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Kearny Financial Corp. Reports Fourth Quarter and Year End 2018 Operating Results

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FAIRFIELD, N.J., July 30, 2018 (GLOBE NEWSWIRE) -- Kearny Financial Corp. (NASDAQ:KRNY) (the "Company"), the holding company of Kearny Bank (the "Bank"), today reported net income for the quarter ended June 30, 2018 of $7.7 million, or $0.08 per basic and diluted share.  The results represent an increase of $2.3 million compared to net income of $5.4 million, or $0.07 per basic and diluted share, for the quarter ended March 31, 2018.

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

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

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

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

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

Acquisition Highlights

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

  • Loans acquired with aggregate fair values totaling $1.12 billion primarily comprising residential and commercial mortgage loans.  Acquired loans included $5.4 million of nonperforming loans whose fair values at acquisition reflected negligible levels of impairment;
     
  • Deposits assumed with aggregate fair values totaling $949.8 million housed across a retail banking network consisting of 12 branches located in New Jersey's Passaic, Bergen, Hudson and Essex counties;
     
  • Securities acquired with aggregate fair values of $326.9 million primarily comprising U.S. agency and other high-quality debt securities;
     
  • Borrowings assumed with fair values of $414.1 million comprised entirely of outstanding advances from the Federal Home Loan Bank of New York;
     
  • Merger consideration primarily comprising 25.4 million shares of the Company's common stock issued to CSBK stockholders reflecting an exchange of 1.191 of Company shares for each outstanding share of CSBK common stock at the time of closing as well as cash distributed to CSBK stockholders and eligible option holders for the settlement of fractional shares and the value of outstanding options to purchase CSBK stock, respectively.

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

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

  • Net interest income increased by $13.5 million, or 50.0%, to $40.6 million from $27.1 million;
     
  • Net interest margin increased by 31 basis points to 2.72% from 2.41%;
     
  • Excluding the impact of non-recurring, merger-related expenses recognized during both comparative periods:
     
    • Non-interest expense increased by $4.0 million, or 17.9%, to $26.1 million from $22.1 million;
       
    • The non-interest expense ratio decreased by 23 basis points to 1.59% from 1.82%.
       
    • The efficiency ratio decreased by 13.0% to 59.4% from 72.4%;
       
    • Return on average on average assets ratio increased by 22 basis points to 0.69% from 0.47%.

Overview of Financial Performance

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

  • The Company's aggregate loan portfolio, excluding loans held for sale and the allowance for loan losses, increased by $1.15 billion to $4.50 billion, or 68.4% of total assets, at June 30, 2018 from $3.35 billion, or 67.9% of total assets, at March 31, 2018.  For the year ended June 30, 2018, the Company's aggregate loan portfolio increased by $1.26 billion, or 38.7%, from $3.25 billion, or 67.4% of total assets, at June 30, 2017.
  • The outstanding balance of the Company's commercial mortgage loans increased by $476.6 million to $3.06 billion at June 30, 2018 from $2.58 billion at March 31, 2018.  For the year ended June 30, 2018, commercial mortgage loans grew $563.9 million from $2.50 billion at June 30, 2017.  The organic growth in commercial mortgage loans during the quarter and year ended June 30, 2018 continued to reflect the impact of an accelerated rate of loan prepayments compared to prior years that partially offset the increase in loans arising from loan origination volume.  In addition to the growth arising from the CSBK acquisition, the Company continues to execute organic strategies designed to increase the origination volume of commercial mortgage loans to compensate for the challenges presented by the noted increase in prepayments.  Toward that end, the Company's pipeline of commercial mortgage loans in the underwriting process increased during the quarter ended June 30, 2018. 
  • The outstanding balance of residential mortgage loans held in the portfolio, including home equity loans and lines of credit, increased by $744.9 million to $1.39 billion at June 30, 2018 from $643.3 million at March 31, 2018.  For the year ended June 30, 2018, residential mortgage loans grew $738.1 million from $650.1 million at June 30, 2017.  The increase in residential mortgage loans during the quarter and year ended June 30, 2018 primarily reflected the impact of the CSBK acquisition as the Company continued emphasizing its mortgage banking strategy through which most residential mortgage loans originated are sold into the secondary market.
  • Asset quality remained strong throughout the quarter and year ended June 30, 2018.  The outstanding balance of nonperforming loans increased by $2.6 million to $16.9 million, or 0.37% of total loans, at June 30, 2018 from $14.2 million, or 0.42% of total loans, at March 31, 2018.  For the year ended June 30, 2018, nonperforming loans decreased by $2.0 million from $18.9 million, or 0.58% of total loans, at June 30, 2017.   As noted earlier, the increase in the outstanding balance of nonperforming loans at June 30, 2018 included a nominal balance of loans acquired from CSBK which was partially offset by a net decrease in the remaining balance of nonperforming loans during the reported periods. 
  • The allowance for loan losses increased to $30.9 million at June 30, 2018 from $30.2 million at March 31, 2018, resulting in a "total loan coverage ratio", representing the balance of the allowance for loan losses as a percentage of total loans, of 0.68% and 0.90%, respectively.  For the year ended June 30, 2018, the allowance for loan losses increased by $1.6 million from $29.3 million, or 0.90% of total loans, at June 30, 2017.  The decrease in the "total loan coverage ratio" for both the quarter and year ended June 30, 2018 largely reflects the impact of the CSBK acquisition and the related accounting standards which generally preclude acquired loan balances from being considered in the balance of the allowance for loan losses at the time of their acquisition.  In lieu thereof, an accretable "credit mark" is established as a component of the purchase accounting fair value adjustments which directly reduces the carrying value of the acquired loan portfolio.
  • The Company's securities portfolio increased by $170.7 million to $1.31 billion, or 20.0% of total assets, at June 30, 2018 from $1.14 billion, or 23.2% of total assets, at March 31, 2018.  For the year ended June 30, 2018, the securities portfolio increased by $207.7 million, or 18.8%, from $1.11 billion, or 23.0% of total assets at June 30, 2017.  The increase in the securities portfolio for the quarter and year ended June 30, 2018 largely reflected the impact of securities acquired from CSBK.  The Company sold a significant portion of the securities originally acquired from CSBK with a portion of the sale proceeds reinvested into shorter-duration, higher-yielding securities and the remainder reinvested into loans. 
  • The balance of cash and cash equivalents increased by $90.6 million to $128.9 million at June 30, 2018 from $38.3 million at March 31, 2018.  For the year ended June 30, 2018, cash and cash equivalents increased by $50.6 million from $78.2 million at June 30, 2017.  The increase for the quarter and year ended June 30, 2018 partly reflected day-to-day operating fluctuations in the Company's balance of short-term liquidity coupled with the acquisition of cash and cash equivalents balances acquired from CSBK.  Notwithstanding the increase in their overall balance, the Company generally endeavors to limit the balance of cash and cash equivalents held to the minimum levels needed to meet its short-term funding obligations and overall liquidity risk management objectives.  As such, the excess balance of cash and cash equivalents held at June 30, 2018 is generally expected to be redeployed into higher-yielding assets during the quarter ending September 30, 2018.
  • The Company's total deposits increased by $1.01 billion to $4.07 billion at June 30, 2018, from $3.07 billion at March 31, 2018.  For the year ended June 30, 2018, total deposits increased by $1.14 billion from $2.93 billion at June 30, 2017.  The increase in deposits for the quarter and year ended June 30, 2018 largely reflected the impact of deposits acquired from CSBK while also reflecting the continuing effects of product, pricing and marketing strategies implemented during fiscal 2018.
  • Total borrowings increased by $346.6 million to $1.20 billion at June 30, 2018, from $852.0 million at March 31, 2018.  For the year ended June 30, 2018, total borrowings increased by $392.4 million from $806.2 million at June 30, 2017.  The increase in borrowings for the quarter and year ended June 30, 2018 partly reflected the impact of borrowings acquired from CSBK.  The increase attributable to the CSBK acquisition was partly offset by the repayment of maturing FHLB term and overnight advances coupled with changes in depositor sweep account balances representing normal day-to-day fluctuations in such balances. 
  • The Company's stockholders' equity increased by $277.5 million to $1.27 billion at June 30, 2018 from $991.2 million at March 31, 2018.  The increase in stockholders' equity for the quarter ended June 30, 2018 partly reflected $330.7 million of capital stock issued by the Company in conjunction with the acquisition of CSBK.  The increase also reflected net income earned during the period coupled with a decrease in unearned ESOP shares and a net increase in accumulated other comprehensive income primarily reflecting changes in the fair value of the Company's derivatives and available for sale securities portfolios.  The noted increases in stockholders' equity were partially offset by the Company's repurchase of 4.5 million shares of its capital stock during the quarter ended June 30, 2018 at a total cost of $62.5 million and at an average cost of $13.85 per share, coupled with cash dividends paid to stockholders of $3.9 million during the period.  For the year ended June 30, 2018, stockholders' equity increased by $211.6 million from $1.06 billion at June 30, 2017.  The net increase for the year was generally attributable to the cumulative effects of the same factors that contributed to the net change in stockholders' equity for the quarter ended June 30, 2018.
  • At June 30, 2018, the Company's total consolidated equity to assets ratio was 19.28% while the Bank's total consolidated equity to assets ratio was 18.19%. The Company's and Bank's regulatory capital ratios at June 30, 2018 were well in excess of the levels required by federal banking regulators to be classified as "well-capitalized" under regulatory guidelines. 

