FOR IMMEDIATE RELEASE
October 31, 2005
For further information contact:
Craig Montanaro
Senior Vice President,
Director of Strategic Planning
Kearny Financial Corp.
(973) 244-4510
KEARNY FINANCIAL CORP.
REPORTS FIRST QUARTER 2006 OPERATING RESULTS
Fairfield, New Jersey, October 31, 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 September 30, 2005 of
$3.0 million compared with $3.8 million for the quarter ended September 30, 2004
and $8.1 million reported for the quarter ended June 30, 2005. Net income for
the quarter ended June 30, 2005 included $7.6 million of non-interest income
from the gain on sale of available for sale securities.
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 26 retail branch offices located in Bergen, Hudson, Passaic, Morris,
Middlesex, Essex, Union and Ocean counties, New Jersey. At September 30, 2005,
Kearny Financial Corp. had total assets, deposits and stockholders' equity of
$2.08 billion, $1.50 billion and $506.0 million, respectively.
The following is a financial overview for the quarter:
Net Interest Income
- -------------------
Net interest income for the quarter ended September 30, 2005 was $12.8 million.
This compares to $12.8 million for the same quarter in 2004 and $13.2 million
reported for the quarter ended June 30, 2005. The net interest margin for the
quarter ended September 30, 2005 was 2.63%. This compares to 2.87% for the same
quarter in 2004 and 2.72% reported for the quarter ended June 30, 2005. The
Company attributes the decrease in interest income between linked quarters to
the competitive market for deposits, which is driving up the Bank's cost of
funds. Presently, interest-bearing liabilities are repricing faster than
interest-bearing assets, further depressing the net interest margin. However,
the Company continues to deploy the proceeds from its initial public offering,
primarily into loans receivable, which is expected to help mitigate the increase
in the cost of funds.
Non-interest Income
- -------------------
Non-interest income attributed to fees, service charges and miscellaneous income
increased $34,000, or 7.2%, to $507,000 for the quarter ended September 30,
2005, compared to $473,000 for the quarter ended June 30, 2005. For the quarter
ended September 30, 2004, non-interest income attributed to fees, service
charges and miscellaneous income was $494,000. The increase in non-interest
income was due primarily to income realized from additional bank owned life
insurance purchased during the quarter ended September 30, 2005.
Non-interest income from gains on the sale of securities was $86,000 for the
quarter ended September 30, 2005 resulting from the sale of a $6.9 million
government income fund acquired during an earlier merger, and held in the
Company's available for sale portfolio. This compares to non-interest income
from gains on the sale of securities of $7.6 million for the linked quarter as
the result of the sale of 120,000 shares of Freddie Mac common stock,
representing approximately 48% of the Company's investment in Freddie Mac common
stock. There was no income from gains on the sale of securities during the
quarter ended September 30, 2004.
Non-interest Expense
- --------------------
Non-interest expense for the quarter ended September 30, 2005 was $9.4 million,
$117,000 lower as compared to the quarter ended June 30, 2005. For the quarter
ended September 30, 2004, non-interest expense was $7.8 million. The decrease in
non-interest expense for the linked quarters resulted primarily from lower
equipment expense, advertising expense and miscellaneous expenses, partially
offset by higher office occupancy expenses. Salaries and employee benefits were
flat for the linked quarters. The quarters ended September 30, 2005 and June 30,
2005 both contained employee stock ownership plan ("ESOP") compensation expense
while the quarter ended September 30, 2004 did not include this expense
category. The Bank established the ESOP plan during the initial public offering
completed in February 2005 and purchased 1.7 million shares in the IPO.
Loans and Asset Quality
- -----------------------
Loans receivable, net of deferred fees and the allowance for loan losses,
increased $39.5 million, or 7.1% to $597.5 million at September 30, 2005, from
$558.0 million at June 30, 2005. The increase came in one-to-four family
mortgage loans, particularly first mortgages, home equity loans and home equity
lines of credit, and, to a lesser extent, in non-residential mortgage loans and
construction loans, offset by nominal decreases in multi-family mortgages and
commercial business loans.
