PRESS RELEASE OF ORITANI FINANCIAL CORP.
August 6, 2008
For further information contact:
Kevin J. Lynch
Chairman, President and Chief Executive Officer
Oritani Financial Corp.
(201) 664-5400
ORITANI FINANCIAL CORP.
ANNOUNCES QUARTERLY AND ANNUAL RESULTS
Township of Washington, N.J., August 6, 2008 - Oritani Financial Corp. (the
"Company" or "OFC") (NASDAQ: ORIT), the holding company for Oritani Savings Bank
(the "Bank") reported net income of $1.4 million, or $0.04 per basic and fully
diluted share, for the three months ended June 30, 2008, as compared to net
income of $7.7 million, or $0.20 per basic share, for the corresponding 2007
period. The Company also reported net income of $9.0 million, or $0.23 per basic
and fully diluted share, for the twelve months ended June 30, 2008, as compared
to net income of $11.0 million for the corresponding 2007 period.
As further described below, there were several non-recurring items that affected
the Company's results of operations. The items primarily impacting the three
month period ended June 30, 2008 were:
o Provision for loan losses totaling $2.6 million.
o A pre-tax charge of $646,000 as a result of an other than temporary
impairment in the value of a mutual fund investment.
o A $1.1 million gain on the sale of a Real Estate Held for Investment
property
Also, the results for the corresponding 2007 period were increased by the
reversal of a $3.2 million valuation allowance related to certain New Jersey
State deferred tax assets.
In addition to the items above, the results for the twelve month period ended
June 30, 2008 were impacted by an additional impairment charge, totaling
$352,000, recorded during the March 31, 2008 period. In addition to the $3.2
million valuation allowance reversal, the results for the twelve month period
ended June 30, 2007 were also positively impacted by the reinvestment of the
proceeds related to the subscription stock offering and a gain of $514,000
regarding the sale of our former headquarters; and offset by a $9.1 million
pre-tax charitable contribution to the OritaniSavingsBank Charitable Foundation.
"As the strategic plan for capital management has shifted to organic growth, we
have seized opportunities in the marketplace to achieve substantial, high
quality, loan growth. Our annual loan growth was nearly $250 million with almost
$100 million coming in the last quarter alone. These results brought our ending
balance in loans to over $1.0 billion." said Kevin J. Lynch, the Company's
Chairman, President and CEO. "We believe that we are poised to continue
considerable loan growth and we will continue to focus on positioning the
Company for strong organic growth throughout the balance sheet." Mr. Lynch also
commented on the $2.6 million loan loss provision recorded during the quarter.
"Although we have made a sizeable provision to the allowance for loan losses, we
have not experienced a loss in over ten years. We continue to work closely with
the borrower of our impaired loans and I am cautiously optimistic that we will
resolve these loans without a loss."
Comparison of Operating Results
- -------------------------------
Interest Income
Total interest income increased by $2.0 million, or 12.2%, to $18.5 million for
the three months ended June 30, 2008, from $16.5 million for the three months
ended June 30, 2007. The largest increase was in interest on mortgage loans. A
critical component of the Company's strategic plan is sound loan growth. The
average balance of loans, net increased to $943.0 million for the 3 months ended
June 30, 2008 from $734.8 million for the corresponding 2007 period. Interest on
mortgage loans increased by $2.8 million, or 23.2%, to $14.6 million for the
three months ended June 30, 2008, from $11.9 million for the three months ended
June 30, 2007. Interest on federal funds sold and short term investments
decreased to $303,000 for the three months ended June 30, 2008, from $1.6
million for the three months ended June 30, 2007. Liquid funds were primarily
deployed in loans and mortgage-backed securities ("MBS") available for sale
("AFS"). Interest on MBS AFS increased by $1.3 million to $1.6 million for the
three months ended June 30, 2008, from $240,000 for the three months ended June
30, 2007. Funds were deployed in this investment type as spreads and structures
were considered attractive. Interest on the other investment related captions of
securities held to maturity ("HTM"), securities AFS and MBS HTM decreased by
$762,000, or 27.5%, to $2.0 million for the three months ended June 30, 2008,
from $2.8 million for the three months ended June 30, 2007. The cash flows from
these investments were also primarily deployed into loans and MBS AFS.
