Oritani Financial Corp. :ORIT-US: Earnings Analysis: Q3, 2017 By the Numbers : May 17, 2017

Oritani Financial Corp. reports financial results for the quarter ended March 31, 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., Magyar Bancorp, Inc. and MSB Financial Corp (OCFC-US, KRNY-US, PFS-US, NYCB-US, MGYR-US and MSBF-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 48.34 million, Net Earnings of USD 24.27 million.
  • Net interest income margins narrowed from 89.59% to 55.43% compared to the same period last year.
  • Net loan assets changed 17.01% compared to same period last year and 4.37% from previous period, total deposits changed 20.48% compared to same period last year and 3.44% from previous period.
  • Year-on-year change in operating cash flow of 128.82% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth from operating margin improvements as well as from one-time items.

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):

2017-03-31 2016-12-31 2016-09-30 2016-06-30 2016-03-31
Relevant Numbers (Quarterly)
Revenues (mil) 48.34 27.15 26.24 33.1 28.07
Revenue Growth (%YOY) 72.2 -48.25 -11.72 -5.25 0.9
Earnings (mil) 24.27 11.38 10.61 11.06 11.31
Earnings Growth (%YOY) 114.5 -28.23 -12.9 -29.7 3.25
Net Margin (%) 50.2 41.9 40.44 33.42 40.3
EPS 0.54 0.26 0.24 0.24 0.26
Return on Equity (%) 17.73 8.44 7.9 8.32 8.64
Return on Assets (%) 2.39 1.17 1.14 1.22 1.27

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Market Share Versus Profits

Revenues History
Earnings History

ORIT-US‘s change in revenue this period compared to the same period last year of 72.20% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that ORIT-US is holding onto its market share. Also, for comparison purposes, revenues changed by 78.05% and earnings by 113.31% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

ORIT-US‘s earnings rose year-on-year. But this growth has not come as a result of improvement in net interest income margins or any loan loss improvement activities in its operations. Net interest income margins were 55.43% compared to 96.60% in the immediate last period. Net interest income after provisions margins were 55.43% this period compared to 96.60% in the previous 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 (Qtr YOY)
Total Deposits Growth Rate History (Qtr YOY)

The firm’s decline in net interest income margins came despite the relative increase in the levels of net loan assets. In addition, total deposits as a percentage of equity went from 4.21% to 4.81%. On an absolute basis, net loan assets changed 17.01% compared to the same period last year and 4.37% from the previous period. Total deposits changed 20.48% compared to the same period last year and 3.44% 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 128.82% 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

The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating margins from 63.13% to 79.54% and (2) one-time items. The company’s pretax margins are now 79.94%, compared to 64.08% for the same period last year.

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

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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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