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

  • The Company's net interest income increased by $13.5 million to $40.6 million for the quarter ended June 30, 2018 from $27.1 million for the quarter ended March 31, 2018.  For the year ended June 30, 2018, net interest income increased by $18.7 million to $121.3 million from $102.6 million for the year ended June 30, 2017.
  • The Company's net interest margin increased 31 basis points to 2.72% for the quarter ended June 30, 2018 from 2.41% for the quarter ended March 31, 2018 while the net interest rate spread increased by 33 basis points to 2.48% from 2.15% for those same comparative periods, respectively.  For the year ended June 30, 2018, the net interest margin increased by nine basis points to 2.50% from 2.41% for the year ended June 30, 2017 while the net interest rate spread increased by 11 basis points to 2.25% from 2.14% for those same comparative periods, respectively. 

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

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

    For the year ended June 30, 2018, the Company recognized net charge offs totaling $1.1 million reflecting an annualized charge off rate of 0.03% on the average balance of total loans for fiscal 2018.  By comparison, the Company's net charge offs totaled approximately $324,000 for the year ended June 30, 2017 reflecting an annualized charge off rate of 0.01% on the average balance of total loans for fiscal 2017. 
  • The Company's provision for loan losses increased by $294,000 to $717,000 for the quarter ended June 30, 2018 compared to $423,000 for the quarter ended March 31, 2018.  The increase in the provision largely reflected the net effect of updates to historical and environmental loss factors that increased the level of provision expense between comparative periods.  The increase in the provision expense was partially offset by a decrease in net charge offs between the two comparative periods, as discussed above, as well as the effects of comparatively lower growth during the quarter ended June 30, 2018 in the performing portion of the non-acquired loan portfolio that is collectively evaluated for impairment using historical and environmental loss factors.
  • For the year ended June 30, 2018, the provision for loan losses decreased by $2.7 million to $2.7 million from $5.4 million for the year ended June 30, 2017.  The decrease in the provision was partly attributable to the effects of comparatively lower growth during fiscal 2018 in the performing portion of the non-acquired loan portfolio that is collectively evaluated for impairment using historical and environmental loss factors while also reflecting the effects of updates to such factors between comparative periods.  This decrease was partially offset by an increase in net charge offs recognized between the two comparative periods, as discussed above.

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

  • Aggregate loan sale gains totaled $127,000 for the quarter ended June 30, 2018 compared to $346,000 for the quarter ended March 31, 2018 while such gains totaled $1.0 million and $1.5 million for the years ended June 30, 2018 and June 30, 2017, respectively.  The decrease in gains recognized was partly attributable to an overall increase in market interest rates that has reduced rate refinancing incentives for residential mortgage borrowers.  A decrease in SBA sale gains between both sets of comparative periods generally reflected fluctuations in loan origination volume and timing that generally characterizes the Company's SBA lending activities.
  • Fees and service charges totaled $1.2 million for the quarter ended June 30, 2018 compared to $1.5 million for the quarter ended March 31, 2018.  For the year ended June 30, 2018, fees and service charges increased to $5.4 million from $3.3 million for the year ended June 30, 2017.  The increased level of fees and service charges for the year ended June 30, 2018 was largely attributable to increased recognition of commercial loan prepayment fees while their inherent variability was the largest contributor to the decrease in fees and charges between the linked quarters ended June 30, 2018 and March 31, 2018.

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

  • The Company's ratio of non-interest expense to average assets totaled 1.90% for the quarter ended June 30, 2018 compared to 1.85% for the prior quarter ended March 31, 2018.  For those same comparative periods, the Company's operating efficiency ratio decreased to 71.1% from 73.7%, respectively.    As noted earlier, excluding the impact of merger-related expenses, the Company's non-interest expense to average assets ratios would have been 1.59% and 1.82% for the quarters ended June 30, 2018 and March 31, 2018, respectively, while the Company's operating efficiency ratios would have been 59.4% and 72.4% for those same periods, respectively.

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

Collectively, the factors noted above contributed to the increases in net income for the quarter and year ended June 30, 2018 noted earlier.  The increases in net income had a favorable impact on the Company's earnings-based performance ratios as highlighted below:

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

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

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

  • The Company increased its regular quarterly cash dividend payable to stockholders by $0.01 from $0.03 per share declared and paid during the quarters ended September 30, 2017, December 31, 2017 and March 31, 2018, to $0.04 per share declared and paid during the quarter ended June 30, 2018.  The Company continues to evaluate its dividend policies and practices in relation to its capital management and shareholder value objectives.
  • In April 2018, the Company completed the repurchase of its shares of capital stock under its second share repurchase program announced in May 2017 through which it authorized the repurchase of 8,559,084 shares, or 10%, of the Company's outstanding shares.  The shares associated with this second program were repurchased at a total cost of $122.0 million and at an average cost of $14.25 per share.
     
  • In May 2018, the Company announced a third share repurchase program through which it authorized the repurchase of 10,238,557 shares, or 10%, of the Company's outstanding shares.  Through June 30, 2018, the Company repurchased a total of 2,695,460 shares, or 26.3% of the shares authorized for repurchase under this third program, at a total cost of $38.4 million and at an average cost of $14.23 per share.

The exhibits that follow this narrative begin with the presentation of the Linked-Quarter Comparative Financial Analysis and Year-to-Year Comparative Financial Analysis. These tabular presentations support the discussion above by presenting the Company's financial condition and operating results for the quarter and fiscal year ended June 30, 2018 compared to those for the prior linked-quarter ended March 31, 2018 and prior fiscal year ended June 30, 2017, respectively.  This analysis is followed by a tabular Five-Quarter Financial Trend Analysis that presents similar financial information, together with other financial highlights and performance metrics, over a consecutive five quarter look-back period that is intended to reflect the Company's financial performance and strategic achievements over this extended period of time.  The exhibits conclude with the presentation of the Reconciliation of GAAP to Non-GAAP financial data included in this news release.

Statements contained in this news release that are not historical facts are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995.  Such forward-looking statements are subject to risks and uncertainties which could cause actual results to differ materially from those currently anticipated due to a number of factors, which include, but are not limited to, factors discussed in documents filed by the Company with the Securities and Exchange Commission from time to time.  The Company does not undertake and specifically disclaims any obligation to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Company.