For the twelve months ended June 30, 2008, total interest income increased by
$8.2 million, or 13.0%, to $71.6 million, from $63.3 million for the twelve
months ended June 30, 2007. The largest increase was in interest on mortgage
loans as the patterns described above for the quarterly results affected the
entire year. Interest on mortgage loans increased by $10.8 million, or 24.3%, to
$55.1 million for the twelve months ended June 30, 2008, from $44.3 million for
the twelve months ended June 30, 2007. Interest on federal funds sold and short
term investments decreased by $5.1 million to $1.7 million for the twelve months
ended June 30, 2008, from $6.8 million for the twelve months ended June 30,
2007. Interest on MBS AFS increased by $3.9 million to $4.7 million for the
twelve months ended June 30, 2008, from $813,000 for the twelve months ended
June 30, 2007. Interest on the other investment related captions of securities
HTM, securities AFS and MBS HTM decreased by $1.3 million, or 11.3%, to $10.1
million for the twelve months ended June 30, 2008, from $11.4 million for the
twelve months ended June 30, 2007.
Interest Expense
Total interest expense increased by $1.0 million, or 12.3%, to $9.5 million for
the three months ended June 30, 2008, from $8.5 million for the three months
ended June 30, 2007. Interest expense on deposits decreased by $777,000, or
12.6%, to $5.4 million for the three months ended June 30, 2008, from $6.2
million for the three months ended June 30, 2007. The average balance of
deposits increased to $704.8 million for the three months ended June 30, 2008
from $698.1 million for the three months ended June 30, 2007. However, the
interest rate environment allowed the Bank to reprice most maturing certificates
at a lower rate. The cost of deposits decreased to 3.07% for the three months
ended June 30, 2008 from 3.54% for the three months ended June 30, 2007.
Interest expense on borrowings was affected by a significant increase in the
average balance as additional borrowings were used to fund much of the asset
growth. Interest expense on borrowings increased by $1.8 million to $4.1 million
for the three months ended June 30, 2008, from $2.3 million for the three months
ended June 30, 2007.
Total interest expense increased by $4.4 million, or 13.3%, to $37.2 million for
the twelve months ended June 30, 2008, from $32.8 million for the twelve months
ended June 30, 2007. Interest expense on deposits and stock subscription
proceeds was relatively stable, increasing by $183,000 in fiscal 2008 versus
fiscal 2007. Results for the 2007 period were enhanced by the lower rate of
interest paid on stock subscription proceeds. Interest expense on borrowings
increased by $4.2 million to $13.3 million for the twelve months ended June 30,
2008, from $9.1 million for the twelve months ended June 30, 2007. The average
balance of borrowings increased by $99.6 million over the periods.
Net Interest Income
Net interest income increased by $967,000, or 12.1%, to $9.0 million for the
three months ended June 30, 2008, from $8.0 million for the three months ended
June 30, 2007. On a trailing quarter basis, net interest income increased by
$253,000, or 2.9%, from $8.7 million for the three months ended March 31, 2008.
The Company's net interest rate spreads for the three months ended June 30,
2008, March 31, 2008 and June 30, 2007 were 2.05%, 2.06% and 2.07%,
respectively. Net interest income increased by $3.9 million, or 12.7%, to $34.4
million for the twelve months ended June 30, 2008, from $30.5 million for the
twelve months ended June 30, 2007. The Company's net interest income and net
interest rate spread were both negatively impacted in the three month period
ended June 30, 2008 due to the reversal of accrued interest income on loans
delinquent more than 90 days. The Company's net interest rate spreads for the
twelve months ended June 30, 2008 and June 30, 2007 were 2.05% and 2.23%,
respectively.
Provision for Loan Losses
The Company recorded provisions for loan losses of $2.6 million for the three
months ended June 30, 2008 as compared to $435,000 for the three months ended
June 30, 2007. The Company recorded provisions for loan losses of $4.7 million
for the twelve months ended June 30, 2008 as compared to $1.2 million for the
twelve months ended June 30, 2007. There were no recoveries or charge-offs in
any of the periods.
The Company's allowance for loan losses is analyzed quarterly and many factors
are considered, including comparison to peer reserve levels. A significant
component of the increased 2008 provisions was loan growth during the periods.
