FAIRFIELD, NJ--(Marketwire - November 1, 2007) - Kearny Financial Corp. (
Kearny Federal Savings Bank operates from its administrative headquarters in Fairfield, New Jersey, and 26 retail branch offices located in Bergen, Hudson, Passaic, Morris, Middlesex, Essex, Union and Ocean Counties, New Jersey. At September 30, 2007, Kearny Financial Corp. had total assets, deposits and stockholders' equity of $1.95 billion, $1.34 billion and $469.2 million, respectively.
The following is an overview of the Company's financial results for the quarter ended September 30, 2007:
Net Interest Income
Net interest income during the quarter ended September 30, 2007 was $11.4 million, an increase of $405,000 or 3.7%, compared to net interest income of $11.0 million during the quarter ended June 30, 2007 and a decrease of $316,000 or 2.7%, compared to net interest income of $11.7 million during the quarter ended September 30, 2006. The Bank's net interest margin during the quarter ended September 30, 2007 was 2.60%, compared to 2.39% during the quarter ended June 30, 2007 and 2.52% during the quarter ended September 30, 2006. The increase in net interest income between linked quarters resulted from a decrease in interest expense, which was partially offset by a decrease in interest income. The decrease in net interest income year-over-year resulted from an increase in the Bank's cost of funds partially offset by an increase in interest income.
Interest income decreased $619,000 or 2.6%, to $23.4 million during the quarter ended September 30, 2007 compared to $24.0 million during the quarter ended June 30, 2007 and increased $129,000 or 0.6%, compared to $23.3 million during the quarter ended September 30, 2006. Interest expense decreased $1.0 million or 7.6%, to $12.0 million during the quarter ended September 30, 2007 compared to $13.1 million during the quarter ended June 30, 2007 and increased $445,000 or 3.8%, compared to $11.6 million during the quarter ended September 30, 2006.
Interest income from loans increased $1.3 million to $13.2 million during the quarter ended September 30, 2007 compared to $11.9 million during the quarter ended June 30, 2007 and increased $2.9 million compared to $10.3 million during the quarter ended September 30, 2006. The increase in interest income between linked quarters and year-over-year resulted from increases in average loans receivable and yield. Average loans receivable during the quarters ended September 30, 2007, June 30, 2007 and September 30, 2006 were $906.6 million, $831.1 million and $727.3 million, respectively. Average loans receivable represented 51.7%, 45.3% and 39.3% of average interest-earning assets during the quarters ended September 30, 2007, June 30, 2007 and September 30, 2006, respectively. In keeping with the Bank's business plan, management continued to emphasize growth of the loan portfolio during the linked quarters and year-over-year.
Interest income from mortgage-backed securities, securities and other interest-earning assets, primarily cash and cash equivalents, decreased $1.9 million to $10.2 million during the quarter ended September 30, 2007 compared to $12.1 million during the quarter ended June 30, 2007 and decreased $2.8 million from $13.0 million during the quarter ended September 30, 2006. The decrease between linked quarters and year-over-year was due to decreases in the average balances of mortgage-backed securities, securities and cash and cash equivalents partially offset by an increase in yield. Management utilized cash flows from the securities portfolio to fund loan originations and deposit outflows.
Interest expense from deposits decreased $1.1 million to $11.3 million during the quarter ended September 30, 2007 from $12.4 million during the quarter ended June 30, 2007 and increased $505,000 compared to $10.7 million during the quarter ended September 30, 2006. The decrease in interest expense from deposits between the quarters ended September 30, 2007 and June 30, 2007 resulted from decreases in average interest-bearing deposits as well as a decrease in their cost. Average certificates of deposit decreased from $930.1 million during the quarter ended June 30, 2007 to $840.1 million during the quarter ended September 30, 2007. Depositors previously attracted by promotional interest rates offered for special certificates of deposit terms, particularly 13-months, withdrew their funds rather than accept lower interest rates upon renewal. The increase in interest expense from deposits between the quarters ended September 30, 2007 and 2006 resulted from an increase in the cost of deposits partially offset by a decrease in average interest-bearing deposits.
Interest expense attributed to Federal Home Loan Bank advances increased $86,000 to $791,000 during the quarter ended September 30, 2007 compared to $705,000 during the quarter ended June 30, 2007 due to an increase in average advances partially offset by a lower cost of borrowings. Interest expense from advances decreased $60,000 during the quarter ended September 30, 2007 from $851,000 during the quarter ended September 30, 2006 due to a lower cost of borrowings partially offset by an increase in average advances.
