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Kearny Financial Corp. Reports Fourth Quarter 2017 Operating Results

FAIRFIELD, N.J., July 28, 2017 (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, 2017 of $4.4 million, or $0.05 per basic and diluted share. The results represent an increase in net income of $336,000 compared to net income of $4.1 million, or $0.05 per basic and diluted share, for the quarter ended March 31, 2017.

For the fiscal year ended June 30, 2017, the Company reported net income of $18.6 million, or $0.22 per basic and diluted share. The results represent an increase of $2.8 million compared to net income of $15.8 million, or $0.18 per basic and diluted share, for the fiscal year ended June 30, 2016.

Overview

The Company continued to execute strategies throughout fiscal 2017 intended to grow and diversify its balance sheet while increasing earnings and prudently managing capital to promote long-term growth in shareholder value. These strategies resulted in several incremental balance sheet growth and diversification achievements that are included among the following noteworthy highlights for the quarter and year ended June 30, 2017:

  • The Company’s aggregate loan portfolio, excluding loans held for sale and the allowance for loan losses, increased by $122.6 million, or 3.9%, to $3.25 billion, or 67.4% of total assets, at June 30, 2017 from $3.12 billion, or 65.1% of total assets, at March 31, 2017. For the year ended June 30, 2017, the Company’s aggregate loan portfolio increased by $571.3 million, or 21.4%, from $2.67 billion, or 59.4% of total assets, at June 30, 2016.

    The growth in the loan portfolio largely reflected the Company’s continued strategic focus on commercial loans, which increased by $121.2 million, or 4.9%, for the quarter ended June 30, 2017, while growth in commercial loans totaled $622.9 million, or 32.0%, for the year ended June 30, 2017.
  • Nonperforming loans decreased by $2.1 million to $18.9 million, or 0.58% of total loans, at June 30, 2017 from $21.0 million, or 0.67% of total loans, at March 31, 2017. For the year ended June 30, 2017, nonperforming loans decreased by $2.2 million from $21.1 million, or 0.79% of total loans, at June 30, 2016.
  • The allowance for loan losses increased by $1.7 million to $29.3 million, or 0.90% of total loans, at June 30, 2017 from $27.6 million, or 0.88% of total loans, at March 31, 2017. For the year ended June 30, 2017, the allowance for loan losses increased by $5.1 million from $24.2 million, or 0.91% of total loans, at June 30, 2016.
  • The “nonperforming loan coverage ratio”, representing the balance of the allowance for loan losses as a percentage of nonperforming loans, increased to 155.2% at June 30, 2017 from 131.4% at March 31, 2017 and 115.1% at June 30, 2016.
  • The Company’s securities portfolio decreased by $9.9 million, or 0.9%, to $1.11 billion, or 23.0% of total assets, at June 30, 2017 from $1.12 billion, or 23.3% of total assets, at March 31, 2017. For the year ended June 30, 2017, the securities portfolio decreased by $143.7 million, or 11.5%, from $1.25 billion, or 27.8% of total assets at June 30, 2016.

    The net decrease in the securities portfolio for the quarter ended June 30, 2017 partly reflected normal principal repayments arising from amortization, calls and maturities of securities. A portion of the security repayments were used to fund growth in loans while the remainder was reinvested into uncapped, floating-rate securities and tax-favored municipal securities during the period. The net decrease in the securities portfolio for the quarter ended June 30, 2017 was partially offset by a net increase in the fair value of the available for sale portfolio during the period.

    The net decrease in the portfolio for the year ended June 30, 2017 was partly attributable to these same factors while also reflecting additional purchases of mortgage-backed securities and corporate debt obligations during the year. These purchases were partially offset by the sale of highly-seasoned, fixed-rate mortgage-backed securities whose proceeds were also used to fund a portion of the loan growth during fiscal 2017.
  • The balance of cash and cash equivalents decreased by $92.4 million to $78.2 million at June 30, 2017 from $170.6 million at March 31, 2017. The decrease in cash and equivalents largely reflected the reinvestment of short-term liquid assets whose balances at March 31, 2017 reflected a temporary increase arising from additional borrowings drawn at the close of the period to fund future loan growth, as described in greater detail below.

    For the year ended June 30, 2017, cash and cash equivalents decreased by $121.0 million from $199.2 million at June 30, 2016 reflecting the Company’s continuing effort to reallocate interest-earning cash and equivalents into comparatively higher-yielding assets in the loan portfolio. This effort is further exemplified by the $80.4 million decrease in the average balance of other interest-earning assets to $114.1 million for the year ended June 30, 2017 from $194.5 million for the year ended June 30, 2016. Other interest-earning assets generally include the balance of interest-earning cash deposits held in other banks coupled with the balance of the Bank’s mandatory investment in the capital stock of the Federal Home Loan Bank of New York.
  • The Company’s total deposits increased by $76.9 million to $2.93 billion at June 30, 2017, from $2.85 billion at March 31, 2017. The growth in deposits during the fourth quarter included a $65.4 million increase in interest-bearing deposits coupled with an increase in non-interest-bearing deposits of $11.5 million. For the year ended June 30, 2017, total deposits increased by $235.3 million from $2.69 billion at June 30, 2016 reflecting increases in interest-bearing and non-interest bearing deposits of $206.6 million and $28.7 million, respectively.

    The growth in deposits for the quarter and year ended June 30, 2017 largely reflected the combined effects of new product, pricing and marketing strategies enacted during fiscal 2017.
  • Total borrowings decreased by $19.1 million to $806.2 million at June 30, 2017, from $825.3 million at March 31, 2017. The decrease in borrowings largely reflected a $19.0 million decrease in depositor sweep account balances – a significant portion of which was transferred into interest-bearing deposit accounts during the period.

    For the year ended June 30, 2017, total borrowings increased by $191.8 million. The increase in borrowings included a $196.9 million increase in FHLB advances that largely reflected an additional $200.0 million of advances drawn during fiscal 2017 to fund loan growth. The Company utilized interest-rate derivatives to extend the effective duration of these short-term advances to largely offset the duration of the loans funded for interest rate risk management purposes. The increase in FHLB advances was partially offset by the repayment of a maturing $5.0 million term advance plus principal repayments on an amortizing advance. The decrease in total borrowings also reflected a $5.1 million decrease in depositor sweep accounts that was partly attributable to net transfers to interest-bearing deposit accounts, as noted above.
  • The Company’s total assets increased by $21.9 million to $4.82 billion at June 30, 2017 from $4.80 billion at March 31, 2017. For the year ended June 30, 2017, total assets increased by $318.1 million from $4.50 billion at June 30, 2016.
  • The Company’s stockholders’ equity decreased by $36.8 million to $1.06 billion at June 30, 2017 from $1.09 billion at March 31, 2017. For the year ended June 30, 2017, stockholders’ equity decreased by $90.4 million from $1.15 billion at June 30, 2016.