Loans, net increased $96.7 million and $248.5 million during the three and
twelve months ended June 30, 2008, respectively. This compares to growth of
$36.2 million and $115.5 million during the three and twelve months ended June
30, 2007, respectively.
Delinquency information is provided below:
Delinquency Totals
06/30/08 03/31/08 12/31/07 09/30/07 06/30/07
--------------- -------------- -------------- ------------- ----------
(in thousands)
30 - 59 days past due $ 27,985 $ 24,189 $ 343 $ 1,553 $ 594
60 - 89 days past due 18 14,034 - - -
90+ days past due 13,876 384 - 555 -
-----------------------------------------------------------------------------
Total $ 41,879 $ 38,607 $ 343 $ 2,108 $ 594
=============================================================================
Of the loans that comprise the 90+ days total at June 30, 2008, two of the loans
are to the same borrower and comprise $13.8 million of the balance. These loans
were in the 60-89 day category at March 31, 2008. No payments have been received
on these two loans over the quarter. The loans are secured by a condominium
construction project and raw land with all building approvals. The Bank is
continuing to work with the borrower. These two loans were considered impaired
as of June 30, 2008. In accordance with the results of the Company's Statement
of Financial Accounting Standards #114 impairment analysis, a specific reserve
of $1.4 million was recorded against one of these loans. This reserve was a
significant component of the additional provision for loan losses recorded in
the 2008 periods. No reserve was required for the other loan as the loan is
considered to be well collateralized. The Bank has no other impaired loans at
June 30, 2008. With regard to the 30 - 59 days delinquency total at June 30,
2008, there are three loans that comprise $22.6 million of this total. These
three loans were also 30 - 59 days delinquent at March 31, 2008. Payments have
been received on these loans though they have not been brought fully current by
the borrowers.
Other Income
Other income increased by $299,000, or 22.3%, to $1.6 million for the three
months ended June 30, 2008, from $1.3 million for the three months ended June
30, 2007. The primary reason for the increase was a $1.1 million gain on the
sale of a multifamily property that had been held and operated as a real estate
investment. This gain was partially offset by a $646,000 impairment charge taken
on the Bank's investment in a mutual fund investment. This is a mutual fund that
invests primarily in agency and private label MBS. The market values of the
fund's holdings have been steadily decreasing which has caused a corresponding
decrease in the fund's net asset value. The Bank has a $7.8 million investment
remaining in this asset. Income from investments in real estate joint ventures
and real estate operations, net decreased by $67,000, or 10.2%, to $591,000 for
the three months ended June 30, 2008, from $658,000 for the three months ended
June 30, 2007. The income reported in this caption is dependent upon the
operations of various properties and is subject to fluctuation.
Other income decreased by $373,000, or 7.0%, to $4.9 million for the twelve
months ended June 30, 2008, from $5.3 million for the twelve months ended June
30, 2007. Net gain on sale of assets increased by $582,000 to $1.1 million for
the twelve months ended June 30, 2008, from $514,000 for the twelve months ended
June 30, 2007. The 2008 gain consists of the sale described above while the 2007
gain pertains to the sale of the Company's former headquarters in Hackensack,
NJ. Writedowns due to investment impairments totaled $998,000 for the twelve
months ended June 30, 2008. The writedowns consisted of the charge described
above as well as a $352,000 impairment charge related to equity securities that
the Company recorded in the March 31, 2008 period. There were no impairment
charges taken in 2007. The "other" caption within other income decreased by
$257,000 to $146,000 for the twelve months ended June 30, 2008, from $403,000
for the twelve months ended June 30, 2007. The decrease in this caption was
primarily due to float earnings on the oversubscription funds returned to
subscribers that was realized in 2007.
