Kearny Financial Corp. - FORM 8-K - EX-99.1

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8-K - 8-K - Kearny Financial Corp.	krny-8k_20210128.htm

Exhibit 99.1

FOR IMMEDIATE RELEASE

January 28, 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 2021 SECOND QUARTER RESULTS

Fairfield, N.J., January 28, 2021 – Kearny Financial Corp. (NASDAQ GS: KRNY) (the “Company”), the holding company of Kearny Bank (the “Bank”), reported net income for the quarter ended December 31, 2020 of $16.9 million, or $0.20 per diluted share, compared to $11.4 million, or $0.13 per diluted share, for the quarter ended September 30, 2020.

As previously reported, net income for the quarter ended September 30, 2020 was impacted by various non-recurring items which were recognized in conjunction with the Company’s acquisition of MSB Financial Corp. (“MSB”) and its subsidiary Millington Bank. Excluding the effects of these non-recurring items, net of tax, net income for the quarter ended September 30, 2020 would have been $15.0 million or $0.17 per diluted share.

Craig L. Montanaro, President and Chief Executive Officer, commented, “I am pleased to report another quarter of very strong core earnings resulting from a combination of cost of funds reductions, expense control efforts and operating efficiencies gained from the MSB acquisition. Despite the operational challenges presented by the pandemic, our business generation efforts continue unabated and we have had outstanding success retaining and growing core deposits, in particular within the markets previously served by Millington Bank.”

With regard to the Company’s share repurchase program, Mr. Montanaro further noted, “Our robust capital position allowed us to resume our share repurchase program on October 19, 2020 and, since that time, we have been opportunistic buyers of our stock. During the quarter we repurchased approximately 4.5 million shares at an average price of $10.14 per share, or 98.2% of tangible book value at December 31, 2020. In this environment we continue to believe that repurchases represent an excellent strategy to build long-term shareholder value.”

Balance Sheet

•

Deposits increased by $272.7 million to $5.31 billion at December 31, 2020 from $5.04 billion at September 30, 2020, reflecting quarterly growth of $272.6 million, or 8.9%, in core non-maturity deposits.

•

Loans receivable decreased by $126.1 million to $4.83 billion at December 31, 2020 from $4.95 billion at September 30, 2020. The net decrease for the period included the sale of $43.6 million of Paycheck Protection Program (“PPP”) loans, which resulted in a gain on sale of $352,000.

•

Investment securities increased to $1.73 billion, or 23.5% of total assets, at December 31, 2020 from $1.54 billion at September 30, 2020, while borrowings decreased to $865.7 million, or 11.8% of total assets, from $1.08 billion, for those same comparative periods.

•

During the quarter ended December 31, 2020 the Company sold $24.4 million of investment securities with a weighted average yield of 1.98%, the proceeds of which were utilized to extinguish $27.0 million of Federal Home Loan Bank (“FHLB”) advances with a weighted average cost of 2.85%. Associated gains on sale of investment securities totaled $800,000 while debt extinguishment expense totaled $796,000.

Earnings

Net Interest Income, Spread and Margin

•

Net interest income increased by $391,000 to $44.6 million for the quarter ended December 31, 2020 from $44.2 million for the quarter ended September 30, 2020. This increase was the result of a $2.9 million reduction in interest expense that was partially offset by a $2.5 million reduction in interest income. Included in net interest income was purchase accounting accretion of $3.7 million and $4.2 million, for the quarters ended December 31, 2020 and September 30, 2020, respectively.

•

Net interest margin for the quarter ended December 31, 2020 declined two basis points to 2.64% from 2.66% for the quarter ended September 30, 2020. For those same comparative periods, yield on interest-earning assets decreased by 22 basis points to 3.45% while the cost of interest-bearing liabilities decreased by 23 basis points to 0.97%.

Non-Interest Income

•

Fees and service charges totaled $1.9 million for the quarter ended December 31, 2020 compared to $1.1 million for the quarter ended September 30, 2020. The increase was largely attributable to an increase of $712,000 in loan pre-payment penalty income to $1.4 million.

•

Loan sale gains totaled $2.4 million for the quarter ended December 31, 2020 as compared to $1.9 million for the quarter ended September 30, 2020. The increase for the quarter was largely attributable to the sale of $43.6 million of PPP loans which resulted in a gain on sale of $352,000, as noted earlier.

•

Gain (loss) on sale and call of securities reflected a gain of $813,000 for the quarter ended December 31, 2020 compared to a loss of $377,000 for the quarter ended September 30, 2020.

Non-Interest Expense

•

Non-interest expense decreased by $3.1 million to $30.5 million for the quarter ended December 31, 2020 compared to $33.6 million for the quarter ended September 30, 2020. This decrease was largely attributable to $4.3 million in merger-related expenses recognized in the prior comparative period with no such expenses recognized in the current period. The decrease was partially offset by $796,000 of non-recurring debt extinguishment expenses, as noted earlier, and an asset impairment charge of $347,000 related to a branch closure. The remaining change in non-interest expense included increases in equipment and systems expense, advertising and marketing expense, FDIC insurance premiums and miscellaneous expense.

•

The efficiency and non-interest expense ratios were 59.01% and 1.65%, respectively, for the quarter ended December 31, 2020 as compared to 64.69% and 1.85%, respectively, for the quarter ended September 30, 2020. Adjusting for the impact of non-recurring items, the efficiency and non-interest expense ratios would have been 57.70% and 1.59% respectively, for the quarter ended December 31, 2020 as compared to 59.83% and 1.61%, respectively, for the quarter ended September 30, 2020.

Income Taxes

•

Income tax expense totaled $5.6 million for the quarter ended December 31, 2020 compared to $2.9 million for the quarter ended September 30, 2020, resulting in effective tax rates of 24.9% and 20.2%, respectively.

•

The comparatively lower effective income tax rate for the prior period reflected the effects of various non-recurring items recorded in the prior comparative quarter, in conjunction with the Company’s acquisition of MSB.