    The decrease in stockholders’ equity for the quarter and year ended June 30, 2017 largely reflected the return of capital to shareholders through share repurchases and cash dividends during the periods. These decreases were partially offset by net income earned during the respective periods coupled with net increases in accumulated other comprehensive income reflecting changes in the fair value of the Company’s derivatives and available for sale securities portfolios.

    At June 30, 2017, the Company’s total consolidated equity to assets ratio was 21.9% while the Bank’s total consolidated equity to assets ratio was 17.42%. The Company’s and Bank’s capital ratios at June 30, 2017 were well in excess of the levels required by federal banking regulators to be classified “well-capitalized” under regulatory guidelines.

As highlighted below, the noted balance sheet growth, reinvestment and reallocation achievements helped to offset the adverse effects on net interest income that resulted from the downward pressure on net interest margin arising from low market interest rates and a flattening yield curve:

  • The Company’s net interest income increased $523,000 to $26.7 million for the quarter ended June 30, 2017 from $26.2 million for the quarter ended March 31, 2017. For the year ended June 30, 2017, net interest income increased by $7.6 million to $102.6 million from $95.0 million for the year ended June 30, 2016.
  • The Company’s net interest margin decreased eight basis points to 2.40% for the quarter ended June 30, 2017 from 2.48% for the quarter ended March 31, 2017 while the net interest rate spread decreased by eight basis points to 2.13% from 2.21% for those same comparative periods, respectively. For the year ended June 30, 2017, the net interest margin increased by six basis points to 2.41% from 2.35% for the year ended June 30, 2016 while the net interest rate spread increased by eight basis points to 2.14% from 2.06% 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:

  • For the quarter ended June 30, 2017, the Company recognized recoveries of charge offs from prior periods that exceeded the level of charge offs recognized for the current period. The net recoveries of $483,000 recognized during the period reflected an annualized charge off (recovery) rate of (0.06)% on the average balance of total loans for the quarter ended June 30, 2017. By comparison, the Company’s net charge offs totaled approximately $254,000 for the quarter ended March 31, 2017, reflecting an annualized charge off rate of 0.03%.

    For the year ended June 30, 2017, the Company recognized net charge offs totaling $324,000 reflecting an annualized charge off rate of 0.01% on the average balance of total loans for fiscal 2017. By comparison, the Company’s net charge offs totaled approximately $2.1 million for the year ended June 30, 2016 reflecting an annualized charge off rate of 0.08% on the average balance of total loans for fiscal 2016.
  • The Company’s provision for loan losses totaled $1.2 million for the quarter ended June 30, 2017 compared to $1.8 million for the quarter ended March 31, 2017. The decrease in the provision was primarily attributable to the differences in the amount of net charge offs and recoveries recognized between the two comparative periods, as discussed above. To a lesser extent, the decrease in provision expense also reflected the comparatively lower level of growth during the quarter ended June 30, 2017 in the performing portion of the loan portfolio which is collectively evaluated for impairment using historical and environmental loss factors. The decrease in the provision also reflected updates to historical loss factors during the quarter ended June 30, 2017 that reflected the decrease in net charge off activity while also reflecting less noteworthy updates to environmental loss factors during the period.

    For the year ended June 30, 2017, the provision for loan losses decreased by $5.3 million to $5.4 million from $10.7 million for the year ended June 30, 2016. The decrease in the provision was partly attributable to the decrease in net charge offs recognized between the two comparative periods, as discussed above. The decrease in annual provision expense also reflected decreases in historical loss factors during fiscal 2017 that resulted from the noted decrease in net charge off activity during the period. To a lesser extent, the decrease in provision expense reflected the comparative effects of updates to environmental loss factors between periods. Finally, the decrease in provision expense also reflected a nominal decrease in the level of growth in performing loans between comparative periods.

The strategies executed by the Company during the quarter and year ended June 30, 2017 also served to strengthen and diversify its sources of non-interest income, as highlighted below:

  • Gains on sale of residential mortgage loans totaled $139,000 for the quarter ended June 30, 2017 compared to $166,000 for the quarter ended March 31, 2017. The decrease in sale gains primarily reflected a modest decrease in the average net gain recognized per loan sold while the volume of loans originated and sold remained stable between comparative periods. For the year ended June 30, 2017, gains on sale of residential mortgage loans totaled $713,000 compared to $82,000 for the year ended June 30, 2016.

    The Company expects to increase the volume and sale gains recognized on residential mortgage loans originated and sold during fiscal 2018 compared to fiscal 2017. In addition to bolstering non-interest income, the Company’s mortgage banking activities are expected to continue serving as a strategy to manage exposure to interest rate risk.
  • Gains on sale of SBA loans originated totaled $392,000 for the quarter ended June 30, 2017 compared to $80,000 for the quarter ended March 31, 2017. The increase in sale gains primarily reflected an increase in the balance of SBA loans originated and sold between comparative periods. For the year ended June 30, 2017, gains on sale of SBA loans totaled $822,000 compared to $353,000 for the year ended June 30, 2016.

    The Company expects to increase the volume and sale gains recognized on SBA loans originated and sold during fiscal 2018 compared to fiscal 2017.

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. These tactics have enabled the Company to defray a portion of the compensation costs associated with the Company’s 2016 Equity Incentive Plan:

  • The Company’s ratio of non-interest expense to average assets totaled 1.83% for the quarter ended June 30, 2017 compared to 1.84% for the prior quarter ended March 31, 2017. For those same comparative periods, the Company’s operating efficiency ratio increased to 74.1% from 73.9%, respectively. For the year ended June 30, 2017, the Company’s ratio of non-interest expense to average assets totaled 1.76% compared to 1.64% for the year ended June 30, 2016. For those same comparative periods, the Company’s operating efficiency ratio increased to 71.2% from 68.5%, respectively.

    The increase in the Company’s non-interest expense and operating efficiency ratios during fiscal 2017 partly reflected the impact of the Company’s 2016 Equity Incentive Plan approved by shareholders in October 2016. Based on the original value of the grants at the time they were issued on December 1, 2016, coupled with the five year vesting period, the “pre-tax” and “after-tax” expense associated with the noted grants total approximately $6.2 million and $4.3 million per year, respectively The Company estimates that the recurring expenses associated with its 2016 Equity Incentive Plan increased its ratio of non-interest expense to average assets by 0.08% for the year ended June 30, 2017 while adding 3.18% to its efficiency ratio for the same period.

Collectively, the factors noted above contributed to the increase in net income for the quarter and year ended June 30, 2017 noted earlier. These increases in operating earnings 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, 2017 totaled 0.37% compared to 0.36% for the prior quarter ended March 31, 2017. For the year ended June 30, 2017, the return on average assets totaled 0.40% compared to 0.36% for the prior year ended June 30, 2016.
  • The Company’s return on average equity for the quarter ended June 30, 2017 totaled 1.64% compared to 1.47% for the prior quarter ended March 31, 2017. For the year ended June 30, 2017, the return on average equity totaled 1.68% compared to 1.36% for the prior year ended June 30, 2016.

