8-K
Kearny Financial Corp. (KRNY)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 27, 2021
KEARNY FINANCIAL CORP.
(Exact name of Registrant as Specified in Its Charter)
| Maryland | 001-37399 | 30-0870244 |
|---|---|---|
| (State or Other Jurisdiction<br><br>of Incorporation) | (Commission File Number) | (IRS Employer<br><br>Identification No.) |
| 120 Passaic Avenue | 07004 | |
| Fairfield, New Jersey<br><br>(Address of Principal Executive Offices) | (Zip Code) |
Registrant’s Telephone Number, Including Area Code: (973) 244-4500
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, $0.01 par value | KRNY | The NASDAQ Stock Market LLC |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operation and Financial Condition
On October 27, 2021, Kearny Financial Corp. (the “Company”), the holding company for Kearny Bank, issued a press release reporting its financial results for the period ended September 30, 2021.
A copy of the press release announcing the results is included as Exhibit 99.1 to this Current Report on Form 8-K and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933.
Item 8.01 Other Events
On October 27, 2021, Kearny Financial Corp.’s Board of Directors announced a quarterly cash dividend of $0.11 per share, payable on November 24, 2021 to stockholders of record as of November 10, 2021. This dividend represents an increase of $0.01, or 10%, from the prior quarter’s dividend of $0.10 per share.
Item 9.01 Financial Statements and Exhibits
(a) Financial Statements of Business Acquired. Not applicable.
(b) Pro Forma Financial Information. Not applicable.
(c) Shell Company Transaction. Not applicable.
(d) Exhibits.
| Exhibit Number | Description |
|---|---|
| 99.1 | Press release dated October 27, 2021. |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| KEARNY FINANCIAL CORP. | ||
|---|---|---|
| Date: October 28, 2021 | By: | /s/ Craig L. Montanaro |
| Craig L. Montanaro | ||
| President and Chief Executive Officer |
EX-99.1
Exhibit 99.1
FOR IMMEDIATE RELEASE
October 27, 2021
For further information contact:
Craig L. Montanaro, President and Chief Executive Officer, or
Keith Suchodolski, Executive Vice President and Chief Financial Officer
Kearny Financial Corp.
(973) 244-4500
KEARNY FINANCIAL CORP. REPORTS FISCAL 2022 FIRST QUARTER RESULTS
AND 10% INCREASE IN CASH DIVIDEND
Fairfield, N.J., October 27, 2021 – Kearny Financial Corp. (NASDAQ GS: KRNY) (the “Company”), the holding company of Kearny Bank (the “Bank”), reported net income for the quarter ended September 30, 2021 of $19.7 million, or $0.26 per diluted share, compared to $18.5 million, or $0.24 per diluted share, for the quarter ended June 30, 2021.
The Company also announced that its Board of Directors has declared a quarterly cash dividend of $0.11 per share, payable on November 24, 2021 to stockholders of record as of November 10, 2021. This dividend represents an increase of $0.01, or 10%, from the prior quarter’s dividend of $0.10 per share.
Craig L. Montanaro, President and Chief Executive Officer, commented, “We are very pleased with our first quarter results which reflected record earnings, continued net interest margin expansion and sustained growth in non-interest-bearing deposits, which increased 6.3% from June 30, 2021. Additionally, we continued to right-size our retail branch footprint with the announcement of three additional branch consolidations, bringing our total to 15 over the past two and a half years.” Mr. Montanaro continued, “Despite strong origination volume, loan balances for the quarter were negatively impacted by record levels of commercial loan repayment activity. However, we remain optimistic as our commercial loan pipeline stands at a historically high level heading into the second quarter of the fiscal year.”
Regarding the Company's capital management strategies Mr. Montanaro noted, “As we move further into fiscal 2022, capital management remains a strategic priority. Our recent authorization of a new 10% share repurchase plan, coupled with the increase in our quarterly cash dividend, demonstrates our commitment to returning excess capital to our shareholders while retaining sufficient capital to allow us to take advantage of strategic capital deployment opportunities as they may arise.”
Balance Sheet
Deposits decreased $90.2 million to $5.40 billion at September 30, 2021, from $5.49 billion at June 30, 2021, reflecting the controlled run-off of time deposits which was partially offset by growth in core non-maturity deposits. For the quarter ended September 30, 2021, non-interest-bearing deposits increased $37.6 million, or 6.3%.
Loans receivable decreased $62.1 million to $4.79 billion at September 30, 2021, from $4.85 billion at June 30, 2021, due primarily to record levels of repayment activity in the commercial real estate and multifamily mortgage portfolios that more than offset the strong loan origination volume for the quarter.
Investment securities decreased $26.3 million to $1.69 billion at September 30, 2021, from $1.72 billion at June 30, 2021, representing 23.5% of total assets at each of those comparative periods.
Borrowings increased $35.1 million to $721.0 million, or 10.0% of total assets, at September 30, 2021, from $685.9 million, or 9.4% of total assets, at June 30, 2021.
Earnings
Performance Highlights
Return on average assets improved to 1.09% for the quarter ended September 30, 2021. Excluding the impact of non-recurring items, including branch consolidation charges, impairment charges and net effect of sale and call of securities, return on average assets would have been 1.15%. (1)
Return on average equity improved to 7.66% for the quarter ended September 30, 2021 while return on average tangible equity improved to 9.67%. Excluding the impact of non-recurring items, as noted above, return on average tangible equity would have been 10.26%. (1)
Net Interest Income and Net Interest Margin
Effective July 1, 2021, loan prepayment penalty income was reclassified to interest income on loans. Previously, loan prepayment penalty income was recorded within non-interest income. Interest income and non-interest income for all periods presented in this earnings release reflect this reclassification. Except where noted in the footnotes to the tables provided in this earnings release, there were no other changes resulting from this reclassification.
Net interest margin expanded seven basis points to 2.99% for the quarter ended September 30, 2021, from 2.92% for the quarter ended June 30, 2021, and was largely due to a reduction in the cost of interest-bearing liabilities, which declined six basis points to 0.55%.
Net interest income increased $525,000 to $49.6 million for the quarter ended September 30, 2021, from $49.1 million for the quarter ended June 30, 2021. Included in net interest income for the quarters ended September 30, 2021 and June 30, 2021, respectively, was purchase accounting accretion of $2.9 million and $3.1 million, and loan prepayment penalty income of $1.7 million and $902,000.
Non-Interest Income
Fees and service charges increased $184,000 to $607,000 for the quarter ended September 30, 2021 from $423,000 for the quarter ended June 30, 2021, and was largely attributable to fluctuations in various loan-related fee categories.
Gain on sale of loans increased $643,000 to $1.0 million for the quarter ended September 30, 2021 from $363,000 for the quarter ended June 30, 2021. This increase largely reflected greater volume and an improved average sales price of residential mortgage loans sold during the period.
Included in other income for the prior quarter ended June 30, 2021 were non-recurring gains of $205,000 attributable to the sale of properties sold in connection with branch consolidation activities, as previously disclosed. No such gains were recorded during the quarter ended September 30, 2021.
Non-Interest Expense
Non-interest expense decreased $183,000 to $31.8 million for the quarter ended September 30, 2021, from $32.0 million for the quarter ended June 30, 2021. Salaries and benefits expense increased $840,000, or 4.7%, from June 30, 2021 due largely to annual merit increases and increases in benefit plan expense. Net occupancy expense increased $1.5 million, or 51.7%, primarily due to non-recurring expense of $1.3 million and $250,000, respectively, related to the consolidation of three retail branch locations and facility repairs made in connection with damage incurred during Tropical Storm Ida.
Other expense decreased $2.7 million to $3.1 million for the quarter ended September 30, 2021, from $5.8 million for the quarter ended June 30, 2021 and was largely comprised of declines of $1.6 million and $566,000, respectively, in asset impairment charges and provisions for credit losses on off-balance sheet credit exposures. Also contributing to the decrease were less noteworthy reductions in loan expense, legal fees and consulting fees. For the quarter ended September 30, 2021, asset impairment charges recorded in other expense, related to the previously noted branch consolidations, totaled $420,000, while provisions for credit losses on off-balance sheet credit exposures reflected a provision reversal of $124,000.
