Kearny Financial Corp. Reports Fiscal 2021 Second Quarter Results
FAIRFIELD, N.J., Jan. 28, 2021 (GLOBE NEWSWIRE) -- Kearny Financial Corp. (NASDAQ GS: KRNY) (the “Company”), the holding company of Kearny Bank (the “Bank”), reported net income for the quarter ended December 31, 2020 of $16.9 million, or $0.20 per diluted share, compared to $11.4 million, or $0.13 per diluted share, for the quarter ended September 30, 2020.
As previously reported, net income for the quarter ended September 30, 2020 was impacted by various non-recurring items which were recognized in conjunction with the Company’s acquisition of MSB Financial Corp. (“MSB”) and its subsidiary Millington Bank. Excluding the effects of these non-recurring items, net of tax, net income for the quarter ended September 30, 2020 would have been $15.0 million or $0.17 per diluted share.
Craig L. Montanaro, President and Chief Executive Officer, commented, “I am pleased to report another quarter of very strong core earnings resulting from a combination of cost of funds reductions, expense control efforts and operating efficiencies gained from the MSB acquisition. Despite the operational challenges presented by the pandemic, our business generation efforts continue unabated and we have had outstanding success retaining and growing core deposits, in particular within the markets previously served by Millington Bank.”
With regard to the Company’s share repurchase program, Mr. Montanaro further noted, “Our robust capital position allowed us to resume our share repurchase program on October 19, 2020 and, since that time, we have been opportunistic buyers of our stock. During the quarter we repurchased approximately 4.5 million shares at an average price of $10.14 per share, or 98.2% of tangible book value at December 31, 2020. In this environment we continue to believe that repurchases represent an excellent strategy to build long-term shareholder value.”
Balance Sheet
- Deposits increased by $272.7 million to $5.31 billion at December 31, 2020 from $5.04 billion at September 30, 2020, reflecting quarterly growth of $272.6 million, or 8.9%, in core non-maturity deposits.
- Loans receivable decreased by $126.1 million to $4.83 billion at December 31, 2020 from $4.95 billion at September 30, 2020. The net decrease for the period included the sale of $43.6 million of Paycheck Protection Program (“PPP”) loans, which resulted in a gain on sale of $352,000.
- Investment securities increased to $1.73 billion, or 23.5% of total assets, at December 31, 2020 from $1.54 billion at September 30, 2020, while borrowings decreased to $865.7 million, or 11.8% of total assets, from $1.08 billion, for those same comparative periods.
- During the quarter ended December 31, 2020 the Company sold $24.4 million of investment securities with a weighted average yield of 1.98%, the proceeds of which were utilized to extinguish $27.0 million of Federal Home Loan Bank (“FHLB”) advances with a weighted average cost of 2.85%. Associated gains on sale of investment securities totaled $800,000 while debt extinguishment expense totaled $796,000.
Earnings
Net Interest Income, Spread and Margin
- Net interest income increased by $391,000 to $44.6 million for the quarter ended December 31, 2020 from $44.2 million for the quarter ended September 30, 2020. This increase was the result of a $2.9 million reduction in interest expense that was partially offset by a $2.5 million reduction in interest income. Included in net interest income was purchase accounting accretion of $3.7 million and $4.2 million, for the quarters ended December 31, 2020 and September 30, 2020, respectively.
- Net interest margin for the quarter ended December 31, 2020 declined two basis points to 2.64% from 2.66% for the quarter ended September 30, 2020. For those same comparative periods, yield on interest-earning assets decreased by 22 basis points to 3.45% while the cost of interest-bearing liabilities decreased by 23 basis points to 0.97%.
Non-Interest Income
- Fees and service charges totaled $1.9 million for the quarter ended December 31, 2020 compared to $1.1 million for the quarter ended September 30, 2020. The increase was largely attributable to an increase of $712,000 in loan pre-payment penalty income to $1.4 million.
- Loan sale gains totaled $2.4 million for the quarter ended December 31, 2020 as compared to $1.9 million for the quarter ended September 30, 2020. The increase for the quarter was largely attributable to the sale of $43.6 million of PPP loans which resulted in a gain on sale of $352,000, as noted earlier.
- Gain (loss) on sale and call of securities reflected a gain of $813,000 for the quarter ended December 31, 2020 compared to a loss of $377,000 for the quarter ended September 30, 2020.
Non-Interest Expense
- Non-interest expense decreased by $3.1 million to $30.5 million for the quarter ended December 31, 2020 compared to $33.6 million for the quarter ended September 30, 2020. This decrease was largely attributable to $4.3 million in merger-related expenses recognized in the prior comparative period with no such expenses recognized in the current period. The decrease was partially offset by $796,000 of non-recurring debt extinguishment expenses, as noted earlier, and an asset impairment charge of $347,000 related to a branch closure. The remaining change in non-interest expense included increases in equipment and systems expense, advertising and marketing expense, FDIC insurance premiums and miscellaneous expense.
- The efficiency and non-interest expense ratios were 59.01% and 1.65%, respectively, for the quarter ended December 31, 2020 as compared to 64.69% and 1.85%, respectively, for the quarter ended September 30, 2020. Adjusting for the impact of non-recurring items, the efficiency and non-interest expense ratios would have been 57.70% and 1.59% respectively, for the quarter ended December 31, 2020 as compared to 59.83% and 1.61%, respectively, for the quarter ended September 30, 2020.
Income Taxes
- Income tax expense totaled $5.6 million for the quarter ended December 31, 2020 compared to $2.9 million for the quarter ended September 30, 2020, resulting in effective tax rates of 24.9% and 20.2%, respectively.
- The comparatively lower effective income tax rate for the prior period reflected the effects of various non-recurring items recorded in the prior comparative quarter, in conjunction with the Company’s acquisition of MSB.
Performance Ratios
- Return on average assets was 0.92% for the quarter ended December 31, 2020 as compared to 0.63% for the quarter ended September 30, 2020. Adjusting for the impact of non-recurring items, adjusted return on average assets would have been 0.90% and 0.83% for those same comparative periods.
- Return on average equity was 6.07% for the quarter ended December 31, 2020 as compared to 4.10% for the quarter ended September 30, 2020 while return on average tangible equity was 7.52% as compared to 5.08% for those same comparative periods, respectively. Adjusting for the impact on non-recurring items, adjusted return on average equity would have been 5.96% for the quarter ended December 31, 2020, as compared to 5.40% for the quarter ended September 30, 2020 while the adjusted return on average tangible equity would have been 7.39% and 6.70% for those same comparative periods, respectively.
Asset Quality
- Non-performing assets totaled $71.7 million, or 0.98% of total assets, at December 31, 2020 compared to $45.3 million, or 0.62% of total assets, at September 30, 2020. This increase was largely attributable to two commercial mortgage loans and two multi-family mortgage loans, secured by various properties located in New York City, which were placed on non-accrual status during the quarter. All four loans are well secured and currently require no specific impairment reserve.
- Net charge offs totaled $108,000 for the quarter ended December 31, 2020 compared to $67,000 for the quarter ended September 30, 2020, reflecting annualized net charge off rates of 0.01% for both comparative periods.
- Based on Section 4013 of the CARES Act, the Consolidated Appropriations Act, 2021 and related guidance promulgated by federal banking regulators, qualifying loan modifications, including short-term payment deferrals, are not considered to be troubled debt restructurings. As of December 31, 2020, the Company had active payment deferrals on 37 loans totaling $33.2 million, representing 0.68% of total loans.
- The Company recorded a credit loss provision reversal of $1.4 million for the quarter ended December 31, 2020 compared to a credit loss provision of $4.1 million for the quarter ended September 30, 2020. The comparatively higher level of provision for the prior period primarily reflected the impact of $5.1 million of provision expense that was attributable to the acquired MSB loans.
- The Allowance for Credit Losses (“ACL”) decreased to $63.4 million at December 31, 2020 from $64.9 million at September 30, 2020, with such balances reflecting an ACL to total loans ratio of 1.30% as of those dates.