The earnings for the quarter and year ended June 30, 2017 augmented the Company’s stockholders’ equity, which continues to reflect the capital resulting from the second-step conversion and stock offering that were completed in fiscal 2015. As such, the Company continued to execute key capital management strategies during fiscal 2017 to further support shareholder value:

  • The Company increased its regular quarterly cash dividend payable to stockholders by $0.01 from $0.02 per share declared and paid during the quarters ended September 30, 2016 and December 31, 2016, to $0.03 per share declared and paid during the quarters ended March 31, 2017 and June 30, 2017. The Company continues to evaluate its dividend policies and practices in relation to its capital management and shareholder value objectives.
  • In May 2017, the Company completed the repurchase of its shares of capital stock under its first share repurchase program announced in May 2016 through which it authorized the repurchase of 9,352,809 shares, or 10%, of the Company’s outstanding shares. The shares associated with this first program were repurchased at a total cost of $130.6 million and at an average cost of $13.96 per share.
  • In May 2017, the Company announced a second share repurchase program through which it authorized the repurchase of 8,559,084 shares, or 10%, of the Company’s outstanding shares. Through June 30, 2017, the Company repurchased a total of 1,240,000 shares, or 14.5% of the shares authorized for repurchase under this second program, at a total cost of $17.7 million and at an average cost of $14.30 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, 2017 compared to those for the prior linked-quarter ended March 31, 2017 and prior fiscal year ended June 30, 2016, 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.

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 Kearny Financial Corp. with the Securities and Exchange Commission from time to time. The Company does not undertake and specifically disclaims any obligation to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Company.

Linked-Quarter Comparative Financial Analysis
Summary Balance Sheet
(Dollars in Thousands,
Except Per Share Data, Unaudited)
AtVariance
or Change

Variance
or Change
Pct.
June 30,March 31,
2017 2017
Assets
Cash and cash equivalents$ 78,237 $ 170,591 $ (92,354) (54.1)
Securities available for sale 613,760 614,948 (1,188) (0.2)
Securities held to maturity 493,321 501,987 (8,666) (1.7)
Loans held-for-sale 4,692 744 3,948 530.6
Loans receivable, including yield adjustments 3,245,261 3,122,628 122,633 3.9
Less allowance for loan losses (29,286) (27,614) (1,672) 6.1
Net loans receivable 3,215,975 3,095,014 120,961 3.9
Premises and equipment 39,585 38,904 681 1.8
Federal Home Loan Bank stock 39,958 39,474 484 1.2
Accrued interest receivable 12,493 12,320 173 1.4
Goodwill 108,591 108,591 - -
Bank owned life insurance 181,223 179,935 1,288 0.7
Deferred income taxes, net 15,454 14,318 1,136 7.9
Other assets 14,838 19,416 (4,578) (23.6)
Total assets $ 4,818,127 $ 4,796,242 $ 21,885 0.5
Liabilities
Deposits$ 2,930,127 $ 2,853,263 $ 76,864 2.7
Borrowings 806,228 825,260 (19,032) (2.3)
Advance payments by borrowers for taxes 8,711 8,059 652 8.1
Other liabilities 15,880 15,650 230 1.5
Total liabilities 3,760,946 3,702,232 58,714 1.6
Stockholders' Equity
Common stock 844 873 (29) (3.3)
Paid-in capital 728,790 768,373 (39,583) (5.2)
Retained earnings 361,039 359,083 1,956 0.5
Unearned ESOP shares (34,536) (35,022) 486 (1.4)
Accumulated other comprehensive income, net 1,044 703 341 48.5
Total stockholders' equity 1,057,181 1,094,010 (36,829) (3.4)
Total liabilities and stockholders' equity$ 4,818,127 $ 4,796,242 $ 21,885 0.5
Consolidated capital ratios
Equity to assets 21.94% 22.81% -0.87%
Tangible equity to tangible assets 20.14% 21.02% -0.88%
Share data
Outstanding shares (period end) 84,351 87,256 (2,905) (3.3)
Equity per share$ 12.53 $ 12.54 $ (0.01) (0.1)
Tangible equity per share (1)$ 11.24 $ 11.29 $ (0.05) (0.4)
(1) Tangible equity equals total stockholders' equity reduced by goodwill and core deposit intangible assets.
Summary Income Statement
(Dollars and Shares in Thousands,
Except Per Share Data, Unaudited)
For the three months endedVariance
or Change

Variance
or Change
Pct.
June 30,March 31,
2017 2017
Interest income
Loans$ 29,842 $ 28,235 $ 1,607 5.7
Mortgage-backed securities 3,063 3,222 (159) (4.9)
Debt securities:
Taxable 2,868 2,488 380 15.3
Tax-exempt 605 582 23 4.0
Other interest-earning assets 586 481 105 21.8
Total Interest Income 36,964 35,008 1,956 5.6
Interest expense
Deposits 5,909 5,420 489 9.0
Borrowings 4,325 3,381 944 27.9
Total interest expense 10,234 8,801 1,433 16.3
Net interest income 26,730 26,207 523 2.0
Provision for loan losses 1,188 1,809 (621) (34.3)
Net interest income after provision for
loan losses
25,542 24,398 1,144 4.7
Non-interest income
Fees and service charges 839 498 341 68.5
Loss on sale and call of securities - (22) 22 (100.0)
Gain on sale of loans 531 245 286 116.7
Gain (loss) on sale of real estate owned 3 (106) 109 (102.8)
Income from bank owned life insurance 1,288 1,279 9 0.7
Electronic banking fees and charges 287 240 47 19.6
Miscellaneous 72 119 (47) (39.5)
Total non-interest income 3,020 2,253 767 34.0
Non-interest expense
Salaries and employee benefits 12,887 12,430 457 3.7
Net occupancy expense of premises 2,013 2,088 (75) (3.6)
Equipment and systems 2,204 2,068 136 6.6
Advertising and marketing 937 753 184 24.4
Federal deposit insurance premium 352 338 14 4.1
Directors' compensation 689 689 - -
Miscellaneous 2,969 2,668 301 11.3
Total non-interest expense 22,051 21,034 1,017 4.8
Income before income taxes 6,511 5,617 894 15.9
Income taxes 2,107 1,549 558 36.0
Net income$ 4,404 $ 4,068 $ 336 8.3
Net income per common share (EPS)
Basic$ 0.05 $ 0.05 $-
Diluted$ 0.05 $ 0.05 $-
Dividends declared
Cash dividends declared per common share$ 0.03 $ 0.03 $-
Cash dividends declared$ 2,448 $ 2,525 $ (77)
Dividend payout ratio 55.6% 62.1% -6.48%
Weighted average number of common
shares outstanding
Basic 82,372 84,542 (2,170)
Diluted 82,429 84,624 (2,195)
Average Balance Sheet Data
(Dollars in Thousands, Unaudited)