The efficiency and non-interest expense ratios were 59.57% and 1.76%, respectively, for the quarter ended September 30, 2021. Excluding the impact of non-recurring items, as noted above, the efficiency and non-interest expense ratios for the quarter ended September 30, 2021 would have been 56.36% and 1.66%, respectively. (1)
Income Taxes
Income tax expense increased $239,000 to $7.3 million for the quarter ended September 30, 2021 compared to $7.0 million for the quarter ended June 30, 2021, resulting in effective tax rates of 26.9% and 27.6%, respectively.
Asset Quality
The balance of non-performing loans decreased $6.8 million to $72.9 million, or 1.02% of total assets, at September 30, 2021, from $79.8 million, or 1.10% of total assets, at June 30, 2021. At September 30, 2021, the Company had active COVID-19 payment deferrals on 13 residential mortgage and home equity loans totaling $5.6 million, representing 0.12% of total loans.
Net charge offs totaled $980,000, or 0.08% of average loans, on an annualized basis, for the quarter ended September 30, 2021 compared to $656,000, or 0.05%, for the quarter ended June 30, 2021. Of the charge-offs recorded during the quarter ended September 30, 2021, $935,000, or 95.5%, had previously been individually reserved for within the allowance for credit losses ("ACL").
For the quarter ended September 30, 2021, the Company recorded a provision for credit loss reversal of $5.4 million, compared to a provision for credit loss reversal of $4.9 million for the quarter ended June 30, 2021. The reversal for the quarter ended September 30, 2021 primarily reflected a reduction in the expected life of various segments of the loan portfolio along with continued improvement in the Company's credit risk outlook.
The ACL decreased to $51.8 million, or 1.08% of total loans, at September 30, 2021, from $58.2 million, or 1.19% of total loans at June 30, 2021.
Capital
For the quarter ended September 30, 2021, book value per share increased by $0.17 to $13.38 while tangible book value per share increased by $0.06 to $10.55.
During the quarter ended September 30, 2021, the Company repurchased 3,157,788 shares of common stock at a cost of $39.0 million, or $12.35 per share.
On September 20, 2021, the Company announced the completion of its seventh stock repurchase plan which authorized the repurchase of 4,064,649 shares. Such shares were repurchased at a cost of $50.5 million, or an average price of $12.43 per share. On September 22, 2021, the Company announced the authorization of an eighth stock repurchase plan to repurchase up to 7,602,021 shares, or approximately 10% of the Company's outstanding shares as of that date. Through September 30, 2021, the Company repurchased a total of 213,139 shares, or 2.8% of the shares authorized for repurchase under the current repurchase program, at a total cost of $2.6 million and at an average cost of $12.41 per share.
At September 30, 2021, the Company’s tangible equity to tangible assets ratio equaled 11.48% and the regulatory capital ratios, of both the Company and the Bank, were in excess of the levels required by federal banking regulators to be classified as “well-capitalized” under regulatory guidelines.
(1) Please reference the Reconciliation of GAAP to Non-GAAP tables for a reconciliation of the non-GAAP financial measures.
Statements contained in this news release that are not historical facts are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties which could cause actual results to differ materially from those currently anticipated due to a number of factors, which include, but are not limited to, factors discussed in documents filed by the Company with the Securities and Exchange Commission from time to time. The Company does not undertake and specifically disclaims any obligation to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Company.
In addition, the COVID-19 pandemic has had, and may continue to have, an adverse impact on the Company, its clients and the communities it serves. Given its ongoing and dynamic nature, it is difficult to predict the full impact of the COVID-19 pandemic on our business. The extent of such impact will depend on future developments, which are highly uncertain, including whether the coronavirus can continue to be controlled and abated and if the economy is able to remain open. As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, we could be subject to any of the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations: the demand for our products and services may decline, making it difficult to grow assets and income; if the economy is unable to substantially remain open, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income; collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase; our allowance for credit losses may increase if borrowers experience financial difficulties, which will adversely affect our net income; the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us; as the result of the decline in the Federal Reserve Board’s target federal funds rate to near 0%, the yield on our assets may decline to a greater extent than the decline in our cost of interest-bearing liabilities, reducing our net interest margin and spread and reducing net income; due to a decline in our stock price or other factors, goodwill may become impaired and be required to be written down; and our cyber security risks are increased as the result of an increase in the number of employees working remotely.
Category: Earnings
| Linked-Quarter Comparative Financial Analysis | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Kearny Financial Corp. | ||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Consolidated Balance Sheets | ||||||||||||
| (Dollars and Shares in Thousands, | September 30, | June 30, | Variance | Variance | ||||||||
| Except Per Share Data) | 2021 | 2021 | or Change | or Change Pct. | ||||||||
| (Unaudited) | (Audited) | |||||||||||
| Assets | ||||||||||||
| Cash and cash equivalents | $ | 54,070 | $ | 67,855 | $ | (13,785 | ) | -20.3 | % | |||
| Securities available for sale | 1,651,156 | 1,676,864 | (25,708 | ) | -1.5 | % | ||||||
| Securities held to maturity | 37,497 | 38,138 | (641 | ) | -1.7 | % | ||||||
| Loans held-for-sale | 12,884 | 16,492 | (3,608 | ) | -21.9 | % | ||||||
| Loans receivable | 4,789,339 | 4,851,394 | (62,055 | ) | -1.3 | % | ||||||
| Less: allowance for credit losses on loans | (51,785 | ) | (58,165 | ) | 6,380 | -11.0 | % | |||||
| Net loans receivable | 4,737,554 | 4,793,229 | (55,675 | ) | -1.2 | % | ||||||
| Premises and equipment | 55,236 | 56,338 | (1,102 | ) | -2.0 | % | ||||||
| Federal Home Loan Bank stock | 36,615 | 36,615 | - | 0.0 | % | |||||||
| Accrued interest receivable | 19,541 | 19,362 | 179 | 0.9 | % | |||||||
| Goodwill | 210,895 | 210,895 | - | 0.0 | % | |||||||
| Core deposit intangible | 3,524 | 3,705 | (181 | ) | -4.9 | % | ||||||
| Bank owned life insurance | 284,871 | 283,310 | 1,561 | 0.6 | % | |||||||
| Deferred income taxes, net | 27,771 | 29,323 | (1,552 | ) | -5.3 | % | ||||||
| Other real estate owned | 178 | 178 | - | 0.0 | % | |||||||
| Other assets | 51,896 | 51,431 | 465 | 0.9 | % | |||||||
| Total assets | $ | 7,183,688 | $ | 7,283,735 | $ | (100,047 | ) | -1.4 | % | |||
| Liabilities | ||||||||||||
| Deposits: | ||||||||||||
| Non-interest-bearing | 631,344 | $ | 593,718 | $ | 37,626 | 6.3 | % | |||||
| Interest-bearing | 4,763,795 | 4,891,588 | (127,793 | ) | -2.6 | % | ||||||
| Total deposits | 5,395,139 | 5,485,306 | (90,167 | ) | -1.6 | % | ||||||
| Borrowings | 720,990 | 685,876 | 35,114 | 5.1 | % | |||||||
| Advance payments by borrowers for taxes | 16,222 | 15,752 | 470 | 3.0 | % | |||||||
| Other liabilities | 36,914 | 53,857 | (16,943 | ) | -31.5 | % | ||||||
| Total liabilities | 6,169,265 | 6,240,791 | (71,526 | ) | -1.1 | % | ||||||
| Stockholders' Equity | ||||||||||||
| Common stock | 758 | 790 | (32 | ) | -4.1 | % | ||||||
| Paid-in capital | 616,894 | 654,396 | (37,502 | ) | -5.7 | % | ||||||
| Retained earnings | 420,701 | 408,367 | 12,334 | 3.0 | % | |||||||
| Unearned ESOP shares | (26,266 | ) | (26,753 | ) | 487 | -1.8 | % | |||||
| Accumulated other comprehensive income | 2,336 | 6,144 | (3,808 | ) | -62.0 | % | ||||||
| Total stockholders' equity | 1,014,423 | 1,042,944 | (28,521 | ) | -2.7 | % | ||||||
| Total liabilities and stockholders' equity | $ | 7,183,688 | $ | 7,283,735 | $ | (100,047 | ) | -1.4 | % | |||
| Consolidated capital ratios | ||||||||||||
| Equity to assets | 14.12 | % | 14.32 | % | -0.20 | % | ||||||
| Tangible equity to tangible assets (1) | 11.48 | % | 11.72 | % | -0.24 | % | ||||||
| Share data | ||||||||||||
| Outstanding shares | 75,800 | 78,965 | (3,165 | ) | -4.0 | % | ||||||
| Book value per share | $ | 13.38 | $ | 13.21 | $ | 0.17 | 1.3 | % | ||||
| Tangible book value per share (2) | $ | 10.55 | $ | 10.49 | $ | 0.06 | 0.6 | % |
(1) Tangible equity equals total stockholders' equity reduced by goodwill and core deposit intangible assets. Tangible assets equals total assets reduced by goodwill and core deposit intangible assets.