Operating Expenses
Operating expenses increased by $1.7 million, or 44.9%, to $5.6 million for the
three months ended June 30, 2008, from $3.9 million for the three months ended
June 30, 2007. The primary reason for the increase pertained to compensation,
payroll taxes and fringe benefits. Expenses in this category increased by $1.6
million to $4.1 million for the three months ended June 30, 2008, from $2.5
million for the three months ended June 30, 2007. In May, 2008, stock and
options grants that had been approved in the Company's 2007 Equity Incentive
Plan were awarded. The amortization of the cost of this plan began in May and
totaled $610,000 for the three months ended June 30, 2008. In addition, ESOP
costs increased $66,000 in the 2008 period (versus the 2007 period). Expenses
for the 2007 period were reduced due to a $492,000 refund of a prior period
pension contribution. The balance of the increase is primarily due to increased
compensation costs as the Company has increased personnel to assist with
implementing the organic growth strategy. Insurance, Legal, Audit and Accounting
expenses increased by $177,000 to $451,000 for the three months ended June 30,
2008, from $274,000 for the three months ended June 30, 2007. The increase is
primarily related to increased external auditing fees and costs associated with
implementation and compliance with Section 404 of the Sarbanes-Oxley Act of 2002
("SOX").
Operating expenses decreased by $5.8 million to $19.5 million for the twelve
months ended June 30, 2008, from $25.2 million for the twelve months ended June
30, 2007. The primary reason for the decrease was the $9.1 million contribution
to the OritaniSavingsBank Charitable Foundation in the 2007 period.
Compensation, payroll taxes and fringe benefits increased by $2.7 million, or
24.2%, to $13.9 million for the twelve months ended June 30, 2008, from $11.2
million for the twelve months ended June 30, 2007. The factors described above
for the three month period also affected the twelve month period. The increase
in ESOP related expense, however, was far more pronounced in the twelve month
period ending June 30, 2008. ESOP related expenses increased 758,000 in 2008
versus 2007. Other significant factors contributing to the 2008 increase (versus
2007) were an increase in Director related costs of $218,000; payroll tax
expenses of $103,000 and employee health insurance expenses of $120,000. The
balance of the increase is due to increased compensation costs. Insurance,
Legal, Audit and Accounting expenses increased by $477,000 to $1.3 million for
the twelve months ended June 30, 2008, from $779,000 for the twelve months ended
June 30, 2007. In addition to the factors described above for this caption,
there was also a significant increase in legal fees.
Income Taxes
Income tax expense of $992,000 was recognized for the three months ended June
30, 2008 against pre-tax income of $2.4 million. This compares to an income tax
benefit of $2.7 million for the three months ended June 30, 2007 against pre-tax
income of $5.1 million. The benefit recognized in the 2007 period was due to the
reversal of the valuation allowance related to the deferred tax assets
associated with New Jersey State tax net operating loss carryforward. For the
twelve months ended June 30, 2008, income tax expense of $6.2 million was
recognized against pre-tax income of $15.2 million. For the twelve months ended
June 30, 2007, income tax benefit of $1.7 million was recognized against pre-tax
income of $9.4 million. The tax benefit was due to the $3.2 million valuation
allowance reversal as well as a decreased effective tax rate. The contribution
to OritaniSavingsBank Charitable Foundation resulted in a decrease in the
effective tax rate for 2007.
Balance Sheet Summary
- ---------------------
Total assets increased $248.9 million, or 20.8%, to $1.44 billion at June 30,
2008, from $1.19 billion at June 30, 2007. The increase was primarily due to
increased loans funded by increased borrowings.
The largest asset increase occurred in loans, net. Loans, net increased $248.5
million, or 32.8%, to $1.01 billion at June 30, 2008, from $758.5 million at
June 30, 2007. The Company continued its emphasis on loan originations,
particularly multifamily and commercial real estate loans. Loan originations for
the twelve months ended June 30, 2008 totaled $359.3 million and an additional
$11.3 million of loans were purchased.
The Company also returned to purchases of mortgage backed securities,
particularly as rates increased and spreads on these products widened. New
purchases were classified as MBS AFS, which increased $110.4 million to $149.2
million at June 30, 2008, from $38.8 million at June 30, 2007.
Growth in loans, net and MBS AFS were primarily funded through decreases in cash
and cash equivalents (which includes fed funds and short term investments) and
MBS HTM, as well as new borrowings. Cash and cash equivalents decreased $54.6
million to $8.9 million at June 30, 2008, from $63.5 million at June 30, 2007.
MBS HTM decreased $53.5 million to $164.0 million at June 30, 2008, from $217.4
million at June 30, 2007.