Liquidity & Capital
- At December 31, 2020, liquid assets included $129.7 million of short-term cash and equivalents supplemented by $1.70 billion of investment securities classified as available for sale. The Company had the capacity to borrow additional funds totaling $615.0 million via unsecured lines of credit and $1.75 billion and $292.0 million, without pledging additional collateral, from the FHLB of New York and Federal Reserve Bank, respectively.
- On October 19, 2020, the Company announced the resumption of its previously approved stock repurchase plan, which, at the time of the announcement, had 761,030 shares of common stock remaining to be repurchased. In addition, the Company announced the authorization of a new repurchase plan totaling 4,475,523 shares, or 5% of the Company’s then outstanding common stock. For the quarter ended December 31, 2020, the Company repurchased a total of 4,508,689 shares at a cost of $45.7 million, or $10.14 per share, equal to 98.2% of tangible book value at December 31, 2020.
- On January 22, 2021, the Company announced the completion of its previously disclosed stock repurchase plans and the authorization of a new repurchase plan totaling 4,210,520 shares, or 5% of the Company’s outstanding common stock.
- For the quarter ended December 31, 2020, book value per share increased by $0.30 to $12.86 while tangible book value per share increased by $0.18 to $10.33.
- At December 31, 2020, the Company’s ratio of tangible equity to tangible assets equaled 12.32%. At December 31, 2020, the regulatory capital ratios, of both the Company and the Bank 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.
In addition, the COVID-19 pandemic is having an adverse impact on the Company, its customers and the communities it serves. Given its ongoing and dynamic nature, it is difficult to predict the full impact of the COVID-19 outbreak on our business. The extent of such impact will depend on future developments, which are highly uncertain, including when the coronavirus can be controlled and abated and when and how the economy may be reopened or remain open. As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, we could be subject to any of the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations: the demand for our products and services may decline, making it difficult to grow assets and income; if the economy is unable to substantially reopen or remain open, and high levels of unemployment continue for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income; collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase; our allowance for credit losses may increase if borrowers experience financial difficulties, which will adversely affect our net income; the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us; as the result of the decline in the Federal Reserve Board’s target federal funds rate to near 0%, the yield on our assets may decline to a greater extent than the decline in our cost of interest-bearing liabilities, reducing our net interest margin and spread and reducing net income; due to a decline in our stock price or other factors, goodwill may become impaired and be required to be written down; and our cyber security risks are increased as the result of an increase in the number of employees working remotely.
Category: Earnings
| Linked-Quarter Comparative Financial Analysis | ||||||||||||
| Summary Balance Sheet | At | Variance | ||||||||||
| (Dollars and Shares in Thousands, | December 31, | September 30, | Variance | or Change | ||||||||
| Except Per Share Data, Unaudited) | 2020 | 2020 | or Change | Pct. | ||||||||
| Assets | ||||||||||||
| Cash and cash equivalents | $ | 129,694 | $ | 145,818 | $ | (16,124 | ) | -11.1 | % | |||
| Securities available for sale | 1,695,893 | 1,508,542 | 187,351 | 12.4 | % | |||||||
| Securities held to maturity | 29,549 | 31,576 | (2,027 | ) | -6.4 | % | ||||||
| Loans held-for-sale | 12,601 | 20,170 | (7,569 | ) | -37.5 | % | ||||||
| Loans receivable | 4,828,634 | 4,954,750 | (126,116 | ) | -2.5 | % | ||||||
| Less allowance for credit losses on loans | (63,386 | ) | (64,860 | ) | 1,474 | -2.3 | % | |||||
| Net loans receivable | 4,765,248 | 4,889,890 | (124,642 | ) | -2.5 | % | ||||||
| Premises and equipment | 61,181 | 61,808 | (627 | ) | -1.0 | % | ||||||
| Federal Home Loan Bank stock | 45,578 | 55,118 | (9,540 | ) | -17.3 | % | ||||||
| Accrued interest receivable | 19,826 | 20,368 | (542 | ) | -2.7 | % | ||||||
| Goodwill | 210,895 | 210,895 | - | 0.0 | % | |||||||
| Core deposit intangible | 4,151 | 4,420 | (269 | ) | -6.1 | % | ||||||
| Bank owned life insurance | 280,235 | 278,639 | 1,596 | 0.6 | % | |||||||
| Deferred income taxes, net | 30,846 | 33,319 | (2,473 | ) | -7.4 | % | ||||||
| Other real estate owned | 178 | 178 | - | 0.0 | % | |||||||
| Other assets | 49,278 | 49,468 | (190 | ) | -0.4 | % | ||||||
| Total assets | $ | 7,335,153 | $ | 7,310,209 | $ | 24,944 | 0.3 | % | ||||
| Liabilities | ||||||||||||
| Deposits | $ | 5,312,613 | $ | 5,039,912 | $ | 272,701 | 5.4 | % | ||||
| Borrowings | 865,651 | 1,077,540 | (211,889 | ) | -19.7 | % | ||||||
| Advance payments by borrowers for taxes | 16,100 | 17,008 | (908 | ) | -5.3 | % | ||||||
| Other liabilities | 48,448 | 51,689 | (3,241 | ) | -6.3 | % | ||||||
| Total liabilities | 6,242,812 | 6,186,149 | 56,663 | 0.9 | % | |||||||
| Stockholders' Equity | ||||||||||||
| Common stock | 849 | 895 | (46 | ) | -5.1 | % | ||||||
| Paid-in capital | 724,389 | 769,269 | (44,880 | ) | -5.8 | % | ||||||
| Retained earnings | 388,376 | 378,134 | 10,242 | 2.7 | % | |||||||
| Unearned ESOP shares | (27,726 | ) | (28,212 | ) | 486 | -1.7 | % | |||||
| Accumulated other comprehensive income | 6,453 | 3,974 | 2,479 | 62.4 | % | |||||||
| Total stockholders' equity | 1,092,341 | 1,124,060 | (31,719 | ) | -2.8 | % | ||||||
| Total liabilities and stockholders' equity | $ | 7,335,153 | $ | 7,310,209 | $ | 24,944 | 0.3 | % | ||||
| Consolidated capital ratios | ||||||||||||
| Equity to assets | 14.89 | % | 15.38 | % | -0.49 | % | ||||||
| Tangible equity to tangible assets | 12.32 | % | 12.81 | % | -0.49 | % | ||||||
| Share data | ||||||||||||
| Outstanding shares | 84,938 | 89,510 | (4,572 | ) | -5.1 | % | ||||||
| Book value per share | $ | 12.86 | $ | 12.56 | $ | 0.30 | 2.4 | % | ||||
| Tangible book value per share (1) | $ | 10.33 | $ | 10.15 | $ | 0.18 | 1.8 | % | ||||
___________________
(1) Tangible book value 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, | December 31, | September 30, | Variance | or Change | ||||||||
| Except Per Share Data, Unaudited) | 2020 | 2020 | or Change | Pct. | ||||||||
| Interest income | ||||||||||||
| Loans | $ | 49,466 | $ | 52,180 | $ | (2,714 | ) | -5.2 | % | |||
| Taxable investment securities | 7,707 | 7,336 | 371 | 5.1 | % | |||||||
| Tax-exempt investment securities | 433 | 454 | (21 | ) | -4.6 | % | ||||||
| Other interest-earning assets | 787 | 914 | (127 | ) | -13.9 | % | ||||||
| Total Interest Income | 58,393 | 60,884 | (2,491 | ) | -4.1 | % | ||||||