(2) Tangible book value equals total stockholders' equity reduced by goodwill and core deposit intangible assets.
| Kearny Financial Corp. | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Consolidated Statements of Income | ||||||||||||
| (Unaudited) | ||||||||||||
| Three Months Ended | ||||||||||||
| (Dollars and Shares in Thousands, | September 30, | June 30, | Variance | Variance | ||||||||
| Except Per Share Data) | 2021 | 2021 | or Change | or Change Pct. | ||||||||
| Interest income | ||||||||||||
| Loans (1) | $ | 48,230 | $ | 48,464 | $ | (234 | ) | -0.5 | % | |||
| Taxable investment securities | 8,212 | 8,304 | (92 | ) | -1.1 | % | ||||||
| Tax-exempt investment securities | 333 | 355 | (22 | ) | -6.2 | % | ||||||
| Other interest-earning assets | 431 | 549 | (118 | ) | -21.5 | % | ||||||
| Total Interest Income | 57,206 | 57,672 | (466 | ) | -0.8 | % | ||||||
| Interest expense | ||||||||||||
| Deposits | 4,065 | 5,156 | (1,091 | ) | -21.2 | % | ||||||
| Borrowings | 3,551 | 3,451 | 100 | 2.9 | % | |||||||
| Total interest expense | 7,616 | 8,607 | (991 | ) | -11.5 | % | ||||||
| Net interest income | 49,590 | 49,065 | 525 | 1.1 | % | |||||||
| Reversal of provision for credit losses | (5,400 | ) | (4,941 | ) | (459 | ) | 9.3 | % | ||||
| Net interest income after reversal of provision<br> for credit losses | 54,990 | 54,006 | 984 | 1.8 | % | |||||||
| Non-interest income | ||||||||||||
| Fees and service charges (1) | 607 | 423 | 184 | 43.5 | % | |||||||
| Gain on sale and call of securities | 1 | 313 | (312 | ) | -99.7 | % | ||||||
| Gain on sale of loans | 1,006 | 363 | 643 | 177.1 | % | |||||||
| Income from bank owned life insurance | 1,561 | 1,545 | 16 | 1.0 | % | |||||||
| Electronic banking fees and charges | 407 | 452 | (45 | ) | -10.0 | % | ||||||
| Other income | 218 | 400 | (182 | ) | -45.5 | % | ||||||
| Total non-interest income | 3,800 | 3,496 | 304 | 8.7 | % | |||||||
| Non-interest expense | ||||||||||||
| Salaries and employee benefits | 18,617 | 17,777 | 840 | 4.7 | % | |||||||
| Net occupancy expense of premises | 4,547 | 2,998 | 1,549 | 51.7 | % | |||||||
| Equipment and systems | 3,825 | 3,575 | 250 | 7.0 | % | |||||||
| Advertising and marketing | 392 | 581 | (189 | ) | -32.5 | % | ||||||
| Federal deposit insurance premium | 492 | 490 | 2 | 0.4 | % | |||||||
| Directors' compensation | 803 | 749 | 54 | 7.2 | % | |||||||
| Other expense | 3,127 | 5,816 | (2,689 | ) | -46.2 | % | ||||||
| Total non-interest expense | 31,803 | 31,986 | (183 | ) | -0.6 | % | ||||||
| Income before income taxes | 26,987 | 25,516 | 1,471 | 5.8 | % | |||||||
| Income taxes | 7,272 | 7,033 | 239 | 3.4 | % | |||||||
| Net income | $ | 19,715 | $ | 18,483 | $ | 1,232 | 6.7 | % | ||||
| Net income per common share (EPS) | ||||||||||||
| Basic | $ | 0.26 | $ | 0.24 | $ | 0.02 | ||||||
| Diluted | $ | 0.26 | $ | 0.24 | $ | 0.02 | ||||||
| Dividends declared | ||||||||||||
| Cash dividends declared per common share | $ | 0.10 | $ | 0.10 | $ | - | ||||||
| Cash dividends declared | $ | 7,381 | $ | 7,710 | $ | (329 | ) | |||||
| Dividend payout ratio | 37.4 | % | 41.7 | % | -4.3 | % | ||||||
| Weighted average number of common<br> shares outstanding | ||||||||||||
| Basic | 74,537 | 77,658 | (3,121 | ) | ||||||||
| Diluted | 74,556 | 77,680 | (3,124 | ) |
(1) Effective July 1, 2021, loan prepayment penalty income is recorded as a component of interest income on loans. Previously, loan prepayment penalty income was recorded within non-interest income. Amounts shown for June 30, 2021 have been adjusted to reflect this change. Loan prepayment penalty income for the period ended June 30, 2021 was $902,000.
| Kearny Financial Corp. | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Average Balance Sheet Data | ||||||||||||
| (Unaudited) | ||||||||||||
| Three Months Ended | ||||||||||||
| September 30, | June 30, | Variance | Variance | |||||||||
| (Dollars in Thousands) | 2021 | 2021 | or Change | or Change Pct. | ||||||||
| Assets | ||||||||||||
| Interest-earning assets: | ||||||||||||
| Loans receivable, including loans held for sale | $ | 4,835,676 | $ | 4,817,980 | $ | 17,696 | 0.4 | % | ||||
| Taxable investment securities | 1,649,953 | 1,720,838 | (70,885 | ) | -4.1 | % | ||||||
| Tax-exempt investment securities | 59,115 | 63,047 | (3,932 | ) | -6.2 | % | ||||||
| Other interest-earning assets | 85,749 | 117,212 | (31,463 | ) | -26.8 | % | ||||||
| Total interest-earning assets | 6,630,493 | 6,719,077 | (88,584 | ) | -1.3 | % | ||||||
| Non-interest-earning assets | 616,735 | 609,762 | 6,973 | 1.1 | % | |||||||
| Total assets | $ | 7,247,228 | $ | 7,328,839 | $ | (81,611 | ) | -1.1 | % | |||
| Liabilities and Stockholders' Equity | ||||||||||||
| Interest-bearing liabilities: | ||||||||||||
| Deposits: | ||||||||||||
| Interest-bearing demand | $ | 1,954,271 | $ | 1,930,193 | $ | 24,078 | 1.2 | % | ||||
| Savings | 1,102,865 | 1,118,402 | (15,537 | ) | -1.4 | % | ||||||
| Certificates of deposit | 1,798,473 | 1,934,650 | (136,177 | ) | -7.0 | % | ||||||
| Total interest-bearing deposits | 4,855,609 | 4,983,245 | (127,636 | ) | -2.6 | % | ||||||
| Borrowings: | ||||||||||||
| Federal Home Loan Bank advances | 665,915 | 665,802 | 113 | 0.0 | % | |||||||
| Other borrowings | 28,532 | 6,670 | 21,862 | 327.8 | % | |||||||
| Total borrowings | 694,447 | 672,472 | 21,975 | 3.3 | % | |||||||
| Total interest-bearing liabilities | 5,550,056 | 5,655,717 | (105,661 | ) | -1.9 | % | ||||||
| Non-interest-bearing liabilities: | ||||||||||||
| Non-interest-bearing deposits | 610,271 | 566,632 | 43,639 | 7.7 | % | |||||||
| Other non-interest-bearing liabilities | 56,893 | 52,292 | 4,601 | 8.8 | % | |||||||
| Total non-interest-bearing liabilities | 667,164 | 618,924 | 48,240 | 7.8 | % | |||||||
| Total liabilities | 6,217,220 | 6,274,641 | (57,421 | ) | -0.9 | % | ||||||
| Stockholders' equity | 1,030,008 | 1,054,198 | (24,190 | ) | -2.3 | % | ||||||
| Total liabilities and stockholders' equity | $ | 7,247,228 | $ | 7,328,839 | $ | (81,611 | ) | -1.1 | % | |||
| Average interest-earning assets to average<br> interest-bearing liabilities | 119.47 | % | 118.80 | % | 0.67 | % | 0.6 | % | ||||
| Kearny Financial Corp. | ||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |||
| Performance Ratio Highlights | ||||||||||||
| (Unaudited) | ||||||||||||
| Three Months Ended | ||||||||||||
| September 30, | June 30, | Variance | ||||||||||
| 2021 | 2021 | or Change | ||||||||||
| Average yield on interest-earning assets: | ||||||||||||
| Loans receivable, including loans held for sale (1) | 3.99 | % | 4.02 | % | -0.03 | % | ||||||
