FOR IMMEDIATE RELEASE
August 10, 2005
For further information contact:
Craig Montanaro
Senior Vice President,
Director of Strategic Planning
Kearny Financial Corp.
(973) 244-4510
KEARNY FINANCIAL CORP.
REPORTS FOURTH QUARTER 2005 OPERATING RESULTS
Fairfield, New Jersey, August 10, 2005 - Kearny Financial Corp. (Nasdaq NMS:
KRNY) (the "Company"), the holding company of Kearny Federal Savings Bank (the
"Bank"), today reported net income for the quarter ended June 30, 2005 of $8.1
million compared with $3.7 million for the quarter ended June 30, 2004. Net
income for the fiscal year ended June 30, 2005 was $18.9 million, an increase of
46.5%, from $12.9 million for the fiscal year ended June 30, 2004.
The Company completed its initial public offering during the quarter ended March
31, 2005. A total of 21,821,250 shares, representing 30% of the outstanding
common stock, were sold to eligible subscribers, including 1,745,700 shares
issued to the Kearny Federal Savings Bank Employee Stock Ownership Plan. The
remaining 70% of the Company continues to be held by Kearny MHC, the mutual
holding company parent of the Company. Net proceeds of the offering were $214.6
million. Shares of the Company began trading on the Nasdaq National Market under
the symbol "KRNY" on February 24, 2005.
Kearny Financial Corp. is the holding company for Kearny Federal Savings Bank,
which operates from its administrative headquarters building in Fairfield, New
Jersey, and twenty-five retail branch offices located in Bergen, Hudson,
Passaic, Morris, Middlesex, Essex, Union and Ocean counties, New Jersey. At June
30, 2005, Kearny Financial Corp. had total assets, deposits and stockholders'
equity of $2.11 billion, $1.53 billion and $505.5 million, respectively.
The following is a financial overview for the quarter:
Net Interest Income
- -------------------
Net interest income for the quarter ended June 30, 2005 was $13.2 million. This
compares to $12.4 million for the same quarter in 2004 and $13.3 million
reported for the quarter ended March 31, 2005. The net interest margin of 2.72%
for this quarter increased from 2.69% for the quarter ended March 31, 2005. The
net interest spread of 2.25% for this quarter compares to 2.50% for the quarter
ended March 31, 2005. Despite the decrease in net interest spread, net interest
income remained relatively stable compared to the quarter ended March 31, 2005,
due to an increase in the ratio of average interest-earning assets to average
interest-bearing liabilities, improving to 127.66% for the quarter ended June
30, 2005, compared to 112.32% for the quarter ended March 31, 2005. The Company
attributes the increase in the ratio to the proceeds from the initial public
offering, which it began to deploy in the latest quarter.
Non-interest Income
- -------------------
Non-interest income attributed to fees, service charges and miscellaneous income
decreased $19,000, or 3.9%, to $473,000 for the quarter ended June 30, 2005,
compared to $492,000 for the quarter ended March 31, 2005. The decrease was due
primarily to non-recurring loan fee income reported in the quarter ended March
31, 2005, partially offset by higher fee income from the Bank's retail branch
network in the quarter ended June 30, 2005. Non-interest income from gains on
the sale of securities was $7.6 million for the quarter as the result of the
sale of 120,000 shares of Freddie Mac common stock. Concern about the future of
government sponsored enterprises, triggered the sale of approximately 48% of the
Company's Freddie Mac common stock investment, which were held in the Company's
available for sale portfolio.
Non-interest Expenses
- ---------------------
Non-interest expenses for the quarter ended June 30, 2005 were $9.5 million, up
$684,000 as compared to the quarter ended March 31, 2005. The increase is
attributed to higher salaries and employee benefits, advertising and
miscellaneous expenses, partially offset by lower office occupancy and equipment
expense. The increase in salaries and employee benefits, which represented 68.1%
or $466,000 of the increase in non-interest expenses, resulted from employee
stock ownership plan ("ESOP") compensation expense, partially offset by lower
expenses for other components of this category. The ESOP plan was put into place
following the initial public offering completed in February 2005.
Loans and Asset Quality
- -----------------------
Loans receivable, net of deferred fees and the allowance for loan losses,
increased $41.9 million, or 8.1% to $558.0 million at June 30, 2005, from $516.1
million at March 31, 2005. The increase came primarily in one-to-four family
mortgage loans, particularly first mortgages and home equity loans, and in
non-residential mortgage loans and construction loans, offset by decreases in
home equity lines of credit and commercial business loans.
The provision for loan losses was $61,000 for the quarter ended June 30, 2005.