The provision for loan losses was $75,000 for the quarter ended September 30,
2005. Total loans increased to $602.1 million at September 30, 2005 from $562.6
million at June 30, 2005. Non-performing loans were $2.0 million, or 0.33% of
total loans at September 30, 2005, as compared to $1.9 million, or 0.34% of
total loans at June 30, 2005. The allowance for loan losses as a percentage of
total loans outstanding was 0.91% at September 30, 2005 and 0.96% at June 30,
2005, reflecting allowance balances of $5.5 million and $5.4 million,
respectively.
Securities
- ----------
Mortgage-backed securities held to maturity decreased by $11.9 million, or 1.6%,
to $746.2 million at September 30, 2005, from $758.1 million at June 30, 2005.
Cash flow from monthly principal and interest payments funded loan originations
and deposit outflows during the quarter.
2
Investment securities held to maturity decreased $6.5 million, or 1.4%, to
$463.6 million at September 30, 2005, from $470.1 million at June 30, 2005. The
decrease came primarily in the government agency notes category, with the
proceeds from maturing notes funding loan originations and deposit outflows
during the quarter.
The carrying value of securities available for sale decreased to $25.5 million
at September 30, 2005, from $33.6 million at June 30, 2005, due primarily to the
sale of a government income fund and mark-to-market adjustments to other
investments in the available for sale portfolio.
Deposits
- --------
Deposits decreased $32.1 million, or 2.1%, to $1.50 billion at September 30,
2005, from $1.53 billion at June 30, 2005. The decrease was primarily in
certificates of deposit. After reacting to competitive pressures in the market
place by raising short-term interest rates during the previous quarter, which
attracted new deposits, the Bank pulled back from that strategy during the
current quarter to slow the increase in the cost of funds. During the quarter
ended June 30, 2005, deposits increased $77.8 million. The increase was
primarily in certificates of deposit.
FHLB Advances
- -------------
Federal Home Loan Bank advances decreased to $61.5 million at September 30,
2005, from $61.7 million at June 30, 2005 due to scheduled principal payments on
amortizing advances.
Capital Management
- ------------------
During the quarter ended September 30, 2005, stockholders' equity increased
$564,000 to $506.0 million from $505.5 million at June 30, 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 and common stock dividends paid in the current quarter and declared for
the subsequent quarter. 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.
The ratio of tangible equity to tangible assets was 21.02% at September 30,
2005. The Tier 1 capital ratio was 57.09%, 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)
September 30, June 30,
2005 2005
---------- ----------
Balance Sheet Data:
Assets $2,075,959 $2,107,005
Loans receivable, net 597,500 558,018
Mortgage-backed securities held to maturity 746,193 758,121
Securities available for sale 25,534 33,591
Investment securities held to maturity 463,551 470,098
Cash and cash equivalents 85,288 139,865
Goodwill 82,263 82,263
Deposits 1,496,744 1,528,777
Federal Home Loan Bank advances 61,544 61,687
Total stockholders' equity 506,046 505,482
For the Three Months Ended
--------------------------------------------
September 30, June 30, September 30,
2005 2005 2004
----------- ----------- -----------
Summary of Operations:
Interest income $ 21,971 $ 21,624 $ 19,907
Interest expense 9,158 8,381 7,103
----------- ----------- -----------
Net interest income 12,813 13,243 12,804
Provision for loan losses 75 61 151
----------- ----------- -----------
Net interest income after provision for loan losses 12,738 13,182 12,653
Non-interest income 507 473 494
Non-interest income from gain on sale of available
for sale securities 86 7,634 0
Non-interest expense 9,378 9,495 7,789
----------- ----------- -----------
Income before taxes 3,953 11,794 5,358
Provision for income taxes 989 3,710 1,562
----------- ----------- -----------
Net income $ 2,964 $ 8,084 $ 3,796
=========== =========== ===========
Per Share Data:
Net income per share - basic $ 0.04 $ 0.11 $ 379.60
Net income per share - diluted $ 0.04 $ 0.11 $ 379.60
Weighted average number of common shares
outstanding - basic 71,052,679 71,016,446 10,000
Weighted average number of common shares
outstanding - diluted 71,052,679 71,016,446 10,000
Per Share Data:
Cash dividends per share (1) $ 0.04 $ 0.00 $ 0.00
Dividend payout ratio (2) 29.45% 0.00% 0.00%
(1) Represents cash dividends paid per share to minority stockholders
(21,821,250 shares).