Performance Ratios

•

Return on average assets was 0.92% for the quarter ended December 31, 2020 as compared to 0.63% for the quarter ended September 30, 2020. Adjusting for the impact of non-recurring items, adjusted return on average assets would have been 0.90% and 0.83% for those same comparative periods.

•

Return on average equity was 6.07% for the quarter ended December 31, 2020 as compared to 4.10% for the quarter ended September 30, 2020 while return on average tangible equity was 7.52% as compared to 5.08% for those same comparative periods, respectively. Adjusting for the impact on non-recurring items, adjusted return on average equity would have been 5.96% for the quarter ended December 31, 2020, as compared to 5.40% for the quarter ended September 30, 2020 while the adjusted return on average tangible equity would have been 7.39% and 6.70% for those same comparative periods, respectively.

Asset Quality

•

Non-performing assets totaled $71.7 million, or 0.98% of total assets, at December 31, 2020 compared to $45.3 million, or 0.62% of total assets, at September 30, 2020. This increase was largely attributable to two commercial mortgage loans and two multi-family mortgage loans, secured by various properties located in New York City, which were placed on non-accrual status during the quarter. All four loans are well secured and currently require no specific impairment reserve.

•

Net charge offs totaled $108,000 for the quarter ended December 31, 2020 compared to $67,000 for the quarter ended September 30, 2020, reflecting annualized net charge off rates of 0.01% for both comparative periods.

•

Based on Section 4013 of the CARES Act, the Consolidated Appropriations Act, 2021 and related guidance promulgated by federal banking regulators, qualifying loan modifications, including short-term payment deferrals, are not considered to be troubled debt restructurings. As of December 31, 2020, the Company had active payment deferrals on 37 loans totaling $33.2 million, representing 0.68% of total loans.

•

The Company recorded a credit loss provision reversal of $1.4 million for the quarter ended December 31, 2020 compared to a credit loss provision of $4.1 million for the quarter ended September 30, 2020. The comparatively higher level of provision for the prior period primarily reflected the impact of $5.1 million of provision expense that was attributable to the acquired MSB loans.

•

The Allowance for Credit Losses (“ACL”) decreased to $63.4 million at December 31, 2020 from $64.9 million at September 30, 2020, with such balances reflecting an ACL to total loans ratio of 1.30% as of those dates.

Liquidity & Capital

•

At December 31, 2020, liquid assets included $129.7 million of short-term cash and equivalents supplemented by $1.70 billion of investment securities classified as available for sale. The Company had the capacity to borrow additional funds totaling $615.0 million via unsecured lines of credit and $1.75 billion and $292.0 million, without pledging additional collateral, from the FHLB of New York and Federal Reserve Bank, respectively.

•

On October 19, 2020, the Company announced the resumption of its previously approved stock repurchase plan, which, at the time of the announcement, had 761,030 shares of common stock remaining to be repurchased. In addition, the Company announced the authorization of a new repurchase plan totaling 4,475,523 shares, or 5% of the Company’s then outstanding common stock. For the quarter ended December 31, 2020, the Company repurchased a total of 4,508,689 shares at a cost of $45.7 million, or $10.14 per share, equal to 98.2% of tangible book value at December 31, 2020.

•

On January 22, 2021, the Company announced the completion of its previously disclosed stock repurchase plans and the authorization of a new repurchase plan totaling 4,210,520 shares, or 5% of the Company’s outstanding common stock.

•

For the quarter ended December 31, 2020, book value per share increased by $0.30 to $12.86 while tangible book value per share increased by $0.18 to $10.33.

•

At December 31, 2020, the Company’s ratio of tangible equity to tangible assets equaled 12.32%. At December 31, 2020, the regulatory capital ratios, of both the Company and the Bank were in excess of the levels required by federal banking regulators to be classified as “well-capitalized” under regulatory guidelines.

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

In addition, the COVID-19 pandemic is having an adverse impact on the Company, its customers and the communities it serves. Given its ongoing and dynamic nature, it is difficult to predict the full impact of the COVID-19 outbreak on our business. The extent of such impact will depend on future developments, which are highly uncertain, including when the coronavirus can be controlled and abated and when and how the economy may be reopened or remain open. As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, we could be subject to any of the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations: the demand for our products and services may decline, making it difficult to grow assets and income; if the economy is unable to substantially reopen or remain open, and high levels of unemployment continue for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income; collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase; our allowance for credit losses may increase if borrowers experience financial difficulties, which will adversely affect our net income; the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us; as the result of the decline in the Federal Reserve Board’s target federal funds rate to near 0%, the yield on our assets may decline to a greater extent than the decline in our cost of interest-bearing liabilities, reducing our net interest margin and spread and reducing net income; due to a decline in our stock price or other factors, goodwill may become impaired and be required to be written down; and our cyber security risks are increased as the result of an increase in the number of employees working remotely.

Category: Earnings

Linked-Quarter Comparative Financial Analysis

Summary Balance Sheet	At									Variance
(Dollars and Shares in Thousands,	December 31,			September 30,			Variance			or Change
Except Per Share Data, Unaudited)	2020			2020			or Change			Pct.
Assets
Cash and cash equivalents	$	129,694		$	145,818		$	(16,124	)		-11.1	%
Securities available for sale		1,695,893			1,508,542			187,351			12.4	%
Securities held to maturity		29,549			31,576			(2,027	)		-6.4	%
Loans held-for-sale		12,601			20,170			(7,569	)		-37.5	%
Loans receivable		4,828,634			4,954,750			(126,116	)		-2.5	%
Less allowance for credit losses on loans		(63,386	)		(64,860	)		1,474			-2.3	%
Net loans receivable		4,765,248			4,889,890			(124,642	)		-2.5	%
Premises and equipment		61,181			61,808			(627	)		-1.0	%
Federal Home Loan Bank stock		45,578			55,118			(9,540	)		-17.3	%
Accrued interest receivable		19,826			20,368			(542	)		-2.7	%
Goodwill		210,895			210,895			-			0.0	%
Core deposit intangible		4,151			4,420			(269	)		-6.1	%
Bank owned life insurance		280,235			278,639			1,596			0.6	%
Deferred income taxes, net		30,846			33,319			(2,473	)		-7.4	%
Other real estate owned		178			178			-			0.0	%
Other assets		49,278			49,468			(190	)		-0.4	%
Total assets	$	7,335,153		$	7,310,209		$	24,944			0.3	%

