3,674,180

Depositor sweep accounts

8,771

36,931

16,702

23,580

28,502

Total retail funding

3,854,466

3,843,975

3,812,269

3,733,472

3,702,682

Wholesale funding:

Interest-bearing demand

$

-

$

-

$

-

$

-

$

210,825

Certificates of deposit (listing service)

66,110

78,704

108,067

104,990

104,256

Certificates of deposit (brokered)

235,805

251,825

269,800

139,939

84,343

Total wholesale deposits

301,915

330,529

377,867

244,929

399,424

FHLB advances

1,283,211

1,289,285

1,293,845

1,335,844

1,170,144

Overnight borrowings

30,000

-

-

60,000

-

Total wholesale funding

1,615,126

1,619,814

1,671,712

1,640,773

1,569,568

Total funding

$

5,469,592

$

5,463,789

$

5,483,981

$

5,374,245

$

5,272,250

Retail funding as a % of total funding

70.5

%

70.4

%

69.5

%

69.5

%

70.2

%

Wholesale funding as a % of total funding

29.5

%

29.6

%

30.5

%

30.5

%

29.8

%


Summary Income Statement

For the three months ended

(Dollars and Shares in Thousands,

June 30,

March 31,

December 31,

September 30,

June 30,

Except Per Share Data, Unaudited)

2019

2019

2018

2018

2018

Interest income

Loans

$

47,818

$

48,116

$

49,015

$

47,437

$

46,615

Taxable investment securities

9,772

9,511

9,051

8,879

8,670

Tax-exempt investment securities

700

710

713

716

702

Other interest-earning assets

1,158

1,320

1,243

1,174

1,275

Total interest income

59,448

59,657

60,022

58,206

57,262

Interest expense

Deposits

15,131

14,114

12,727

10,539

9,755

Borrowings

7,171

6,905

7,946

7,487

6,916

Total interest expense

22,302

21,019

20,673

18,026

16,671

Net interest income

37,146

38,638

39,349

40,180

40,591

Provision for loan losses (provision reversal)

664

(179

)

971

2,100

717

Net interest income after provision
(provision reversal) for loan losses

36,482

38,817

38,378

38,080

39,874

Non-interest income

Fees and service charges

1,340

1,674

1,258

1,173

1,205

(Loss) gain on sale and call of securities

(141

)

(182

)

-

-

9

Gain on sale of loans

196

151

101

132

127

Gain (loss) on sale and write down of other real estate owned

9

(6

)

36

(50

)

60

Income from bank owned life insurance

1,586

1,560

1,599

1,594

1,604

Electronic banking fees and charges

270

253

277

250

278

Miscellaneous

128

226

38

83

75

Total non-interest income

3,388

3,676

3,309

3,182

3,358

Non-interest expense

Salaries and employee benefits

16,338

15,350

15,699

15,642

15,277

Net occupancy expense of premises

2,744

2,979

2,761

2,736

2,716

Equipment and systems

2,917

3,053

3,377

2,926

2,776

Advertising and marketing

948

739

787

577

757

Federal deposit insurance premium

438

455

421

465

463

Directors' compensation

770

770

746

758

754

Merger-related expenses

-

-

-

-

5,149

Miscellaneous

4,590

3,425

3,479

3,353

3,365

Total non-interest expense

28,745

26,771

27,270

26,457

31,257

Income before income taxes

11,125

15,722

14,417

14,805

11,975

Income taxes

2,314

4,305

3,649

3,659

4,257

Net income

$

8,811

$

11,417

$

10,768

$

11,146

$

7,718

Net income per common share (EPS)

Basic

$

0.10

$

0.13

$

0.12

$

0.12

$

0.08

Diluted

$

0.10

$

0.13

$

0.12

$

0.12

$

0.08

Dividends declared (1)

Cash dividends declared per common share

$

0.06

$

0.06

$

0.05

$

0.20

$

0.04

Cash dividends declared

$

5,204

$

5,338

$

4,082

$

19,404

$

3,892

Dividend payout ratio

59.1

%

46.8

%

37.9

%

174.1

%

50.4

%

Weighted average number of common
shares outstanding

Basic

87,090

89,488

92,434

95,127

98,046

Diluted

87,132

89,532

92,480

95,181

98,100

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


For the three months ended

Average Balance Sheet Data

June 30,

March 31,

December 31,

September 30,

June 30,

(Dollars in Thousands, Unaudited)

2019

2019

2018

2018

2018

Assets

Interest-earning assets:

Loans receivable, including loans held for sale

$

4,648,362

$

4,709,052

$

4,758,587

$

4,562,375

$

4,507,336

Taxable investment securities

1,184,401

1,161,492

1,158,720

1,180,655

1,192,066

Tax-exempt investment securities

132,110

134,309

135,453

136,056

134,683

Other interest-earning assets

98,374

107,554

87,916

112,629

142,591

Total interest-earning assets

6,063,247

6,112,407

6,140,676

5,991,715

5,976,676

Non-interest-earning assets

572,218

574,921

587,921

596,006

586,976

Total assets

$

6,635,465

$

6,687,328

$

6,728,597

$

6,587,721

$

6,563,652

Liabilities and Stockholders' Equity

Interest-bearing liabilities:

Deposits:

Interest-bearing demand

$

815,624

$

790,567

$

792,989

$

788,148

$

1,004,445

Savings and club

780,558

773,308

743,676

747,743

724,430

Certificates of deposit

2,229,723

2,288,836

2,214,932

2,046,997

1,983,372

Total interest-bearing deposits

3,825,905

3,852,711

3,751,597

3,582,888

3,712,247

Borrowings:

Federal Home Loan Bank advances

1,284,427

1,292,168

1,293,470

1,350,113

1,179,147

Other borrowings

29,439

26,037

119,281

40,981

34,636

Total borrowings

1,313,866

1,318,205

1,412,751

1,391,094

1,213,783

Total interest-bearing liabilities

5,139,771

5,170,916

5,164,348

4,973,982

4,926,030

Non-interest-bearing liabilities:

Non-interest-bearing deposits

311,648

307,645

315,165

314,114

305,763

Other non-interest-bearing liabilities

39,294

35,930

37,374

43,533

39,340

Total non-interest-bearing liabilities

350,942

343,575

352,539

357,647

345,103

Total liabilities

5,490,713

5,514,491

5,516,887

5,331,629

5,271,133

Stockholders' equity

1,144,752

1,172,837

1,211,710

1,256,092

1,292,519

Total liabilities and stockholders' equity

$

6,635,465

$

6,687,328

$

6,728,597

$

6,587,721

$

6,563,652

Average interest-earning assets to average
interest-bearing liabilities

117.97

%

118.21

%

118.91

%

120.46

%

121.33

%


For the three months ended

June 30,

March 31,

December 31,

September 30,

June 30,

Performance Ratio Highlights

2019

2019

2018

2018

2018

Average yield on interest-earning assets:

Loans receivable, including loans held for sale

4.11

%

4.09

%

4.12

%

4.16

%

4.14

%

Taxable investment securities

3.30

%

3.28

%

3.12

%

3.01

%

2.91

%

Tax-exempt investment securities (1)

2.12

%

2.12

%

2.11

%

2.10

%

2.09

%

Other interest-earning assets

4.71

%

4.91

%

5.66

%

4.17

%

3.58

%

Total interest-earning assets

3.92

%

3.91

%

3.91

%

3.89

%

3.83

%

Average cost of interest-bearing liabilities:

Deposits:

Interest-bearing demand

1.19

%

1.06

%

0.97

%

0.86

%

0.89

%

Savings and club

0.68

%

0.60

%

0.49

%

0.41

%

0.29

%

Certificates of deposit

2.04

%

1.90

%

1.79

%

1.58

%

1.41

%

Total interest-bearing deposits

1.58

%

1.47

%

1.36

%

1.18

%

1.05

%

Borrowings:

Federal Home Loan Bank advances

2.21

%

2.13

%

2.27

%

2.19

%

2.34

%

Other borrowings

0.99

%

0.35

%

1.99

%

0.94

%

0.34

%

Total borrowings

2.18

%

2.10

%

2.25

%

2.15

%

2.28

%

Total interest-bearing liabilities

1.74

%

1.63

%

1.60

%

1.45

%

1.35

%

Interest rate spread (2)

2.18

%

2.28

%

2.31

%

2.44

%

2.48

%

Net interest margin (3)

2.45

%

2.53

%

2.56

%

2.68

%

2.72

%

Non-interest income to average assets
(annualized)

0.20

%

0.22

%

0.20

%

0.19

%

0.20

%

Non-interest expense to average assets
(annualized)

1.73

%

1.60

%

1.62

%

1.61

%

1.90

%

Efficiency ratio (4)

70.91

%

63.27

%

63.93

%

61.01

%

71.12

%

Return on average assets (annualized)

0.53

%

0.68

%

0.64

%

0.68

%

0.47

%

Return on average equity (annualized)

3.08

%

3.89

%

3.55

%

3.55

%

2.39

%

Return on average tangible equity (annualized) (5)

3.80

%

4.78

%

4.33

%

4.29

%

2.90

%

____________________
(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.
(5) Average tangible equity equals total average stockholders’ equity reduced by average goodwill and average core deposit intangible assets.