For the three months endedVariance
or Change

Variance
or Change
Pct.
June 30,March 31,
2017 2017
Assets
Interest-earning assets:
Loans receivable, including loans held for sale$ 3,200,968 $ 3,029,151 $ 171,817 5.7
Mortgage-backed securities 532,621 582,591 (49,970) (8.6)
Debt securities: -
Tax-exempt 119,957 116,479 3,478 3.0
Taxable 476,499 441,124 35,375 8.0
Total debt securities 596,456 557,603 38,853 7.0
Other interest-earning assets 118,349 61,336 57,013 93.0
Total interest-earning assets 4,448,394 4,230,681 217,713 5.1
Non-interest-earning assets 358,791 352,419 6,372 1.8
Total assets $ 4,807,185 $ 4,583,100 $ 224,085 4.9
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Deposits:
Interest-bearing demand$ 813,148 $ 756,520 $ 56,628 7.5
Savings and club 523,798 520,572 3,226 0.6
Certificates of deposit 1,289,504 1,242,757 46,747 3.8
Total interest-bearing deposits 2,626,450 2,519,849 106,601 4.2
Borrowings:
Federal Home Loan Bank Advances 775,703 643,504 132,199 20.5
Other borrowings 40,064 44,940 (4,876) (10.9)
Total borrowings 815,767 688,444 127,323 18.5
Total interest-bearing liabilities 3,442,217 3,208,293 233,924 7.3
Non-interest-bearing liabilities:
Non-interest-bearing deposits 262,499 246,449 16,050 6.5
Other non-interest-bearing liabilities 25,112 25,028 84 0.3
Total non-interest-bearing liabilities 287,611 271,477 16,134 5.9
Total liabilities 3,729,828 3,479,770 250,058 7.2
Stockholders' equity 1,077,357 1,103,330 (25,973) (2.4)
Total liabilities and stockholders' equity$ 4,807,185 $ 4,583,100 $ 224,085 4.9
Average interest-earning assets to average
interest-bearing liabilities
129.23% 131.87% -2.64% -2.0
Performance Ratio Highlights

For the three months endedVariance
or Change

Variance
or Change
Pct.
June 30,March 31,
2017 2017
Average yield on interest-earning assets:
Loans receivable, including loans held for sale 3.73% 3.73% 0.00%
Mortgage-backed securities 2.30% 2.21% 0.09%
Debt securities:
Tax-exempt 2.02% 2.00% 0.02%
Taxable 2.41% 2.26% 0.15%
Total debt securities 2.33% 2.20% 0.13%
Other interest-earning assets 1.98% 3.13% -1.15%
Total interest-earning assets 3.32% 3.31% 0.01%
Average cost of interest-bearing liabilities:
Deposits:
Interest-bearing demand 0.71% 0.65% 0.06%
Savings and club 0.12% 0.12% 0.00%
Certificates of deposit 1.34% 1.30% 0.04%
Total interest-bearing deposits 0.90% 0.86% 0.04%
Borrowings:
Federal Home Loan Bank Advances 2.21% 2.08% 0.13%
Other borrowings 0.27% 0.35% -0.08%
Total borrowings 2.12% 1.96% 0.16%
Total interest-bearing liabilities 1.19% 1.10% 0.09%
Interest rate spread (1) 2.13% 2.21% -0.08%
Net interest margin (2) 2.40% 2.48% -0.08%
Non-interest income to average assets
(annualized)
0.25% 0.20% 0.05%
Non-interest expense to average assets
(annualized)
1.83% 1.84% 0.00%
Efficiency ratio (3) 74.12% 73.91% 0.21%
Return on average assets (annualized) 0.37% 0.36% 0.01%
Return on average equity (annualized) 1.64% 1.47% 0.17%
(1) Interest income divided by average interest-earning assets less interest expense divided by average interest-bearing liabilities.
(2) Net interest income divided by average interest-earning assets.
(3) Non-interest expense divided by the sum of net interest income and non-interest income.
Year-to-Year Comparative Financial Analysis
Summary Balance Sheet
(Dollars in Thousands,
Except Per Share Data, Unaudited)
AtVariance
or Change

Variance
or Change
Pct.
June 30,June 30,
2017 2016
Assets
Cash and cash equivalents$ 78,237 $ 199,200 $ (120,963) (60.7)
Securities available for sale 613,760 673,537 (59,777) (8.9)
Securities held to maturity 493,321 577,286 (83,965) (14.5)
Loans held-for-sale 4,692 3,316 1,376 41.5
Loans receivable, including yield adjustments 3,245,261 2,673,987 571,274 21.4
Less allowance for loan losses (29,286) (24,229) (5,057) 20.9
Net loans receivable 3,215,975 2,649,758 566,217 21.4
Premises and equipment 39,585 38,385 1,200 3.1
Federal Home Loan Bank stock 39,958 30,612 9,346 30.5
Accrued interest receivable 12,493 11,212 1,281 11.4
Goodwill 108,591 108,591 - -
Bank owned life insurance 181,223 176,016 5,207 3.0
Deferred income taxes, net 15,454 25,973 (10,519) (40.5)
Other assets 14,838 6,173 8,665 140.4
Total assets $ 4,818,127 $ 4,500,059 $ 318,068 7.1
Liabilities
Deposits$ 2,930,127 $ 2,694,833 $ 235,294 8.7
Borrowings 806,228 614,423 191,805 31.2
Advance payments by borrowers for taxes 8,711 7,906 805 10.2
Other liabilities 15,880 35,268 (19,388) (55.0)
Total liabilities 3,760,946 3,352,430 408,516 12.2
Stockholders' Equity
Common stock 844 918 (74) (8.1)
Paid-in capital 728,790 849,173 (120,383) (14.2)
Retained earnings 361,039 350,806 10,233 2.9
Unearned ESOP shares (34,536) (36,481) 1,945 (5.3)
Accumulated other comprehensive income (loss), net 1,044 (16,787) 17,831 (106.2)
Total stockholders' equity 1,057,181 1,147,629 (90,448) (7.9)
Total liabilities and stockholders' equity$ 4,818,127 $ 4,500,059 $ 318,068 7.1
Consolidated capital ratios
Equity to assets 21.94% 25.50% -3.56%
Tangible equity to tangible assets 20.14% 23.65% -3.51%
Share data
Outstanding shares (period end) 84,351 91,822 (7,471) (8.1)
Equity per share$ 12.53 $ 12.50 $ 0.03 0.2
Tangible equity per share (1)$ 11.24 $ 11.31 $ (0.07) (0.6)
(1) Tangible equity equals total stockholders' equity reduced by goodwill and core deposit intangible assets.
Summary Income Statement
(Dollars and Shares in Thousands,
Except Per Share Data, Unaudited)
For the year endedVariance
or Change

