FOR IMMEDIATE RELEASE
February 2, 2006
For further information contact:
Craig Montanaro
Senior Vice President,
Director of Strategic Planning
Kearny Financial Corp.
(973) 244-4510
KEARNY FINANCIAL CORP.
REPORTS SECOND QUARTER 2006 OPERATING RESULTS
Fairfield, New Jersey, February 2, 2006 - 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 December 31, 2005 of
$2.3 million, a decrease of 23.3%, compared with $3.0 million for the quarter
ended September 30, 2005 and a decrease of 28.1%, compared with $3.2 million
reported for the quarter ended December 31, 2004. Net income for the six months
ended December 31, 2005 was $5.3 million, a decrease of 24.3%, from $7.0 million
for the six months ended December 31, 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 26 retail branch offices located in Bergen, Hudson, Passaic, Morris,
Middlesex, Essex, Union and Ocean counties, New Jersey. At December 31, 2005,
Kearny Financial Corp. had total assets, deposits and stockholders' equity of
$2.06 billion, $1.48 billion and $506.4 million, respectively.
The following is a financial overview of the results for the quarter ended
December 31, 2005:
Net Interest Income
- -------------------
Net interest income for the quarter ended December 31, 2005 was $12.5 million, a
decrease of 2.3%, compared to $12.8 million for the quarter ended September 30,
2005 and a decrease of 1.6%, from $12.7 million reported for the quarter ended
December 31, 2004. The Bank's net interest margin for the quarter ended December
31, 2005 was 2.61%. This compares to 2.63% for the quarter ended September 30,
2005 and 2.89% reported for the quarter ended December 31, 2004.
The Company attributes the decrease in net interest income between linked
quarters and compared to the quarter ended December 31, 2004, to the competitive
market for deposits, which increased the Bank's cost of funds. At the same time,
interest-bearing liabilities repriced at a rate faster than interest-earning
assets, further depressing the Bank's net interest margin. Despite strong growth
in the loan portfolio between linked quarters and compared to the quarter ended
December 31, 2004, a flattening Treasury yield curve hindered the Bank's efforts
to offset increasing interest expense. While interest income remained unchanged
at $22.0 million for the quarters ended December 31, 2005 and September 30,
2005, interest expense increased 3.8% to
$9.5 million, from $9.2 million between linked quarters. Interest income for the
quarter ended December 31, 2005 increased 11.1%, to $22.0 million from $19.8
million for the quarter ended December 31, 2004. However, interest expense for
the quarter ended December 31, 2005 increased 31.9%, to $9.5 million from $7.2
million for the quarter ended December 31, 2004.
Non-interest Income
- -------------------
Non-interest income attributed to fees, service charges and miscellaneous income
increased $110,000, or 21.7%, to $617,000 for the quarter ended December 31,
2005, compared to $507,000 for the quarter ended September 30, 2005. For the
quarter ended December 31, 2004, non-interest income attributed to fees, service
charges and miscellaneous income was $410,000. The increase in non-interest
income between linked quarters and compared to the quarter ended December 31,
2004, was due primarily to income realized from additional bank owned life
insurance purchased during both of the two most recent quarters, plus a
non-recurring mortgage prepayment penalty of $73,000.
There was no non-interest income from gains on the sale of securities during the
quarter ended December 31, 2005, compared to non-interest income from gains on
the sale of securities of $86,000 for the quarter ended September 30, 2005.
There was no non-interest income from gains on the sale of securities during the
quarter ended December 31, 2004.
Non-interest Expense
- --------------------
Non-interest expense increased $760,000, or 8.1%, to $10.1 million for the
quarter ended December 31, 2005, from $9.4 million for the quarter ended
September 30, 2005. Non-interest expense increased $1.3 million, or 14.8%, from
$8.8 million for the quarter ended December 31, 2004 to $10.1 million for the
quarter ended December 31, 2005. The increase in non-interest expense between
linked quarters resulted primarily from higher salaries and employee benefits,
nominally higher equipment expense, a slight increase in advertising expense and
higher miscellaneous expenses, partially offset by lower office occupancy
expense. The increase in non-interest expense compared to the quarter ended
December 31, 2004 resulted primarily from higher salaries and employee benefits
and higher miscellaneous expenses.