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

For the three months ended

(Dollars in Thousands,

June 30,

March 31,

December 31,

September 30,

June 30,

Except Per Share Data, Unaudited)

2019

2019

2018

2018

2018

Adjusted Net Income

Net income (GAAP)

$

8,811

$

11,417

$

10,768

$

11,146

$

7,718

Add: Merger-related expenses - net of tax

-

-

-

-

3,698

Add: Branch consolidation expenses - net of tax

1,216

-

-

-

-

Adjusted net income (non-GAAP)

$

10,027

$

11,417

$

10,768

$

11,146

$

11,416

Adjusted Net Income per Common Share (EPS)

Net income per common share Basic and
Diluted (GAAP)

$

0.10

$

0.13

$

0.12

$

0.12

$

0.08

Add: Merger-related expenses - net of tax

-

-

-

-

0.04

Add: Branch consolidation expenses - net of tax

0.01

-

-

-

-

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

$

0.11

$

0.13

$

0.12

$

0.12

$

0.12

Adjusted Non-Interest Expense

Non-interest expense (GAAP)

$

28,745

$

26,771

$

27,270

$

26,457

$

31,257

Less: Merger-related expenses

-

-

-

-

(5,149

)

Less: Branch consolidation expenses (1)

(1,725

)

-

-

-

-

Adjusted non-interest expense (non-GAAP)

$

27,020

$

26,771

$

27,270

$

26,457

$

26,108

Adjusted Non-Interest Expense Ratio

Non-interest expense to average assets (GAAP)

1.73

%

1.60

%

1.62

%

1.61

%

1.90

%

Less: Merger-related expenses

0.00

%

0.00

%

0.00

%

0.00

%

-0.31

%

Less: Branch consolidation expenses

-0.10

%

0.00

%

0.00

%

0.00

%

0.00

%

Adjusted non-interest expense ratio (non-GAAP)

1.63

%

1.60

%

1.62

%

1.61

%

1.59

%

Adjusted Efficiency Ratio

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

70.9

%

63.3

%

63.9

%

61.0

%

71.1

%

Less: Merger-related expenses

0.0

%

0.0

%

0.0

%

0.0

%

-11.7

%

Less: Branch consolidation expenses

-4.3

%

0.0

%

0.0

%

0.0

%

0.0

%

Adjusted efficiency ratio (non-GAAP)

66.6

%

63.3

%

63.9

%

61.0

%

59.4

%

Adjusted Return on Average Assets

Return on average assets (GAAP)

0.53

%

0.68

%

0.64

%

0.68

%

0.47

%

Add: Merger-related expenses - net of tax

0.00

%

0.00

%

0.00

%

0.00

%

0.22

%

Add: Branch consolidation expenses - net of tax

0.07

%

0.00

%

0.00

%

0.00

%

0.00

%

Adjusted return on average assets (non-GAAP)

0.60

%

0.68

%

0.64

%

0.68

%

0.69

%

Adjusted Return on Average Equity

Return on average equity (GAAP)

3.08

%

3.89

%

3.55

%

3.55

%

2.39

%

Add: Merger-related expenses - net of tax

0.00

%

0.00

%

0.00

%

0.00

%

1.14

%

Add: Branch consolidation expenses - net of tax

0.42

%

0.00

%

0.00

%

0.00

%

0.00

%

Adjusted return on average equity (non-GAAP)

3.50

%

3.89

%

3.55

%

3.55

%

3.53

%

____________________
(1) The amounts included in branch consolidation expenses were located on the income statement in salaries and employee benefits and miscellaneous expense totaling $654,000 and $1,071,000, respectively.


For the three months ended

Reconciliation of GAAP to Non-GAAP

June 30,

March 31,

December 31,

September 30,

June 30,

(Dollars in Thousands, Unaudited)

2019

2019

2018

2018

2018

Calculation of Return on Average Tangible
Equity

Net income annualized (GAAP)

$

35,244

$

45,668

$

43,072

$

44,584

$

30,872

Total Average equity (GAAP)

$

1,144,752

$

1,172,837

$

1,211,710

$

1,256,092

$

1,292,519

Less: average goodwill

(210,895

)

(210,895

)

(210,895

)

(210,895

)

(221,024

)

Less: average other intangible assets

(5,313

)

(5,606

)

(5,915

)

(6,191

)

(6,404

)

Adjusted average tangible equity (non-GAAP)

$

928,544

$

956,336

$

994,900

$

1,039,006

$

1,065,091

Return on average tangible equity (non-GAAP)

3.80

%

4.78

%

4.33

%

4.29

%

2.90

%

Calculation of Adjusted Return on Average
Tangible Equity

Adjusted net income annualized (non-GAAP)