Variance
or Change
Pct.
June 30,June 30,
2017 2016
Interest income
Loans$ 111,181 $ 97,956 $ 13,225 13.5
Mortgage-backed securities 14,001 17,251 (3,250) (18.8)
Debt securities:
Taxable 9,542 7,719 1,823 23.6
Tax-exempt 2,300 2,191 109 5.0
Other interest-earning assets 2,069 1,771 298 16.8
Total Interest Income 139,093 126,888 12,205 9.6
Interest expense
Deposits 22,100 18,673 3,427 18.4
Borrowings 14,419 13,230 1,189 9.0
Total interest expense 36,519 31,903 4,616 14.5
Net interest income 102,574 94,985 7,589 8.0
Provision for loan losses 5,381 10,690 (5,309) (49.7)
Net interest income after provision for
loan losses
97,193 84,295 12,898 15.3
Non-interest income
Fees and service charges 3,289 3,516 (227) (6.5)
(Loss) gain on sale and call of securities (1) 2 (3) (150.0)
Gain on sale of loans 1,535 436 1,099 252.1
Loss on sale of real estate owned (106) (137) 31 (22.6)
Income from bank owned life insurance 5,207 5,563 (356) (6.4)
Electronic banking fees and charges 1,080 1,091 (11) (1.0)
Miscellaneous 344 256 88 34.4
Total non-interest income 11,348 10,727 621 5.8
Non-interest expense
Salaries and employee benefits 47,818 42,105 5,713 13.6
Net occupancy expense of premises 8,018 7,487 531 7.1
Equipment and systems 8,350 7,729 621 8.0
Advertising and marketing 2,626 2,020 606 30.0
Federal deposit insurance premium 1,334 2,708 (1,374) (50.7)
Directors' compensation 1,982 812 1,170 144.1
Miscellaneous 10,990 9,556 1,434 15.0
Total non-interest expense 81,118 72,417 8,701 12.0
Income before income taxes 27,423 22,605 4,818 21.3
Income taxes 8,820 6,783 2,037 30.0
Net income$ 18,603 $ 15,822 $ 2,781 17.6
Net income per common share (EPS)
Basic$ 0.22 $ 0.18 $ 0.04
Diluted$ 0.22 $ 0.18 $ 0.04
Dividends declared
Cash dividends declared per common share$ 0.10 $ 0.08 $ 0.02
Cash dividends declared$ 8,370 $ 7,164 $ 1,206
Dividend payout ratio 45.0% 45.3% -0.29%
Weighted average number of common
shares outstanding
Basic 84,590 89,591 (5,001)
Diluted 84,661 89,625 (4,964)
Average Balance Sheet Data
(Dollars in Thousands, Unaudited)

For the year endedVariance
or Change

Variance
or Change
Pct.
June 30,June 30,
2017 2016
Assets
Interest-earning assets:
Loans receivable, including loans held for sale$ 2,955,686 $ 2,512,231 $ 443,455 17.7
Mortgage-backed securities 621,618 741,163 (119,545) (16.1)
Debt securities: -
Tax-exempt 114,545 110,022 4,523 4.1
Taxable 444,890 492,382 (47,492) (9.6)
Total debt securities 559,435 602,404 (42,969) (7.1)
Other interest-earning assets 114,121 194,451 (80,330) (41.3)
Total interest-earning assets 4,250,860 4,050,249 200,611 5.0
Non-interest-earning assets 355,554 355,110 444 0.1
Total assets $ 4,606,414 $ 4,405,359 $ 201,055 4.6
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Deposits:
Interest-bearing demand$ 769,943 $ 723,130 $ 46,813 6.5
Savings and club 519,535 516,390 3,145 0.6
Certificates of deposit 1,242,857 1,116,906 125,951 11.3
Total interest-bearing deposits 2,532,335 2,356,426 175,909 7.5
Borrowings:
Federal Home Loan Bank Advances 647,360 582,118 65,242 11.2
Other borrowings 38,412 35,392 3,020 8.5
Total borrowings 685,772 617,510 68,262 11.1
Total interest-bearing liabilities 3,218,107 2,973,936 244,171 8.2
Non-interest-bearing liabilities:
Non-interest-bearing deposits 249,693 225,396 24,297 10.8
Other non-interest-bearing liabilities 32,312 39,890 (7,578) (19.0)
Total non-interest-bearing liabilities 282,005 265,286 16,719 6.3
Total liabilities 3,500,112 3,239,222 260,890 8.1
Stockholders' equity 1,106,302 1,166,138 (59,836) (5.1)
Total liabilities and stockholders' equity$ 4,606,414 $ 4,405,360 $ 201,054 4.6
Average interest-earning assets to average
interest-bearing liabilities
132.09% 136.19% -4.10% -3.0
Performance Ratio Highlights