Liabilities
Deposits	$	5,312,613		$	5,039,912		$	272,701			5.4	%
Borrowings		865,651			1,077,540			(211,889	)		-19.7	%
Advance payments by borrowers for taxes		16,100			17,008			(908	)		-5.3	%
Other liabilities		48,448			51,689			(3,241	)		-6.3	%
Total liabilities		6,242,812			6,186,149			56,663			0.9	%

Stockholders' Equity
Common stock		849			895			(46	)		-5.1	%
Paid-in capital		724,389			769,269			(44,880	)		-5.8	%
Retained earnings		388,376			378,134			10,242			2.7	%
Unearned ESOP shares		(27,726	)		(28,212	)		486			-1.7	%
Accumulated other comprehensive income		6,453			3,974			2,479			62.4	%
Total stockholders' equity		1,092,341			1,124,060			(31,719	)		-2.8	%
Total liabilities and stockholders' equity	$	7,335,153		$	7,310,209		$	24,944			0.3	%

Consolidated capital ratios
Equity to assets		14.89	%		15.38	%		-0.49	%
Tangible equity to tangible assets		12.32	%		12.81	%		-0.49	%

Share data
Outstanding shares		84,938			89,510			(4,572	)		-5.1	%
Book value per share	$	12.86		$	12.56		$	0.30			2.4	%
Tangible book value per share⁽¹⁾	$	10.33		$	10.15		$	0.18			1.8	%

(1)	Tangible book value equals total stockholders' equity reduced by goodwill and core deposit intangible assets.

Summary Income Statement	For the three months ended									Variance
(Dollars and Shares in Thousands,	December 31,			September 30,			Variance			or Change
Except Per Share Data, Unaudited)	2020			2020			or Change			Pct.
Interest income
Loans	$	49,466		$	52,180		$	(2,714	)		-5.2	%
Taxable investment securities		7,707			7,336			371			5.1	%
Tax-exempt investment securities		433			454			(21	)		-4.6	%
Other interest-earning assets		787			914			(127	)		-13.9	%
Total Interest Income		58,393			60,884			(2,491	)		-4.1	%

Interest expense
Deposits		8,647			11,062			(2,415	)		-21.8	%
Borrowings		5,193			5,660			(467	)		-8.3	%
Total interest expense		13,840			16,722			(2,882	)		-17.2	%
Net interest income		44,553			44,162			391			0.9	%
(Reversal of) provision for credit losses		(1,365	)		4,059			(5,424	)		-133.6	%
Net interest income after (reversal of) provision for credit losses		45,918			40,103			5,815			14.5	%

Non-interest income
Fees and service charges		1,896			1,076			820			76.2	%
Gain (loss) on sale and call of securities		813			(377	)		1,190			315.6	%
Gain on sale of loans		2,378			1,890			488			25.8	%
Income from bank owned life insurance		1,596			1,596			-			0.0	%
Electronic banking fees and charges		404			405			(1	)		-0.2	%
Bargain purchase gain		-			3,053			(3,053	)		-100.0	%
Other income		67			90			(23	)		-25.6	%
Total non-interest income		7,154			7,733			(579	)		-7.5	%

Non-interest expense
Salaries and employee benefits		17,081			16,977			104			0.6	%
Net occupancy expense of premises		3,120			3,122			(2	)		-0.1	%
Equipment and systems		3,902			3,570			332			9.3	%
Advertising and marketing		513			500			13			2.6	%
Federal deposit insurance premium		490			472			18			3.8	%
Directors' compensation		748			748			-			0.0	%
Merger-related expenses		-			4,349			(4,349	)		-100.0	%
Debt extinguishment expenses		796			-			796			0.0	%
Other expense		3,860			3,835			25			0.7	%
Total non-interest expense		30,510			33,573			(3,063	)		-9.1	%
Income before income taxes		22,562			14,263			8,299			58.2	%
Income taxes		5,614			2,884			2,730			94.7	%
Net income	$	16,948		$	11,379		$	5,569			48.9	%

Net income per common share (EPS)
Basic	$	0.20		$	0.13		$	0.07
Diluted	$	0.20		$	0.13		$	0.07

Dividends declared
Cash dividends declared per common share	$	0.08		$	0.08		$	-
Cash dividends declared	$	6,706		$	6,917		$	(211	)
Dividend payout ratio		39.6	%		60.8	%		-21.2	%

Weighted average number of common shares outstanding
Basic		85,120			86,008			(888	)
Diluted		85,123			86,009			(886	)

	For the three months ended									Variance
Average Balance Sheet Data	December 31,			September 30,			Variance			or Change
(Dollars in Thousands, Unaudited)	2020			2020			or Change			Pct.
Assets
Interest-earning assets:
Loans receivable, including loans held for sale	$	4,871,268		$	4,958,293		$	(87,025	)		-1.8	%
Taxable investment securities		1,544,095			1,350,511			193,584			14.3	%
Tax-exempt investment securities		79,044			82,603			(3,559	)		-4.3	%
Other interest-earning assets		266,114			247,543			18,571			7.5	%
Total interest-earning assets		6,760,521			6,638,950			121,571			1.8	%
Non-interest-earning assets		632,084			624,252			7,832			1.3	%
Total assets	$	7,392,605		$	7,263,202		$	129,403			1.8	%

Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Deposits:
Interest-bearing demand	$	1,683,222		$	1,464,238		$	218,984			15.0	%
Savings		1,058,675			1,006,075			52,600			5.2	%
Certificates of deposit		1,899,406			1,988,689			(89,283	)		-4.5	%
Total interest-bearing deposits		4,641,303			4,459,002			182,301			4.1	%
Borrowings:
Federal Home Loan Bank advances		1,057,958			1,130,836			(72,878	)		-6.4	%
Other borrowings		-			3,568			(3,568	)		-100.0	%
Total borrowings		1,057,958			1,134,404			(76,446	)		-6.7	%
Total interest-bearing liabilities		5,699,261			5,593,406			105,855			1.9	%
Non-interest-bearing liabilities:
Non-interest-bearing deposits		502,479			479,141			23,338			4.9	%
Other non-interest-bearing liabilities		73,683			79,620			(5,937	)		-7.5	%
Total non-interest-bearing liabilities		576,162			558,761			17,401			3.1	%
Total liabilities		6,275,423			6,152,167			123,256			2.0	%
Stockholders' equity		1,117,182			1,111,035			6,147			0.6	%
Total liabilities and stockholders' equity	$	7,392,605		$	7,263,202		$	129,403			1.8	%

Average interest-earning assets to average interest-bearing liabilities		118.62	%		118.69	%		-0.07	%		-0.1	%

	For the three months ended
	December 31,			September 30,			Variance
Performance Ratio Highlights	2020			2020			or Change
Average yield on interest-earning assets:
Loans receivable, including loans held for sale		4.06	%		4.21	%		-0.15	%
Taxable investment securities		2.00	%		2.17	%		-0.17	%
Tax-exempt investment securities ⁽¹⁾		2.19	%		2.20	%		-0.01	%
Other interest-earning assets		1.18	%		1.48	%		-0.30	%
Total interest-earning assets		3.45	%		3.67	%		-0.22	%

Average cost of interest-bearing liabilities:
Deposits:
Interest-bearing demand		0.47	%		0.60	%		-0.13	%
Savings		0.33	%		0.57	%		-0.24	%
Certificates of deposit		1.22	%		1.50	%		-0.28	%
Total interest-bearing deposits		0.75	%		0.99	%		-0.24	%
Borrowings:
Federal Home Loan Bank advances		1.96	%		2.00	%		-0.04	%
Other borrowings		0.00	%		0.04	%		-0.04	%
Total borrowings		1.96	%		2.00	%		-0.04	%
Total interest-bearing liabilities		0.97	%		1.20	%		-0.23	%

Interest rate spread⁽²⁾		2.48	%		2.47	%		0.01	%
Net interest margin⁽³⁾		2.64	%		2.66	%		-0.02	%

Non-interest income to average assets (annualized)		0.39	%		0.43	%		-0.04	%
Non-interest expense to average assets (annualized)		1.65	%		1.85	%		-0.20	%

Efficiency ratio⁽⁴⁾		59.01	%		64.69	%		-5.68	%

Return on average assets (annualized)		0.92	%		0.63	%		0.29	%
Return on average equity (annualized)		6.07	%		4.10	%		1.97	%
Return on average tangible equity (annualized) ⁽⁵⁾		7.52	%		5.08	%		2.44	%

(1)	The yield on tax-exempt investment securities has not been adjusted to reflect their tax-effective yield.

(2)	Interest income divided by average interest-earning assets less interest expense divided by average interest-bearing liabilities.

(3)	Net interest income divided by average interest-earning assets.

(4)	Non-interest expense divided by the sum of net interest income and non-interest income.

(5)	Average tangible equity equals total average stockholders’ equity reduced by average goodwill and average core deposit intangible assets.

Five-Quarter Financial Trend Analysis

Summary Balance Sheet	At
(Dollars and Shares in Thousands,	December 31,			September 30,			June 30,			March 31,			December 31,
Except Per Share Data, Unaudited)	2020			2020			2020			2020			2019
Assets
Cash and cash equivalents	$	129,694		$	145,818		$	180,967		$	59,452		$	41,796
Securities available for sale		1,695,893			1,508,542			1,385,703			1,476,344			1,402,206
Securities held to maturity		29,549			31,576			32,556			34,618			36,073
Loans held-for-sale		12,601			20,170			20,789			11,245			5,952
Loans receivable		4,828,634			4,954,750			4,498,397			4,562,512			4,492,697
Less allowance for credit losses on loans		(63,386	)		(64,860	)		(37,327	)		(37,191	)		(30,937	)
Net loans receivable		4,765,248			4,889,890			4,461,070			4,525,321			4,461,760
Premises and equipment		61,181			61,808			57,389			58,985			56,542
Federal Home Loan Bank stock		45,578			55,118			58,654			59,324			62,838
Accrued interest receivable		19,826			20,368			17,373			19,036			18,261
Goodwill		210,895			210,895			210,895			210,895			210,895
Core deposit intangible		4,151			4,420			3,995			4,242			4,545
Bank owned life insurance		280,235			278,639			262,380			260,843			259,312
Deferred income taxes, net		30,846			33,319			25,480			27,150			20,438
Other real estate owned		178			178			178			178			178
Other assets		49,278			49,468			40,746			26,200			29,605
Total assets	$	7,335,153		$	7,310,209		$	6,758,175		$	6,773,833		$	6,610,401

Liabilities
Deposits	$	5,312,613		$	5,039,912		$	4,430,282		$	4,253,254		$	4,188,822
Borrowings		865,651			1,077,540			1,173,165			1,384,025			1,275,049
Advance payments by borrowers for taxes		16,100			17,008			16,569			16,492			16,585
Other liabilities		48,448			51,689			53,982			50,390			35,375
Total liabilities		6,242,812			6,186,149			5,673,998			5,704,161			5,515,831

Stockholders' Equity
Common stock		849			895			837			837			851
Paid-in capital		724,389			769,269			722,871			721,474			737,539
Retained earnings		388,376			378,134			387,911			380,671			377,896
Unearned ESOP shares		(27,726	)		(28,212	)		(28,699	)		(29,185	)		(29,671	)
Accumulated other comprehensive income (loss)		6,453			3,974			1,257			(4,125	)		7,955
Total stockholders' equity		1,092,341			1,124,060			1,084,177			1,069,672			1,094,570
Total liabilities and stockholders' equity	$	7,335,153		$	7,310,209		$	6,758,175		$	6,773,833		$	6,610,401

Consolidated capital ratios
Equity to assets		14.89	%		15.38	%		16.04	%		15.79	%		16.56	%
Tangible equity to tangible assets		12.32	%		12.81	%		13.29	%		13.03	%		13.75	%

Share data
Outstanding shares		84,938			89,510			83,663			83,664			85,150
Book value per share	$	12.86		$	12.56		$	12.96		$	12.79		$	12.85
Tangible book value per share⁽¹⁾	$	10.33		$	10.15		$	10.39		$	10.21		$	10.32

(1)	Tangible book value equals total stockholders' equity reduced by goodwill and core deposit intangible assets.