Non-interest Income
Non-interest income attributed to fees, service charges and miscellaneous income increased $39,000 or 5.9%, to $705,000 during the quarter ended September 30, 2007 compared to $666,000 during the quarter ended June 30, 2007. The increase in non-interest income between linked quarters resulted from higher fees and service charges from retail operations, particularly the overdraft privilege program introduced in May 2007. Non-interest income during the quarter ended September 30, 2007 increased $137,000 or 24.1%, compared to $568,000 during the quarter ended September 30, 2006 due primarily to higher fees and service charges from retail operations, year-over-year.
There were gains on sale of securities of $7,000 recorded during the quarter ended September 30, 2007 compared to no gains or losses during the quarters ended June 30, 2007 or September 30, 2006.
Non-interest Expense
Non-interest expense decreased $896,000 or 8.0%, to $10.4 million during the quarter ended September 30, 2007 compared to $11.3 million during the quarter ended June 30, 2007. Non-interest expense decreased $735,000 or 6.6%, year-over-year from $11.1 million during the quarter ended September 30, 2006.
The largest decreases during the quarter ended September 30, 2007 when compared to the quarter ended June 30, 2007 were salaries and employee benefits, equipment expense and advertising which decreased $607,000, $216,000 and $85,000, respectively. Partially offsetting these decreases was an increase in net occupancy expense of premises of $18,000.
Contributing to the decrease in salaries and employee benefits was a non-recurring charge of $264,000 resulting from a severance agreement with a senior officer of the Bank recorded in the quarter ended June 30, 2007. Effective July 1, 2007, the Company implemented a freeze on all future benefit accruals under the Bank's non-contributory defined benefit pension plan and related benefits equalization plan. As a result of the freeze, pension plan expense decreased $395,000 between linked quarters. The freeze provides additional flexibility in controlling the costs associated with the plans while still preserving the participants' earned and vested benefits.
The decrease in equipment expense between the quarters ended September 30 and June 30, 2007 was due to cost savings negotiated with several of the Bank's electronic data processing service providers and to a non-recurring charge of $88,000 recorded in the quarter ended June 30, 2007 resulting from the settlement of a dispute with an electronic data processing service provider. The decrease in advertising expense between the quarters ended September 30 and June 30, 2007 was due primarily to a reduction in newspaper advertising. Management devoted the Bank's newspaper advertising to loan products while temporarily discontinuing the marketing of deposit products.
The decrease in non-interest expense during the quarter ended September 30, 2007 compared to the quarter ended September 30, 2006 resulted primarily from decreases in salaries and employee benefits, equipment expense, advertising expense and directors' compensation of $491,000, $40,000, $142,000 and $97,000, respectively. These decreases were partially offset by an increase in net occupancy expense of premises of $32,000.
Loans and Asset Quality
Loans receivable, net of deferred fees and costs and the allowance for loan losses, increased $69.7 million to $930.2 million at September 30, 2007 from $860.5 million at June 30, 2007. Total loans increased to $935.3 million at September 30, 2007 from $865.0 million at June 30, 2007. One-to-four family first mortgage loans increased $47.9 million between June 30 and September 30, 2007. Nonresidential mortgages, home equity loans and multi-family mortgages increased $15.5 million, $4.5 million and $2.2 million, respectively. Commercial business loans and construction loans increased $673,000 and $613,000, respectively while other loan categories decreased $1.1 million in the aggregate.
The provision for loan losses decreased $99,000 to $94,000 during the quarter ended September 30, 2007, compared to $193,000 during the quarter ended June 30, 2007 and decreased $64,000 compared to $158,000 during the quarter ended September 30, 2006. The provisions during all three quarters resulted primarily from growth in the loan portfolio. Non-performing loans were $1.3 million or 0.13% of total loans at September 30, 2007 compared to $1.5 million or 0.17% of total loans reported at June 30, 2007. The allowance for loan losses as a percentage of total loans outstanding was 0.66% at September 30, 2007 and 0.70% at June 30, 2007, reflecting allowance balances of $6.1 million and $6.0 million, respectively.
Securities
Between June 30 and September 30, 2007, mortgage-backed securities increased by $36.0 million to $679.8 million, due to a $7.2 million increase in fair value and purchases totaling $63.7 million during the quarter, partially offset by principal repayments and maturities. Between June 30 and September 30, 2007, the securities portfolio decreased $43.0 million to $45.9 million, due primarily to sales of securities partially offset by a $450,000 increase in fair value. Management sold securities from the municipal bond portfolio with an amortized cost of $43.2 million which resulted in gains of $7,000.