| Taxable investment securities | 1.99 | % | 1.93 | % | 0.06 | % | ||||||
| Tax-exempt investment securities (2) | 2.25 | % | 2.25 | % | 0.00 | % | ||||||
| Other interest-earning assets | 2.01 | % | 1.87 | % | 0.14 | % | ||||||
| Total interest-earning assets (1) | 3.45 | % | 3.43 | % | 0.02 | % | ||||||
| Average cost of interest-bearing liabilities: | ||||||||||||
| Deposits: | ||||||||||||
| Interest-bearing demand | 0.23 | % | 0.27 | % | -0.04 | % | ||||||
| Savings | 0.12 | % | 0.15 | % | -0.03 | % | ||||||
| Certificates of deposit | 0.57 | % | 0.71 | % | -0.14 | % | ||||||
| Total interest-bearing deposits | 0.33 | % | 0.41 | % | -0.08 | % | ||||||
| Borrowings: | ||||||||||||
| Federal Home Loan Bank advances | 2.13 | % | 2.07 | % | 0.06 | % | ||||||
| Other borrowings | 0.10 | % | 0.07 | % | 0.03 | % | ||||||
| Total borrowings | 2.05 | % | 2.05 | % | 0.00 | % | ||||||
| Total interest-bearing liabilities | 0.55 | % | 0.61 | % | -0.06 | % | ||||||
| Interest rate spread (1) (3) | 2.90 | % | 2.82 | % | 0.08 | % | ||||||
| Net interest margin (1) (4) | 2.99 | % | 2.92 | % | 0.07 | % | ||||||
| Non-interest income to average assets<br> (annualized) (1) | 0.21 | % | 0.19 | % | 0.02 | % | ||||||
| Non-interest expense to average assets<br> (annualized) | 1.76 | % | 1.75 | % | 0.01 | % | ||||||
| Efficiency ratio (5) | 59.57 | % | 60.86 | % | -1.29 | % | ||||||
| Return on average assets (annualized) | 1.09 | % | 1.01 | % | 0.08 | % | ||||||
| Return on average equity (annualized) | 7.66 | % | 7.01 | % | 0.65 | % | ||||||
| Return on average tangible equity (annualized) (6) | 9.67 | % | 8.81 | % | 0.86 | % |
(1) Effective July 1, 2021, loan prepayment penalty income is recorded as a component of interest income on loans. Previously, loan prepayment penalty income was recorded within non-interest income. Amounts shown for June 30, 2021 have been adjusted to reflect this change. Loan prepayment penalty income for the period ended June 30, 2021 was $902,000.
(2) The yield on tax-exempt investment securities has not been adjusted to reflect their tax-effective yield.
(3) Interest income divided by average interest-earning assets less interest expense divided by average interest-bearing liabilities.
(4) Net interest income divided by average interest-earning assets.
(5) Non-interest expense divided by the sum of net interest income and non-interest income.
(6) Average tangible equity equals total average stockholders’ equity reduced by average goodwill and average core deposit intangible assets.
| Five-Quarter Financial Trend Analysis | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Consolidated Balance Sheets | At | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| (Dollars and Shares in Thousands, | September 30, | June 30, | March 31, | December 31, | September 30, | ||||||||||
| Except Per Share Data) | 2021 | 2021 | 2021 | 2020 | 2020 | ||||||||||
| (Unaudited) | (Audited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||
| Assets | |||||||||||||||
| Cash and cash equivalents | $ | 54,070 | $ | 67,855 | $ | 108,991 | $ | 129,694 | $ | 145,818 | |||||
| Securities available for sale | 1,651,156 | 1,676,864 | 1,778,970 | 1,695,893 | 1,508,542 | ||||||||||
| Securities held to maturity | 37,497 | 38,138 | 27,168 | 29,549 | 31,576 | ||||||||||
| Loans held-for-sale | 12,884 | 16,492 | 5,172 | 12,601 | 20,170 | ||||||||||
| Loans receivable | 4,789,339 | 4,851,394 | 4,798,239 | 4,828,634 | 4,954,750 | ||||||||||
| Less: allowance for credit losses on loans | (51,785 | ) | (58,165 | ) | (63,762 | ) | (63,386 | ) | (64,860 | ) | |||||
| Net loans receivable | 4,737,554 | 4,793,229 | 4,734,477 | 4,765,248 | 4,889,890 | ||||||||||
| Premises and equipment | 55,236 | 56,338 | 60,360 | 61,181 | 61,808 | ||||||||||
| Federal Home Loan Bank stock | 36,615 | 36,615 | 45,578 | 45,578 | 55,118 | ||||||||||
| Accrued interest receivable | 19,541 | 19,362 | 20,562 | 19,826 | 20,368 | ||||||||||
| Goodwill | 210,895 | 210,895 | 210,895 | 210,895 | 210,895 | ||||||||||
| Core deposit intangible | 3,524 | 3,705 | 3,888 | 4,151 | 4,420 | ||||||||||
| Bank owned life insurance | 284,871 | 283,310 | 281,765 | 280,235 | 278,639 | ||||||||||
| Deferred income taxes, net | 27,771 | 29,323 | 32,230 | 30,846 | 33,319 | ||||||||||
| Other real estate owned | 178 | 178 | 178 | 178 | 178 | ||||||||||
| Other assets | 51,896 | 51,431 | 47,760 | 49,278 | 49,468 | ||||||||||
| Total assets | $ | 7,183,688 | $ | 7,283,735 | $ | 7,357,994 | $ | 7,335,153 | $ | 7,310,209 | |||||
| Liabilities | |||||||||||||||
| Deposits: | |||||||||||||||
| Non-interest-bearing | $ | 631,344 | $ | 593,718 | $ | 545,746 | $ | 518,828 | $ | 487,710 | |||||
| Interest-bearing | 4,763,795 | 4,891,588 | 4,828,706 | 4,793,785 | 4,552,202 | ||||||||||
| Total deposits | 5,395,139 | 5,485,306 | 5,374,452 | 5,312,613 | 5,039,912 | ||||||||||
| Borrowings | 720,990 | 685,876 | 865,763 | 865,651 | 1,077,540 | ||||||||||
| Advance payments by borrowers for taxes | 16,222 | 15,752 | 15,300 | 16,100 | 17,008 | ||||||||||
| Other liabilities | 36,914 | 53,857 | 38,667 | 48,448 | 51,689 | ||||||||||
| Total liabilities | 6,169,265 | 6,240,791 | 6,294,182 | 6,242,812 | 6,186,149 | ||||||||||
| Stockholders' Equity | |||||||||||||||
| Common stock | 758 | 790 | 820 | 849 | 895 | ||||||||||
| Paid-in capital | 616,894 | 654,396 | 691,280 | 724,389 | 769,269 | ||||||||||
| Retained earnings | 420,701 | 408,367 | 397,594 | 388,376 | 378,134 | ||||||||||
| Unearned ESOP shares | (26,266 | ) | (26,753 | ) | (27,239 | ) | (27,726 | ) | (28,212 | ) | |||||
| Accumulated other comprehensive income | 2,336 | 6,144 | 1,357 | 6,453 | 3,974 | ||||||||||
| Total stockholders' equity | 1,014,423 | 1,042,944 | 1,063,812 | 1,092,341 | 1,124,060 | ||||||||||
| Total liabilities and stockholders' equity | $ | 7,183,688 | $ | 7,283,735 | $ | 7,357,994 | $ | 7,335,153 | $ | 7,310,209 | |||||
| Consolidated capital ratios | |||||||||||||||
| Equity to assets | 14.12 | % | 14.32 | % | 14.46 | % | 14.89 | % | 15.38 | % | |||||
| Tangible equity to tangible assets (1) | 11.48 | % | 11.72 | % | 11.89 | % | 12.32 | % | 12.81 | % | |||||
| Share data | |||||||||||||||
| Outstanding shares | 75,800 | 78,965 | 81,943 | 84,938 | 89,510 | ||||||||||
| Book value per share | $ | 13.38 | $ | 13.21 | $ | 12.98 | $ | 12.86 | $ | 12.56 | |||||
| Tangible book value per share (2) | $ | 10.55 | $ | 10.49 | $ | 10.36 | $ | 10.33 | $ | 10.15 |
(1) Tangible equity equals total stockholders' equity reduced by goodwill and core deposit intangible assets. Tangible assets equals total assets reduced by goodwill and core deposit intangible assets.