	At
Supplemental Balance Sheet Highlights	December 31,		September 30,		June 30,		March 31,		December 31,
(Dollars in Thousands, Unaudited)	2020		2020		2020		2020		2019
Cash and cash equivalents
Cash and due from depository institutions	$	23,968	$	18,628	$	20,391	$	20,200	$	17,843
Interest-bearing deposits in other banks		105,726		127,190		160,576		39,252		23,953
Total cash and cash equivalents	$	129,694	$	145,818	$	180,967	$	59,452	$	41,796

Securities available for sale
Debt securities:
U.S. agency securities	$	-	$	-	$	-	$	-	$	606
Municipal and state obligations		47,763		50,877		54,054		58,151		88,057
Asset-backed securities		255,407		258,801		172,447		169,102		177,676
Collateralized loan obligations		196,685		196,398		193,788		189,565		198,324
Corporate bonds		167,168		122,276		143,639		163,715		192,074
Trust preferred securities		2,866		2,773		2,627		2,852		3,795
Debt securities		669,889		631,125		566,555		583,385		660,532

Mortgage-backed securities:
Collateralized mortgage obligations		20,510		25,770		30,903		34,671		57,839
Residential pass-through securities		705,991		625,715		561,954		607,113		360,900
Commercial pass-through securities		299,503		225,932		226,291		251,175		322,935
Mortgage-backed securities		1,026,004		877,417		819,148		892,959		741,674
Total securities available for sale	$	1,695,893	$	1,508,542	$	1,385,703	$	1,476,344	$	1,402,206

Securities held to maturity
Debt securities:
Municipal and state obligations	$	29,549	$	31,576	$	32,556	$	34,618	$	36,073
Total securities held to maturity	$	29,549	$	31,576	$	32,556	$	34,618	$	36,073

Total securities	$	1,725,442	$	1,540,118	$	1,418,259	$	1,510,962	$	1,438,279

	At
Supplemental Balance Sheet Highlights	December 31,			September 30,			June 30,			March 31,			December 31,
(Dollars in Thousands, Unaudited)	2020			2020			2020			2020			2019
Loan portfolio composition:
Commercial loans:
Multi-family	$	2,076,483		$	2,110,300		$	2,059,568		$	1,879,907		$	1,856,591
Nonresidential		1,123,695			1,124,330			960,853			1,202,652			1,172,213
Commercial business		202,010			255,888			138,788			73,922			67,887
Construction		90,398			79,178			20,961			17,880			16,221
Total commercial loans		3,492,586			3,569,696			3,180,170			3,174,361			3,112,912
One- to four-family residential mortgage loans		1,305,351			1,353,197			1,273,022			1,338,099			1,331,301
Consumer loans:
Home equity loans and lines of credit		65,298			71,540			82,920			87,909			89,916
Other consumer loans		4,123			4,136			3,991			4,604			4,908
Total consumer loans		69,421			75,676			86,911			92,513			94,824
Total loans, excluding yield adjustments		4,867,358			4,998,569			4,540,103			4,604,973			4,539,037
Unaccreted yield adjustments		(38,724	)		(43,819	)		(41,706	)		(42,461	)		(46,340	)
Loans receivable, net of yield adjustments		4,828,634			4,954,750			4,498,397			4,562,512			4,492,697
Less allowance for credit losses on loans		(63,386	)		(64,860	)		(37,327	)		(37,191	)		(30,937	)
Net loans receivable	$	4,765,248		$	4,889,890		$	4,461,070		$	4,525,321		$	4,461,760

Loan portfolio allocation:
Commercial loans:
Multi-family		42.7	%		42.2	%		45.3	%		40.8	%		40.9	%
Nonresidential		23.1	%		22.5	%		21.2	%		26.1	%		25.8	%
Commercial business		4.2	%		5.1	%		3.1	%		1.6	%		1.5	%
Construction		1.8	%		1.6	%		0.4	%		0.4	%		0.4	%
Total commercial loans		71.8	%		71.4	%		70.0	%		68.9	%		68.6	%
One- to four-family residential mortgage loans		26.8	%		27.1	%		28.1	%		29.1	%		29.3	%
Consumer loans:
Home equity loans and lines of credit		1.3	%		1.4	%		1.8	%		1.9	%		2.0	%
Other consumer loans		0.1	%		0.1	%		0.1	%		0.1	%		0.1	%
Total consumer loans		1.4	%		1.5	%		1.9	%		2.0	%		2.1	%
Total loans, excluding yield adjustments		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

Asset quality:
Nonperforming assets:
Accruing loans - 90 days and over past due	$	-		$	238		$	5		$	12		$	19
Nonaccrual loans		71,472			44,837			36,691			35,384			21,935
Total nonperforming loans		71,472			45,075			36,696			35,396			21,954
Other real estate owned		178			178			178			178			178
Total nonperforming assets	$	71,650		$	45,253		$	36,874		$	35,574		$	22,132

Nonperforming loans (% total loans)		1.48	%		0.91	%		0.82	%		0.78	%		0.49	%
Nonperforming assets (% total assets)		0.98	%		0.62	%		0.55	%		0.53	%		0.33	%

Allowance for credit losses on loans (ACL):
ACL to total loans		1.30	%		1.30	%		0.82	%		0.81	%		0.68	%
ACL to nonperforming loans		88.69	%		143.89	%		101.72	%		105.07	%		140.92	%
Net charge offs	$	109		$	67		$	38		$	16		$	30
Average net charge off rate (annualized)		0.01	%		0.01	%		0.00	%		0.00	%		0.00	%