For further information contact:
Craig L. Montanaro, President and Chief Executive Officer, or
Eric B. Heyer, Senior Executive Vice President and Chief Operating Officer
Kearny Financial Corp.
(973) 244-4500

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)   2018     2018   or Change Pct.
Assets        
Cash and cash equivalents $   128,864   $   38,283   $   90,581   236.6 %
Securities available for sale     725,085       684,771       40,314   5.9 %
Securities held to maturity     589,730       459,380       130,350   28.4 %
Loans held-for-sale     863       2,377       (1,514 ) -63.7 %
Loans receivable, including yield adjustments     4,501,348       3,351,369       1,149,979   34.3 %
Less allowance for loan losses     (30,865 )     (30,248 )     (617 ) 2.0 %
Net loans receivable     4,470,483       3,321,121       1,149,362   34.6 %
Premises and equipment     56,240       42,856       13,384   31.2 %
Federal Home Loan Bank stock     59,004       39,112       19,892   50.9 %
Accrued interest receivable     18,510       13,926       4,584   32.9 %
Goodwill     210,895       108,591       102,304   94.2 %
Bank owned life insurance     249,816       184,981       64,835   35.0 %
Deferred income taxes, net     23,754       3,898       19,856   509.4 %
Other assets     46,630       34,404       12,226   35.5 %
Total assets $   6,579,874   $   4,933,700   $   1,646,174   33.4 %
         
Liabilities        
Deposits $   4,073,604   $   3,067,102   $   1,006,502   32.8 %
Borrowings     1,198,646       852,009       346,637   40.7 %
Advance payments by borrowers for taxes     18,088       8,969       9,119   101.7 %
Other liabilities     20,788       14,419       6,369   44.2 %
Total liabilities     5,311,126       3,942,499       1,368,627   34.7 %
         
Stockholders' Equity        
Common stock     996       788       208   26.4 %
Paid-in capital     922,711       653,045       269,666   41.3 %
Retained earnings     359,096       355,270       3,826   1.1 %
Unearned ESOP shares     (32,590 )     (33,076 )     486   -1.5 %
Accumulated other comprehensive income, net     18,535       15,174       3,361   22.1 %
Total stockholders' equity     1,268,748       991,201       277,547   28.0 %
Total liabilities and stockholders' equity $   6,579,874   $   4,933,700   $   1,646,174   33.4 %
         
Consolidated capital ratios        
Equity to assets   19.28 %   20.09 %   -0.81 %  
Tangible equity to tangible assets   16.53 %   18.29 %   -1.76 %  
         
Share data        
Outstanding shares     99,626       78,765       20,861   26.5 %
Equity per share $   12.74   $   12.58   $   0.16   1.3 %
Tangible equity per share (1) $   10.56   $   11.20   $   (0.64 ) -5.7 %
(1) Tangible equity equals total stockholders' equity reduced by goodwill and core deposit intangible assets.


Summary Income Statement
For the three months ended   Variance
(Dollars and Shares in Thousands, June 30, March 31, Variance
or Change
Except Per Share Data, Unaudited)   2018     2018   or Change Pct.
Interest income        
Loans $   46,615   $   30,728   $   15,887   51.7 %
Taxable investment securities     8,670       6,450       2,220   34.4 %
Tax-exempt investment securities     702       652       50   7.7 %
Other interest-earning assets     1,275       715       560   78.3 %
Total Interest Income     57,262       38,545       18,717   48.6 %
         
Interest expense        
Deposits     9,755       7,026       2,729   38.8 %
Borrowings     6,916       4,462       2,454   55.0 %
Total interest expense     16,671       11,488       5,183   45.1 %
Net interest income     40,591       27,057       13,534   50.0 %
Provision for loan losses     717       423       294   69.5 %
Net interest income after provision for
  loan losses
    39,874       26,634       13,240   49.7 %
         
Non-interest income        
Fees and service charges     1,205       1,537       (332 ) -21.6 %
Gain (loss) on sale and call of securities     9       (1 )     10   -1000.0 %
Gain on sale of loans     127       346       (219 ) -63.3 %
Gain on sale of real estate owned     60       7       53   757.1 %
Income from bank owned life insurance     1,604       1,227       377   30.7 %
Electronic banking fees and charges     278       243       35   14.4 %
Miscellaneous     75       189       (114 ) -60.3 %
Total non-interest income     3,358       3,548       (190 ) -5.4 %
         
Non-interest expense        
Salaries and employee benefits     15,353       12,888       2,465   19.1 %
Net occupancy expense of premises     2,716       2,359       357   15.1 %
Equipment and systems     2,776       2,323       453   19.5 %
Advertising and marketing     757       745       12   1.6 %
Federal deposit insurance premium     463       350       113   32.3 %
Directors' compensation     754       689       65   9.4 %
Merger-related expenses     5,149       401       4,748   1184.0 %
Miscellaneous     3,289       2,788       501   18.0 %
Total non-interest expense     31,257       22,543       8,714   38.7 %
Income before income taxes     11,975       7,639       4,336   56.8 %
Income taxes     4,257       2,262       1,995   88.2 %
Net income $   7,718   $   5,377   $   2,341   43.5 %
         
Net income per common share (EPS)        
Basic $   0.08   $   0.07   $   0.01    
Diluted $   0.08   $   0.07   $   0.01    
         
Dividends declared        
Cash dividends declared per common share $   0.04   $   0.03   $   0.01    
Cash dividends declared $   3,892   $   2,262   $   1,630    
Dividend payout ratio   50.4 %   42.1 %   8.3 %  
         
Weighted average number of  common
 shares outstanding
       
Basic     98,046       75,492       22,554    
Diluted     98,100       75,539       22,561    


Average Balance Sheet Data
For the three months ended   Variance
(Dollars in Thousands, Unaudited) June 30, March 31, Variance
or Change
    2018     2018   or Change Pct.
Assets        
Interest-earning assets:        
Loans receivable, including loans held for sale $   4,507,336   $   3,293,664   $   1,213,672   36.8 %
Taxable investment securities     1,192,066       1,003,600       188,466   18.8 %
Tax-exempt investment securities     134,683       127,605       7,078   5.5 %
Other interest-earning assets     142,591       67,770       74,821   110.4 %
Total interest-earning assets     5,976,676       4,492,639       1,484,037   33.0 %
Non-interest-earning assets     586,976       369,299       217,677   58.9 %
Total assets $   6,563,652   $   4,861,938   $   1,701,714   35.0 %
         
Liabilities and Stockholders' Equity        
Interest-bearing liabilities:        
Deposits:        
Interest-bearing demand $   1,004,445   $   870,762   $   133,683   15.4 %
Savings and club     724,430       513,948       210,482   41.0 %
Certificates of deposit     1,983,372       1,385,151       598,221   43.2 %
Total interest-bearing deposits     3,712,247       2,769,861       942,386   34.0 %
Borrowings:        
Federal Home Loan Bank Advances     1,179,147       777,721       401,426   51.6 %
Other borrowings     34,636       33,529       1,107   3.3 %
Total borrowings     1,213,783       811,250       402,533   49.6 %
Total interest-bearing liabilities     4,926,030       3,581,111       1,344,919   37.6 %
Non-interest-bearing liabilities:        
Non-interest-bearing deposits     305,763       267,152       38,611   14.5 %
Other non-interest-bearing liabilities     39,340       24,953       14,387   57.7 %
Total non-interest-bearing liabilities     345,103       292,105       52,998   18.1 %
Total liabilities     5,271,133       3,873,216       1,397,917   36.1 %
Stockholders' equity     1,292,519       988,722       303,797   30.7 %
Total liabilities and stockholders' equity $   6,563,652   $   4,861,938   $   1,701,714   35.0 %
         
Average interest-earning assets to average
 interest-bearing liabilities
  121.33 %   125.45 %   -4.13 % -3.3 %