(2) Tangible book value equals total stockholders' equity reduced by goodwill and core deposit intangible assets.
| At | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Supplemental Balance Sheet Highlights | September 30, | June 30, | March 31, | December 31, | September 30, | ||||||||||
| (Dollars in Thousands, Unaudited) | 2021 | 2021 | 2021 | 2020 | 2020 | ||||||||||
| Loan portfolio composition: | |||||||||||||||
| Commercial loans: | |||||||||||||||
| Multi-family | $ | 1,978,681 | $ | 2,039,260 | $ | 2,055,396 | $ | 2,076,483 | $ | 2,110,300 | |||||
| Nonresidential | 1,023,391 | 1,079,444 | 1,110,765 | 1,123,695 | 1,124,330 | ||||||||||
| Commercial business | 169,392 | 168,951 | 183,181 | 202,010 | 255,888 | ||||||||||
| Construction | 112,226 | 93,804 | 95,533 | 90,398 | 79,178 | ||||||||||
| Total commercial loans | 3,283,690 | 3,381,459 | 3,444,875 | 3,492,586 | 3,569,696 | ||||||||||
| One- to four-family residential mortgage loans | 1,483,106 | 1,447,721 | 1,323,485 | 1,305,351 | 1,353,197 | ||||||||||
| Consumer loans: | |||||||||||||||
| Home equity loans and lines of credit | 44,912 | 47,871 | 59,721 | 65,298 | 71,540 | ||||||||||
| Other consumer loans | 3,020 | 3,259 | 3,445 | 4,123 | 4,136 | ||||||||||
| Total consumer loans | 47,932 | 51,130 | 63,166 | 69,421 | 75,676 | ||||||||||
| Total loans, excluding yield adjustments | 4,814,728 | 4,880,310 | 4,831,526 | 4,867,358 | 4,998,569 | ||||||||||
| Unaccreted yield adjustments | (25,389 | ) | (28,916 | ) | (33,287 | ) | (38,724 | ) | (43,819 | ) | |||||
| Loans receivable, net of yield adjustments | 4,789,339 | 4,851,394 | 4,798,239 | 4,828,634 | 4,954,750 | ||||||||||
| Less: allowance for credit losses on loans | (51,785 | ) | (58,165 | ) | (63,762 | ) | (63,386 | ) | (64,860 | ) | |||||
| Net loans receivable | $ | 4,737,554 | $ | 4,793,229 | $ | 4,734,477 | $ | 4,765,248 | $ | 4,889,890 | |||||
| Loan portfolio allocation: | |||||||||||||||
| Commercial loans: | |||||||||||||||
| Multi-family | 41.1 | % | 41.8 | % | 42.5 | % | 42.7 | % | 42.2 | % | |||||
| Nonresidential | 21.3 | % | 22.1 | % | 23.0 | % | 23.1 | % | 22.5 | % | |||||
| Commercial business | 3.5 | % | 3.5 | % | 3.8 | % | 4.2 | % | 5.1 | % | |||||
| Construction | 2.3 | % | 1.9 | % | 2.0 | % | 1.8 | % | 1.6 | % | |||||
| Total commercial loans | 68.2 | % | 69.3 | % | 71.3 | % | 71.8 | % | 71.4 | % | |||||
| One- to four-family residential mortgage loans | 30.8 | % | 29.7 | % | 27.4 | % | 26.8 | % | 27.1 | % | |||||
| Consumer loans: | |||||||||||||||
| Home equity loans and lines of credit | 0.9 | % | 0.9 | % | 1.2 | % | 1.3 | % | 1.4 | % | |||||
| Other consumer loans | 0.1 | % | 0.1 | % | 0.1 | % | 0.1 | % | 0.1 | % | |||||
| Total consumer loans | 1.0 | % | 1.0 | % | 1.3 | % | 1.4 | % | 1.5 | % | |||||
| Total loans, excluding yield adjustments | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||
| Asset quality: | |||||||||||||||
| Nonperforming assets: | |||||||||||||||
| Accruing loans - 90 days and over past due | $ | - | $ | - | $ | 2 | $ | - | $ | 238 | |||||
| Nonaccrual loans | 72,945 | 79,767 | 71,416 | 71,472 | 44,837 | ||||||||||
| Total nonperforming loans | 72,945 | 79,767 | 71,418 | 71,472 | 45,075 | ||||||||||
| Other real estate owned | 178 | 178 | 178 | 178 | 178 | ||||||||||
| Total nonperforming assets | $ | 73,123 | $ | 79,945 | $ | 71,596 | $ | 71,650 | $ | 45,253 | |||||
| Nonperforming loans (% total loans) | 1.52 | % | 1.64 | % | 1.49 | % | 1.48 | % | 0.91 | % | |||||
| Nonperforming assets (% total assets) | 1.02 | % | 1.10 | % | 0.97 | % | 0.98 | % | 0.62 | % | |||||
| Allowance for credit losses on loans (ACL): | |||||||||||||||
| ACL to total loans | 1.08 | % | 1.19 | % | 1.32 | % | 1.30 | % | 1.30 | % | |||||
| ACL to nonperforming loans | 70.99 | % | 72.92 | % | 89.28 | % | 88.69 | % | 143.89 | % | |||||
| Net charge offs | $ | 980 | $ | 656 | $ | 750 | $ | 109 | $ | 67 | |||||
| Average net charge off rate (annualized) | 0.08 | % | 0.05 | % | 0.06 | % | 0.01 | % | 0.01 | % | |||||
| At | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Supplemental Balance Sheet Highlights | September 30, | June 30, | March 31, | December 31, | September 30, | ||||||||||
| (Dollars in Thousands, Unaudited) | 2021 | 2021 | 2021 | 2020 | 2020 | ||||||||||
| Funding by type: | |||||||||||||||
| Deposits: | |||||||||||||||
| Non-interest-bearing deposits | $ | 631,344 | $ | 593,718 | $ | 545,746 | $ | 518,828 | $ | 487,710 | |||||
| Interest-bearing demand | 1,937,661 | 1,902,478 | 1,923,184 | 1,752,699 | 1,561,135 | ||||||||||
| Savings | 1,089,699 | 1,111,364 | 1,105,481 | 1,075,122 | 1,025,245 | ||||||||||
| Certificates of deposit | 1,736,435 | 1,877,746 | 1,800,041 | 1,965,964 | 1,965,822 | ||||||||||
| Interest-bearing deposits | 4,763,795 | 4,891,588 | 4,828,706 | 4,793,785 | 4,552,202 | ||||||||||
| Total deposits | 5,395,139 | 5,485,306 | 5,374,452 | 5,312,613 | 5,039,912 | ||||||||||
| Borrowings: | |||||||||||||||
| Federal Home Loan Bank advances | 665,990 | 665,876 | 865,763 | 865,651 | 1,077,540 | ||||||||||
| Overnight borrowings | 55,000 | 20,000 | - | - | - | ||||||||||
| Total borrowings | 720,990 | 685,876 | 865,763 | 865,651 | 1,077,540 | ||||||||||
| Total funding | $ | 6,116,129 | $ | 6,171,182 | $ | 6,240,215 | $ | 6,178,264 | $ | 6,117,452 | |||||
| Loans as a % of deposits | 88.1 | % | 87.7 | % | 88.2 | % | 89.9 | % | 97.4 | % | |||||
| Deposits as a % of total funding | 88.2 | % | 88.9 | % | 86.1 | % | 86.0 | % | 82.4 | % | |||||
| Borrowings as a % of total funding | 11.8 | % | 11.1 | % | 13.9 | % | 14.0 | % | 17.6 | % | |||||
| Funding by source: | |||||||||||||||