| Interest expense | ||||||||||||
| Deposits | 8,647 | 11,062 | (2,415 | ) | -21.8 | % | ||||||
| Borrowings | 5,193 | 5,660 | (467 | ) | -8.3 | % | ||||||
| Total interest expense | 13,840 | 16,722 | (2,882 | ) | -17.2 | % | ||||||
| Net interest income | 44,553 | 44,162 | 391 | 0.9 | % | |||||||
| (Reversal of) provision for credit losses | (1,365 | ) | 4,059 | (5,424 | ) | -133.6 | % | |||||
| Net interest income after (reversal of) provision for credit losses | 45,918 | 40,103 | 5,815 | 14.5 | % | |||||||
| Non-interest income | ||||||||||||
| Fees and service charges | 1,896 | 1,076 | 820 | 76.2 | % | |||||||
| Gain (loss) on sale and call of securities | 813 | (377 | ) | 1,190 | 315.6 | % | ||||||
| Gain on sale of loans | 2,378 | 1,890 | 488 | 25.8 | % | |||||||
| Income from bank owned life insurance | 1,596 | 1,596 | - | 0.0 | % | |||||||
| Electronic banking fees and charges | 404 | 405 | (1 | ) | -0.2 | % | ||||||
| Bargain purchase gain | - | 3,053 | (3,053 | ) | -100.0 | % | ||||||
| Other income | 67 | 90 | (23 | ) | -25.6 | % | ||||||
| Total non-interest income | 7,154 | 7,733 | (579 | ) | -7.5 | % | ||||||
| Non-interest expense | ||||||||||||
| Salaries and employee benefits | 17,081 | 16,977 | 104 | 0.6 | % | |||||||
| Net occupancy expense of premises | 3,120 | 3,122 | (2 | ) | -0.1 | % | ||||||
| Equipment and systems | 3,902 | 3,570 | 332 | 9.3 | % | |||||||
| Advertising and marketing | 513 | 500 | 13 | 2.6 | % | |||||||
| Federal deposit insurance premium | 490 | 472 | 18 | 3.8 | % | |||||||
| Directors' compensation | 748 | 748 | - | 0.0 | % | |||||||
| Merger-related expenses | - | 4,349 | (4,349 | ) | -100.0 | % | ||||||
| Debt extinguishment expenses | 796 | - | 796 | 0.0 | % | |||||||
| Other expense | 3,860 | 3,835 | 25 | 0.7 | % | |||||||
| Total non-interest expense | 30,510 | 33,573 | (3,063 | ) | -9.1 | % | ||||||
| Income before income taxes | 22,562 | 14,263 | 8,299 | 58.2 | % | |||||||
| Income taxes | 5,614 | 2,884 | 2,730 | 94.7 | % | |||||||
| Net income | $ | 16,948 | $ | 11,379 | $ | 5,569 | 48.9 | % | ||||
| Net income per common share (EPS) | ||||||||||||
| Basic | $ | 0.20 | $ | 0.13 | $ | 0.07 | ||||||
| Diluted | $ | 0.20 | $ | 0.13 | $ | 0.07 | ||||||
| Dividends declared | ||||||||||||
| Cash dividends declared per common share | $ | 0.08 | $ | 0.08 | $ | - | ||||||
| Cash dividends declared | $ | 6,706 | $ | 6,917 | $ | (211 | ) | |||||
| Dividend payout ratio | 39.6 | % | 60.8 | % | -21.2 | % | ||||||
| Weighted average number of common shares outstanding | ||||||||||||
| Basic | 85,120 | 86,008 | (888 | ) | ||||||||
| Diluted | 85,123 | 86,009 | (886 | ) | ||||||||
| For the three months ended | Variance | |||||||||||
| Average Balance Sheet Data | December 31, | September 30, | Variance | or Change | ||||||||
| (Dollars in Thousands, Unaudited) | 2020 | 2020 | or Change | Pct. | ||||||||
| Assets | ||||||||||||
| Interest-earning assets: | ||||||||||||
| Loans receivable, including loans held for sale | $ | 4,871,268 | $ | 4,958,293 | $ | (87,025 | ) | -1.8 | % | |||
| Taxable investment securities | 1,544,095 | 1,350,511 | 193,584 | 14.3 | % | |||||||
| Tax-exempt investment securities | 79,044 | 82,603 | (3,559 | ) | -4.3 | % | ||||||
| Other interest-earning assets | 266,114 | 247,543 | 18,571 | 7.5 | % | |||||||
| Total interest-earning assets | 6,760,521 | 6,638,950 | 121,571 | 1.8 | % | |||||||
| Non-interest-earning assets | 632,084 | 624,252 | 7,832 | 1.3 | % | |||||||
| Total assets | $ | 7,392,605 | $ | 7,263,202 | $ | 129,403 | 1.8 | % | ||||
| Liabilities and Stockholders' Equity | ||||||||||||
| Interest-bearing liabilities: | ||||||||||||
| Deposits: | ||||||||||||
| Interest-bearing demand | $ | 1,683,222 | $ | 1,464,238 | $ | 218,984 | 15.0 | % | ||||
| Savings | 1,058,675 | 1,006,075 | 52,600 | 5.2 | % | |||||||
| Certificates of deposit | 1,899,406 | 1,988,689 | (89,283 | ) | -4.5 | % | ||||||
| Total interest-bearing deposits | 4,641,303 | 4,459,002 | 182,301 | 4.1 | % | |||||||
| Borrowings: | ||||||||||||
| Federal Home Loan Bank advances | 1,057,958 | 1,130,836 | (72,878 | ) | -6.4 | % | ||||||
| Other borrowings | - | 3,568 | (3,568 | ) | -100.0 | % | ||||||
| Total borrowings | 1,057,958 | 1,134,404 | (76,446 | ) | -6.7 | % | ||||||
| Total interest-bearing liabilities | 5,699,261 | 5,593,406 | 105,855 | 1.9 | % | |||||||
| Non-interest-bearing liabilities: | ||||||||||||
| Non-interest-bearing deposits | 502,479 | 479,141 | 23,338 | 4.9 | % | |||||||
| Other non-interest-bearing liabilities | 73,683 | 79,620 | (5,937 | ) | -7.5 | % | ||||||
| Total non-interest-bearing liabilities | 576,162 | 558,761 | 17,401 | 3.1 | % | |||||||
| Total liabilities | 6,275,423 | 6,152,167 | 123,256 | 2.0 | % | |||||||
| Stockholders' equity | 1,117,182 | 1,111,035 | 6,147 | 0.6 | % | |||||||
| Total liabilities and stockholders' equity | $ | 7,392,605 | $ | 7,263,202 | $ | 129,403 | 1.8 | % | ||||
| Average interest-earning assets to average | ||||||||||||
| interest-bearing liabilities | 118.62 | % | 118.69 | % | -0.07 | % | -0.1 | % | ||||
| For the three months ended | |||||||||
| December 31, | September 30, | Variance | |||||||
| Performance Ratio Highlights | 2020 | 2020 | or Change | ||||||
| Average yield on interest-earning assets: | |||||||||
| Loans receivable, including loans held for sale | 4.06 | % | 4.21 | % | -0.15 | % | |||
| Taxable investment securities | 2.00 | % | 2.17 | % | -0.17 | % | |||
| Tax-exempt investment securities (1) | 2.19 | % | 2.20 | % | -0.01 | % | |||
| Other interest-earning assets | 1.18 | % | 1.48 | % | -0.30 | % | |||
| Total interest-earning assets | 3.45 | % | 3.67 | % | -0.22 | % | |||
| Average cost of interest-bearing liabilities: | |||||||||
| Deposits: | |||||||||
| Interest-bearing demand | 0.47 | % | 0.60 | % | -0.13 | % | |||
| Savings | 0.33 | % | 0.57 | % | -0.24 | % | |||
| Certificates of deposit | 1.22 | % | 1.50 | % | -0.28 | % | |||
| Total interest-bearing deposits | 0.75 | % | 0.99 | % | -0.24 | % | |||
| Borrowings: | |||||||||
| Federal Home Loan Bank advances | 1.96 | % | 2.00 | % | -0.04 | % | |||
| Other borrowings | 0.00 | % | 0.04 | % | -0.04 | % | |||
| Total borrowings | 1.96 | % | 2.00 | % | -0.04 | % | |||
| Total interest-bearing liabilities | 0.97 | % | 1.20 | % | -0.23 | % | |||
| Interest rate spread (2) | 2.48 | % | 2.47 | % | 0.01 | % | |||
| Net interest margin (3) | 2.64 | % | 2.66 | % | -0.02 | % | |||
| Non-interest income to average assets | |||||||||
| (annualized) | 0.39 | % | 0.43 | % | -0.04 | % | |||
| Non-interest expense to average assets | |||||||||
| (annualized) | 1.65 | % | 1.85 | % | -0.20 | % | |||
| Efficiency ratio (4) | 59.01 | % | 64.69 | % | -5.68 | % | |||
| Return on average assets (annualized) | 0.92 | % | 0.63 | % | 0.29 | % | |||
| Return on average equity (annualized) | 6.07 | % | 4.10 | % | 1.97 | % | |||
| Return on average tangible equity (annualized) (5) | 7.52 | % | 5.08 | % | 2.44 | % | |||
___________________
(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.