	At
Supplemental Balance Sheet Highlights	December 31,			September 30,			June 30,			March 31,			December 31,
(Dollars in Thousands, Unaudited)	2020			2020			2020			2020			2019
Funding by type:
Deposits:
Non-interest-bearing deposits	$	518,828		$	487,710		$	419,138		$	321,824		$	312,098
Interest-bearing demand		1,752,699			1,561,135			1,264,151			1,134,420			1,060,434
Savings		1,075,122			1,025,245			906,597			848,950			829,321
Certificates of deposit		1,965,964			1,965,822			1,840,396			1,948,060			1,986,969
Interest-bearing deposits		4,793,785			4,552,202			4,011,144			3,931,430			3,876,724
Total deposits		5,312,613			5,039,912			4,430,282			4,253,254			4,188,822

Borrowings:
Federal Home Loan Bank advances		865,651			1,077,540			1,167,429			1,177,319			1,253,958
Overnight borrowings		-			-			-			200,000			15,000
Depositor sweep accounts		-			-			5,736			6,706			6,091
Total borrowings		865,651			1,077,540			1,173,165			1,384,025			1,275,049

Total funding	$	6,178,264		$	6,117,452		$	5,603,447		$	5,637,279		$	5,463,871

Loans as a % of deposits		89.9	%		97.4	%		101.2	%		106.7	%		106.7	%
Deposits as a % of total funding		86.0	%		82.4	%		79.1	%		75.4	%		76.7	%
Borrowings as a % of total funding		14.0	%		17.6	%		20.9	%		24.6	%		23.3	%

Funding by source:
Retail funding:
Non-interest-bearing deposits	$	518,828		$	487,710		$	419,138		$	321,824		$	312,098
Interest-bearing demand		1,752,699			1,561,135			1,264,151			1,134,420			1,060,434
Savings		1,075,122			1,025,245			906,597			848,950			829,321
Certificates of deposit		1,658,277			1,775,189			1,773,257			1,833,081			1,876,280
Total retail deposits		5,004,926			4,849,279			4,363,143			4,138,275			4,078,133
Depositor sweep accounts		-			-			5,736			6,706			6,091
Total retail funding		5,004,926			4,849,279			4,368,879			4,144,981			4,084,224

Wholesale funding:
Certificates of deposit (listing service)	$	43,112		$	57,251		$	35,760		$	33,608		$	42,119
Certificates of deposit (brokered)		264,575			133,382			31,379			81,371			68,570
Total wholesale deposits		307,687			190,633			67,139			114,979			110,689
FHLB advances		865,651			1,077,540			1,167,429			1,177,319			1,253,958
Overnight borrowings		-			-			-			200,000			15,000
Total wholesale funding		1,173,338			1,268,173			1,234,568			1,492,298			1,379,647

Total funding	$	6,178,264		$	6,117,452		$	5,603,447		$	5,637,279		$	5,463,871

Retail funding as a % of total funding		81.0	%		79.3	%		78.0	%		73.5	%		74.7	%
Wholesale funding as a % of total funding		19.0	%		20.7	%		22.0	%		26.5	%		25.3	%

Summary Income Statement	For the three months ended
(Dollars and Shares in Thousands,	December 31,			September 30,			June 30,			March 31,			December 31,
Except Per Share Data, Unaudited)	2020			2020			2020			2020			2019
Interest income
Loans	$	49,466		$	52,180		$	46,192		$	46,603		$	45,608
Taxable investment securities		7,707			7,336			9,769			10,526			9,698
Tax-exempt investment securities		433			454			487			547			666
Other interest-earning assets		787			914			903			1,100			1,210
Total interest income		58,393			60,884			57,351			58,776			57,182

Interest expense
Deposits		8,647			11,062			12,439			14,768			15,590
Borrowings		5,193			5,660			4,462			6,398			6,985
Total interest expense		13,840			16,722			16,901			21,166			22,575
Net interest income		44,553			44,162			40,450			37,610			34,607
(Reversal of) provision for credit losses		(1,365	)		4,059			174			6,270			(1,465	)
Net interest income after (reversal of) provision for credit losses		45,918			40,103			40,276			31,340			36,072

Non-interest income
Fees and service charges		1,896			1,076			1,696			1,338			2,145
Gain (loss) on sale and call of securities		813			(377	)		19			2,234			11
Gain on sale of loans		2,378			1,890			1,348			565			668
Loss on sale and write down of other real estate owned		-			-			-			-			(28	)
Income from bank owned life insurance		1,596			1,596			1,537			1,532			1,576
Electronic banking fees and charges		404			405			325			309			293
Bargain purchase gain		-			3,053			-			-			-
Other income		67			90			77			223			(111	)
Total non-interest income		7,154			7,733			5,002			6,201			4,554

Non-interest expense
Salaries and employee benefits		17,081			16,977			15,527			15,537			15,174
Net occupancy expense of premises		3,120			3,122			2,688			2,685			3,082
Equipment and systems		3,902			3,570			2,948			2,672			3,046
Advertising and marketing		513			500			751			612			890
Federal deposit insurance premium		490			472			286			-			-
Directors' compensation		748			748			769			771			769
Merger-related expenses		-			4,349			447			285			219
Debt extinguishment expenses		796			-			-			2,156			-
Other expense		3,860			3,835			3,475			3,344			3,247
Total non-interest expense		30,510			33,573			26,891			28,062			26,427
Income before income taxes		22,562			14,263			18,387			9,479			14,199
Income taxes		5,614			2,884			4,698			225			3,547
Net income	$	16,948		$	11,379		$	13,689		$	9,254		$	10,652

Net income per common share (EPS)
Basic	$	0.20		$	0.13		$	0.17		$	0.11		$	0.13
Diluted	$	0.20		$	0.13		$	0.17		$	0.11		$	0.13