| Retail deposits: | |||||||||||||||
| Non-interest-bearing deposits | $ | 631,344 | $ | 593,718 | $ | 545,746 | $ | 518,828 | $ | 487,710 | |||||
| Interest-bearing demand | 1,937,661 | 1,902,478 | 1,923,184 | 1,752,699 | 1,561,135 | ||||||||||
| Savings | 1,089,699 | 1,111,364 | 1,105,481 | 1,075,122 | 1,025,245 | ||||||||||
| Certificates of deposit | 1,264,016 | 1,398,808 | 1,508,494 | 1,658,277 | 1,775,189 | ||||||||||
| Total retail deposits | 4,922,720 | 5,006,368 | 5,082,905 | 5,004,926 | 4,849,279 | ||||||||||
| Wholesale funding: | |||||||||||||||
| Certificates of deposit (listing service) | $ | 13,817 | $ | 20,322 | $ | 32,952 | $ | 43,112 | $ | 57,251 | |||||
| Certificates of deposit (brokered) | 458,602 | 458,616 | 258,595 | 264,575 | 133,382 | ||||||||||
| Total wholesale deposits | 472,419 | 478,938 | 291,547 | 307,687 | 190,633 | ||||||||||
| FHLB advances | 665,990 | 665,876 | 865,763 | 865,651 | 1,077,540 | ||||||||||
| Overnight borrowings | 55,000 | 20,000 | - | - | - | ||||||||||
| Total wholesale funding | 1,193,409 | 1,164,814 | 1,157,310 | 1,173,338 | 1,268,173 | ||||||||||
| Total funding | $ | 6,116,129 | $ | 6,171,182 | $ | 6,240,215 | $ | 6,178,264 | $ | 6,117,452 | |||||
| Retail funding as a % of total funding | 80.5 | % | 81.1 | % | 81.5 | % | 81.0 | % | 79.3 | % | |||||
| Wholesale funding as a % of total funding | 19.5 | % | 18.9 | % | 18.5 | % | 19.0 | % | 20.7 | % | |||||
| Consolidated Statements of Income | Three Months Ended | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| (Dollars and Shares in Thousands, | September 30, | June 30, | March 31, | December 31, | September 30, | ||||||||||
| Except Per Share Data, Unaudited) | 2021 | 2021 | 2021 | 2020 | 2020 | ||||||||||
| Interest income | |||||||||||||||
| Loans (1) | $ | 48,230 | $ | 48,464 | $ | 50,159 | $ | 50,806 | $ | 52,811 | |||||
| Taxable investment securities | 8,212 | 8,304 | 7,891 | 7,707 | 7,336 | ||||||||||
| Tax-exempt investment securities | 333 | 355 | 410 | 433 | 454 | ||||||||||
| Other interest-earning assets | 431 | 549 | 705 | 787 | 914 | ||||||||||
| Total interest income | 57,206 | 57,672 | 59,165 | 59,733 | 61,515 | ||||||||||
| Interest expense | |||||||||||||||
| Deposits | 4,065 | 5,156 | 6,670 | 8,647 | 11,062 | ||||||||||
| Borrowings | 3,551 | 3,451 | 4,012 | 5,193 | 5,660 | ||||||||||
| Total interest expense | 7,616 | 8,607 | 10,682 | 13,840 | 16,722 | ||||||||||
| Net interest income | 49,590 | 49,065 | 48,483 | 45,893 | 44,793 | ||||||||||
| (Reversal of) provision for credit losses | (5,400 | ) | (4,941 | ) | 1,126 | (1,365 | ) | 4,059 | |||||||
| Net interest income after (reversal of)<br> provision for credit losses | 54,990 | 54,006 | 47,357 | 47,258 | 40,734 | ||||||||||
| Non-interest income | |||||||||||||||
| Fees and service charges (1) | 607 | 423 | 473 | 556 | 445 | ||||||||||
| Gain (loss) on sale and call of securities | 1 | 313 | 18 | 813 | (377 | ) | |||||||||
| Gain on sale of loans | 1,006 | 363 | 943 | 2,378 | 1,890 | ||||||||||
| Income from bank owned life insurance | 1,561 | 1,545 | 1,530 | 1,596 | 1,596 | ||||||||||
| Electronic banking fees and charges | 407 | 452 | 456 | 404 | 405 | ||||||||||
| Bargain purchase gain | - | - | - | - | 3,053 | ||||||||||
| Other income | 218 | 400 | 1,194 | 67 | 90 | ||||||||||
| Total non-interest income | 3,800 | 3,496 | 4,614 | 5,814 | 7,102 | ||||||||||
| Non-interest expense | |||||||||||||||
| Salaries and employee benefits | 18,617 | 17,777 | 16,965 | 17,081 | 16,977 | ||||||||||
| Net occupancy expense of premises | 4,547 | 2,998 | 3,433 | 3,120 | 3,122 | ||||||||||
| Equipment and systems | 3,825 | 3,575 | 3,823 | 3,902 | 3,570 | ||||||||||
| Advertising and marketing | 392 | 581 | 567 | 513 | 500 | ||||||||||
| Federal deposit insurance premium | 492 | 490 | 488 | 490 | 472 | ||||||||||
| Directors' compensation | 803 | 749 | 748 | 748 | 748 | ||||||||||
| Merger-related expenses | - | - | - | - | 4,349 | ||||||||||
| Debt extinguishment expenses | - | - | - | 796 | - | ||||||||||
| Other expense | 3,127 | 5,816 | 3,792 | 3,860 | 3,835 | ||||||||||
| Total non-interest expense | 31,803 | 31,986 | 29,816 | 30,510 | 33,573 | ||||||||||
| Income before income taxes | 26,987 | 25,516 | 22,155 | 22,562 | 14,263 | ||||||||||
| Income taxes | 7,272 | 7,033 | 5,732 | 5,614 | 2,884 | ||||||||||
| Net income | $ | 19,715 | $ | 18,483 | $ | 16,423 | $ | 16,948 | $ | 11,379 | |||||
| Net income per common share (EPS) | |||||||||||||||
| Basic | $ | 0.26 | $ | 0.24 | $ | 0.20 | $ | 0.20 | $ | 0.13 | |||||
| Diluted | $ | 0.26 | $ | 0.24 | $ | 0.20 | $ | 0.20 | $ | 0.13 | |||||
| Dividends declared | |||||||||||||||
| Cash dividends declared per common share | $ | 0.10 | $ | 0.10 | $ | 0.09 | $ | 0.08 | $ | 0.08 | |||||
| Cash dividends declared | $ | 7,381 | $ | 7,710 | $ | 7,205 | $ | 6,706 | $ | 6,917 | |||||
| Dividend payout ratio | 37.4 | % | 41.7 | % | 43.9 | % | 39.6 | % | 60.8 | % | |||||
| Weighted average number of common<br> shares outstanding | |||||||||||||||
| Basic | 74,537 | 77,658 | 80,673 | 85,120 | 86,008 | ||||||||||
| Diluted | 74,556 | 77,680 | 80,690 | 85,123 | 86,009 |
(1) Effective July 1, 2021, loan prepayment penalty income is recorded as a component of interest income on loans. Previously, loan prepayment penalty income was recorded within non-interest income. Periods prior to September 30, 2021 have been adjusted to reflect this change. Loan prepayment penalty income for the periods ended June 30, 2021, March 31, 2021, December 31, 2020 and September 30, 2020 was $902,000, $852,000, $1,340,000 and $631,000, respectively.