Total loans increased to $562.6 million at June 30, 2005 from $520.7 million at
March 31, 2005. Non-performing loans were $1.9 million, or 0.34% of total loans
at June 30, 2005, as compared to $2.4 million, or 0.47% of total loans at March
31, 2005. The allowance for loan losses as a percentage of total loans
outstanding was 0.96% at June 30, 2005 and 1.04% at March 31, 2005, reflecting
allowance balances of $5.4 million and $5.4 million, respectively.
Securities
- ----------
Mortgage-backed securities held to maturity increased by $30.5 million, or 4.2%,
to $758.1 million at June 30, 2005, from $727.6 million at March 31, 2005. The
increase resulted from the deployment of cash and cash equivalents.
Investment securities held to maturity increased $19.8 million, or 4.4%, to
$470.1 million at June 30, 2005, from $450.3 million at March 31, 2005. The
increase came primarily in the tax-exempt category, reflecting the purchase of
bank-qualified municipal bonds, and resulted from the deployment of cash and
cash equivalents.
2
The carrying value of securities available for sale decreased to $33.6 million
at June 30, 2005, from $40.7 million at March 31, 2005, due primarily to the
sale of Freddie Mac common stock.
Deposits
- --------
Deposits increased $77.8 million, or 5.4%, to $1.53 billion at June 30, 2005,
from $1.45 billion at March 31, 2005. The Company reacted to competitive
pressures in the market place by raising short-term interest rates during the
quarter, which attracted new deposits. For the quarter ended March 31, 2005,
excluding the effect of withdrawals to fund purchases of the Company's common
stock, deposits remained nearly flat after recording a decrease of $18.1 million
during the quarter ended December 31, 2004.
FHLB Advances
- -------------
Federal Home Loan Bank (the "FHLB") advances decreased to $61.7 million at June
30, 2005, from $81.8 million at March 31, 2005 primarily resulting from maturing
advances that were not renewed. Short-term advances borrowed earlier in the year
to fund commitments to purchase securities were no longer needed following the
initial public offering completed in February 2005.
Capital Management
- ------------------
During the quarter ended June 30, 2005, stockholders' equity increased $4.0
million to $505.5 million from $501.5 million at March 31, 2005. The increase is
attributed to net income recorded during the quarter plus the release of
unearned ESOP shares offset by a decrease in accumulated other comprehensive
income. The decrease in accumulated other comprehensive income resulted from a
reduction in the carrying value, net of taxes, of the Company's available for
sale portfolio due to the sale of Freddie Mac common stock.
The ratio of tangible equity to assets was 20.65% at June 30, 2005. The Tier 1
capital ratio was 58.06%, far in excess of the 6.00% level required to be
considered "well-capitalized" under regulatory guidelines.
Statements contained in this news release, which 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 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.
3
KEARNY FINANCIAL CORP.
FINANCIAL HIGHLIGHTS
(Dollars in thousands, except per share data)
(Unaudited)
June 30, March 31,
2005 2005
---- ----
Balance Sheet Data:
Assets $ 2,107,005 $ 2,045,995
Loans receivable, net 558,018 516,109
Mortgage-backed securities held to maturity 758,121 727,628
Securities available for sale 33,591 40,680
Investment securities held to maturity 470,098 450,270
Cash and cash equivalents 139,865 164,592
Goodwill 82,263 82,263
Deposits 1,528,777 1,451,024
Federal Home Loan Bank advances 61,687 81,826
Total stockholders' equity 505,482 501,466
For the Three Months Ended
-------------------------------------------
June 30, March 31, June 30,
2005 2005 2004
---- ---- ----
Summary of Operations:
Interest income $ 21,626 $ 21,078 $ 19,554
Interest expense 8,383 7,764 7,147
------------ ------------- --------
Net interest income 13,243 13,314 12,407
Provision for loan losses 61 (110) 0
------------ ------------- --------
Net interest income after provision for loan losses 13,182 13,424 12,407
Non-interest income 473 492 364
Non-interest income from gain on sale of available
for sale securities 7,634 0 0
Non-interest expenses 9,495 8,811 7,326
------------ ------------- --------
Income before taxes 11,794 5,105 5,445
Provision for income taxes 3,710 1,279 1,786
------------ ------------- --------
Net income $ 8,084 $ 3,826 $ 3,659
============ ============= ========
Per Share Data:
Net income per share - basic $0.11 $0.05 $365.90
Net income per share - diluted $0.11 $0.05 $365.90
Weighted average number of common shares