| Five-Quarter Financial Trend Analysis | |||||||||||||||
| Summary Balance Sheet | At | ||||||||||||||
| (Dollars and Shares in Thousands, | December 31, | September 30, | June 30, | March 31, | December 31, | ||||||||||
| Except Per Share Data, Unaudited) | 2020 | 2020 | 2020 | 2020 | 2019 | ||||||||||
| Assets | |||||||||||||||
| Cash and cash equivalents | $ | 129,694 | $ | 145,818 | $ | 180,967 | $ | 59,452 | $ | 41,796 | |||||
| Securities available for sale | 1,695,893 | 1,508,542 | 1,385,703 | 1,476,344 | 1,402,206 | ||||||||||
| Securities held to maturity | 29,549 | 31,576 | 32,556 | 34,618 | 36,073 | ||||||||||
| Loans held-for-sale | 12,601 | 20,170 | 20,789 | 11,245 | 5,952 | ||||||||||
| Loans receivable | 4,828,634 | 4,954,750 | 4,498,397 | 4,562,512 | 4,492,697 | ||||||||||
| Less allowance for credit losses on loans | (63,386 | ) | (64,860 | ) | (37,327 | ) | (37,191 | ) | (30,937 | ) | |||||
| Net loans receivable | 4,765,248 | 4,889,890 | 4,461,070 | 4,525,321 | 4,461,760 | ||||||||||
| Premises and equipment | 61,181 | 61,808 | 57,389 | 58,985 | 56,542 | ||||||||||
| Federal Home Loan Bank stock | 45,578 | 55,118 | 58,654 | 59,324 | 62,838 | ||||||||||
| Accrued interest receivable | 19,826 | 20,368 | 17,373 | 19,036 | 18,261 | ||||||||||
| Goodwill | 210,895 | 210,895 | 210,895 | 210,895 | 210,895 | ||||||||||
| Core deposit intangible | 4,151 | 4,420 | 3,995 | 4,242 | 4,545 | ||||||||||
| Bank owned life insurance | 280,235 | 278,639 | 262,380 | 260,843 | 259,312 | ||||||||||
| Deferred income taxes, net | 30,846 | 33,319 | 25,480 | 27,150 | 20,438 | ||||||||||
| Other real estate owned | 178 | 178 | 178 | 178 | 178 | ||||||||||
| Other assets | 49,278 | 49,468 | 40,746 | 26,200 | 29,605 | ||||||||||
| Total assets | $ | 7,335,153 | $ | 7,310,209 | $ | 6,758,175 | $ | 6,773,833 | $ | 6,610,401 | |||||
| Liabilities | |||||||||||||||
| Deposits | $ | 5,312,613 | $ | 5,039,912 | $ | 4,430,282 | $ | 4,253,254 | $ | 4,188,822 | |||||
| Borrowings | 865,651 | 1,077,540 | 1,173,165 | 1,384,025 | 1,275,049 | ||||||||||
| Advance payments by borrowers for taxes | 16,100 | 17,008 | 16,569 | 16,492 | 16,585 | ||||||||||
| Other liabilities | 48,448 | 51,689 | 53,982 | 50,390 | 35,375 | ||||||||||
| Total liabilities | 6,242,812 | 6,186,149 | 5,673,998 | 5,704,161 | 5,515,831 | ||||||||||
| Stockholders' Equity | |||||||||||||||
| Common stock | 849 | 895 | 837 | 837 | 851 | ||||||||||
| Paid-in capital | 724,389 | 769,269 | 722,871 | 721,474 | 737,539 | ||||||||||
| Retained earnings | 388,376 | 378,134 | 387,911 | 380,671 | 377,896 | ||||||||||
| Unearned ESOP shares | (27,726 | ) | (28,212 | ) | (28,699 | ) | (29,185 | ) | (29,671 | ) | |||||
| Accumulated other comprehensive income (loss) | 6,453 | 3,974 | 1,257 | (4,125 | ) | 7,955 | |||||||||
| Total stockholders' equity | 1,092,341 | 1,124,060 | 1,084,177 | 1,069,672 | 1,094,570 | ||||||||||
| Total liabilities and stockholders' equity | $ | 7,335,153 | $ | 7,310,209 | $ | 6,758,175 | $ | 6,773,833 | $ | 6,610,401 | |||||
| Consolidated capital ratios | |||||||||||||||
| Equity to assets | 14.89 | % | 15.38 | % | 16.04 | % | 15.79 | % | 16.56 | % | |||||
| Tangible equity to tangible assets | 12.32 | % | 12.81 | % | 13.29 | % | 13.03 | % | 13.75 | % | |||||
| Share data | |||||||||||||||
| Outstanding shares | 84,938 | 89,510 | 83,663 | 83,664 | 85,150 | ||||||||||
| Book value per share | $ | 12.86 | $ | 12.56 | $ | 12.96 | $ | 12.79 | $ | 12.85 | |||||
| Tangible book value per share (1) | $ | 10.33 | $ | 10.15 | $ | 10.39 | $ | 10.21 | $ | 10.32 | |||||
___________________
(1) Tangible book value equals total stockholders' equity reduced by goodwill and core deposit intangible assets.