| Three Months Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Average Balance Sheet Data | September 30, | June 30, | March 31, | December 31, | September 30, | ||||||||||
| (Dollars in Thousands, Unaudited) | 2021 | 2021 | 2021 | 2020 | 2020 | ||||||||||
| Assets | |||||||||||||||
| Interest-earning assets: | |||||||||||||||
| Loans receivable, including loans held for sale | $ | 4,835,676 | $ | 4,817,980 | $ | 4,816,592 | $ | 4,871,268 | $ | 4,958,293 | |||||
| Taxable investment securities | 1,649,953 | 1,720,838 | 1,674,223 | 1,544,095 | 1,350,511 | ||||||||||
| Tax-exempt investment securities | 59,115 | 63,047 | 73,573 | 79,044 | 82,603 | ||||||||||
| Other interest-earning assets | 85,749 | 117,212 | 169,291 | 266,114 | 247,543 | ||||||||||
| Total interest-earning assets | 6,630,493 | 6,719,077 | 6,733,679 | 6,760,521 | 6,638,950 | ||||||||||
| Non-interest-earning assets | 616,735 | 609,762 | 617,440 | 632,084 | 624,252 | ||||||||||
| Total assets | $ | 7,247,228 | $ | 7,328,839 | $ | 7,351,119 | $ | 7,392,605 | $ | 7,263,202 | |||||
| Liabilities and Stockholders' Equity | |||||||||||||||
| Interest-bearing liabilities: | |||||||||||||||
| Deposits: | |||||||||||||||
| Interest-bearing demand | $ | 1,954,271 | $ | 1,930,193 | $ | 1,831,617 | $ | 1,683,222 | $ | 1,464,238 | |||||
| Savings | 1,102,865 | 1,118,402 | 1,084,981 | 1,058,675 | 1,006,075 | ||||||||||
| Certificates of deposit | 1,798,473 | 1,934,650 | 1,904,234 | 1,899,406 | 1,988,689 | ||||||||||
| Total interest-bearing deposits | 4,855,609 | 4,983,245 | 4,820,832 | 4,641,303 | 4,459,002 | ||||||||||
| Borrowings: | |||||||||||||||
| Federal Home Loan Bank advances | 665,915 | 665,802 | 865,690 | 1,057,958 | 1,130,836 | ||||||||||
| Other borrowings | 28,532 | 6,670 | - | - | 3,568 | ||||||||||
| Total borrowings | 694,447 | 672,472 | 865,690 | 1,057,958 | 1,134,404 | ||||||||||
| Total interest-bearing liabilities | 5,550,056 | 5,655,717 | 5,686,522 | 5,699,261 | 5,593,406 | ||||||||||
| Non-interest-bearing liabilities: | |||||||||||||||
| Non-interest-bearing deposits | 610,271 | 566,632 | 525,018 | 502,479 | 479,141 | ||||||||||
| Other non-interest-bearing liabilities | 56,893 | 52,292 | 57,018 | 73,683 | 79,620 | ||||||||||
| Total non-interest-bearing liabilities | 667,164 | 618,924 | 582,036 | 576,162 | 558,761 | ||||||||||
| Total liabilities | 6,217,220 | 6,274,641 | 6,268,558 | 6,275,423 | 6,152,167 | ||||||||||
| Stockholders' equity | 1,030,008 | 1,054,198 | 1,082,561 | 1,117,182 | 1,111,035 | ||||||||||
| Total liabilities and stockholders' equity | $ | 7,247,228 | $ | 7,328,839 | $ | 7,351,119 | $ | 7,392,605 | $ | 7,263,202 | |||||
| Average interest-earning assets to average<br> interest-bearing liabilities | 119.47 | % | 118.80 | % | 118.41 | % | 118.62 | % | 118.69 | % | |||||
| Three Months Ended | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| September 30, | June 30, | March 31, | December 31, | September 30, | |||||||||||
| Performance Ratio Highlights | 2021 | 2021 | 2021 | 2020 | 2020 | ||||||||||
| Average yield on interest-earning assets: | |||||||||||||||
| Loans receivable, including loans held for sale (1) | 3.99 | % | 4.02 | % | 4.17 | % | 4.17 | % | 4.26 | % | |||||
| Taxable investment securities | 1.99 | % | 1.93 | % | 1.89 | % | 2.00 | % | 2.17 | % | |||||
| Tax-exempt investment securities (2) | 2.25 | % | 2.25 | % | 2.23 | % | 2.19 | % | 2.20 | % | |||||
| Other interest-earning assets | 2.01 | % | 1.87 | % | 1.67 | % | 1.18 | % | 1.48 | % | |||||
| Total interest-earning assets (1) | 3.45 | % | 3.43 | % | 3.51 | % | 3.53 | % | 3.71 | % | |||||
| Average cost of interest-bearing liabilities: | |||||||||||||||
| Deposits: | |||||||||||||||
| Interest-bearing demand | 0.23 | % | 0.27 | % | 0.34 | % | 0.47 | % | 0.60 | % | |||||
| Savings | 0.12 | % | 0.15 | % | 0.21 | % | 0.33 | % | 0.57 | % | |||||
| Certificates of deposit | 0.57 | % | 0.71 | % | 0.96 | % | 1.22 | % | 1.50 | % | |||||
| Total interest-bearing deposits | 0.33 | % | 0.41 | % | 0.55 | % | 0.75 | % | 0.99 | % | |||||
| Borrowings: | |||||||||||||||
| Federal Home Loan Bank advances | 2.13 | % | 2.07 | % | 1.85 | % | 1.96 | % | 2.00 | % | |||||
| Other borrowings | 0.10 | % | 0.07 | % | 0.00 | % | 0.00 | % | 0.04 | % | |||||
| Total borrowings | 2.05 | % | 2.05 | % | 1.85 | % | 1.96 | % | 2.00 | % | |||||
| Total interest-bearing liabilities | 0.55 | % | 0.61 | % | 0.75 | % | 0.97 | % | 1.20 | % | |||||
| Interest rate spread (1) (3) | 2.90 | % | 2.82 | % | 2.76 | % | 2.56 | % | 2.51 | % | |||||
| Net interest margin (1) (4) | 2.99 | % | 2.92 | % | 2.88 | % | 2.72 | % | 2.70 | % | |||||
| Non-interest income to average assets<br> (annualized) (1) | 0.21 | % | 0.19 | % | 0.25 | % | 0.31 | % | 0.39 | % | |||||
| Non-interest expense to average assets<br> (annualized) | 1.76 | % | 1.75 | % | 1.62 | % | 1.65 | % | 1.85 | % | |||||
| Efficiency ratio (5) | 59.57 | % | 60.86 | % | 56.15 | % | 59.01 | % | 64.69 | % | |||||
| Return on average assets (annualized) | 1.09 | % | 1.01 | % | 0.89 | % | 0.92 | % | 0.63 | % | |||||
| Return on average equity (annualized) | 7.66 | % | 7.01 | % | 6.07 | % | 6.07 | % | 4.10 | % | |||||
| Return on average tangible equity (annualized) (6) | 9.67 | % | 8.81 | % | 7.57 | % | 7.52 | % | 5.08 | % |
(1) Effective July 1, 2021, loan prepayment penalty income is recorded as a component of interest income on loans. Previously, loan prepayment penalty income was recorded within non-interest income. Periods prior to September 30, 2021 have been adjusted to reflect this change. Loan prepayment penalty income for the periods ended June 30, 2021, March 31, 2021, December 31, 2020 and September 30, 2020 was $902,000, $852,000, $1,340,000 and $631,000, respectively.
(2) The yield on tax-exempt investment securities has not been adjusted to reflect their tax-effective yield.
(3) Interest income divided by average interest-earning assets less interest expense divided by average interest-bearing liabilities.
(4) Net interest income divided by average interest-earning assets.
(5) Non-interest expense divided by the sum of net interest income and non-interest income.
(6) Average tangible equity equals total average stockholders’ equity reduced by average goodwill and average core deposit intangible assets.