  For the three months ended    
Performance Ratio Highlights June 30,   March 31,   Variance
 
  2018   2018   or Change  
Average yield on interest-earning assets:        
Loans receivable, including loans held for sale 4.14 % 3.73 % 0.41%  
Taxable investment securities 2.91 % 2.57 % 0.34%  
Tax-exempt investment securities (1) 2.09 % 2.04 % 0.05%  
Other interest-earning assets 3.58 % 4.22 % -0.64%  
Total interest-earning assets 3.83 % 3.43 % 0.40%  
         
Average cost of interest-bearing liabilities:        
Deposits:        
Interest-bearing demand 0.89 % 0.84 % 0.05%  
Savings and club 0.29 % 0.12 % 0.17%  
Certificates of deposit 1.41 % 1.46 % -0.05%  
Total interest-bearing deposits 1.05 % 1.01 % 0.04%  
Borrowings:        
Federal Home Loan Bank Advances 2.34 % 2.27 % 0.07%  
Other borrowings 0.34 % 0.56 % -0.22%  
Total borrowings 2.28 % 2.20 % 0.08%  
Total interest-bearing liabilities 1.35 % 1.28 % 0.07%  
         
Interest rate spread (2) 2.48 % 2.15 % 0.33%  
Net interest margin (3) 2.72 % 2.41 % 0.31%  
         
Non-interest income to average assets
 (annualized)
0.20 % 0.29 % -0.09%  
Non-interest expense to average assets
 (annualized)
1.90 % 1.85 % 0.05%  
         
Efficiency ratio (4) 71.12 % 73.66 % -2.54  
         
Return on average assets (annualized) 0.47 % 0.44 % 0.03%  
Return on average equity (annualized) 2.39 % 2.18 % 0.21%  
(1) The yield on tax-exempt investment securities has not been adjusted to reflect their tax-effective yield.  
(2) Interest income divided by average interest-earning assets less interest expense divided by average interest-bearing liabilities.
(3) Net interest income divided by average interest-earning assets.      
(4) Non-interest expense divided by the sum of net interest income and non-interest income.  


Year-to-Year Comparative Financial Analysis
         
Summary Balance Sheet
At   Variance
(Dollars in Thousands, June 30, June 30, Variance
or Change
Except Per Share Data, Unaudited)   2018     2017   or Change Pct.
Assets        
Cash and cash equivalents $   128,864   $   78,237   $   50,627   64.7 %
Securities available for sale     725,085       613,760       111,325   18.1 %
Securities held to maturity     589,730       493,321       96,409   19.5 %
Loans held-for-sale     863       4,692       (3,829 ) -81.6 %
Loans receivable, including yield adjustments     4,501,348       3,245,261       1,256,087   38.7 %
Less allowance for loan losses     (30,865 )     (29,286 )     (1,579 ) 5.4 %
Net loans receivable     4,470,483       3,215,975       1,254,508   39.0 %
Premises and equipment     56,240       39,585       16,655   42.1 %
Federal Home Loan Bank stock     59,004       39,958       19,046   47.7 %
Accrued interest receivable     18,510       12,493       6,017   48.2 %
Goodwill     210,895       108,591       102,304   94.2 %
Bank owned life insurance     249,816       181,223       68,593   37.9 %
Deferred income taxes, net     23,754       15,454       8,300   53.7 %
Other assets     46,630       14,838       31,792   214.3 %
Total assets $   6,579,874   $   4,818,127   $   1,761,747   36.6 %
         
Liabilities        
Deposits $   4,073,604   $   2,929,745   $   1,143,859   39.0 %
Borrowings     1,198,646       806,228       392,418   48.7 %
Advance payments by borrowers for taxes     18,088       8,711       9,377   107.6 %
Other liabilities     20,788       16,262       4,526   27.8 %
Total liabilities     5,311,126       3,760,946       1,550,180   41.2 %
         
Stockholders' Equity        
Common stock $   996       844       152   18.0 %
Paid-in capital     922,711       728,790       193,921   26.6 %
Retained earnings     359,096       361,039       (1,943 ) -0.5 %
Unearned ESOP shares     (32,590 )     (34,536 )     1,946   -5.6 %
Accumulated other comprehensive income, net     18,535       1,044       17,491   1675.4 %
Total stockholders' equity     1,268,748       1,057,181       211,567   20.0 %
Total liabilities and stockholders' equity $   6,579,874   $   4,818,127   $   1,761,747   36.6 %
         
Consolidated capital ratios        
Equity to assets   19.28 %   21.94 %   -2.66 %  
Tangible equity to tangible assets   16.53 %   20.14 %   -3.61 %  
         
Share data        
Outstanding shares (period end)     99,626       84,351       15,275   18.1 %
Equity per share $   12.74   $   12.53   $   0.21   1.7 %
Tangible equity per share (1) $   10.56   $   11.24   $   (0.68 ) -6.0 %
(1) Tangible equity equals total stockholders' equity reduced by goodwill and core deposit intangible assets.


Summary Income Statement
For the year ended   Variance
(Dollars and Shares in Thousands, June 30, June 30, Variance
or Change
Except Per Share Data, Unaudited)   2018     2017   or Change Pct.
Interest income        
Loans $   138,426   $   111,181   $   27,245   24.5 %
Taxable investment securities     27,053       23,543       3,510   14.9 %
Tax-exempt investment securities     2,616       2,300       316   13.7 %
Other interest-earning assets     3,336       2,069       1,267   61.2 %
Total Interest Income     171,431       139,093       32,338   23.2 %
         
Interest expense        
Deposits     29,649       22,100       7,549   34.2 %
Borrowings     20,489       14,419       6,070   42.1 %
Total interest expense     50,138       36,519       13,619   37.3 %
Net interest income     121,293       102,574       18,719   18.2 %
Provision for loan losses     2,706       5,381       (2,675 ) -49.7 %
Net interest income after provision for
  loan losses
    118,587       97,193       21,394   22.0 %
         
Non-interest income        
Fees and service charges     5,412       3,289       2,123   64.5 %
Gain (Loss) on sale and call of securities     8       (1 )     9   -900.0 %
Gain on sale of loans     1,004       1,535       (531 ) -34.6 %
Loss on sale of real estate owned     (19 )     (106 )     87   -82.1 %
Income from bank owned life insurance     5,362       5,207       155   3.0 %
Electronic banking fees and charges     1,101       1,080       21   1.9 %
Miscellaneous     395       344       51   14.8 %
Total non-interest income     13,263       11,348       1,915   16.9 %
         
Non-interest expense        
Salaries and employee benefits     54,034       47,818       6,216   13.0 %
Net occupancy expense of premises     9,178       8,018       1,160   14.5 %
Equipment and systems     9,482       8,350       1,132   13.6 %
Advertising and marketing     2,960       2,626       334   12.7 %
Federal deposit insurance premium     1,516       1,334       182   13.6 %
Directors' compensation     2,820       1,982       838   42.3 %
Merger-related expenses     6,743       -       -   0.0 %
Miscellaneous     11,117       10,990       127   1.2 %
Total non-interest expense     97,850       81,118       16,732   20.6 %
Income before income taxes     34,000       27,423       6,577   24.0 %
Income taxes     14,404       8,820       5,584   63.3 %
Net income $   19,596   $   18,603   $   993   5.3 %
         
Net income per common share (EPS)        
Basic $   0.24   $   0.22   $   0.02    
Diluted $   0.24   $   0.22   $   0.02    
         
Dividends declared        
Cash dividends declared per common share $   0.25   $   0.10   $   0.15    
Cash dividends declared $   20,158   $   8,370   $   11,788    
Dividend payout ratio   102.9 %   45.0 %   57.88 %  
         
Weighted average number of  common
 shares outstanding
       
Basic     82,587       84,590       (2,003 )  
Diluted     82,643       84,661       (2,018 )  