(2) Represents cash dividends paid to minority stockholders divided by net
income.
4
KEARNY FINANCIAL CORP.
FINANCIAL HIGHLIGHTS
(Dollars in thousands, except per share data)
(Unaudited)
For the Three Months Ended
-------------------------------------------------------
September 30, June 30, September 30,
2005 2005 2004
---- ---- ----
Performance Ratios:
Return on average assets 0.56% 1.54% 0.79%
Return on average equity 2.35% 6.44% 5.16%
Net interest rate spread (1) 2.11% 2.25% 2.65%
Net interest margin (2) 2.63% 2.72% 2.87%
Average interest-earning assets to average
interest-bearing liabilities 127.71% 127.66% 114.31%
Efficiency ratio (net of gain on sale of available
for sale securities) 70.41% 69.23% 58.57%
Non-interest expense to average assets 1.79% 1.81% 1.62%
(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 30, June 30, September 30,
2005 2005 2004
---- ---- ----
Asset Quality Ratios:(1)
Non-performing loans to total loans 0.33% 0.34% 0.48%
Non-performing assets to total assets 0.10% 0.10% 0.14%
Net charge-offs to average loans outstanding 0.00% 0.00% 0.00%
Allowance for loan losses to total loans 0.91% 0.96% 1.02%
Allowance for loan losses to non-performing loans 279.13% 281.79% 213.65%
(1) Asset quality ratios are period end ratios unless otherwise noted.
At or for the Three Months Ended
-----------------------------------------------------
September 30, June 30, September 30,
2005 2005 2004
---- ---- ----
Capital Ratios:
Average equity to average assets 24.04% 23.95% 15.30%
Equity to assets at period end 24.38% 23.99% 15.64%
Tangible equity to tangible assets at period end 21.02% 20.66% 11.73%
5
KEARNY FINANCIAL CORP.
FINANCIAL HIGHLIGHTS
(Dollars in thousands, except per share data)
(Unaudited)
For the Three Months Ended
---------------------------------------
September 30, June 30, September 30,
2005 2005 2004
---------- ---------- ----------
Average Balances:
Loans receivable, net $ 576,751 $ 537,397 $ 510,730
Mortgage-backed securities held to maturity 757,472 763,223 754,994
Investment securities held to maturity and securities
available for sale 501,748 502,697 481,960
Other interest-earning assets 111,397 141,119 34,585
---------- ---------- ----------
Total interest earning assets 1,947,368 1,944,436 1,782,269
Non-interest-earning assets 154,113 151,714 141,747
---------- ---------- ----------
Total assets $2,101,481 $2,096,150 $1,924,016
========== ========== ==========
Deposits $1,462,018 $1,456,742 $1,473,030
FHLB advances 62,821 66,346 86,103
---------- ---------- ----------
Total interest-bearing liabilities 1,524,839 1,523,088 1,559,133
Non-interest-bearing liabilities 71,430 71,131 70,552
Stockholders' equity 505,212 501,931 294,331
---------- ---------- ----------
Total liabilities and stockholders' equity $2,101,481 $2,096,150 $1,924,016
========== ========== ==========
For the Three Months Ended
---------------------------------------
September 30, June 30, September 30,
2005 2005 2004
---------- ---------- ----------
Spread and Margin Analysis:
Average yield on:
Loans receivable, net 5.63% 5.71% 5.59%
Mortgage-backed securities held to maturity 4.52% 4.54% 4.58%
Investment securities held to maturity and securities
available for sale 3.48% 3.44% 3.33%
Other interest-earning assets 3.30% 2.76% 1.33%
Average cost of:
Deposits 2.27% 2.06% 1.66%
FHLB advances 5.55% 5.34% 4.60%
Net interest rate spread 2.11% 2.25% 2.65%
Net interest margin 2.63% 2.72% 2.87%
Average interest-earning assets to average
interest-bearing liabilities 127.71% 127.66% 114.31%
6