The quarter ended December 31, 2005 contained for the first time, expense
attributed to stock benefit plans approved at the Company's annual meeting held
in October 2005. The expense recorded, as a component of salaries and employee
benefits, was $575,000. The quarters ended December 31, 2005 and September 30,
2005 both contained employee stock ownership plan ("ESOP") compensation expense
of $440,000 and $437,000, respectively; also recorded as a component of salaries
and employee benefits, while the quarter ended December 31, 2004 did not include
this expense category. The Bank established the ESOP plan during the initial
public offering completed in February 2005, purchasing 1.7 million shares in the
IPO.
Miscellaneous expenses were $1.2 million in the quarter ended December 31, 2005,
compared to $979,000 and $928,000 for the quarters ended September 30, 2005 and
December 31, 2004, respectively. Miscellaneous expenses included higher legal
fees, audit and accounting fees and expenses attributed to the annual meeting,
all of which are costs associated with being a public company.
Loans and Asset Quality
- -----------------------
Loans receivable, net of deferred fees and the allowance for loan losses,
increased $30.6 million, or 5.1%, to $628.1 million at December 31, 2005, from
$597.5 million at September 30, 2005. The increase came in one-to-four family
mortgage loans, particularly first mortgages and home equity loans. The increase
also came in construction loans, for both one-to-four family and
2
multi-family structures. To a lesser extent, there were increases in
non-residential mortgage loans, multi-family mortgage loans and commercial
business loans. During the quarter, there was a nominal decrease in home equity
lines of credit.
The provision for loan losses was $64,000 for the quarter ended December 31,
2005. Total loans increased to $632.7 million at December 31, 2005 from $602.1
million at September 30, 2005. Non-performing loans were $1.2 million, or 0.2%
of total loans at December 31, 2005, as compared to $2.0 million, or 0.33% of
total loans at September 30, 2005. The allowance for loan losses as a percentage
of total loans outstanding was 0.88% at December 31, 2005 and 0.91% at September
30, 2005, reflecting allowance balances of $5.6 million and $5.5 million,
respectively.
Securities
- ----------
Mortgage-backed securities held to maturity decreased by $28.2 million, or 3.8%,
to $718.0 million at December 31, 2005, from $746.2 million at September 30,
2005. Cash flow from monthly principal and interest payments was used to fund
loan originations and deposit outflows during the quarter.
The carrying value of securities available for sale increased to $26.7 million
at December 31, 2005, from $25.5 million at September 30, 2005, due to
mark-to-market adjustments reflecting increases in the value of the investments
in the available for sale portfolio.
Investment securities held to maturity decreased $1.8 million, or 0.4%, to
$461.8 million at December 31, 2005, from $463.6 million at September 30, 2005.
The decrease came in the municipal bond category, with proceeds from maturing
bonds used to fund deposit outflows during the quarter.
Deposits
- --------
Deposits decreased $13.2 million, or 0.9%, to $1.48 billion at December 31,
2005, from $1.50 billion at September 30, 2005. During the current quarter, the
Bank continued to resist pressure to increase the rates it pays on deposits.
Management's goal is to slow the increase in the cost of funds being caused by a
rise in market interest rates. The result of this strategy is the run off of
deposits. The decrease was primarily in certificates of deposit, partially
offset by a nominal increase in core deposits. During the quarter ended June 30,
2005, the Bank reacted to competitive pressures in the market place by offering
a premium short-term interest rate, which attracted new money in the form of
certificates of deposit. However, the Bank retreated from that strategy during
the two most recent quarters due to the negative effect on its cost of funds.
During the quarter ended September 30, 2005, deposits decreased $32.1 million,
again with the decrease coming primarily in certificates of deposit.
3
FHLB Advances
- -------------
Federal Home Loan Bank advances decreased $144,000, or 0.2%, to $61.4 million at
December 31, 2005, from $61.5 million at September 30, 2005 due to scheduled
principal payments on amortizing advances.
Capital Management
- ------------------
During the quarter ended December 31, 2005, stockholders' equity increased
$368,000 to $506.4 million from $506.0 million at September 30, 2005. The
increase is attributed to net income recorded during the quarter, an increase in
accumulated other comprehensive income, the release of unearned ESOP shares and
transactions resulting from the stock option plan approved at the Company's
annual meeting held in October 2005. The increase was partially offset by
treasury stock purchased and common stock dividends declared for the subsequent
quarter. The increase in accumulated other comprehensive income resulted from an
improvement in the carrying value, net of taxes, of the Company's available for
sale portfolio.
The Company's ratio of tangible equity to tangible assets was 21.18% at December
31, 2005. The Tier 1 capital ratio was 55.3%, far in excess of the 6.00% level
required to be considered "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.