Average Balance Sheet Data
For the year ended   Variance
(Dollars in Thousands, Unaudited) June 30, June 30, Variance
or Change
    2018     2017   or Change Pct.
Assets        
Interest-earning assets:        
Loans receivable, including loans held for sale $   3,577,598   $   2,955,686   $   621,912   21.0 %
Taxable investment securities     1,048,163       1,066,508       (18,345 ) -1.7 %
Tax-exempt investment securities     127,779       114,545       13,234   11.6 %
Other interest-earning assets     93,209       114,121       (20,912 ) -18.3 %
Total interest-earning assets     4,846,749       4,250,860       595,889   14.0 %
Non-interest-earning assets     420,219       355,554       64,665   18.2 %
Total assets $   5,266,968   $   4,606,414   $   660,554   14.3 %
         
Liabilities and Stockholders' Equity        
Interest-bearing liabilities:        
Deposits:        
Interest-bearing demand $   896,695   $   769,767   $   126,928   16.5 %
Savings and club     569,777       519,506       50,271   9.7 %
Certificates of deposit     1,496,743       1,241,958       254,785   20.5 %
Total interest-bearing deposits     2,963,215       2,531,231       431,984   17.1 %
Borrowings:        
Federal Home Loan Bank Advances     876,253       647,360       228,893   35.4 %
Other borrowings     34,274       38,412       (4,138 ) -10.8 %
Total borrowings     910,527       685,772       224,755   32.8 %
Total interest-bearing liabilities     3,873,742       3,217,003       656,739   20.4 %
Non-interest-bearing liabilities:        
Non-interest-bearing deposits     281,262       249,693       31,569   12.6 %
Other non-interest-bearing liabilities     30,298       33,416       (3,118 ) -9.3 %
Total non-interest-bearing liabilities     311,560       283,109       28,451   10.0 %
Total liabilities     4,185,302       3,500,112       685,190   19.6 %
Stockholders' equity     1,081,666       1,106,302       (24,636 ) -2.2 %
Total liabilities and stockholders' equity $   5,266,968   $   4,606,414   $   660,554   14.3 %
         
Average interest-earning assets to average
 interest-bearing liabilities
  125.12 %   132.14 %   -7.02 % -5.3 %


  For the year ended    
Performance Ratio Highlights June 30,   June 30,   Variance  
  2018   2017   or Change  
Average yield on interest-earning assets:        
Loans receivable, including loans held for sale 3.87 % 3.76 % 0.11%  
Taxable investment securities 2.58 % 2.21 % 0.37%  
Tax-exempt investment securities (1) 2.05 % 2.01 % 0.04%  
Other interest-earning assets 3.58 % 1.81 % 1.77%  
Total interest-earning assets 3.54 % 3.27 % 0.27%  
         
Average cost of interest-bearing liabilities:        
Deposits:        
Interest-bearing demand 0.82 % 0.66 % 0.16%  
Savings and club 0.17 % 0.13 % 0.04%  
Certificates of deposit 1.42 % 1.32 % 0.10%  
Total interest-bearing deposits 1.00 % 0.87 % 0.13%  
Borrowings:        
Federal Home Loan Bank Advances 2.32 % 2.21 % 0.11%  
Other borrowings 0.40 % 0.33 % 0.07%  
Total borrowings 2.25 % 2.10 % 0.15%  
Total interest-bearing liabilities 1.29 % 1.13 % 0.16%  
         
Interest rate spread (2) 2.25 % 2.14 % 0.11%  
Net interest margin (3) 2.50 % 2.41 % 0.09%  
         
  Non-interest income to average assets 0.25 % 0.25 % 0.01%  
Non-interest expense to average assets 1.86 % 1.76 % 0.10%  
         
Efficiency ratio (4) 72.72 % 71.20 % 1.52%  
         
Return on average assets (annualized) 0.37 % 0.40 % -0.03%  
Return on average equity (annualized) 1.81 % 1.68 % 0.13%  
(1) The yield on tax-exempt investment securities has not been adjusted to reflect their tax-effective yield.  
(2) Interest income divided by average interest-earning assets less interest expense divided by average interest-bearing liabilities.
(3) Net interest income divided by average interest-earning assets.      
(4) Non-interest expense divided by the sum of net interest income and non-interest income.  


Five-Quarter Financial Trend Analysis
           
Summary Balance Sheet
At
(Dollars and Shares in Thousands, June 30, March 31, December 31, September 30, June 30,
Except Per Share Data, Unaudited)   2018     2018     2017     2017     2017  
Assets          
Cash and cash equivalents $   128,864   $   38,283   $   50,685   $   38,823   $   78,237  
Securities available for sale     725,085       684,771       637,671       636,600       613,760  
Securities held to maturity     589,730       459,380       471,452       482,926       493,321  
Loans held-for-sale     863       2,377       3,490       3,808       4,692  
Loans receivable, including yield adjustments     4,501,348       3,351,369       3,291,516       3,260,328       3,245,261  
Less allowance for loan losses     (30,865 )     (30,248 )     (30,066 )     (29,445 )     (29,286 )
Net loans receivable     4,470,483       3,321,121       3,261,450       3,230,883       3,215,975  
Premises and equipment     56,240       42,856       41,829       40,132       39,585  
Federal Home Loan Bank stock     59,004       39,112       39,113       39,115       39,958  
Accrued interest receivable     18,510       13,926       13,524       13,268       12,493  
Goodwill     210,895       108,591       108,591       108,591       108,591  
Bank owned life insurance     249,816       184,981       183,754       182,489       181,223  
Deferred income taxes, net     23,754       3,898       6,941       13,230       15,454  
Other assets     46,630       34,404       25,347       18,285       14,838  
Total assets $   6,579,874   $   4,933,700   $   4,843,847   $   4,808,150   $   4,818,127  
           
Liabilities          
Deposits $   4,073,604   $   3,067,102   $   3,033,231   $   2,952,887   $   2,929,745  
Borrowings     1,198,646       852,009       798,864       808,554       806,228  
Advance payments by borrowers for taxes      18,088       8,969       8,511       9,787       8,711  
Other liabilities     20,788       14,419       13,968       22,689       16,262  
Total liabilities     5,311,126       3,942,499       3,854,574       3,793,917       3,760,946  
           
Stockholders' Equity          
Common stock     996       788       795       815       844  
Paid-in capital     922,711       653,045       662,093       690,204       728,790  
Retained earnings     359,096       355,270       353,536       354,123       361,039  
Unearned ESOP shares     (32,590 )     (33,076 )     (33,563 )     (34,049 )     (34,536 )
Accumulated other comprehensive income, net     18,535       15,174       6,412       3,140       1,044  
Total stockholders' equity     1,268,748       991,201       989,273       1,014,233       1,057,181  
Total liabilities and stockholders' equity $   6,579,874   $   4,933,700   $   4,843,847   $   4,808,150   $   4,818,127  
           
Consolidated capital ratios          
Equity to assets   19.28 %   20.09 %   20.42 %   21.09 %   21.94 %
Tangible equity to tangible assets   16.53 %   18.29 %   18.59 %   19.27 %   20.14 %
           
Share data          
Outstanding shares     99,626       78,765       79,527       81,548       84,351  
Equity per share $   12.74   $   12.58   $   12.44   $   12.44   $   12.53  
Tangible equity per share (1) $   10.56   $   11.20   $   11.07   $   11.10   $   11.24  
(1) Tangible equity equals total stockholders' equity reduced by goodwill and core deposit intangible assets.  


