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 ChangePct.
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 ChangePct.
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 ChangePct.
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 HighlightsJune 30, March 31, Variance
 
 2018 2018 or Change 
Average yield on interest-earning assets:    
Loans receivable, including loans held for sale4.14%3.73%0.41% 
Taxable investment securities2.91%2.57%0.34% 
Tax-exempt investment securities (1)2.09%2.04%0.05% 
Other interest-earning assets3.58%4.22%-0.64% 
Total interest-earning assets3.83%3.43%0.40% 
     
Average cost of interest-bearing liabilities:    
Deposits:    
Interest-bearing demand0.89%0.84%0.05% 
Savings and club0.29%0.12%0.17% 
Certificates of deposit1.41%1.46%-0.05% 
Total interest-bearing deposits1.05%1.01%0.04% 
Borrowings:    
Federal Home Loan Bank Advances2.34%2.27%0.07% 
Other borrowings0.34%0.56%-0.22% 
Total borrowings2.28%2.20%0.08% 
Total interest-bearing liabilities1.35%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 ChangePct.
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 ChangePct.
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 ChangePct.
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 HighlightsJune 30, June 30, Variance 
 2018 2017 or Change 
Average yield on interest-earning assets:    
Loans receivable, including loans held for sale3.87%3.76%0.11% 
Taxable investment securities2.58%2.21%0.37% 
Tax-exempt investment securities (1)2.05%2.01%0.04% 
Other interest-earning assets3.58%1.81%1.77% 
Total interest-earning assets3.54%3.27%0.27% 
     
Average cost of interest-bearing liabilities:    
Deposits:    
Interest-bearing demand0.82%0.66%0.16% 
Savings and club0.17%0.13%0.04% 
Certificates of deposit1.42%1.32%0.10% 
Total interest-bearing deposits1.00%0.87%0.13% 
Borrowings:    
Federal Home Loan Bank Advances2.32%2.21%0.11% 
Other borrowings0.40%0.33%0.07% 
Total borrowings2.25%2.10%0.15% 
Total interest-bearing liabilities1.29%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 assets0.25%0.25%0.01% 
Non-interest expense to average assets1.86%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 HighlightsJune 30,March 31,December 31,September 30,June 30,
 20182018201720172017
Average yield on interest-earning assets:     
Loans receivable, including loans held for sale4.14%3.73%3.76%3.74%3.73%
Taxable investment securities2.91%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 assets3.58%4.22%3.42%3.21%1.98%
Total interest-earning assets3.83%3.43%3.41%3.37%3.32%
      
Average cost of interest-bearing liabilities:     
Deposits:     
Interest-bearing demand0.89%0.84%0.80%0.76%0.71%
Savings and club0.29%0.12%0.12%0.12%0.12%
Certificates of deposit1.41%1.46%1.43%1.38%1.34%
Total interest-bearing deposits1.05%1.01%0.98%0.93%0.90%
Borrowings:     
Federal Home Loan Bank Advances2.34%2.27%2.33%2.33%2.21%
Other borrowings0.34%0.56%0.27%0.27%0.27%
Total borrowings2.28%2.20%2.25%2.25%2.12%
Total interest-bearing liabilities1.35%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-GAAPJune 30,March 31,December 31,September 30,June 30,
(Unaudited)20182018201720172017
Adjusted Non-Interest Expense      
Non-interest expense (GAAP)  31,257  22,54322,76421,28622,051
Effect to adjust for:     
Merger-related expenses  (5,149)  (401)(1,193)  -  -
Adjusted non-interest expense
 (non-GAAP)		26,10822,14221,57121,28622,051
      
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 expenses0.31%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 expenses1.59%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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