Dividends declared⁽¹⁾
Cash dividends declared per common share	$	0.08		$	0.08		$	0.08		$	0.08		$	0.07
Cash dividends declared	$	6,706		$	6,917		$	6,449		$	6,479		$	5,760
Dividend payout ratio		39.6	%		60.8	%		47.1	%		70.0	%		54.1	%

Weighted average number of common shares outstanding
Basic		85,120			86,008			80,678			81,339			82,831
Diluted		85,123			86,009			80,680			81,358			82,876

	For the three months ended
Average Balance Sheet Data	December 31,			September 30,			June 30,			March 31,			December 31,
(Dollars in Thousands, Unaudited)	2020			2020			2020			2020			2019
Assets
Interest-earning assets:
Loans receivable, including loans held for sale	$	4,871,268		$	4,958,293		$	4,567,229		$	4,503,996		$	4,547,126
Taxable investment securities		1,544,095			1,350,511			1,369,014			1,406,973			1,244,475
Tax-exempt investment securities		79,044			82,603			89,263			101,771			125,187
Other interest-earning assets		266,114			247,543			141,964			104,241			117,811
Total interest-earning assets		6,760,521			6,638,950			6,167,470			6,116,981			6,034,599
Non-interest-earning assets		632,084			624,252			605,876			598,335			590,746
Total assets	$	7,392,605		$	7,263,202		$	6,773,346		$	6,715,316		$	6,625,345

Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Deposits:
Interest-bearing demand	$	1,683,222		$	1,464,238		$	1,189,044		$	1,112,080		$	982,163
Savings		1,058,675			1,006,075			876,580			838,501			813,626
Certificates of deposit		1,899,406			1,988,689			1,879,039			2,004,785			2,063,066
Total interest-bearing deposits		4,641,303			4,459,002			3,944,663			3,955,366			3,858,855
Borrowings:
Federal Home Loan Bank advances		1,057,958			1,130,836			1,202,522			1,208,627			1,255,597
Other borrowings		-			3,568			96,770			87,072			34,733
Total borrowings		1,057,958			1,134,404			1,299,292			1,295,699			1,290,330
Total interest-bearing liabilities		5,699,261			5,593,406			5,243,955			5,251,065			5,149,185
Non-interest-bearing liabilities:
Non-interest-bearing deposits		502,479			479,141			380,067			317,530			320,161
Other non-interest-bearing liabilities		73,683			79,620			72,007			55,456			53,479
Total non-interest-bearing liabilities		576,162			558,761			452,074			372,986			373,640
Total liabilities		6,275,423			6,152,167			5,696,029			5,624,051			5,522,825
Stockholders' equity		1,117,182			1,111,035			1,077,317			1,091,265			1,102,520
Total liabilities and stockholders' equity	$	7,392,605		$	7,263,202		$	6,773,346		$	6,715,316		$	6,625,345

Average interest-earning assets to average interest-bearing liabilities		118.62	%		118.69	%		117.61	%		116.49	%		117.20	%

	For the three months ended
	December 31,			September 30,			June 30,			March 31,			December 31,
Performance Ratio Highlights	2020			2020			2020			2020			2019
Average yield on interest-earning assets:
Loans receivable, including loans held for sale		4.06	%		4.21	%		4.05	%		4.14	%		4.01	%
Taxable investment securities		2.00	%		2.17	%		2.85	%		2.99	%		3.12	%
Tax-exempt investment securities ⁽¹⁾		2.19	%		2.20	%		2.18	%		2.15	%		2.13	%
Other interest-earning assets		1.18	%		1.48	%		2.54	%		4.22	%		4.11	%
Total interest-earning assets		3.45	%		3.67	%		3.72	%		3.84	%		3.79	%

Average cost of interest-bearing liabilities:
Deposits:
Interest-bearing demand		0.47	%		0.60	%		0.72	%		1.17	%		1.29	%
Savings		0.33	%		0.57	%		0.81	%		0.85	%		0.81	%
Certificates of deposit		1.22	%		1.50	%		1.82	%		1.94	%		2.09	%
Total interest-bearing deposits		0.75	%		0.99	%		1.26	%		1.49	%		1.62	%
Borrowings:
Federal Home Loan Bank advances		1.96	%		2.00	%		1.47	%		2.03	%		2.19	%
Other borrowings		0.00	%		0.04	%		0.13	%		1.17	%		1.36	%
Total borrowings		1.96	%		2.00	%		1.37	%		1.98	%		2.17	%
Total interest-bearing liabilities		0.97	%		1.20	%		1.29	%		1.61	%		1.75	%

Interest rate spread⁽²⁾		2.48	%		2.47	%		2.43	%		2.23	%		2.04	%
Net interest margin⁽³⁾		2.64	%		2.66	%		2.62	%		2.46	%		2.29	%

Non-interest income to average assets (annualized)		0.39	%		0.43	%		0.30	%		0.37	%		0.27	%
Non-interest expense to average assets (annualized)		1.65	%		1.85	%		1.59	%		1.67	%		1.60	%

Efficiency ratio⁽⁴⁾		59.01	%		64.69	%		59.16	%		64.05	%		67.48	%

Return on average assets (annualized)		0.92	%		0.63	%		0.81	%		0.55	%		0.64	%
Return on average equity (annualized)		6.07	%		4.10	%		5.08	%		3.39	%		3.86	%
Return on average tangible equity (annualized) ⁽⁵⁾		7.52	%		5.08	%		6.35	%		4.23	%		4.80	%

(1)	The yield on tax-exempt investment securities has not been adjusted to reflect their tax-effective yield.

(2)	Interest income divided by average interest-earning assets less interest expense divided by average interest-bearing liabilities.

(3)	Net interest income divided by average interest-earning assets.

(4)	Non-interest expense divided by the sum of net interest income and non-interest income.

(5)	Average tangible equity equals total average stockholders’ equity reduced by average goodwill and average core deposit intangible assets.