Supplemental Balance Sheet Highlights
At
(Dollars in Thousands, Unaudited) June 30, March 31, December 31, September 30, June 30,
   2018  2018  2017  2017  2017
Cash and cash equivalents          
Cash and due from depository institutions $   26,199 $   18,229 $   17,899 $   17,972 $   18,889
Interest-bearing deposits in other banks     102,665     20,054     32,786     20,851     59,348
Total cash and cash equivalents $   128,864 $   38,283 $   50,685 $   38,823 $   78,237
           
Securities available for sale          
Debt securities:          
U.S. agency securities $   4,411 $   4,667 $   4,810 $   5,063 $   5,316
Municipal and state obligations     26,088     26,733     27,428     27,725     27,740
Asset-backed securities     182,620     182,066     169,484     163,615     162,429
Collateralized loan obligations     226,066     178,342     133,341     128,383     98,154
Corporate bonds     147,594     142,202     142,397     142,489     142,318
Trust preferred securities     3,783     8,485     8,494     8,544     8,540
Debt securities available for sale     590,562     542,495     485,954     475,819     444,497
                     
Mortgage-backed securities:                    
Collateralized mortgage obligations     24,292     25,601     27,187     28,790     30,536
Residential pass-through securities     102,359     108,736     116,496      123,868     130,550
Commercial pass-through securities     7,872     7,939     8,034     8,123     8,177
Mortgage-backed securities     134,523     142,276     151,717     160,781     169,263
Total securities available for sale $   725,085 $   684,771 $   637,671 $   636,600 $   613,760
                     
Securities held to maturity                    
Debt securities:                    
U.S. agency securities $   -  $   -  $   -  $   35,000 $   35,000
Municipal and state obligations     109,483     98,011     100,671     95,954     94,713
Subordinated debt     46,294     30,000     25,000     15,000     15,000
Debt securities held to maturity     155,777     128,011     125,671     145,954     144,713
           
Mortgage-backed securities:          
Collateralized mortgage obligations     56,886     34,309     35,861     16,600     17,854
Residential pass-through securities     200,622     151,605     160,487     169,257     178,813
Commercial pass-through securities     176,445     145,455     149,433     151,115     151,941
Mortgage-backed securities     433,953     331,369     345,781     336,972     348,608
Total securities held to maturity $   589,730 $   459,380 $   471,452 $   482,926 $   493,321
                     
Total securities $   1,314,815 $   1,144,151 $   1,109,123 $   1,119,526 $   1,107,081


Supplemental Balance Sheet Highlights
At
(Dollars in Thousands, Unaudited) June 30, March 31, December 31, September 30, June 30,
    2018     2018     2017     2017     2017  
Loan portfolio composition:          
Residential first mortgage loans $   1,297,453   $   563,807   $   574,322   $   559,593   $   567,323  
Home equity loans and lines of credit     90,761       79,522       80,961       80,746       82,822  
Residential mortgage loans     1,388,214       643,329       655,283       640,339       650,145  
Multifamily mortgage loans     1,758,584       1,471,573       1,438,386       1,427,840       1,412,575  
Nonresidential and mixed use mortgage loans     1,302,961       1,113,385       1,069,254       1,085,983       1,085,064  
Commercial mortgage loans     3,061,545       2,584,958       2,507,640       2,513,823       2,497,639  
Commercial business loans     85,825       88,216       92,442       81,676       74,471  
Construction loans     23,271       22,963       22,205       8,320       3,815  
Account loans     3,283       3,038       2,996       2,800       2,863  
Other consumer loans     5,777       7,186       8,951       10,988       13,520  
Consumer loans     9,060       10,224       11,947       13,788       16,383  
Total loans, excluding yield adjustments     4,567,915       3,349,690       3,289,517       3,257,946       3,242,453  
Unamortized yield adjustments     (66,567 )     1,679       1,999       2,382       2,808  
Loans receivable, including yield adjustments     4,501,348       3,351,369       3,291,516       3,260,328       3,245,261  
Less allowance for loan losses     (30,865 )     (30,248 )     (30,066 )     (29,445 )     (29,286 )
Net loans receivable $   4,470,483   $   3,321,121   $   3,261,450   $   3,230,883   $   3,215,975  
           
Loan portfolio allocation:          
Residential first mortgage loans   28.4 %   16.8 %   17.5 %   17.2 %   17.5 %
Home equity loans and lines of credit   2.0 %   2.4 %   2.5 %   2.5 %   2.6 %
Residential mortgage loans   30.4 %   19.2 %   20.0 %   19.7 %   20.1 %
Multifamily mortgage loans   38.5 %   43.9 %   43.7 %   43.8 %   43.6 %
Nonresidential and mixed use mortgage loans   28.5 %   33.2 %   32.5 %   33.3 %   33.4 %
Commercial mortgage loans   67.0 %   77.1 %   76.2 %   77.1 %   77.0 %
Commercial business loans   1.9 %   2.6 %   2.8 %   2.5 %   2.3 %
Construction loans   0.5 %   0.7 %   0.7 %   0.3 %   0.1 %
Account loans   0.1 %   0.1 %   0.1 %   0.1 %   0.1 %
Other consumer loans   0.1 %   0.3 %   0.2 %   0.3 %   0.4 %
Consumer loans   0.2 %   0.4 %   0.3 %   0.4 %   0.5 %
Total loans, excluding yield adjustments   100.0 %   100.0 %   100.0 %   100.0 %   100.0 %
           
Asset quality:          
Nonperforming assets:          
Accruing loans > 90 days past due $   60   $   45   $   31   $   105   $   74  
Nonaccrual loans     16,799       14,190       16,315       18,006       18,798  
Total nonperforming loans     16,859       14,235       16,346       18,111       18,872  
Other real estate owned     725       1,094       1,693       2,424       1,632  
Total nonperforming assets $   17,584   $   15,329   $   18,039   $   20,535   $   20,504  
           
Nonperforming loans (% total loans)   0.37 %   0.42 %   0.50 %   0.56 %   0.58 %
Nonperforming assets (% total assets)   0.27 %   0.31 %   0.37 %   0.43 %   0.43 %
           
Allowance for loan losses (ALLL):          
ALLL to total loans   0.68 %   0.90 %   0.91 %   0.90 %   0.90 %
ALLL to nonperforming loans   183.08 %   212.49 %   183.93 %   162.58 %   155.18 %
Net charge offs (recoveries) $   101   $   241   $   315   $   471   $   (483 )
Average net charge off (recovery) rate (annualized)   0.01 %   0.03 %   0.04 %   0.06 %   -0.06 %
           


Supplemental Balance Sheet Highlights
At
(Dollars in Thousands, Unaudited) June 30, March 31, December 31, September 30, June 30,
    2018     2018     2017     2017     2017  
Funding by type:          
Deposits          
Non-interest-bearing deposits $   311,938   $   270,217   $   275,065   $   279,263   $   267,412  
Interest-bearing demand     1,000,989       871,425       879,385       855,822       847,400  
Savings and club     744,039       515,805       517,400       519,037       523,981  
Certificates of deposit     2,016,638       1,409,655       1,361,381       1,298,765       1,290,952  
Interest-bearing deposits     3,761,666       2,796,885       2,758,166       2,673,624       2,662,333  
Total deposits     4,073,604       3,067,102       3,033,231       2,952,887       2,929,745  
           
Borrowings:          
Federal Home Loan Bank advances     1,170,144       775,625       775,649       775,673       775,696  
Overnight borrowings     -       42,000       -       -       -  
Depositor sweep accounts     28,502       34,384       23,215       32,881       30,532  
Total borrowings     1,198,646       852,009       798,864       808,554       806,228  
           
Total funding $   5,272,250   $   3,919,111   $   3,832,095   $   3,761,441   $   3,735,973  
           
Loans as a % of deposits   109.8 %   108.4 %   107.6 %   109.5 %   109.9 %
Deposits as a % of total funding   77.3 %   78.3 %   79.2 %   78.5 %   78.4 %
Borrowings as a % of total funding   22.7 %   21.7 %   20.8 %   21.5 %   21.6 %
           