For the year endedVariance
or Change

Variance
or Change
Pct.
June 30,June 30,
2017 2016
Average yield on interest-earning assets:
Loans receivable, including loans held for sale 3.76% 3.90% -0.14%
Mortgage-backed securities 2.25% 2.33% -0.08%
Debt securities:
Tax-exempt 2.01% 1.99% 0.02%
Taxable 2.14% 1.57% 0.57%
Total debt securities 2.12% 1.65% 0.47%
Other interest-earning assets 1.81% 0.91% 0.90%
Total interest-earning assets 3.27% 3.13% 0.14%
Average cost of interest-bearing liabilities:
Deposits:
Interest-bearing demand 0.66% 0.59% 0.07%
Savings and club 0.13% 0.16% -0.03%
Certificates of deposit 1.32% 1.22% 0.10%
Total interest-bearing deposits 0.87% 0.79% 0.08%
Borrowings:
Federal Home Loan Bank Advances 2.21% 2.24% -0.03%
Other borrowings 0.33% 0.51% -0.18%
Total borrowings 2.10% 2.14% -0.04%
Total interest-bearing liabilities 1.13% 1.07% 0.06%
Interest rate spread (1) 2.14% 2.06% 0.08%
Net interest margin (2) 2.41% 2.35% 0.06%
Non-interest income to average assets
0.25% 0.24% 0.01%
Non-interest expense to average assets
1.76% 1.64% 0.12%
Efficiency ratio (3) 71.20% 68.50% 2.70%
Return on average assets (annualized) 0.40% 0.36% 0.04%
Return on average equity (annualized) 1.68% 1.36% 0.32%
(1) Interest income divided by average interest-earning assets less interest expense divided by average interest-bearing liabilities.
(2) Net interest income divided by average interest-earning assets.
(3) Non-interest expense divided by the sum of net interest income and non-interest income.
Five-Quarter Financial Trend Analysis
Summary Balance Sheet
(Dollars in Thousands,
Except Per Share Data, Unaudited)
At
June 30,March 31,December 31,September 30,June 30,
2017 2017 2016 2016 2016
Assets
Cash and cash equivalents$ 78,237 $ 170,591 $ 37,032 $ 72,593 $ 199,200
Securities available for sale 613,760 614,948 671,281 689,151 673,537
Securities held to maturity 493,321 501,987 517,819 538,319 577,286
Loans held-for-sale 4,692 744 6,686 4,489 3,316
Loans receivable, including yield adjustments 3,245,261 3,122,628 2,973,931 2,845,605 2,673,987
Less allowance for loan losses (29,286) (27,614) (26,060) (25,003) (24,229)
Net loans receivable 3,215,975 3,095,014 2,947,871 2,820,602 2,649,758
Premises and equipment 39,585 38,904 38,341 38,125 38,385
Federal Home Loan Bank stock 39,958 39,474 34,525 31,601 30,612
Accrued interest receivable 12,493 12,320 11,809 11,666 11,212
Goodwill 108,591 108,591 108,591 108,591 108,591
Bank owned life insurance 181,223 179,935 178,656 177,334 176,016
Deferred income taxes, net 15,454 14,318 16,098 22,914 25,973
Other assets 14,838 19,416 16,599 7,896 6,173
Total assets $ 4,818,127 $ 4,796,242 $ 4,585,308 $ 4,523,281 $ 4,500,059
Liabilities
Deposits$ 2,930,127 $ 2,853,263 $ 2,746,017 $ 2,733,960 $ 2,694,833
Borrowings 806,228 825,260 701,849 633,389 614,423
Advance payments by borrowers for taxes 8,711 8,059 7,618 7,597 7,906
Other liabilities 15,880 15,650 15,172 28,801 35,268
Total liabilities 3,760,946 3,702,232 3,470,656 3,403,747 3,352,430
Stockholders' Equity
Common stock 844 873 892 891 918
Paid-in capital 728,790 768,373 795,773 813,648 849,173
Retained earnings 361,039 359,083 357,540 353,763 350,806
Unearned ESOP shares (34,536) (35,022) (35,508) (35,995) (36,481)
Accumulated other comprehensive income (loss), net 1,044 703 (4,045) (12,773) (16,787)
Total stockholders' equity 1,057,181 1,094,010 1,114,652 1,119,534 1,147,629
Total liabilities and stockholders' equity$ 4,818,127 $ 4,796,242 $ 4,585,308 $ 4,523,281 $ 4,500,059
Consolidated capital ratios
Equity to assets 21.94% 22.81% 24.31% 24.75% 25.50%
Tangible equity to tangible assets 20.14% 21.02% 22.47% 22.89% 23.65%
Share data
Outstanding shares (period end) 84,351 87,256 89,176 89,076 91,822
Equity per share$ 12.53 $ 12.54 $ 12.50 $ 12.57 $ 12.50
Tangible equity per share (1)$ 11.24 $ 11.29 $ 11.28 $ 11.34 $ 11.31
(1) Tangible equity equals total stockholders' equity reduced by goodwill and core deposit intangible assets.
Supplemental Balance Sheet Highlights
(Dollars in Thousands, Unaudited)

At
June 30,March 31,December 31,September 30,June 30,
2017 2017 2016 2016 2016
Cash and cash equivalents
Cash and due from depository institutions $ 18,889 $ 17,429 $ 17,541 $ 18,829 $ 21,328
Interest-bearing deposits in other banks 59,348 153,162 19,491 53,764 177,872
Total cash and cash equivalents$ 78,237 $ 170,591 $ 37,032 $ 72,593 $ 199,200
Securities available for sale
Debt securities:
U.S. agency securities$ 5,316 $ 5,622 $ 5,809 $ 6,172 $ 6,440
Municipal and state obligations 27,740 27,259 27,090 28,259 28,398
Asset-backed securities 162,429 150,805 121,445 84,065 82,625
Collateralized loan obligations 98,154 104,811 98,447 128,047 127,374
Corporate bonds 142,318 141,134 138,564 137,976 137,404
Trust preferred securities 8,540 8,248 8,101 7,968 7,669
Debt securities available for sale 444,497 437,879 399,456 392,487 389,910
Mortgage-backed securities:
Collateralized mortgage obligations 30,536 31,941 52,333 57,170 60,577
Residential pass-through securities 130,550 136,926 211,258 231,052 214,526
Commercial pass-through securities 8,177 8,202 8,234 8,442 8,524
Mortgage-backed securities 169,263 177,069 271,825 296,664 283,627
Total securities available for sale$ 613,760 $ 614,948 $ 671,281 $ 689,151 $ 673,537
Securities held to maturity
Debt securities:
U.S. agency securities$ 35,000 $ 35,000 $ 34,999 $ 59,995 $ 84,992
Municipal and state obligations 94,713 91,038 87,682 82,087 82,179
Subordinated debt 15,000 15,000 15,000 - -
Debt securities held to maturity 144,713 141,038 137,681 142,082 167,171
Mortgage-backed securities:
Collateralized mortgage obligations 17,854 19,193 20,543 21,699 23,081
Residential pass-through securities 178,813 186,248 200,402 211,930 223,632
Commercial pass-through securities 151,941 155,508 159,193 162,608 163,402
Mortgage-backed securities 348,608 360,949 380,138 396,237 410,115
Total securities held to maturity$ 493,321 $ 501,987 $ 517,819 $ 538,319 $ 577,286
Total securities$ 1,107,081 $ 1,116,935 $ 1,189,100 $ 1,227,470 $ 1,250,823
Supplemental Balance Sheet Highlights
(Dollars in Thousands, Unaudited)