4
KEARNY FINANCIAL CORP.
FINANCIAL HIGHLIGHTS
(Dollars in thousands, except per share data)
(Unaudited)
December 31, September 30,
2005 2005
---- ----
Balance Sheet Data:
Assets $ 2,062,773 $ 2,075,959
Loans receivable, net 628,121 597,500
Mortgage-backed securities held to maturity 717,953 746,193
Securities available for sale 26,740 25,534
Investment securities held to maturity 461,781 463,551
Cash and cash equivalents 72,894 85,288
Goodwill 82,263 82,263
Deposits 1,483,494 1,496,744
Federal Home Loan Bank advances 61,400 61,544
Total stockholders' equity 506,414 506,046
For the Three Months Ended
---------------------------------------------------
December 31, September 30, December 31,
2005 2005 2004
---- ---- ----
Summary of Operations:
Interest income $ 21,995 $ 21,971 $ 19,832
Interest expense 9,507 9,158 7,174
------------ ------------- ----------
Net interest income 12,488 12,813 12,658
Provision for loan losses 64 75 (34)
------------ ------------- ----------
Net interest income after provision for loan losses 12,424 12,738 12,692
Non-interest income 617 507 410
Non-interest income from gain on sale of available
for sale securities 0 86 0
Non-interest expense 10,138 9,378 8,767
------------ ------------- ----------
Income before taxes 2,903 3,953 4,335
Provision for income taxes 577 989 1,143
------------ ------------- ----------
Net income $ 2,326 $ 2,964 $ 3,192
============ ============= ==========
Per Share Data:
Net income per share - basic $0.03 $0.04 $319.20
Net income per share - diluted $0.03 $0.04 $319.20
Weighted average number of common shares
outstanding - basic 71,046,123 71,052,679 10,000
Weighted average number of common shares
outstanding - diluted 71,096,851 71,052,679 10,000
Per Share Data:
Cash dividends per share (1) $0.05 $0.04 $0.00
Dividend payout ratio (2) 46.91% 29.45% 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.
5
For the Three Months Ended
---------------------------------------------------
December 31, September 30, December 31,
2005 2005 2004
---- ---- ----
Performance Ratios:
Return on average assets 0.45% 0.56% 0.67%
Return on average equity 1.84% 2.35% 4.28%
Net interest rate spread (1) 2.06% 2.11% 2.66%
Net interest margin (2) 2.61% 2.63% 2.89%
Average interest-earning assets to average
interest-bearing liabilities 127.69% 127.71% 114.36%
Efficiency ratio (net of gain on sale of available
for sale securities) 77.36% 70.41% 67.09%
Non-interest expense to average assets 1.96% 1.79% 1.85%
(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
---------------------------------------------------
December 31, September 30, December 31,
2005 2005 2004
---- ---- ----
Asset Quality Ratios:(1)
Non-performing loans to total loans 0.20% 0.33% 0.32%
Non-performing assets to total assets 0.07% 0.10% 0.10%
Net charge-offs to average loans outstanding 0.00% 0.00% 0.00%
Allowance for loan losses to total loans 0.88% 0.91% 1.02%
Allowance for loan losses to non-performing loans 447.54% 279.13% 315.11%
(1) Asset quality ratios are period end ratios unless otherwise noted.