| At | |||||||||||||||
| Supplemental Balance Sheet Highlights | December 31, | September 30, | June 30, | March 31, | December 31, | ||||||||||
| (Dollars in Thousands, Unaudited) | 2020 | 2020 | 2020 | 2020 | 2019 | ||||||||||
| Cash and cash equivalents | |||||||||||||||
| Cash and due from depository institutions | $ | 23,968 | $ | 18,628 | $ | 20,391 | $ | 20,200 | $ | 17,843 | |||||
| Interest-bearing deposits in other banks | 105,726 | 127,190 | 160,576 | 39,252 | 23,953 | ||||||||||
| Total cash and cash equivalents | $ | 129,694 | $ | 145,818 | $ | 180,967 | $ | 59,452 | $ | 41,796 | |||||
| Securities available for sale | |||||||||||||||
| Debt securities: | |||||||||||||||
| U.S. agency securities | $ | - | $ | - | $ | - | $ | - | $ | 606 | |||||
| Municipal and state obligations | 47,763 | 50,877 | 54,054 | 58,151 | 88,057 | ||||||||||
| Asset-backed securities | 255,407 | 258,801 | 172,447 | 169,102 | 177,676 | ||||||||||
| Collateralized loan obligations | 196,685 | 196,398 | 193,788 | 189,565 | 198,324 | ||||||||||
| Corporate bonds | 167,168 | 122,276 | 143,639 | 163,715 | 192,074 | ||||||||||
| Trust preferred securities | 2,866 | 2,773 | 2,627 | 2,852 | 3,795 | ||||||||||
| Debt securities | 669,889 | 631,125 | 566,555 | 583,385 | 660,532 | ||||||||||
| Mortgage-backed securities: | |||||||||||||||
| Collateralized mortgage obligations | 20,510 | 25,770 | 30,903 | 34,671 | 57,839 | ||||||||||
| Residential pass-through securities | 705,991 | 625,715 | 561,954 | 607,113 | 360,900 | ||||||||||
| Commercial pass-through securities | 299,503 | 225,932 | 226,291 | 251,175 | 322,935 | ||||||||||
| Mortgage-backed securities | 1,026,004 | 877,417 | 819,148 | 892,959 | 741,674 | ||||||||||
| Total securities available for sale | $ | 1,695,893 | $ | 1,508,542 | $ | 1,385,703 | $ | 1,476,344 | $ | 1,402,206 | |||||
| Securities held to maturity | |||||||||||||||
| Debt securities: | |||||||||||||||
| Municipal and state obligations | $ | 29,549 | $ | 31,576 | $ | 32,556 | $ | 34,618 | $ | 36,073 | |||||
| Total securities held to maturity | $ | 29,549 | $ | 31,576 | $ | 32,556 | $ | 34,618 | $ | 36,073 | |||||
| Total securities | $ | 1,725,442 | $ | 1,540,118 | $ | 1,418,259 | $ | 1,510,962 | $ | 1,438,279 | |||||
| At | |||||||||||||||
| Supplemental Balance Sheet Highlights | December 31, | September 30, | June 30, | March 31, | December 31, | ||||||||||
| (Dollars in Thousands, Unaudited) | 2020 | 2020 | 2020 | 2020 | 2019 | ||||||||||
| Loan portfolio composition: | |||||||||||||||
| Commercial loans: | |||||||||||||||
| Multi-family | $ | 2,076,483 | $ | 2,110,300 | $ | 2,059,568 | $ | 1,879,907 | $ | 1,856,591 | |||||
| Nonresidential | 1,123,695 | 1,124,330 | 960,853 | 1,202,652 | 1,172,213 | ||||||||||
| Commercial business | 202,010 | 255,888 | 138,788 | 73,922 | 67,887 | ||||||||||
| Construction | 90,398 | 79,178 | 20,961 | 17,880 | 16,221 | ||||||||||
| Total commercial loans | 3,492,586 | 3,569,696 | 3,180,170 | 3,174,361 | 3,112,912 | ||||||||||
| One- to four-family residential mortgage loans | 1,305,351 | 1,353,197 | 1,273,022 | 1,338,099 | 1,331,301 | ||||||||||
| Consumer loans: | |||||||||||||||
| Home equity loans and lines of credit | 65,298 | 71,540 | 82,920 | 87,909 | 89,916 | ||||||||||
| Other consumer loans | 4,123 | 4,136 | 3,991 | 4,604 | 4,908 | ||||||||||
| Total consumer loans | 69,421 | 75,676 | 86,911 | 92,513 | 94,824 | ||||||||||
| Total loans, excluding yield adjustments | 4,867,358 | 4,998,569 | 4,540,103 | 4,604,973 | 4,539,037 | ||||||||||
| Unaccreted yield adjustments | (38,724 | ) | (43,819 | ) | (41,706 | ) | (42,461 | ) | (46,340 | ) | |||||
| Loans receivable, net of yield adjustments | 4,828,634 | 4,954,750 | 4,498,397 | 4,562,512 | 4,492,697 | ||||||||||
| Less allowance for credit losses on loans | (63,386 | ) | (64,860 | ) | (37,327 | ) | (37,191 | ) | (30,937 | ) | |||||
| Net loans receivable | $ | 4,765,248 | $ | 4,889,890 | $ | 4,461,070 | $ | 4,525,321 | $ | 4,461,760 | |||||
| Loan portfolio allocation: | |||||||||||||||
| Commercial loans: | |||||||||||||||
| Multi-family | 42.7 | % | 42.2 | % | 45.3 | % | 40.8 | % | 40.9 | % | |||||
| Nonresidential | 23.1 | % | 22.5 | % | 21.2 | % | 26.1 | % | 25.8 | % | |||||
| Commercial business | 4.2 | % | 5.1 | % | 3.1 | % | 1.6 | % | 1.5 | % | |||||
| Construction | 1.8 | % | 1.6 | % | 0.4 | % | 0.4 | % | 0.4 | % | |||||
| Total commercial loans | 71.8 | % | 71.4 | % | 70.0 | % | 68.9 | % | 68.6 | % | |||||
| One- to four-family residential mortgage loans | 26.8 | % | 27.1 | % | 28.1 | % | 29.1 | % | 29.3 | % | |||||
| Consumer loans: | |||||||||||||||
| Home equity loans and lines of credit | 1.3 | % | 1.4 | % | 1.8 | % | 1.9 | % | 2.0 | % | |||||
| Other consumer loans | 0.1 | % | 0.1 | % | 0.1 | % | 0.1 | % | 0.1 | % | |||||
| Total consumer loans | 1.4 | % | 1.5 | % | 1.9 | % | 2.0 | % | 2.1 | % | |||||
| 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 | $ | - | $ | 238 | $ | 5 | $ | 12 | $ | 19 | |||||
| Nonaccrual loans | 71,472 | 44,837 | 36,691 | 35,384 | 21,935 | ||||||||||
| Total nonperforming loans | 71,472 | 45,075 | 36,696 | 35,396 | 21,954 | ||||||||||
| Other real estate owned | 178 | 178 | 178 | 178 | 178 | ||||||||||
| Total nonperforming assets | $ | 71,650 | $ | 45,253 | $ | 36,874 | $ | 35,574 | $ | 22,132 | |||||
| Nonperforming loans (% total loans) | 1.48 | % | 0.91 | % | 0.82 | % | 0.78 | % | 0.49 | % | |||||
| Nonperforming assets (% total assets) | 0.98 | % | 0.62 | % | 0.55 | % | 0.53 | % | 0.33 | % | |||||
| Allowance for credit losses on loans (ACL): | |||||||||||||||
| ACL to total loans | 1.30 | % | 1.30 | % | 0.82 | % | 0.81 | % | 0.68 | % | |||||
| ACL to nonperforming loans | 88.69 | % | 143.89 | % | 101.72 | % | 105.07 | % | 140.92 | % | |||||
| Net charge offs | $ | 109 | $ | 67 | $ | 38 | $ | 16 | $ | 30 | |||||
| Average net charge off rate (annualized) | 0.01 | % | 0.01 | % | 0.00 | % | 0.00 | % | 0.00 | % | |||||
| At | |||||||||||||||
| Supplemental Balance Sheet Highlights | December 31, | September 30, | June 30, | March 31, | December 31, | ||||||||||