At
June 30,March 31,December 31,September 30,June 30,
2017 2017 2016 2016 2016
Loan portfolio composition:
Residential first mortgage loans$ 567,323 $ 566,665 $ 562,466 $ 584,156 $ 605,203
Home equity loans and lines of credit 82,822 82,412 83,305 85,799 89,566
Residential mortgage loans 650,145 649,077 645,771 669,955 694,769
Multifamily mortgage loans 1,412,575 1,371,339 1,295,207 1,142,908 1,040,293
Nonresidential and mixed use mortgage loans 1,085,064 995,782 932,616 916,769 820,673
Commercial mortgage loans 2,497,639 2,367,121 2,227,823 2,059,677 1,860,966
Commercial business loans 74,471 83,754 75,640 87,333 88,207
Construction loans 3,815 1,494 927 2,059 2,038
Account loans 2,863 2,860 2,980 3,012 3,349
Other consumer loans 13,520 15,313 17,501 19,870 22,052
Consumer loans 16,383 18,173 20,481 22,882 25,401
Total loans, excluding yield adjs 3,242,453 3,119,619 2,970,642 2,841,906 2,671,381
Unamortized yield adjustments 2,808 3,009 3,289 3,699 2,606
Loans receivable, including yield adjs 3,245,261 3,122,628 2,973,931 2,845,605 2,673,987
Less allowance for loan losses (29,286) (27,614) (26,060) (25,003) (24,229)
Net loans receivable$ 3,215,975 $ 3,095,014 $ 2,947,871 $ 2,820,602 $ 2,649,758
Loan portfolio allocation:
Residential first mortgage loans 17.5% 18.2% 18.9% 20.6% 22.7%
Home equity loans and lines of credit 2.6% 2.6% 2.8% 3.0% 3.4%
Residential mortgage loans 20.1% 20.8% 21.7% 23.6% 26.0%
Multifamily mortgage loans 43.6% 44.0% 43.6% 40.2% 38.9%
Nonresidential and mixed use mortgage loans 33.5% 31.9% 31.4% 32.3% 30.7%
Commercial mortgage loans 77.0% 75.9% 75.0% 72.5% 69.7%
Commercial business loans 2.3% 2.7% 2.5% 3.1% 3.3%
Construction loans 0.1% 0.0% 0.0% 0.1% 0.1%
Account loans 0.1% 0.1% 0.1% 0.1% 0.1%
Other consumer loans 0.4% 0.5% 0.6% 0.7% 0.8%
Consumer loans 0.5% 0.6% 0.7% 0.8% 1.0%
Total loans, excluding yield adjs 100.0% 100.0% 100.0% 100.0% 100.0%
Asset quality:
Nonperforming assets:
Accruing loans > 90 days past due$ 74 $ 65 $ 92 $ 77 $ 38
Nonaccrual loans 18,798 20,950 21,473 21,768 21,017
Total nonperforming loans 18,872 21,015 21,565 21,845 21,055
Other real estate owned 1,632 1,668 2,037 1,356 826
Total nonperforming assets$ 20,504 $ 22,683 $ 23,602 $ 23,201 $ 21,881
Nonperforming loans (% total loans) 0.58% 0.67% 0.72% 0.77% 0.79%
Nonperforming assets (% total assets) 0.43% 0.47% 0.51% 0.51% 0.49%
Allowance for loan losses (ALLL):
ALLL to total loans 0.90% 0.88% 0.88% 0.88% 0.91%
ALLL to nonperforming loans 155.18% 131.40% 120.84% 114.46% 115.07%
Net (recoveries) charge offs $ (483)$ 254 $ 198 $ 354 $ 827
Average net (recovery) charge off rate (annualized) -0.06% 0.03% 0.03% 0.05% 0.12%
Supplemental Balance Sheet Highlights
(Dollars in Thousands, Unaudited)

At
June 30,March 31,December 31,September 30,June 30,
2017 2017 2016 2016 2016
Funding by type:
Deposits
Non-interest-bearing deposits$ 267,412 $ 255,939 $ 240,367 $ 251,141 $ 238,751
Interest-bearing demand 847,663 798,203 768,556 750,126 732,633
Savings and club 523,984 524,002 519,257 514,909 516,023
Certificates of deposit 1,291,068 1,275,119 1,217,837 1,217,784 1,207,426
Interest-bearing deposits 2,662,715 2,597,324 2,505,650 2,482,819 2,456,082
Total deposits 2,930,127 2,853,263 2,746,017 2,733,960 2,694,833
Borrowings:
Federal Home Loan Bank advances 775,696 775,719 665,742 600,765 578,788
Depositor sweep accounts 30,532 49,541 36,107 32,624 35,635
Total borrowings 806,228 825,260 701,849 633,389 614,423
Total funding$ 3,736,355 $ 3,678,523 $ 3,447,866 $ 3,367,349 $ 3,309,256
Loans as a % of deposits 109.9% 108.5% 107.6% 103.3% 98.5%
Deposits as a % of total funding 78.4% 77.6% 79.6% 81.2% 81.4%
Borrowings as a % of total funding 21.6% 22.4% 20.4% 18.8% 18.6%
Funding by source:
Retail funding
Non-interest-bearing deposits$ 267,412 $ 255,939 $ 240,367 $ 251,141 $ 238,751
Interest-bearing demand 625,061 568,865 544,487 527,511 508,528
Savings and club 523,984 524,002 519,257 514,909 516,023
Certificates of deposit 1,168,010 1,152,025 1,113,073 1,119,922 1,109,203
Total retail deposits 2,584,467 2,500,831 2,417,184 2,413,483 2,372,505
Depositor sweep accounts 30,532 49,541 36,107 32,624 35,635
Total retail funding 2,614,999 2,550,372 2,453,291 2,446,107 2,408,140
Wholesale funding:
Interest-bearing demand$ 222,602 $ 229,338 $ 224,069 $ 222,615 $ 224,105
Certificates of deposit (listing service) 101,430 101,432 96,516 89,608 89,857
Certificates of deposit (brokered) 21,628 21,662 8,248 8,254 8,366
Total wholesale deposits 345,660 352,432 328,833 320,477 322,328
FHLB Advances 775,696 775,719 665,742 600,765 578,788
Total wholesale funding 1,121,356 1,128,151 994,575 921,242 901,116
Total funding$ 3,736,355 $ 3,678,523 $ 3,447,866 $ 3,367,349 $ 3,309,256
Retail funding as a % of total funding 70.0% 69.3% 71.2% 72.6% 72.8%
Wholesale funding as a % of total funding 30.0% 30.7% 28.8% 27.4% 27.2%
Summary Income Statement
(Dollars and Shares in Thousands,
Except Per Share Data, Unaudited)
For the three months ended
June 30,March 31,December 31,September 30,June 30,
2017 2017 2016 2016 2016
Interest income
Loans$ 29,842 $ 28,235 $ 27,407 $ 25,697 $ 25,698
Mortgage-backed securities 3,063 3,222 3,779 3,937 4,032
Debt securities:
Taxable 2,868 2,488 2,146 2,040 1,990
Tax-exempt 605 582 562 551 551
Other interest-earning assets 586 481 421 581 496
Total Interest Income 36,964 35,008 34,315 32,806 32,767
Interest expense
Deposits 5,909 5,420 5,410 5,361 5,140
Borrowings 4,325 3,381 3,289 3,424 3,400
Total interest expense 10,234 8,801 8,699 8,785 8,540
Net interest income 26,730 26,207 25,616 24,021 24,227
Provision for loan losses 1,188 1,809 1,255 1,129 2,046
Net interest income after provision for
loan losses
25,542 24,398 24,361 22,892 22,181
Non-interest income
Fees and service charges 839 498 1,289 663 1,340
(Loss) gain on sale and call of securities - (22) 21 - -
Gain on sale of loans 531 245 459 300 132
Gain (loss) on sale of real estate owned 3 (106) 12 (15) 24
Income from bank owned life insurance 1,288 1,279 1,321 1,319 1,374
Electronic banking fees and charges 287 240 270 283 284
Miscellaneous 72 119 74 79 57
Total non-interest income 3,020 2,253 3,446 2,629 3,211
Non-interest expense
Salaries and employee benefits 12,887 12,430 11,592 10,909 10,640
Net occupancy expense of premises 2,013 2,088 1,976 1,941 1,813
Equipment and systems 2,204 2,068 2,030 2,048 2,092
Advertising and marketing 937 753 387 549 490
Federal deposit insurance premium 352 338 339 305 687
Directors' compensation 689 689 379 225 224
Miscellaneous 2,969 2,668 2,670 2,683 1,732
Total non-interest expense 22,051 21,034 19,373 18,660 17,678
Income before income taxes 6,511 5,617 8,434 6,861 7,714
Income taxes 2,107 1,549 2,970 2,194 2,833
Net income$ 4,404 $ 4,068 $ 5,464 $ 4,667 $ 4,881
Net income per common share (EPS)
Basic$ 0.05 $ 0.05 $ 0.06 $ 0.05 $ 0.05
Diluted$ 0.05 $ 0.05 $ 0.06 $ 0.05 $ 0.05
Dividends declared
Cash dividends declared per common share$ 0.03 $ 0.03 $ 0.02 $ 0.02 $ 0.02
Cash dividends declared$ 2,448 $ 2,525 $ 1,687 $ 1,710 $ 1,792
Dividend payout ratio 55.6% 62.1% 30.9% 36.6% 36.7%
Weighted average number of common
shares outstanding
Basic 82,372 84,542 85,174 86,246 89,443
Diluted 82,429 84,624 85,258 86,304 89,481
Average Balance Sheet Data
(Dollars in Thousands, Unaudited)