Cash and Cash Equivalents
Cash and cash equivalents, consisting primarily of interest-bearing deposits in other banks, decreased $30.7 million to $132.6 million at September 30, 2007, from $163.3 million at June 30, 2007. The Bank borrowed $100.0 million from the Federal Home Loan Bank during the quarter ended September 30, 2007 to replenish its liquidity, which tightened due to the use of cash and cash equivalents to fund loan originations and deposit outflows.
Deposits
Deposits decreased $73.4 million to $1.34 billion at September 30, 2007, from $1.41 billion at June 30, 2007. During the quarter, certificates of deposit, savings deposits and non-interest-bearing demand accounts decreased $62.3 million, $12.0 million and $1.4 million, respectively. Interest-bearing demand deposits increased $2.3 million. In connection with the focus on lowering the Bank's cost of deposits; management reduced the interest rates available on maturing certificates of deposit previously attracted by promotional interest rates. The recent reductions in the federal funds rate by the Federal Reserve Board of Governors, amounting to a 75 basis point cut in aggregate, appear to be gradually lowering interest rates in the marketplace. As a result, management expects deposit attrition to slow during the next quarter.
Federal Home Loan Bank Advances
Federal Home Loan Bank advances increased $99.8 million to $128.3 million at September 30, 2007 from $28.5 million at June 30, 2007. The increase in borrowings resulted from a need to replenish liquidity utilized to fund loan originations and deposit outflows. The cost of this funding source, relative to the cost of retail certificates of deposit, encouraged management to borrow $100.0 million from the Federal Home Loan Bank during the quarter ended September 30, 2007.
Capital Management
During the quarter ended September 30, 2007, stockholders' equity increased $6.6 million to $469.2 million from $462.6 million at June 30, 2007. The increase was primarily the result of a $5.2 million decrease in accumulated other comprehensive loss due to mark-to-market adjustments to the available for sale securities portfolio and benefit plan related adjustments to equity per FASB Statement No. 158. Also contributing to the increase was net income for the quarter of $1.0 million, the release of $468,000 of ESOP shares and $771,000 of restricted stock plan shares and an adjustment to equity of $477,000 for expensing stock options. Partially offsetting the increase was a $393,000 increase in treasury stock due to the purchase of 34,400 shares of the Company's common stock at a cost of $469,000, partially offset by shares reissued for stock option exercises and a $934,000 cash dividend declared for payment to minority shareholders.
The Bank's ratio of tangible equity to tangible assets was 19.51% at September 30, 2007. The Bank's Tier 1 capital ratio was 41.9%, far in excess of the 6.00% level required by the Office of Thrift Supervision to be classified "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 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.
KEARNY FINANCIAL CORP.
FINANCIAL HIGHLIGHTS
(In Thousands, Except Per Share Data, Unaudited)
September 30, June 30,
2007 2007
--------- ---------
Balance Sheet Data:
Assets $ 1,950,471 $ 1,917,253
Net loans receivable 930,242 860,493
Mortgage-backed securities
available for sale 679,837 643,779
Securities available for sale 45,940 88,869
Cash and cash equivalents 132,562 163,341
Goodwill 82,263 82,263
Deposits 1,338,265 1,411,713
Federal Home Loan Bank advances 128,328 28,488
Total stockholders' equity 469,178 462,592
For the Three Months Ended
-------------------------------------------
September 30, June 30, September 30,
2007 2007 2006
------------- -------- ------------------
Summary of Operations:
Interest income $ 23,413 $ 24,032 $ 23,284
Interest expense 12,041 13,065 11,596
------------- -------- ------------------
Net interest income 11,372 10,967 11,688
Provision for loan losses 94 193 158
------------- -------- ------------------
Net interest income after
provision for loan losses 11,278 10,774 11,530
Non-interest income, excluding
gain (loss)
on sale of securities 705 666 568
Gain (loss) on sale of
securities 7 0 0
Non-interest expense 10,361 11,257 11,096
------------- -------- ------------------
Income before taxes 1,629 183 1,002
Provision for income taxes 599 (36) 76
------------- -------- ------------------
Net income $ 1,030 $ 219 $ 926
============= ======== ==================
Per Share Data:
Net income per share - basic $ 0.02 $ 0.00 $ 0.01
Net income per share - diluted $ 0.02 $ 0.00 $ 0.01
Weighted average number of
common shares
outstanding - basic 68,562 68,938 69,751
Weighted average number of
common shares
outstanding - diluted 68,777 69,153 70,097
Per Share Data:
Cash dividends per share (1) $ 0.05 $ 0.05 $ 0.05
Dividend payout ratio (2) 90.68% 427.40% 100.22%
(1) Represents dividends declared per common share.