This document contains certain non-GAAP financial measures in addition to results presented in accordance with Generally Accepted Accounting Principles (“GAAP”). These non-GAAP measures provide additional information which allow readers to evaluate the ongoing performance of the Company. They are not a substitute for GAAP measures; they should be read and used in conjunction with the Company’s GAAP financial information. A reconciliation of non-GAAP financial measures to GAAP measures is included below. In all cases, it should be understood that non-GAAP per share measures do not depict amounts that accrue directly to the benefit of shareholders.
| Reconciliation of GAAP to Non-GAAP | Three Months Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Dollars and Shares in Thousands, | September 30, | June 30, | March 31, | December 31, | September 30, | ||||||||||
| Except Per Share Data) | 2021 | 2021 | 2021 | 2020 | 2020 | ||||||||||
| Adjusted net income: | |||||||||||||||
| Net income (GAAP) | $ | 19,715 | $ | 18,483 | $ | 16,423 | $ | 16,948 | $ | 11,379 | |||||
| Non-recurring transactions - net of tax: | |||||||||||||||
| Bargain purchase gain | - | - | - | - | (3,053 | ) | |||||||||
| Provision for credit losses on non-PCD loans | - | - | - | - | 3,563 | ||||||||||
| Merger-related expenses | - | - | - | - | 3,123 | ||||||||||
| Branch consolidation expenses and impairment<br> charges | 1,209 | 870 | 264 | 243 | - | ||||||||||
| Net effect of sale and call of securities | (1 | ) | (220 | ) | (13 | ) | (571 | ) | - | ||||||
| Debt extinguishment expenses | - | - | - | 558 | - | ||||||||||
| Reversal of income tax valuation allowance | - | (12 | ) | - | (523 | ) | - | ||||||||
| Net effect of sales of other assets | - | (144 | ) | (587 | ) | - | - | ||||||||
| Adjusted net income | $ | 20,923 | $ | 18,977 | $ | 16,087 | $ | 16,655 | $ | 15,012 | |||||
| Calculation of pre-tax, pre-provision net<br> revenue: | |||||||||||||||
| Net income (GAAP) | $ | 19,715 | $ | 18,483 | $ | 16,423 | $ | 16,948 | $ | 11,379 | |||||
| Adjustments to net income (GAAP): | |||||||||||||||
| Provision for income taxes | 7,272 | 7,033 | 5,732 | 5,614 | 2,884 | ||||||||||
| (Reversal of) provision for credit losses | (5,400 | ) | (4,941 | ) | 1,126 | (1,365 | ) | 4,059 | |||||||
| Pre-tax, pre-provision net revenue (non-GAAP) | $ | 21,587 | $ | 20,575 | $ | 23,281 | $ | 21,197 | $ | 18,322 | |||||
| Adjusted earnings per share: | |||||||||||||||
| Weighted average common shares - basic | 74,537 | 77,658 | 80,673 | 85,120 | 86,008 | ||||||||||
| Weighted average common shares - diluted | 74,556 | 77,680 | 80,690 | 85,123 | 86,009 | ||||||||||
| Earnings per share - basic (GAAP) | $ | 0.26 | $ | 0.24 | $ | 0.20 | $ | 0.20 | $ | 0.13 | |||||
| Earnings per share - diluted (GAAP) | $ | 0.26 | $ | 0.24 | $ | 0.20 | $ | 0.20 | $ | 0.13 | |||||
| Adjusted earnings per share - basic (non-GAAP) | $ | 0.28 | $ | 0.24 | $ | 0.20 | $ | 0.20 | $ | 0.17 | |||||
| Adjusted earnings per share - diluted (non-GAAP) | $ | 0.28 | $ | 0.24 | $ | 0.20 | $ | 0.20 | $ | 0.17 | |||||
| Adjusted return on average assets: | |||||||||||||||
| Total average assets | $ | 7,247,228 | $ | 7,328,839 | $ | 7,351,119 | $ | 7,392,605 | $ | 7,263,202 | |||||
| Return on average assets (GAAP) | 1.09 | % | 1.01 | % | 0.89 | % | 0.92 | % | 0.63 | % | |||||
| Adjusted return on average assets (non-GAAP) | 1.15 | % | 1.04 | % | 0.88 | % | 0.90 | % | 0.83 | % | |||||
| Adjusted return on average equity: | |||||||||||||||
| Total average equity | $ | 1,030,008 | $ | 1,054,198 | $ | 1,082,561 | $ | 1,117,182 | $ | 1,111,035 | |||||
| Return on average equity (GAAP) | 7.66 | % | 7.01 | % | 6.07 | % | 6.07 | % | 4.10 | % | |||||
| Adjusted return on average equity (non-GAAP) | 8.13 | % | 7.20 | % | 5.94 | % | 5.96 | % | 5.40 | % | |||||
| Three Months Ended | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Reconciliation of GAAP to Non-GAAP | September 30, | June 30, | March 31, | December 31, | September 30, | ||||||||||
| (Dollars in Thousands) | 2021 | 2021 | 2021 | 2020 | 2020 | ||||||||||
| Adjusted return on average tangible equity: | |||||||||||||||
| Total average equity | $ | 1,030,008 | $ | 1,054,198 | $ | 1,082,561 | $ | 1,117,182 | $ | 1,111,035 | |||||
| Less: average goodwill | (210,895 | ) | (210,895 | ) | (210,895 | ) | (210,895 | ) | (210,895 | ) | |||||
| Less: average other intangible assets | (3,641 | ) | (3,825 | ) | (4,045 | ) | (4,317 | ) | (4,341 | ) | |||||
| $ | 815,472 | $ | 839,478 | $ | 867,621 | $ | 901,970 | $ | 895,799 | ||||||
| - | - | - | - | ||||||||||||
| Return on average tangible equity (non-GAAP) | 9.67 | % | 8.81 | % | 7.57 | % | 7.52 | % | 5.08 | % | |||||
| Adjusted return on average tangible equity<br> (non-GAAP) | 10.26 | % | 9.04 | % | 7.42 | % | 7.39 | % | 6.70 | % | |||||
| Adjusted non-interest expense ratio: | |||||||||||||||
| Non-interest expense (GAAP) | $ | 31,803 | $ | 31,986 | $ | 29,816 | $ | 30,510 | $ | 33,573 | |||||
| Non-recurring transactions: | |||||||||||||||
| Merger-related expenses | - | - | - | - | (4,349 | ) | |||||||||
| Branch consolidation expenses and<br> impairment charges | (1,711 | ) | (1,239 | ) | (375 | ) | (347 | ) | - | ||||||
| Debt extinguishment expenses | - | - | - | (796 | ) | - | |||||||||
| Non-interest expense (non-GAAP) | $ | 30,092 | $ | 30,747 | $ | 29,441 | $ | 29,367 | $ | 29,224 | |||||
| Non-interest expense ratio (GAAP) | 1.76 | % | 1.75 | % | 1.62 | % | 1.65 | % | 1.85 | % | |||||
| Adjusted non-interest expense ratio (non-GAAP) | 1.66 | % | 1.68 | % | 1.60 | % | 1.59 | % | 1.61 | % | |||||
| Adjusted efficiency ratio: | |||||||||||||||
| Non-interest expense (non-GAAP) | $ | 30,092 | $ | 30,747 | $ | 29,441 | $ | 29,367 | $ | 29,224 | |||||
| Net interest income (GAAP) | $ | 49,590 | $ | 49,065 | $ | 48,483 | $ | 45,893 | $ | 44,793 | |||||
| Total non-interest income (GAAP) | 3,800 | 3,496 | 4,614 | 5,814 | 7,102 | ||||||||||
| Non-recurring transactions: | |||||||||||||||
| Net effect of sale and call of securities | (1 | ) | (313 | ) | (18 | ) | (813 | ) | - | ||||||
| Bargain purchase gain | - | - | - | - | (3,053 | ) | |||||||||
| Net effect of sales of other assets | - | (205 | ) | (837 | ) | - | - | ||||||||
| Total revenue (non-GAAP) | $ | 53,389 | $ | 52,043 | $ | 52,242 | $ | 50,894 | $ | 48,842 | |||||
| Efficiency ratio (GAAP) | 59.57 | % | 60.86 | % | 56.15 | % | 59.01 | % | 64.69 | % | |||||
| Adjusted efficiency ratio (non-GAAP) | 56.36 | % | 59.08 | % | 56.36 | % | 57.70 | % | 59.83 | % |