| (Dollars in Thousands, Unaudited) | 2020 | 2020 | 2020 | 2020 | 2019 | ||||||||||
| Funding by type: | |||||||||||||||
| Deposits: | |||||||||||||||
| Non-interest-bearing deposits | $ | 518,828 | $ | 487,710 | $ | 419,138 | $ | 321,824 | $ | 312,098 | |||||
| Interest-bearing demand | 1,752,699 | 1,561,135 | 1,264,151 | 1,134,420 | 1,060,434 | ||||||||||
| Savings | 1,075,122 | 1,025,245 | 906,597 | 848,950 | 829,321 | ||||||||||
| Certificates of deposit | 1,965,964 | 1,965,822 | 1,840,396 | 1,948,060 | 1,986,969 | ||||||||||
| Interest-bearing deposits | 4,793,785 | 4,552,202 | 4,011,144 | 3,931,430 | 3,876,724 | ||||||||||
| Total deposits | 5,312,613 | 5,039,912 | 4,430,282 | 4,253,254 | 4,188,822 | ||||||||||
| Borrowings: | |||||||||||||||
| Federal Home Loan Bank advances | 865,651 | 1,077,540 | 1,167,429 | 1,177,319 | 1,253,958 | ||||||||||
| Overnight borrowings | - | - | - | 200,000 | 15,000 | ||||||||||
| Depositor sweep accounts | - | - | 5,736 | 6,706 | 6,091 | ||||||||||
| Total borrowings | 865,651 | 1,077,540 | 1,173,165 | 1,384,025 | 1,275,049 | ||||||||||
| Total funding | $ | 6,178,264 | $ | 6,117,452 | $ | 5,603,447 | $ | 5,637,279 | $ | 5,463,871 | |||||
| Loans as a % of deposits | 89.9 | % | 97.4 | % | 101.2 | % | 106.7 | % | 106.7 | % | |||||
| Deposits as a % of total funding | 86.0 | % | 82.4 | % | 79.1 | % | 75.4 | % | 76.7 | % | |||||
| Borrowings as a % of total funding | 14.0 | % | 17.6 | % | 20.9 | % | 24.6 | % | 23.3 | % | |||||
| Funding by source: | |||||||||||||||
| Retail funding: | |||||||||||||||
| Non-interest-bearing deposits | $ | 518,828 | $ | 487,710 | $ | 419,138 | $ | 321,824 | $ | 312,098 | |||||
| Interest-bearing demand | 1,752,699 | 1,561,135 | 1,264,151 | 1,134,420 | 1,060,434 | ||||||||||
| Savings | 1,075,122 | 1,025,245 | 906,597 | 848,950 | 829,321 | ||||||||||
| Certificates of deposit | 1,658,277 | 1,775,189 | 1,773,257 | 1,833,081 | 1,876,280 | ||||||||||
| Total retail deposits | 5,004,926 | 4,849,279 | 4,363,143 | 4,138,275 | 4,078,133 | ||||||||||
| Depositor sweep accounts | - | - | 5,736 | 6,706 | 6,091 | ||||||||||
| Total retail funding | 5,004,926 | 4,849,279 | 4,368,879 | 4,144,981 | 4,084,224 | ||||||||||
| Wholesale funding: | |||||||||||||||
| Certificates of deposit (listing service) | $ | 43,112 | $ | 57,251 | $ | 35,760 | $ | 33,608 | $ | 42,119 | |||||
| Certificates of deposit (brokered) | 264,575 | 133,382 | 31,379 | 81,371 | 68,570 | ||||||||||
| Total wholesale deposits | 307,687 | 190,633 | 67,139 | 114,979 | 110,689 | ||||||||||
| FHLB advances | 865,651 | 1,077,540 | 1,167,429 | 1,177,319 | 1,253,958 | ||||||||||
| Overnight borrowings | - | - | - | 200,000 | 15,000 | ||||||||||
| Total wholesale funding | 1,173,338 | 1,268,173 | 1,234,568 | 1,492,298 | 1,379,647 | ||||||||||
| Total funding | $ | 6,178,264 | $ | 6,117,452 | $ | 5,603,447 | $ | 5,637,279 | $ | 5,463,871 | |||||
| Retail funding as a % of total funding | 81.0 | % | 79.3 | % | 78.0 | % | 73.5 | % | 74.7 | % | |||||
| Wholesale funding as a % of total funding | 19.0 | % | 20.7 | % | 22.0 | % | 26.5 | % | 25.3 | % | |||||
| Summary Income Statement | For the three months ended | ||||||||||||||
| (Dollars and Shares in Thousands, | December 31, | September 30, | June 30, | March 31, | December 31, | ||||||||||
| Except Per Share Data, Unaudited) | 2020 | 2020 | 2020 | 2020 | 2019 | ||||||||||
| Interest income | |||||||||||||||
| Loans | $ | 49,466 | $ | 52,180 | $ | 46,192 | $ | 46,603 | $ | 45,608 | |||||
| Taxable investment securities | 7,707 | 7,336 | 9,769 | 10,526 | 9,698 | ||||||||||
| Tax-exempt investment securities | 433 | 454 | 487 | 547 | 666 | ||||||||||
| Other interest-earning assets | 787 | 914 | 903 | 1,100 | 1,210 | ||||||||||
| Total interest income | 58,393 | 60,884 | 57,351 | 58,776 | 57,182 | ||||||||||
| Interest expense | |||||||||||||||
| Deposits | 8,647 | 11,062 | 12,439 | 14,768 | 15,590 | ||||||||||
| Borrowings | 5,193 | 5,660 | 4,462 | 6,398 | 6,985 | ||||||||||
| Total interest expense | 13,840 | 16,722 | 16,901 | 21,166 | 22,575 | ||||||||||
| Net interest income | 44,553 | 44,162 | 40,450 | 37,610 | 34,607 | ||||||||||
| (Reversal of) provision for credit losses | (1,365 | ) | 4,059 | 174 | 6,270 | (1,465 | ) | ||||||||
| Net interest income after (reversal of) | |||||||||||||||
| provision for credit losses | 45,918 | 40,103 | 40,276 | 31,340 | 36,072 | ||||||||||
| Non-interest income | |||||||||||||||
| Fees and service charges | 1,896 | 1,076 | 1,696 | 1,338 | 2,145 | ||||||||||
| Gain (loss) on sale and call of securities | 813 | (377 | ) | 19 | 2,234 | 11 | |||||||||
| Gain on sale of loans | 2,378 | 1,890 | 1,348 | 565 | 668 | ||||||||||
| Loss on sale and write down of other real estate | |||||||||||||||
| owned | - | - | - | - | (28 | ) | |||||||||
| Income from bank owned life insurance | 1,596 | 1,596 | 1,537 | 1,532 | 1,576 | ||||||||||
| Electronic banking fees and charges | 404 | 405 | 325 | 309 | 293 | ||||||||||
| Bargain purchase gain | - | 3,053 | - | - | - | ||||||||||
| Other income | 67 | 90 | 77 | 223 | (111 | ) | |||||||||
| Total non-interest income | 7,154 | 7,733 | 5,002 | 6,201 | 4,554 | ||||||||||
| Non-interest expense | |||||||||||||||
| Salaries and employee benefits | 17,081 | 16,977 | 15,527 | 15,537 | 15,174 | ||||||||||
| Net occupancy expense of premises | 3,120 | 3,122 | 2,688 | 2,685 | 3,082 | ||||||||||
| Equipment and systems | 3,902 | 3,570 | 2,948 | 2,672 | 3,046 | ||||||||||
| Advertising and marketing | 513 | 500 | 751 | 612 | 890 | ||||||||||
| Federal deposit insurance premium | 490 | 472 | 286 | - | - | ||||||||||
| Directors' compensation | 748 | 748 | 769 | 771 | 769 | ||||||||||
| Merger-related expenses | - | 4,349 | 447 | 285 | 219 | ||||||||||
| Debt extinguishment expenses | 796 | - | - | 2,156 | - | ||||||||||
| Other expense | 3,860 | 3,835 | 3,475 | 3,344 | 3,247 | ||||||||||
| Total non-interest expense | 30,510 | 33,573 | 26,891 | 28,062 | 26,427 | ||||||||||
| Income before income taxes | 22,562 | 14,263 | 18,387 | 9,479 | 14,199 | ||||||||||