(2) Represents dividends declared per common share divided by net income.
At the Three Months Ended
--------------------------------
September September
30, June 30, 30,
2007 2007 2006
---------- ---------- ----------
Per Share Data:
Closing price as reported by NASDAQ $ 12.79 $ 13.48 $ 15.18
Book Value $ 6.60 $ 6.50 $ 6.66
Tangible Book Value $ 5.44 $ 5.34 $ 5.51
For the Three Months Ended
-------------------------------
September September
30, June 30, 30,
2007 2007 2006
--------- --------- ---------
Performance Ratios:
Return on average assets 0.22% 0.04% 0.19%
Return on average equity 0.89% 0.19% 0.78%
Net interest rate spread (1) 1.83% 1.63% 1.83%
Net interest margin (2) 2.60% 2.39% 2.52%
Average interest-earning assets to
Average interest-bearing
liabilities 127.88% 126.64% 127.77%
Efficiency ratio, net of gain on sale
of securities 85.79% 96.77% 90.54%
Non-interest expense to average
assets 2.18% 2.26% 2.22%
(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.
At or for the Three Months Ended
----------------------------------
September September
30, June 30, 30,
2007 2007 2006
---------- ---------- ----------
Asset Quality Ratios:(1)
Non-performing loans to total loans 0.13% 0.17% 0.14%
Non-performing assets to total assets 0.07% 0.08% 0.06%
Net charge-offs to average loans
outstanding 0.00% 0.00% 0.00%
Allowance for loan losses to total
loans 0.66% 0.70% 0.75%
Allowance for loan losses to
non-performing loans 488.70% 406.25% 547.75%
(1) Asset quality ratios are period end ratios unless otherwise noted.
At or for the Three Months Ended
-------------------------------------------
September 30, June 30, September 30,
2007 2007 2006
------------- ------------- -------------
Capital Ratios:
Average equity to average
assets 24.26% 23.67% 23.73%
Equity to assets at period end 24.05% 24.13% 23.85%
Tangible equity to tangible
assets at period end 20.87% 21.10% 20.82%
September September
30, June 30, 30,
2007 2007 2006
----------- ----------- -----------
Average Balances:
Loans receivable $ 906,621 $ 831,115 $ 727,260
Mortgage-backed securities available
for sale 669,842 666,481 683,681
Securities available for sale 83,958 90,947 226,559
Other interest-earning assets 91,988 248,144 215,002
----------- ----------- -----------
Total interest earning assets 1,752,409 1,836,687 1,852,502
Non-interest-earning assets 151,365 156,749 145,551
----------- ----------- -----------
Total assets $ 1,903,774 $ 1,993,436 $ 1,998,053
=========== =========== ===========
Interest-bearing deposits $ 1,303,398 $ 1,398,784 $ 1,388,863
Federal Home Loan Bank advances 66,971 51,492 61,006
----------- ----------- -----------
Total interest-bearing
liabilities 1,370,369 1,450,276 1,449,869
Non-interest-bearing liabilities 71,556 71,273 74,096
Stockholders' equity 461,849 471,887 474,088
----------- ----------- -----------
Total liabilities and
stockholders' equity $ 1,903,774 $ 1,993,436 $ 1,998,053
=========== =========== ===========
For the Three Months Ended
----------------------------------
September 30, June 30, September 30,
2007 2007 2006
---------- ---------- ----------
Spread and Margin Analysis:
Average yield on:
Loans receivable 5.81% 5.74% 5.67%
Mortgage-backed securities
available for sale 4.90% 4.82% 4.69%
Securities available for sale 4.29% 4.28% 4.03%
Other interest-earning assets 4.95% 5.00% 4.96%
Average cost of:
Interest-bearing deposits 3.45% 3.53% 3.09%
Federal Home Loan Bank advances 4.72% 5.48% 5.58%
Net interest rate spread 1.83% 1.63% 1.83%
Net interest margin 2.60% 2.39% 2.52%
Average interest-earning assets to
average
interest-bearing liabilities 127.88% 126.64% 127.77%
Contact Information: For further information contact: Craig L. Montanaro Senior Vice President, Director of Strategic Planning Kearny Financial Corp. (973) 244-4510