This document contains certain non-GAAP financial measures in addition to results presented in accordance with Generally Accepted Accounting Principles (“GAAP”). These non-GAAP measures provide additional information which allow readers to evaluate the ongoing performance of the Company. They are not a substitute for GAAP measures; they should be read and used in conjunction with the Company’s GAAP financial information. A reconciliation of non-GAAP financial measures to GAAP measures is included below. In all cases, it should be understood that non-GAAP per share measures do not depict amounts that accrue directly to the benefit of shareholders.

Reconciliation of GAAP to Non-GAAP	For the three months ended
(Dollars in Thousands,	December 31,			September 30,			June 30,			March 31,			December 31,
Except Per Share Data, Unaudited)	2020			2020			2020			2020			2019
Adjusted net income:
Net income (GAAP)	$	16,948		$	11,379		$	13,689		$	9,254		$	10,652
Non-recurring transactions - net of tax:
Bargain purchase gain		-			(3,053	)		-			-			-
Provision for credit losses on non-PCD loans		-			3,563			-			-			-
Merger-related expenses		-			3,123			426			269			183
Branch consolidation expenses		243			-			-			-			274
Net effect of security sales and debt extinguishment		-			-			-			(55	)		-
Gain (loss) on sale and call of securities		(571	)		-			-			-			-
Debt extinguishment expenses		559			-			-			-			-
Reversal of income tax valuation allowance		(523	)		-			-			(591	)		-
Tax benefit arising from adoption of the CARES Act provisions		-			-			-			(1,624	)		-
Net income (non-GAAP)	$	16,656		$	15,012		$	14,115		$	7,253		$	11,109

Calculation of pre-tax, pre-provision income:
Net income (GAAP)	$	16,948		$	11,379		$	13,689		$	9,254		$	10,652
Adjustments to net income (GAAP):
Provision for income taxes		5,614			2,884			4,698			225			3,547
(Reversal of) provision for credit losses		(1,365	)		4,059			174			6,270			(1,465	)
Pre-tax, pre-provision income (non-GAAP)	$	21,197		$	18,322		$	18,561		$	15,749		$	12,734

Adjusted earnings per share:
Weighted average common shares - basic		85,120			86,008			80,678			81,339			82,831
Weighted average common shares - diluted		85,123			86,009			80,680			81,358			82,876

Earnings per share - basic (GAAP)	$	0.20		$	0.13		$	0.17		$	0.11		$	0.13
Earnings per share - diluted (GAAP)	$	0.20		$	0.13		$	0.17		$	0.11		$	0.13

Adjusted earnings per share - basic (non-GAAP)	$	0.20		$	0.17		$	0.17		$	0.09		$	0.13
Adjusted earnings per share - diluted (non-GAAP)	$	0.20		$	0.17		$	0.17		$	0.09		$	0.13

Adjusted return on average assets:
Total average assets	$	7,392,605		$	7,263,202		$	6,773,346		$	6,715,316		$	6,625,345

Return on average assets (GAAP)		0.92	%		0.63	%		0.81	%		0.55	%		0.64	%
Adjusted return on average assets (non-GAAP)		0.90	%		0.83	%		0.83	%		0.43	%		0.67	%

Adjusted return on average equity:
Total average equity	$	1,117,182		$	1,111,035		$	1,077,317		$	1,091,265		$	1,102,520

Return on average equity (GAAP)		6.07	%		4.10	%		5.08	%		3.39	%		3.86	%
Adjusted return on average equity (non-GAAP)		5.96	%		5.40	%		5.24	%		2.66	%		4.03	%

Reconciliation of GAAP to Non-GAAP	For the three months ended
(Dollars in Thousands,	December 31,			September 30,			June 30,			March 31,			December 31,
Except Per Share Data, Unaudited)	2020			2020			2020			2020			2019
Adjusted return on average tangible equity:
Total average equity	$	1,117,182		$	1,111,035		$	1,077,317		$	1,091,265		$	1,102,520
Less: average goodwill		(210,895	)		(210,895	)		(210,895	)		(210,895	)		(210,895	)
Less: average other intangible assets		(4,317	)		(4,341	)		(4,124	)		(4,408	)		(4,711	)
	$	901,970		$	895,799		$	862,298		$	875,962		$	886,914

Return on average tangible equity (non-GAAP)		7.52	%		5.08	%		6.35	%		4.23	%		4.80	%
Adjusted return on average tangible equity (non-GAAP)		7.39	%		6.70	%		6.55	%		3.31	%		5.01	%

Adjusted non-interest expense ratio:
Non-interest expense (GAAP)	$	30,510		$	33,573		$	26,891		$	28,062		$	26,427
Non-recurring transactions:
Merger-related expenses		-			(4,349	)		(447	)		(285	)		(219	)
Branch consolidation expenses		(347	)		-			-			-			(153	)
Debt extinguishment expenses		(796	)		-			-			(2,156	)		-
Non-interest expense (non-GAAP)	$	29,367		$	29,224		$	26,444		$	25,621		$	26,055

Non-interest expense ratio (GAAP)		1.65	%		1.85	%		1.59	%		1.67	%		1.60	%
Adjusted non-interest expense ratio (non-GAAP)		1.59	%		1.61	%		1.56	%		1.53	%		1.57	%

Adjusted efficiency ratio:
Non-interest expense (non-GAAP)	$	29,367		$	29,224		$	26,444		$	25,621		$	26,055

Net interest income (GAAP)	$	44,553		$	44,162		$	40,450		$	37,610		$	34,607
Total non-interest income (GAAP)		7,154			7,733			5,002			6,201			4,554
Non-recurring transactions:
Branch consolidation expenses		-			-			-			-			236
Gain (loss) on sale and call of securities		(813	)		-			-			(2,234	)		-
Bargain purchase gain		-			(3,053	)		-			-			-
Total revenue (non-GAAP)	$	50,894		$	48,842		$	45,452		$	41,577		$	39,397

Efficiency ratio (GAAP)		59.01	%		64.69	%		59.16	%		64.05	%		67.48	%
Adjusted efficiency ratio (non-GAAP)		57.70	%		59.83	%		58.18	%		61.62	%		66.13	%

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