| Income taxes | 5,614 | 2,884 | 4,698 | 225 | 3,547 | ||||||||||
| Net income | $ | 16,948 | $ | 11,379 | $ | 13,689 | $ | 9,254 | $ | 10,652 | |||||
| Net income per common share (EPS) | |||||||||||||||
| Basic | $ | 0.20 | $ | 0.13 | $ | 0.17 | $ | 0.11 | $ | 0.13 | |||||
| Diluted | $ | 0.20 | $ | 0.13 | $ | 0.17 | $ | 0.11 | $ | 0.13 | |||||
| Dividends declared (1) | |||||||||||||||
| Cash dividends declared per common share | $ | 0.08 | $ | 0.08 | $ | 0.08 | $ | 0.08 | $ | 0.07 | |||||
| Cash dividends declared | $ | 6,706 | $ | 6,917 | $ | 6,449 | $ | 6,479 | $ | 5,760 | |||||
| Dividend payout ratio | 39.6 | % | 60.8 | % | 47.1 | % | 70.0 | % | 54.1 | % | |||||
| Weighted average number of common | |||||||||||||||
| shares outstanding | |||||||||||||||
| Basic | 85,120 | 86,008 | 80,678 | 81,339 | 82,831 | ||||||||||
| Diluted | 85,123 | 86,009 | 80,680 | 81,358 | 82,876 | ||||||||||
| For the three months ended | |||||||||||||||
| Average Balance Sheet Data | December 31, | September 30, | June 30, | March 31, | December 31, | ||||||||||
| (Dollars in Thousands, Unaudited) | 2020 | 2020 | 2020 | 2020 | 2019 | ||||||||||
| Assets | |||||||||||||||
| Interest-earning assets: | |||||||||||||||
| Loans receivable, including loans held for sale | $ | 4,871,268 | $ | 4,958,293 | $ | 4,567,229 | $ | 4,503,996 | $ | 4,547,126 | |||||
| Taxable investment securities | 1,544,095 | 1,350,511 | 1,369,014 | 1,406,973 | 1,244,475 | ||||||||||
| Tax-exempt investment securities | 79,044 | 82,603 | 89,263 | 101,771 | 125,187 | ||||||||||
| Other interest-earning assets | 266,114 | 247,543 | 141,964 | 104,241 | 117,811 | ||||||||||
| Total interest-earning assets | 6,760,521 | 6,638,950 | 6,167,470 | 6,116,981 | 6,034,599 | ||||||||||
| Non-interest-earning assets | 632,084 | 624,252 | 605,876 | 598,335 | 590,746 | ||||||||||
| Total assets | $ | 7,392,605 | $ | 7,263,202 | $ | 6,773,346 | $ | 6,715,316 | $ | 6,625,345 | |||||
| Liabilities and Stockholders' Equity | |||||||||||||||
| Interest-bearing liabilities: | |||||||||||||||
| Deposits: | |||||||||||||||
| Interest-bearing demand | $ | 1,683,222 | $ | 1,464,238 | $ | 1,189,044 | $ | 1,112,080 | $ | 982,163 | |||||
| Savings | 1,058,675 | 1,006,075 | 876,580 | 838,501 | 813,626 | ||||||||||
| Certificates of deposit | 1,899,406 | 1,988,689 | 1,879,039 | 2,004,785 | 2,063,066 | ||||||||||
| Total interest-bearing deposits | 4,641,303 | 4,459,002 | 3,944,663 | 3,955,366 | 3,858,855 | ||||||||||
| Borrowings: | |||||||||||||||
| Federal Home Loan Bank advances | 1,057,958 | 1,130,836 | 1,202,522 | 1,208,627 | 1,255,597 | ||||||||||
| Other borrowings | - | 3,568 | 96,770 | 87,072 | 34,733 | ||||||||||
| Total borrowings | 1,057,958 | 1,134,404 | 1,299,292 | 1,295,699 | 1,290,330 | ||||||||||
| Total interest-bearing liabilities | 5,699,261 | 5,593,406 | 5,243,955 | 5,251,065 | 5,149,185 | ||||||||||
| Non-interest-bearing liabilities: | |||||||||||||||
| Non-interest-bearing deposits | 502,479 | 479,141 | 380,067 | 317,530 | 320,161 | ||||||||||
| Other non-interest-bearing liabilities | 73,683 | 79,620 | 72,007 | 55,456 | 53,479 | ||||||||||
| Total non-interest-bearing liabilities | 576,162 | 558,761 | 452,074 | 372,986 | 373,640 | ||||||||||
| Total liabilities | 6,275,423 | 6,152,167 | 5,696,029 | 5,624,051 | 5,522,825 | ||||||||||
| Stockholders' equity | 1,117,182 | 1,111,035 | 1,077,317 | 1,091,265 | 1,102,520 | ||||||||||
| Total liabilities and stockholders' equity | $ | 7,392,605 | $ | 7,263,202 | $ | 6,773,346 | $ | 6,715,316 | $ | 6,625,345 | |||||
| Average interest-earning assets to average | |||||||||||||||
| interest-bearing liabilities | 118.62 | % | 118.69 | % | 117.61 | % | 116.49 | % | 117.20 | % | |||||
| For the three months ended | |||||||||||||||
| December 31, | September 30, | June 30, | March 31, | December 31, | |||||||||||
| Performance Ratio Highlights | 2020 | 2020 | 2020 | 2020 | 2019 | ||||||||||
| Average yield on interest-earning assets: | |||||||||||||||
| Loans receivable, including loans held for sale | 4.06 | % | 4.21 | % | 4.05 | % | 4.14 | % | 4.01 | % | |||||
| Taxable investment securities | 2.00 | % | 2.17 | % | 2.85 | % | 2.99 | % | 3.12 | % | |||||
| Tax-exempt investment securities (1) | 2.19 | % | 2.20 | % | 2.18 | % | 2.15 | % | 2.13 | % | |||||
| Other interest-earning assets | 1.18 | % | 1.48 | % | 2.54 | % | 4.22 | % | 4.11 | % | |||||
| Total interest-earning assets | 3.45 | % | 3.67 | % | 3.72 | % | 3.84 | % | 3.79 | % | |||||
| Average cost of interest-bearing liabilities: | |||||||||||||||
| Deposits: | |||||||||||||||
| Interest-bearing demand | 0.47 | % | 0.60 | % | 0.72 | % | 1.17 | % | 1.29 | % | |||||
| Savings | 0.33 | % | 0.57 | % | 0.81 | % | 0.85 | % | 0.81 | % | |||||
| Certificates of deposit | 1.22 | % | 1.50 | % | 1.82 | % | 1.94 | % | 2.09 | % | |||||
| Total interest-bearing deposits | 0.75 | % | 0.99 | % | 1.26 | % | 1.49 | % | 1.62 | % | |||||
| Borrowings: | |||||||||||||||
| Federal Home Loan Bank advances | 1.96 | % | 2.00 | % | 1.47 | % | 2.03 | % | 2.19 | % | |||||
| Other borrowings | 0.00 | % | 0.04 | % | 0.13 | % | 1.17 | % | 1.36 | % | |||||
| Total borrowings | 1.96 | % | 2.00 | % | 1.37 | % | 1.98 | % | 2.17 | % | |||||
| Total interest-bearing liabilities | 0.97 | % | 1.20 | % | 1.29 | % | 1.61 | % | 1.75 | % | |||||
| Interest rate spread (2) | 2.48 | % | 2.47 | % | 2.43 | % | 2.23 | % | 2.04 | % | |||||
| Net interest margin (3) | 2.64 | % | 2.66 | % | 2.62 | % | 2.46 | % | 2.29 | % | |||||
| Non-interest income to average assets | |||||||||||||||
| (annualized) | 0.39 | % | 0.43 | % | 0.30 | % | 0.37 | % | 0.27 | % | |||||
| Non-interest expense to average assets | |||||||||||||||
| (annualized) | 1.65 | % | 1.85 | % | 1.59 | % | 1.67 | % | 1.60 | % | |||||
| Efficiency ratio (4) | 59.01 | % | 64.69 | % | 59.16 | % | 64.05 | % | 67.48 | % | |||||
| Return on average assets (annualized) | 0.92 | % | 0.63 | % | 0.81 | % | 0.55 | % | 0.64 | % | |||||
| Return on average equity (annualized) | 6.07 | % | 4.10 | % | 5.08 | % | 3.39 | % | 3.86 | % | |||||