Funding by source:          
Retail funding          
Non-interest-bearing deposits $   311,938   $   270,217   $   275,065   $   279,263   $   267,412  
Interest-bearing demand     790,164       656,114       657,349       633,478       624,798  
Savings and club     744,039       515,805       517,400       519,037       523,981  
Certificates of deposit     1,828,039       1,247,900       1,210,428       1,175,329       1,167,894  
Total retail deposits     3,674,180       2,690,036       2,660,242       2,607,107       2,584,085  
Depositor sweep accounts     28,502       34,384       23,215       32,881       30,532  
Total retail funding     3,702,682       2,724,420       2,683,457       2,639,988       2,614,617  
           
Wholesale funding:          
Interest-bearing demand $   210,825   $   215,311   $   222,036   $   222,344   $   222,602  
Certificates of deposit (listing service)     104,256       104,934       93,853       101,791       101,430  
Certificates of deposit (brokered)     84,343       56,821       57,100       21,645       21,628  
Total wholesale deposits     399,424       377,066       372,989       345,780       345,660  
FHLB Advances     1,170,144       775,625       775,649       775,673       775,696  
Overnight borrowings     -       42,000       -       -       -  
Total wholesale funding     1,569,568       1,194,691       1,148,638       1,121,453       1,121,356  
           
Total funding $   5,272,250   $   3,919,111   $   3,832,095   $   3,761,441   $   3,735,973  
           
Retail funding as a % of total funding   70.2 %   69.5 %   70.0 %   70.2 %   70.0 %
Wholesale funding as a % of total funding   29.8 %   30.5 %   30.0 %   29.8 %   30.0 %


Summary Income Statement
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)   2018     2018     2017     2017     2017  
Interest income          
Loans $   46,615   $   30,728   $   30,610   $   30,473   $   29,842  
Taxable investment securities     8,670       6,450       6,077       5,856       5,931  
Tax-exempt investment securities     702       652       641       621       605  
Other interest-earning assets     1,275       715       704       642       586  
Total interest income     57,262       38,545       38,032       37,592       36,964  
           
Interest expense          
Deposits     9,755       7,026       6,649       6,219       5,909  
Borrowings     6,916       4,462       4,548       4,563       4,325  
Total interest expense     16,671       11,488       11,197       10,782       10,234  
Net interest income     40,591       27,057       26,835       26,810       26,730  
Provision for loan losses     717       423       936       630       1,188  
Net interest income after provision for
  loan losses
    39,874       26,634       25,899       26,180       25,542  
           
Non-interest income          
Fees and service charges     1,205       1,537       1,409       1,261       839  
Gain (loss) on sale and call of securities     9       (1 )     -       -       -  
Gain on sale of loans     127       346       200       331       531  
Gain (loss) on sale of real estate owned     60       7       23       (109 )     3  
Income from bank owned life insurance     1,604       1,227       1,264       1,267       1,288  
Electronic banking fees and charges      278       243       302       278       287  
Miscellaneous     75       189       65       66       72  
Total non-interest income     3,358       3,548       3,263       3,094       3,020  
           
Non-interest expense          
Salaries and employee benefits     15,353       12,888       12,926       12,867       12,887  
Net occupancy expense of premises     2,716       2,359       2,122       1,981       2,013  
Equipment and systems     2,776       2,323       2,193       2,190       2,204  
Advertising and marketing     757       745       748       710        937  
Federal deposit insurance premium     463       350       343       360       352  
Directors' compensation     754       689       688       689       689  
Merger-related expenses     5,149       401       1,193       -       -  
Miscellaneous     3,289       2,788       2,551       2,489       2,969  
Total non-interest expense     31,257       22,543       22,764       21,286       22,051  
Income before income taxes     11,975       7,639       6,398       7,988       6,511  
Income taxes     4,257       2,262       5,129       2,756       2,107  
Net income $   7,718   $   5,377   $   1,269   $   5,232   $   4,404  
           
Net income per common share (EPS)          
Basic $   0.08   $   0.07   $   0.02   $   0.07   $   0.05  
Diluted $   0.08   $   0.07   $   0.02   $   0.07   $   0.05  
           
Dividends declared (1)          
Cash dividends declared per common share $   0.04   $   0.03   $   0.03   $   0.15   $   0.03  
Cash dividends declared $   3,892   $   2,262   $   1,856   $   12,148   $   2,448  
Dividend payout ratio   50.4 %   42.1 %   146.3 %   232.2 %   55.6 %
           
Weighted average number of  common
 shares outstanding
         
Basic     98,046       75,492       77,174       79,649       82,372  
Diluted     98,100       75,539       77,239       79,708       82,429  
  (1) Dividends declared during the quarter ended September 30, 2017 include a $0.12 special dividend representing a supplemental distribution of net income to stockholders from the prior fiscal year ended June 30, 2017.


Average Balance Sheet Data
For the three months ended
(Dollars in Thousands, Unaudited) June 30, March 31, December 31, September 30, June 30,
    2018     2018     2017     2017     2017  
Assets          
Interest-earning assets:          
Loans receivable, including loans held for sale $   4,507,336   $   3,293,664   $   3,255,862   $ 3,257,465   $   3,200,968  
Taxable investment securities     1,192,066       1,003,600       996,397       1,001,183       1,009,120  
Tax-exempt investment securities     134,683       127,605       126,214       122,685       119,957  
Other interest-earning assets     142,591       67,770       82,539       79,920       118,349  
Total interest-earning assets     5,976,676       4,492,639       4,461,012       4,461,253       4,448,394  
Non-interest-earning assets     586,976       369,299       364,015       361,259       358,791  
Total assets $   6,563,652   $   4,861,938   $   4,825,027   $   4,822,512   $   4,807,185  
           
Liabilities and Stockholders' Equity          
Interest-bearing liabilities:          
Deposits:          
Interest-bearing demand $   1,004,445   $   870,762   $   854,142   $   858,039   $   812,932  
Savings and club     724,430       513,948       518,513       522,686       523,771  
Certificates of deposit     1,983,372       1,385,151       1,336,466       1,284,847       1,288,537  
Total interest-bearing deposits     3,712,247       2,769,861       2,709,121       2,665,572       2,625,240  
Borrowings:          
Federal Home Loan Bank Advances     1,179,147       777,721       777,460       778,104       775,703  
Other borrowings     34,636       33,529       30,606       32,041       40,064  
Total borrowings     1,213,783       811,250       808,066       810,145       815,767  
Total interest-bearing liabilities     4,926,030       3,581,111       3,517,187       3,475,717       3,441,007  
Non-interest-bearing liabilities:          
Non-interest-bearing deposits     305,763       267,152       277,236       274,858       262,499  
Other non-interest-bearing liabilities     39,340       24,953       25,777       31,070       26,322  
Total non-interest-bearing liabilities     345,103       292,105       303,013       305,928       288,821  
Total liabilities     5,271,133       3,873,216       3,820,200       3,781,645       3,729,828  
Stockholders' equity     1,292,519       988,722       1,004,827       1,040,867       1,077,357  
Total liabilities and stockholders' equity $   6,563,652   $   4,861,938   $   4,825,027   $   4,822,512   $   4,807,185  
           
Average interest-earning assets to average
 interest-bearing liabilities
  121.33 %   125.45 %   126.83 %   128.35 %   129.28 %


  For the three months ended
Performance Ratio Highlights June 30, March 31, December 31, September 30, June 30,
  2018 2018 2017 2017 2017
Average yield on interest-earning assets:          
Loans receivable, including loans held for sale 4.14% 3.73% 3.76% 3.74% 3.73%
Taxable investment securities 2.91% 2.57% 2.44% 2.34% 2.35%
Tax-exempt investment securities (1) 2.09% 2.04% 2.03% 2.03% 2.02%
Other interest-earning assets 3.58% 4.22% 3.42% 3.21% 1.98%
Total interest-earning assets 3.83% 3.43% 3.41% 3.37% 3.32%
           