outstanding - basic 71,016,446 70,991,935 10,000
Weighted average number of common shares
outstanding - diluted 71,016,446 70,991,935 10,000
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For the Year Ended
------------------------------
June 30, June 30,
2005 2004
---- ----
Summary of Operations:
Interest income $ 82,443 $ 78,654
Interest expense 30,424 32,100
------------- -------------
Net interest income 52,019 46,554
Provision for loans losses 68 0
------------- -------------
Net interest income after provision for loan losses 51,951 46,554
Non-interest income 1,798 1,560
Non-interest income from gain on sale of available
for sale securities 7,705 0
Merger related expenses 0 592
Non-interest expenses, excluding merger related
expenses 34,862 28,880
------------- -------------
Income before taxes 26,592 18,642
Provisions for income taxes 7,694 5,745
------------- -------------
Net income $ 18,898 $ 12,897
============= =============
Per Share Data:
Net income per share - basic $0.27 $1,289.70
Net income per share - diluted $0.27 $1,289.70
Weighted average number of common shares
outstanding - basic 70,997,978 10,000
Weighted average number of common shares
outstanding - diluted 70,997,978 10,000
For the Year Ended
------------------------------
June 30, June 30,
2005 2004
---- ----
Performance Ratios:
Return on average assets 0.94% 0.67%
Return on average equity 5.40% 4.52%
Net interest rate spread (1) 2.52% 2.37%
Net interest margin (2) 2.79% 2.59%
Average interest-earning assets to average
interest-bearing liabilities 116.93% 112.46%
Efficiency ratio (net of gain on sale of available
for sale securities) 64.78% 61.25%
Non-interest expenses to average assets 1.73% 1.52%
(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.
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For the Year Ended
----------------------------
June 30, June 30,
2005 2004
---- ----
Asset Quality Ratios:
Non-performing loans to total loans 0.34% 0.46%
Non-performing assets to total assets 0.10% 0.13%
Net charge-offs to average loans outstanding 0.00% 0.01%
Allowance for loan losses to total loans 0.96% 1.01%
Allowance for loan losses to non-performing loans 281.79% 220.96%
For the Year Ended
----------------------------
June 30, June 30,
2005 2004
---- ----
Capital Ratios:
Average equity to average assets 17.36% 14.73%
Equity to assets at period end 23.99% 15.16%
Tangible equity to tangible assets at period end 20.65% 11.29%
For the Three Months Ended For the Year Ended
---------------------------- ---------------------------
June 30, June 30, June 30, June 30,
2005 2004 2005 2004
---- ---- ---- ----
Average Balances:
Loans receivable, net $ 537,397 $ 503,499 $ 517,746 $ 499,510
Mortgage-backed securities held to maturity 763,223 760,503 740,417 713,422
Investment securities held to maturity and
securities available for sale 502,697 471,457 490,253 425,338
Other interest-earning assets 141,119 45,635 114,916 156,270
----------- ----------- ----------- -----------
Total interest earning assets 1,944,436 1,781,094 1,863,332 1,794,540
Non-interest-earning assets 151,714 145,409 151,055 144,698
----------- ----------- ----------- -----------
Total assets $ 2,096,150 $ 1,926,503 $ 2,014,387 $ 1,939,238
=========== =========== =========== ===========
Deposits $ 1,456,742 $ 1,498,123 $ 1,512,541 $ 1,521,428
FHLB advances 66,346 75,550 80,990 74,340
----------- ----------- ----------- -----------
Total interest-bearing liabilities 1,523,088 1,573,673 1,593,531 1,595,768
Non-interest-bearing liabilities 71,130 61,008 71,119 57,846
Stockholders' equity 501,932 291,822 349,737 285,624
----------- ----------- ----------- -----------
Total liabilities and stockholders' equity $ 2,096,150 $ 1,926,503 $ 2,014,387 $ 1,939,238
=========== =========== =========== ===========
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For the Three Months Ended For the Year Ended
---------------------------- ---------------------------
June 30, June 30, June 30, June 30,
2005 2004 2005 2004
---- ---- ---- ----
Spread and Margin Analysis:
Average yield on:
Loans receivable, net 5.71% 5.42% 5.66% 5.79%
Mortgage-backed securities held to maturity 4.54% 4.64% 4.59% 4.76%
Investment securities held to maturity and
securities available for sale 3.44% 3.19% 3.37% 3.39%
Other interest-earning assets 2.76% 1.27% 2.30% 0.85%
Average cost of:
Deposits 2.06% 1.66% 1.75% 1.85%
FHLB advances 5.34% 4.92% 4.80% 5.40%
Net interest rate spread 2.25% 2.57% 2.52% 2.37%
Net interest margin 2.72% 2.79% 2.79% 2.59%
Average interest-earning assets to average
interest-bearing liabilities 127.66% 113.18% 116.93% 112.46%
7