Oritani Financial Corp. :ORIT-US: Earnings Analysis: 2017 By the Numbers : August 31, 2017

Oritani Financial Corp. reports financial results for the year ended June 30, 2017.

We analyze the earnings along side the following peers of Oritani Financial Corp. – OceanFirst Financial Corp., Kearny Financial Corp., Provident Financial Services, Inc., New York Community Bancorp, Inc. and Magyar Bancorp, Inc. (OCFC-US, KRNY-US, PFS-US, NYCB-US and MGYR-US) that have also reported for this period.

Highlights

  • Net interest income margins widened from 69.96% to 86.68% compared to the same period last year.
  • Net loan assets changed 13.88% compared to same period last year and 13.88% from previous period, total deposits changed 26.39% compared to same period last year and 26.39% from previous period.
  • Year-on-year change in operating cash flow of 32.90% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings decline largely a result of non-operational activity, pretax margins improved from 56.38% to 62.58%.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income (See complete table at the end of this report):

2017 2016 2015 2014 2013
Relevant Numbers (Annual)
Revenues 120.69 143.37 114.23 101.87 103.82
Revenue Growth (YOY) N/A N/A N/A N/A N/A
Earnings 49.14 52.3 46.9 41.06 39.54
Earnings Growth (YOY) -6.03 11.5 14.23 3.83 24.94
Net Margin 40.72 36.48 41.06 40.31 38.09
EPS 1.1 1.21 1.1 0.94 0.92
Return on Equity 8.98 9.93 8.99 7.86 7.68
Return on Assets 1.26 1.49 1.44 1.37 1.43

Access our Ratings and Scores for Oritani Financial Corp.

Earnings Growth Analysis

The company’s year-on-year earnings decline has not come as a result of decline in net interest income margins or because of any loan loss provisions. Both net interest income margins and net interest income after provisions margins have actually improved. In fact, net interest income margins went from 69.96% to 86.68% and net interest income after provisions margins improved from 69.96% to 86.68% over this period. In addition, loan loss provisions as a percentage of net interest income were 0% this period , and 0% a year ago.

Net Interest Income Margin Versus Loan Loss Provisions Margin

Quadrant label definitions. Hover to know more

High Risk; High Reward Loans, Risky Loan Portfolio, Conservative Loan Portfolio, Safer Loan Portfolio
Net Interest Income Margin History
Loan Loss Provisions Margin History

Net Loans and Total Deposits

A financial institution’s core operations represented by Net Interest Income and Net Interest Income after Provisions are dependent on both the growth and quality of its deposits as well as the growth and quality of its loans. A firm could boost its interest income in the short-term by just increasing its loan assets with less concern about their quality – but this would eventually lead to greater loan loss provisions. Similarly a drive to increase deposits could result in higher interest expenses and eventually effect the firm’s equity. It is thus important to understand net interest income performance in context to loan loss provisions, loan assets and deposits.

Loan Assets Growth Rate History (HY YOY)
Total Deposits Growth Rate History (HY YOY)

The firm’s improvement in net interest income margins was influenced by both the relative increase in the levels of net loan assets and the level of total deposits as a percentage of equity. On an absolute basis, net loan assets changed 13.88% compared to the same period last year and 13.88% from the previous period. Total deposits changed 26.39% compared to the same period last year and 26.39% from the previous period.

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

ORIT-US‘s change in operating cash flow of 32.90% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

Margins

Non-operational activities are the primary cause of the company’s fall in earnings. As a matter of fact, both operating margins and pretax margins increased. Operating margins went from 55.56% to 61.94% and pretax margins improved from 56.38% to 62.58%>

EBIT Margin History
PreTax Margin History
EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables

Access our Ratings and Scores for Oritani Financial Corp.

Company Profile

Oritani Financial Corp. engages in the business of holding the common stock of Oritani Bank. It also operates as a holding company of limited liability companies that own a variety of real estate investments. The company was founded in 1998 and is headquartered in Township of Washington, NJ.

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