Average cost of interest-bearing liabilities:          
Deposits:          
Interest-bearing demand 0.89% 0.84% 0.80% 0.76% 0.71%
Savings and club 0.29% 0.12% 0.12% 0.12% 0.12%
Certificates of deposit 1.41% 1.46% 1.43% 1.38% 1.34%
Total interest-bearing deposits 1.05% 1.01% 0.98% 0.93% 0.90%
Borrowings:          
Federal Home Loan Bank Advances 2.34% 2.27% 2.33% 2.33% 2.21%
Other borrowings 0.34% 0.56% 0.27% 0.27% 0.27%
Total borrowings 2.28% 2.20% 2.25% 2.25% 2.12%
Total interest-bearing liabilities 1.35% 1.28% 1.27% 1.24% 1.19%
           
Interest rate spread (2) 2.48% 2.15% 2.14% 2.13% 2.13%
Net interest margin (3) 2.72% 2.41% 2.41% 2.40% 2.40%
           
Non-interest income to average assets
 (annualized)
0.20% 0.29% 0.27% 0.26% 0.25%
Non-interest expense to average assets
 (annualized)
1.90% 1.85% 1.89% 1.77% 1.83%
           
Efficiency ratio (4) 71.12% 73.66% 75.63% 71.18% 74.12%
           
Return on average assets (annualized) 0.47% 0.44% 0.11% 0.43% 0.37%
Return on average equity (annualized) 2.39% 2.18% 0.51% 2.01% 1.64%
(1) The yield on tax-exempt investment securities has not been adjusted to reflect their tax-effective yield.    
(2) Interest income divided by average interest-earning assets less interest expense divided by average interest-bearing liabilities.
(3) Net interest income divided by average interest-earning assets.        
(4) Non-interest expense divided by the sum of net interest income and non-interest income.    
 
This document contains certain non-GAAP financial measures in addition to results presented in accordance with Generally Accepted Accounting Principles ("GAAP"). These non-GAAP measures provide additional information which allow readers to evaluate the ongoing performance of the Company. They are not a substitute for GAAP measures; they should be read and used in conjunction with the Company's GAAP financial information. A reconciliation of non-GAAP financial measures to GAAP measures is included below. In all cases, it should be understood that non-GAAP per share measures do not depict amounts that accrue directly to the benefit of shareholders.
           


Reconciliation of GAAP to Non-GAAP
For the three months ended
(Dollars in Thousands, June 30, March 31, December 31, September 30, June 30,
Except Per Share Data, Unaudited)   2018     2018     2017     2017   2017
Adjusted Net Income          
Net income (GAAP) $   7,718   $   5,377   $   1,269   $   5,232 $   4,404
Effect to adjust for:          
Merger-related expenses     5,149       401       1,193       -     -
Income tax benefit from merger-related
 expenses
    (1,451 )     (22 )     (165 )     -     -
Income tax expense for write-down of net
 deferred tax asset
    -       -       4,867       -     -
Income tax benefit for write-down of net
 deferred tax liability
    -       -       (1,381 )     -     -
Income tax benefit for reduction in current
 year income tax rate (from 35% to 28%)
    -       -       (769 )     -      -
Adjusted net income
 (non-GAAP)
$   11,416   $   5,756   $   5,014   $   5,232 $   4,404
           
Adjusted Net Income per Common Share (EPS)          
Net income per common share
 Basic (GAAP)
$   0.08   $   0.07   $   0.02   $   0.07 $   0.05
Effect to adjust for:          
Merger-related expenses     0.05       0.01       0.02       -      - 
Income tax benefit from merger-related
 expenses
    (0.01 )     -        (0.01 )     -      - 
Income tax expense for write-down of net
 deferred tax asset
    -        -        0.06       -      - 
Income tax benefit for write-down of net
 deferred tax liability
    -        -        (0.02 )     -      - 
Income tax benefit for reduction in current
 year income tax rate (from 35% to 28%)
    -         -        (0.01 )     -      - 
Adjusted net income per common share
 Basic (non-GAAP)
$   0.12   $   0.08   $   0.06   $   0.07 $   0.05
           
Adjusted Net Income per Common Share (EPS)          
Net income per common share
 Diluted (GAAP)
$   0.08   $   0.07   $   0.02   $   0.07 $   0.05
Effect to adjust for:          
Merger-related expenses     0.05       0.01       0.02       -      - 
Income tax benefit from merger-related
 expenses
    (0.01 )     -         (0.01 )     -      - 
Income tax expense for write-down of net
 deferred tax asset
    -        -        0.06       -      - 
Income tax benefit for write-down of net
 deferred tax liability
    -        -        (0.02 )     -      - 
Income tax benefit for reduction in current
 year income tax rate (from 35% to 28%)
    -        -        (0.01 )     -      - 
Adjusted net income per common share
 Diluted (non-GAAP)
$   0.12   $   0.08   $   0.06   $   0.07 $   0.05
           


  For the three months ended
Reconciliation of GAAP to Non-GAAP June 30, March 31, December 31, September 30, June 30,
(Unaudited) 2018 2018 2017 2017 2017
Adjusted Non-Interest Expense          
Non-interest expense (GAAP)   31,257   22,543 22,764 21,286 22,051
Effect to adjust for:          
Merger-related expenses   (5,149)   (401) (1,193)   -   -
Adjusted non-interest expense
 (non-GAAP)
26,108 22,142 21,571 21,286 22,051
           
Adjusted Non-Interest Expense Ratio          
Non-interest expense to average assets (GAAP) 1.90% 1.85% 1.89% 1.77% 1.83%
Effect to adjust for:          
Merger-related expenses -0.31% -0.03% -0.10% 0.00% 0.00%
Adjusted non-interest expense ratio
 (non-GAAP)
1.59% 1.82% 1.79% 1.77% 1.83%
           
Adjusted Efficiency Ratio          
Non-interest expense / (Net interest income
 + non-interest income) (GAAP)
71.1% 73.7% 75.6% 71.2% 74.1%
Effect to adjust for:          
Merger-related expenses -11.7% -1.3% -3.9% 0.0% 0.0%
Adjusted efficiency ratio
 (non-GAAP)
59.4% 72.4% 71.7% 71.2% 74.1%
           
Adjusted Return on Average Assets          
Return on average assets (GAAP) 0.47% 0.44% 0.11% 0.43% 0.37%
Effect to adjust for:          
Merger-related expenses 0.31% 0.03% 0.09% 0.00% 0.00%
Income tax benefit from merger-related
 expenses
-0.09% 0.00% -0.01% 0.00% 0.00%
Income tax expense for write-down of net
 deferred tax asset
0.00% 0.00% 0.40% 0.00% 0.00%
Income tax benefit for write-down of net
 deferred tax liability
0.00% 0.00% -0.11% 0.00% 0.00%
Income tax benefit for reduction in current
 year income tax rate (from 35% to 28%)
0.00% 0.00% -0.06% 0.00% 0.00%
Adjusted return on average assets
 (non-GAAP)
0.69% 0.47% 0.42% 0.43% 0.37%
           
Adjusted Return on Average Equity          
Return on average equity (GAAP) 2.39% 2.18% 0.51% 2.01% 1.64%
Effect to adjust for:          
Merger-related expenses 1.59% 0.16% 0.48% 0.00% 0.00%
Income tax benefit from merger-related
 expenses
-0.45% -0.01% -0.07% 0.00% 0.00%
Income tax expense for write-down of net
 deferred tax asset
0.00% 0.00% 1.94% 0.00% 0.00%
Income tax benefit for write-down of net
 deferred tax liability
0.00% 0.00% -0.55% 0.00% 0.00%
Income tax benefit for reduction in current
 year income tax rate (from 35% to 28%)
0.00% 0.00% -0.31% 0.00% 0.00%
Adjusted return on average equity
 (non-GAAP)
3.53% 2.33% 2.00% 2.01% 1.64%
           

 

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