| Return on average tangible equity (annualized) (5) | 7.52 | % | 5.08 | % | 6.35 | % | 4.23 | % | 4.80 | % | |||||
___________________
(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, | December 31, | September 30, | June 30, | March 31, | December 31, | ||||||||||
| Except Per Share Data, Unaudited) | 2020 | 2020 | 2020 | 2020 | 2019 | ||||||||||
| Adjusted net income: | |||||||||||||||
| Net income (GAAP) | $ | 16,948 | $ | 11,379 | $ | 13,689 | $ | 9,254 | $ | 10,652 | |||||
| Non-recurring transactions - net of tax: | |||||||||||||||
| Bargain purchase gain | - | (3,053 | ) | - | - | - | |||||||||
| Provision for credit losses on non-PCD loans | - | 3,563 | - | - | - | ||||||||||
| Merger-related expenses | - | 3,123 | 426 | 269 | 183 | ||||||||||
| Branch consolidation expenses | 243 | - | - | - | 274 | ||||||||||
| Net effect of security sales and debt | |||||||||||||||
| extinguishment | - | - | - | (55 | ) | - | |||||||||
| Gain (loss) on sale and call of securities | (571 | ) | - | - | - | - | |||||||||
| Debt extinguishment expenses | 559 | - | - | - | - | ||||||||||
| Reversal of income tax valuation allowance | (523 | ) | - | - | (591 | ) | - | ||||||||
| Tax benefit arising from adoption of the | |||||||||||||||
| CARES Act provisions | - | - | - | (1,624 | ) | - | |||||||||
| Net income (non-GAAP) | $ | 16,656 | $ | 15,012 | $ | 14,115 | $ | 7,253 | $ | 11,109 | |||||
| Calculation of pre-tax, pre-provision income: | |||||||||||||||
| Net income (GAAP) | $ | 16,948 | $ | 11,379 | $ | 13,689 | $ | 9,254 | $ | 10,652 | |||||
| Adjustments to net income (GAAP): | |||||||||||||||
| Provision for income taxes | 5,614 | 2,884 | 4,698 | 225 | 3,547 | ||||||||||
| (Reversal of) provision for credit losses | (1,365 | ) | 4,059 | 174 | 6,270 | (1,465 | ) | ||||||||
| Pre-tax, pre-provision income (non-GAAP) | $ | 21,197 | $ | 18,322 | $ | 18,561 | $ | 15,749 | $ | 12,734 | |||||
| Adjusted earnings per share: | |||||||||||||||
| Weighted average common shares - basic | 85,120 | 86,008 | 80,678 | 81,339 | 82,831 | ||||||||||
| Weighted average common shares - diluted | 85,123 | 86,009 | 80,680 | 81,358 | 82,876 | ||||||||||
| Earnings per share - basic (GAAP) | $ | 0.20 | $ | 0.13 | $ | 0.17 | $ | 0.11 | $ | 0.13 | |||||
| Earnings per share - diluted (GAAP) | $ | 0.20 | $ | 0.13 | $ | 0.17 | $ | 0.11 | $ | 0.13 | |||||
| Adjusted earnings per share - basic (non-GAAP) | $ | 0.20 | $ | 0.17 | $ | 0.17 | $ | 0.09 | $ | 0.13 | |||||
| Adjusted earnings per share - diluted (non-GAAP) | $ | 0.20 | $ | 0.17 | $ | 0.17 | $ | 0.09 | $ | 0.13 | |||||
| Adjusted return on average assets: | |||||||||||||||
| Total average assets | $ | 7,392,605 | $ | 7,263,202 | $ | 6,773,346 | $ | 6,715,316 | $ | 6,625,345 | |||||
| Return on average assets (GAAP) | 0.92 | % | 0.63 | % | 0.81 | % | 0.55 | % | 0.64 | % | |||||
| Adjusted return on average assets (non-GAAP) | 0.90 | % | 0.83 | % | 0.83 | % | 0.43 | % | 0.67 | % | |||||
| Adjusted return on average equity: | |||||||||||||||
| Total average equity | $ | 1,117,182 | $ | 1,111,035 | $ | 1,077,317 | $ | 1,091,265 | $ | 1,102,520 | |||||
| Return on average equity (GAAP) | 6.07 | % | 4.10 | % | 5.08 | % | 3.39 | % | 3.86 | % | |||||
| Adjusted return on average equity (non-GAAP) | 5.96 | % | 5.40 | % | 5.24 | % | 2.66 | % | 4.03 | % | |||||
| Reconciliation of GAAP to Non-GAAP | For the three months ended | ||||||||||||||
| (Dollars in Thousands, | December 31, | September 30, | June 30, | March 31, | December 31, | ||||||||||
| Except Per Share Data, Unaudited) | 2020 | 2020 | 2020 | 2020 | 2019 | ||||||||||
| Adjusted return on average tangible equity: | |||||||||||||||
| Total average equity | $ | 1,117,182 | $ | 1,111,035 | $ | 1,077,317 | $ | 1,091,265 | $ | 1,102,520 | |||||
| Less: average goodwill | (210,895 | ) | (210,895 | ) | (210,895 | ) | (210,895 | ) | (210,895 | ) | |||||
| Less: average other intangible assets | (4,317 | ) | (4,341 | ) | (4,124 | ) | (4,408 | ) | (4,711 | ) | |||||
| $ | 901,970 | $ | 895,799 | $ | 862,298 | $ | 875,962 | $ | 886,914 | ||||||
| Return on average tangible equity (non-GAAP) | 7.52 | % | 5.08 | % | 6.35 | % | 4.23 | % | 4.80 | % | |||||
| Adjusted return on average tangible equity | |||||||||||||||
| (non-GAAP) | 7.39 | % | 6.70 | % | 6.55 | % | 3.31 | % | 5.01 | % | |||||
| Adjusted non-interest expense ratio: | |||||||||||||||
| Non-interest expense (GAAP) | $ | 30,510 | $ | 33,573 | $ | 26,891 | $ | 28,062 | $ | 26,427 | |||||
| Non-recurring transactions: | |||||||||||||||
| Merger-related expenses | - | (4,349 | ) | (447 | ) | (285 | ) | (219 | ) | ||||||
| Branch consolidation expenses | (347 | ) | - | - | - | (153 | ) | ||||||||
| Debt extinguishment expenses | (796 | ) | - | - | (2,156 | ) | - | ||||||||
| Non-interest expense (non-GAAP) | $ | 29,367 | $ | 29,224 | $ | 26,444 | $ | 25,621 | $ | 26,055 | |||||
| Non-interest expense ratio (GAAP) | 1.65 | % | 1.85 | % | 1.59 | % | 1.67 | % | 1.60 | % | |||||
| Adjusted non-interest expense ratio (non-GAAP) | 1.59 | % | 1.61 | % | 1.56 | % | 1.53 | % | 1.57 | % | |||||
| Adjusted efficiency ratio: | |||||||||||||||
| Non-interest expense (non-GAAP) | $ | 29,367 | $ | 29,224 | $ | 26,444 | $ | 25,621 | $ | 26,055 | |||||
| Net interest income (GAAP) | $ | 44,553 | $ | 44,162 | $ | 40,450 | $ | 37,610 | $ | 34,607 | |||||
| Total non-interest income (GAAP) | 7,154 | 7,733 | 5,002 | 6,201 | 4,554 | ||||||||||
| Non-recurring transactions: | |||||||||||||||
| Branch consolidation expenses | - | - | - | - | 236 | ||||||||||
| Gain (loss) on sale and call of securities | (813 | ) | - | - | (2,234 | ) | - | ||||||||
| Bargain purchase gain | - | (3,053 | ) | - | - | - | |||||||||
| Total revenue (non-GAAP) | $ | 50,894 | $ | 48,842 | $ | 45,452 | $ | 41,577 | $ | 39,397 | |||||
| Efficiency ratio (GAAP) | 59.01 | % | 64.69 | % | 59.16 | % | 64.05 | % | 67.48 | % | |||||
| Adjusted efficiency ratio (non-GAAP) | 57.70 | % | 59.83 | % | 58.18 | % | 61.62 | % | 66.13 | % | |||||
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