Oritani Financial Corp. :ORIT-US: Earnings Analysis: Q2, 2017 By the Numbers : January 25, 2017

Oritani Financial Corp. reports financial results for the quarter ended December 31, 2016.

Highlights

  • Summary numbers: Revenues of USD 27.15 million, Net Earnings of USD 11.38 million.
  • Net interest income margins widened from 48.21% to 96.60% compared to the same period last year.
  • Net loan assets changed 16.20% compared to same period last year and 5.43% from previous period, total deposits changed 22.19% compared to same period last year and 3.80% from previous period.
  • Earnings decline largely a result of non-operational activity, pretax margins improved from 49.27% to 60.23%.

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):

2016-12-31 2016-09-30 2016-06-30 2016-03-31 2015-12-31
Relevant Numbers (Quarterly)
Revenues (mil) 27.15 26.24 33.1 28.07 52.47
Revenue Growth (%YOY) -48.25 -11.72 -5.25 0.9 99.05
Earnings (mil) 11.38 10.61 11.06 11.31 15.85
Earnings Growth (%YOY) -28.23 -12.9 -29.7 3.25 57.78
Net Margin (%) 41.9 40.44 33.42 40.3 30.21
EPS 0.26 0.24 0.24 0.26 0.37
Return on Equity (%) 8.44 7.9 8.32 8.64 12.19
Return on Assets (%) 1.17 1.14 1.22 1.27 1.85

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Market Share Versus Profits

Revenues History
Earnings History

Compared to the same period last year, ORIT-US‘s change in revenue was close to the amount of its change in earnings. It remains to be seen how the rest of its peer group’s results will turn out and if ORIT-US‘s performance is a sign of any major shift in the composition of market share in this sector. Also, for comparison purposes, revenues changed by 3.47% and earnings by 7.21% compared to the previous period.

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 48.21% to 96.60% and net interest income after provisions margins improved from 48.21% to 96.60% 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 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 (Qtr YOY)
Total Deposits Growth Rate History (Qtr 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 16.20% compared to the same period last year and 5.43% from the previous period. Total deposits changed 22.19% compared to the same period last year and 3.80% from the previous period.

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 48.67% to 59.27% and pretax margins improved from 49.27% to 60.23%>

EBIT Margin History
PreTax Margin History

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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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