Federal Home Loan Bank of New York ("FHLB-NY") stock increased $10.9 million to
$21.5 million at June 30, 2008, from $10.6 million at June 30, 2007. Additional
purchases of this stock were required due to additional advances obtained from
FHLB-NY.
Deposits increased $3.2 million, or 0.5%, to $698.9 million at June 30, 2008,
from $695.8 million at June 30, 2007. Deposit growth has been difficult. Our new
business plan aims for strong, profitable deposit growth.
Borrowings increased $237.0 million, or 120.5%, to $433.7 million at June 30,
2008, from $196.7 million at June 30, 2007. The Company committed to various
advances from the FHLB-NY over the period primarily to fund asset growth.
Stockholders' equity increased $6.4 million, or 2.3%, to $279.0 million at June
30, 2008, from $272.6 million at June 30, 2007. On June 2, 2008, the Company
announced a 10% (1,297,668 share) repurchase program. As of June 30, 2008, the
Company had repurchased 365,100 shares at a total cost of $5.9 million and an
average cost of $16.23 per share. Through July 31, 2008, the Company had
repurchased a total of 837,500 shares under this program at a total cost of
$13.6 million and an average cost of $16.22 per share.
About the Company
- -----------------
Oritani Financial Corp. is the holding company for Oritani Savings Bank, a
savings bank offering a full range of retail and commercial loan and deposit
products. The Bank currently operates its main office and 18 full service
branches in the New Jersey Counties of Bergen, Hudson and Passaic. The Bank
expects to open to two new full service branch locations prior to the end of the
calendar year.
Forward Looking Statements
- --------------------------
Certain statements contained herein are "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Such forward-looking statements may be
identified by reference to a future period or periods, or by the use of
forward-looking terminology, such as "may," "will," "believe," "expect,"
"estimate," "anticipate," "continue," or similar terms or variations on those
terms, or the negative of those terms. Forward-looking statements are subject to
numerous risks and uncertainties, including, but not limited to, those related
to the economic environment, particularly in the market areas in which the
Company operates, competitive products and pricing, fiscal and monetary policies
of the U.S. Government, changes in government regulations affecting financial
institutions, including regulatory fees and capital requirements, changes in
prevailing interest rates, acquisitions and the integration of acquired
businesses, credit risk management, asset-liability management, the financial
and securities markets and the availability of and costs associated with sources
of liquidity.
The Company wishes to caution readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made. The Company
wishes to advise readers that the factors listed above could affect the
Company's financial performance and could cause the Company's actual results for
future periods to differ materially from any opinions or statements expressed
with respect to future periods in any current statements. The Company does not
undertake and specifically declines any obligation to publicly release the
result of any revisions, which may be made to any forward-looking statements to
reflect events or circumstances after the date of such statements or to reflect
the occurrence of anticipated or unanticipated events.
Oritani Financial Corp. and Subsidiaries
Township of Washington, New Jersey
Consolidated Balance Sheets
June 30, 2008 and June 30, 2007
(in thousands, except share data)
June 30, June 30,
Assets 2008 2007
--------------- ----------------
(unaudited)
Cash on hand and in banks $ 7,332 $ 7,823
Federal funds sold and short term investments 1,558 55,703
--------------- ----------------
Cash and cash equivalents 8,890 63,526
Loans, net 1,007,077 758,542
Securities held to maturity, estimated market value of
$5,347 at June 30, 2007 -- 5,415
Securities available for sale, at market value 22,285 35,443
Mortgage-backed securities held to maturity, estimated
market value of $162,671 and $210,505 at
June 30, 2008 and June 30, 2007, respectively 163,950 217,406
Mortgage-backed securities available for sale,
at market value 149,209 38,793
Bank Owned Life Insurance (at cash surrender value) 26,425 25,365
Federal Home Loan Bank of New York stock, at cost 21,547 10,619
Accrued interest receivable 5,646 4,973