For the three months ended
June 30,March 31,December 31,September 30,June 30,
2017 2017 2016 2016 2016
Assets
Interest-earning assets:
Loans receivable, including loans held for sale$ 3,200,968 $3,029,151 $ 2,899,794 $ 2,697,096 $ 2,682,755
Mortgage-backed securities 532,621 582,591 673,569 695,876 705,962
Debt securities:
Tax-exempt 119,957 116,479 112,221 109,625 109,691
Taxable 476,499 441,124 419,966 442,233 459,731
Total debt securities 596,456 557,603 532,187 551,858 569,422
Other interest-earning assets 118,349 61,336 71,072 204,621 191,129
Total interest-earning assets 4,448,394 4,230,681 4,176,622 4,149,451 4,149,268
Non-interest-earning assets 358,791 352,419 351,458 359,514 352,841
Total assets $ 4,807,185 $ 4,583,100 $ 4,528,080 $ 4,508,965 $ 4,502,109
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Deposits:
Interest-bearing demand$ 813,148 $ 756,520 $ 761,765 $ 748,516 $ 726,327
Savings and club 523,798 520,572 518,225 515,615 519,055
Certificates of deposit 1,289,504 1,242,757 1,224,592 1,215,081 1,200,874
Total interest-bearing deposits 2,626,450 2,519,849 2,504,582 2,479,212 2,446,256
Borrowings:
Federal Home Loan Bank Advances 775,703 643,504 594,238 577,305 585,085
Other borrowings 40,064 44,940 35,273 33,530 32,183
Total borrowings 815,767 688,444 629,511 610,835 617,268
Total interest-bearing liabilities 3,442,217 3,208,293 3,134,093 3,090,047 3,063,524
Non-interest-bearing liabilities:
Non-interest-bearing deposits 262,499 246,449 245,928 243,964 232,698
Other non-interest-bearing liabilities 25,112 25,028 31,781 47,092 41,577
Total non-interest-bearing liabilities 287,611 271,477 277,709 291,056 274,275
Total liabilities 3,729,828 3,479,770 3,411,802 3,381,103 3,337,799
Stockholders' equity 1,077,357 1,103,330 1,116,278 1,127,862 1,164,310
Total liabilities and stockholders' equity$ 4,807,185 $ 4,583,100 $ 4,528,080 $ 4,508,965 $ 4,502,109
Average interest-earning assets to average
interest-bearing liabilities
129.23% 131.87% 133.26% 134.28% 135.44%
Performance Ratio Highlights

For the three months ended
June 30,March 31,December 31,September 30,June 30,
2017 2017 2016 2016 2016
Average yield on interest-earning assets:
Loans receivable, including loans held for sale 3.73% 3.73% 3.78% 3.81% 3.83%
Mortgage-backed securities 2.30% 2.21% 2.24% 2.26% 2.28%
Debt securities:
Tax-exempt 2.02% 2.00% 2.00% 2.01% 2.01%
Taxable 2.41% 2.26% 2.04% 1.85% 1.73%
Total debt securities 2.33% 2.20% 2.04% 1.88% 1.79%
Other interest-earning assets 1.98% 3.13% 2.37% 1.14% 1.04%
Total interest-earning assets 3.32% 3.31% 3.29% 3.16% 3.16%
Average cost of interest-bearing liabilities:
Deposits:
Interest-bearing demand 0.71% 0.65% 0.62% 0.63% 0.62%
Savings and club 0.12% 0.12% 0.12% 0.15% 0.16%
Certificates of deposit 1.34% 1.30% 1.33% 1.31% 1.27%
Total interest-bearing deposits 0.90% 0.86% 0.86% 0.87% 0.84%
Borrowings:
Federal Home Loan Bank Advances 2.21% 2.08% 2.20% 2.35% 2.30%
Other borrowings 0.27% 0.35% 0.29% 0.42% 0.50%
Total borrowings 2.12% 1.96% 2.09% 2.24% 2.20%
Total interest-bearing liabilities 1.19% 1.10% 1.11% 1.14% 1.12%
Interest rate spread (1) 2.13% 2.21% 2.18% 2.02% 2.04%
Net interest margin (2) 2.40% 2.48% 2.45% 2.32% 2.34%
Non-interest income to average assets
(annualized)
0.25% 0.20% 0.30% 0.23% 0.29%
Non-interest expense to average assets
(annualized)
1.83% 1.84% 1.71% 1.66% 1.57%
Efficiency ratio (3) 74.12% 73.91% 66.66% 70.02% 64.43%
Return on average assets (annualized) 0.37% 0.36% 0.48% 0.41% 0.43%
Return on average equity (annualized) 1.64% 1.47% 1.96% 1.66% 1.68%
(1) Interest income divided by average interest-earning assets less interest expense divided by average interest-bearing liabilities.
(2) Net interest income divided by average interest-earning assets.
(3) Non-interest expense divided by the sum of net interest income and non-interest income.


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

Source:Kearny Bank