$

40,108

$

45,668

$

43,072

$

44,584

$

45,664

Total Average equity (GAAP)

$

1,144,752

$

1,172,837

$

1,211,710

$

1,256,092

$

1,292,519

Less: average goodwill

(210,895

)

(210,895

)

(210,895

)

(210,895

)

(221,024

)

Less: average other intangible assets

(5,313

)

(5,606

)

(5,915

)

(6,191

)

(6,404

)

Adjusted average tangible equity (non-GAAP)

$

928,544

$

956,336

$

994,900

$

1,039,006

$

1,065,091

Adjusted return on average tangible equity
(non-GAAP)

4.32

%

4.78

%

4.33

%

4.29

%

4.29

%


Reconciliation of GAAP to Non-GAAP

For the year ended

(Dollars in Thousands,

June 30,

June 30,

Except Per Share Data, Unaudited)

2019

2018

Adjusted Net Income

Net income (GAAP)

$

42,142

$

19,596

Add: Merger-related expenses - net of tax

-

5,105

Add: One-time impact of Tax Cuts and Jobs Act of 2017

-

2,717

Add: Branch consolidation expenses - net of tax

1,216

-

Adjusted net income (non-GAAP)

$

43,358

$

27,418

Adjusted Net Income per Common Share (EPS)

Net income per common share
Basic and Diluted (GAAP)

$

0.46

$

0.24

Add: Merger-related expenses - net of tax

-

0.06

Add: One-time impact of Tax Cuts and Jobs Act of 2017

-

0.03

Add: Branch consolidation expenses - net of tax

0.01

-

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

$

0.47

$

0.33

Adjusted Non-Interest Expense

Non-interest expense (GAAP)

$

109,243

$

97,850

Less: Merger-related expenses

-

(6,743

)

Less: Branch consolidation expenses

(1,725

)

-

Adjusted non-interest expense (non-GAAP)

$

107,518

$

91,107

Adjusted Non-Interest Expense Ratio

Non-interest expense to average assets (GAAP)

1.64

%

1.86

%

Less: Merger-related expenses

0.00

%

-0.13

%

Less: Branch consolidation expenses

-0.03

%

0.00

%

Adjusted non-interest expense ratio (non-GAAP)

1.61

%

1.73

%

Adjusted Efficiency Ratio

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

64.69

%

72.72

%

Less: Merger-related expenses

0.00

%

-5.01

%

Less: Branch consolidation expenses

-1.02

%

0.00

%

Adjusted efficiency ratio (non-GAAP)

63.67

%

67.71

%

Adjusted Return on Average Assets

Return on average assets (GAAP)

0.63

%

0.37

%

Add: Merger-related expenses - net of tax

0.00

%

0.10

%

Add: One-time impact of Tax Cuts and Jobs Act of 2017

0.00

%

0.05

%

Add: Branch consolidation expenses - net of tax

0.02

%

0.00

%

Adjusted return on average assets (non-GAAP)

0.65

%

0.52

%

Adjusted Return on Average Equity

Return on average equity (GAAP)

3.52

%

1.81

%

Add: Merger-related expenses - net of tax

0.00

%

0.47

%

Add: One-time impact of Tax Cuts and Jobs Act of 2017

0.00

%

0.25

%

Add: Branch consolidation expenses - net of tax

0.10

%

0.00

%

Adjusted return on average equity (non-GAAP)

3.62

%

2.53

%


For the year ended

Reconciliation of GAAP to Non-GAAP

June 30,

June 30,

(Dollars in Thousands, Unaudited)

2019

2018

Calculation of Return on Average Tangible Equity

Net income (GAAP)

$

42,142

$

19,596

Total Average equity (GAAP)

$

1,196,622

$

1,081,666

Less: average goodwill

(210,895

)

(136,622

)

Less: average other intangible assets

(5,758

)

(1,785

)

Adjusted average tangible equity (non-GAAP)

$

979,969

$

943,259

Return on average tangible equity (non-GAAP)

4.30

%

2.08

%

Calculation of Adjusted Return on Average Tangible Equity

Adjusted net income (non-GAAP)

$

43,358

$

27,418

Total Average equity (GAAP)

$

1,196,622

$

1,081,666

Less: average goodwill

(210,895

)

(136,622

)

Less: average other intangible assets

(5,758

)

(1,785

)

Adjusted average tangible equity (non-GAAP)

$

979,969

$

943,259

Adjusted return on average tangible equity (non-GAAP)

4.42

%

2.91

%


For further information contact:
Craig L. Montanaro, President and Chief Executive Officer, or
Keith Suchodolski, Executive Vice President and Chief Financial Officer
Kearny Financial Corp.
(973) 244-4500