Investments in real estate joint ventures, net 5,564 6,200
Real estate held for investment 3,681 2,492
Office properties and equipment, net 9,287 8,361
Other assets 19,733 17,308
--------------- ----------------
$ 1,443,294 $ 1,194,443
=============== ================
Liabilities
Deposits $ 698,932 $ 695,757
Borrowings 433,672 196,661
Advance payments by borrowers for taxes and
insurance 7,024 5,684
Accrued taxes payable -- 1,463
Official checks outstanding 4,143 5,050
Other liabilities 20,548 17,258
--------------- ----------------
Total liabilities 1,164,319 921,873
=============== ================
Stockholders' Equity
Preferred stock, $0.01 par value; 10,000,000 shares
authorized-none issued or outstanding -- --
Common stock, $0.01 par value; 80,000,000 shares authorized;
40,552,162 issued at June 30, 2008 and June 30, 2007
40,187,062 outstanding at June 30, 2008 and
40,552,162 outstanding at June 30, 2007. 130 130
Additional paid-in capital 128,656 127,710
Unallocated common stock held by the employee stock
ownership plan (14,704) (15,499)
Treasury stock, at cost; 365,100 shares at June 30, 2008 (5,926) --
Retained income 171,160 161,300
Accumulated other comprehensive loss, net of tax (341) (1,071)
--------------- -----------------
Total stockholders' equity 278,975 272,570
--------------- -----------------
$ 1,443,294 $ 1,194,443
=============== =================
Oritani Financial Corp. and Subsidiaries
Township of Washington, New Jersey
Consolidated Statements of Income
Three and Twelve Months Ended June 30, 2008 and 2007
Three months ended Twelve months ended
June 30 June 30
----------------------------------------------------------
2008 2007 2008 2007
------------ -------------- ------------ ------------
unaudited unaudited unaudited
Interest income: (in thousands, except per share data)
Interest on mortgage loans $ 14,636 $ 11,881 $ 55,053 $ 44,278
Interest on securities held to maturity 65 275 999 1,076
Interest on securities available for sale 298 312 1,716 865
Interest on mortgage-backed securities held
to maturity 1,643 2,181 7,409 9,475
Interest on mortgage-backed securities available
for sale 1,563 240 4,710 813
Interest on federal funds sold and short term
investments 303 1,609 1,704 6,842
------------ -------------- ------------ ------------
Total interest income 18,508 16,498 71,591 63,349
------------ -------------- ------------ ------------
Interest expense:
Deposits and stock subscription proceeds 5,401 6,178 23,865 23,682
Borrowings 4,130 2,310 13,343 9,147
------------ -------------- ------------ ------------
Total interest expense 9,531 8,488 37,208 32,829
------------ -------------- ------------ ------------
Net interest income before provision
for loan losses 8,977 8,010 34,383 30,520
Provision for loan losses 2,600 435 4,650 1,210
------------ -------------- ------------ ------------
Net interest income 6,377 7,575 29,733 29,310
------------ -------------- ------------ ------------
Other income:
Service charges 290 325 1,126 1,119
Real estate operations, net 278 502 1,314 1,205
Income from investments in real estate joint
ventures 313 156 1,192 1,084
Bank-owned life insurance 273 256 1,060 984
Net gain on sale of assets 1,096 -- 1,096 514
Net loss on the write down of securities (646) -- (998) --
Other income 38 104 146 403
------------ -------------- ------------ ------------
Total other income 1,642 1,343 4,936 5,309
------------ -------------- ------------ ------------
Operating expenses:
Compensation, payroll taxes and fringe benefits 4,108 2,546 13,923 11,213
Advertising 94 135 470 510
Office occupancy and equipment expense 372 441 1,595 1,575
Data processing service fees 266 257 1,058 1,031
Federal insurance premiums 20 25 92 93
Telephone, Stationary, Postage and Supplies 104 109 417 398
Insurance, Legal, Audit and Accounting 451 274 1,256 779
Contribution to charitable foundation -- -- -- 9,110
Other expenses 185 78 680 540
------------ -------------- ------------ ------------
Total operating expenses 5,600 3,865 19,491 25,249
------------ -------------- ------------ ------------
Income before income tax expense
(benefit) 2,419 5,053 15,178 9,370
Income tax expense (benefit) 992 (2,663) 6,218 (1,664)
------------ -------------- ------------ ------------
Net income $ 1,427 $ 7,716 $ 8,960 $ 11,034
============ ============== ============ ============
Basic and fully diluted income per common share $ 0.04 $ 0.20 $ 0.23 $ n/a
============ ============== ============ ============
* * *
(End)