At or for the Three Months Ended
---------------------------------------------------
December 31, September 30, December 31,
2005 2005 2004
---- ---- ----
Capital Ratios:
Average equity to average assets 24.40% 24.04% 15.72%
Equity to assets at period end 24.55% 24.38% 16.01%
Tangible equity to tangible assets at period end 21.18% 21.02% 11.55%
6
(Unaudited)
For the Three Months Ended
---------------------------------------------------
December 31, September 30, December 31,
2005 2005 2004
---- ---- ----
Average Balances:
Loans receivable, net $ 611,195 $ 576,751 $ 512,029
Mortgage-backed securities held to maturity 739,275 757,472 718,736
Investment securities held to maturity and securities
available for sale 488,455 501,748 488,174
Other interest-earning assets 71,924 111,397 31,870
------------ ------------ ------------
Total interest earning assets 1,910,849 1,947,368 1,750,809
Non-interest-earning assets 162,453 154,113 147,867
------------ ------------ ------------
Total assets $ 2,073,302 $ 2,101,481 $ 1,898,676
============ ============ =============
Deposits $ 1,434,979 $ 1,462,018 $ 1,447,956
FHLB advances 61,451 62,821 82,988
------------ ------------ ------------
Total interest-bearing liabilities 1,496,430 1,524,839 1,530,944
Non-interest-bearing liabilities 70,888 71,430 69,220
Stockholders' equity 505,984 505,212 298,512
------------ ------------ ------------
Total liabilities and stockholders' equity $ 2,073,302 $ 2,101,481 $ 1,898,676
============ ============ ============
For the Three Months Ended
---------------------------------------------------
December 31, September 30, December 31,
2005 2005 2004
---- ---- ----
Spread and Margin Analysis:
Average yield on:
Loans receivable, net 5.59% 5.63% 5.72%
Mortgage-backed securities held to maturity 4.55% 4.52% 4.62%
Investment securities held to maturity and securities
available for sale 3.54% 3.48% 3.35%
Other interest-earning assets 3.92% 3.30% 1.63%
Average cost of:
Deposits 2.41% 2.27% 1.71%
FHLB advances 5.58% 5.55% 4.76%
Net interest rate spread 2.06% 2.11% 2.66%
Net interest margin 2.61% 2.63% 2.89%
Average interest-earning assets to average
interest-bearing liabilities 127.69% 127.71% 114.36%
7
For the Six Months Ended
----------------------------------
December 31, December 31,
2005 2004
---- ----
Summary of Operations:
Interest income $ 43,966 $ 39,739
Interest expense 18,665 14,277
------------ -------------
Net interest income 25,301 25,462
Provision for loan losses 139 117
------------ -------------
Net interest income after provision for loan losses 25,162 25,345
Non-interest income 1,124 833
Non-interest income from gain on sale of available
for sale securities 86 71
Non-interest expense 19,516 16,556
------------ -------------
Income before taxes 6,856 9,693
Provision for income taxes 1,566 2,705
------------ -------------
Net income $ 5,290 $ 6,988
============ =============
Per Share Data:
Net income per share - basic $0.07 $698.80
Net income per share - diluted $0.07 $698.80
Weighted average number of common shares
outstanding - basic 71,049,401 10,000
Weighted average number of common shares
outstanding - diluted 71,074,765 10,000
Per Share Data:
Cash dividends per share (1) $0.09 $0.00
Dividend payout ratio (2) 37.13% 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.
8
For the Six Months Ended
----------------------------------
December 31, December 31,
2005 2004
---- ----
Performance Ratios:
Return on average assets 0.51% 0.73%
Return on average equity 2.09% 4.72%
Net interest rate spread (1) 2.09% 2.65%
Net interest margin (2) 2.62% 2.88%
Average interest-earning assets to average
interest-bearing liabilities 127.70% 114.27%
Efficiency ratio (net of gain on sale of available
for sale securities) 73.85% 62.96%
Non-interest expense to average assets 1.87% 1.73%
(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 Six Months Ended
----------------------------------
December 31, December 31,
2005 2004
---- ----
Asset Quality Ratios:(1)
Non-performing loans to total loans 0.20% 0.32%
Non-performing assets to total assets 0.07% 0.10%
Net charge-offs to average loans outstanding 0.00% 0.00%
Allowance for loan losses to total loans 0.88% 1.02%
Allowance for loan losses to non-performing loans 447.54% 315.11%
(1) Asset quality ratios are period end ratios unless otherwise noted.
At or for the Six Months Ended
----------------------------------
December 31, December 31,
2005 2004
---- ----
Capital Ratios:
Average equity to average assets 24.22% 15.50%
Equity to assets at period end 24.55% 16.01%
Tangible equity to tangible assets at period end 21.18% 11.55%
9
For the Six Months Ended
----------------------------------
December 31, December 31,
2005 2004
---- ----
Average Balances:
Loans receivable, net $ 593,973 $ 511,354
Mortgage-backed securities held to maturity 748,374 736,865
Investment securities held to maturity and securities
available for sale 495,102 485,067
Other interest-earning assets 91,660 33,227
------------ ------------
Total interest earning assets 1,929,109 1,766,513
Non-interest-earning assets 158,444 146,258
------------ ------------
Total assets $ 2,087,553 $ 1,912,771
============ ============
Deposits $ 1,448,498 $ 1,461,365
FHLB advances 62,136 84,545
------------ ------------
Total interest-bearing liabilities 1,510,634 1,545,910
Non-interest-bearing liabilities 71,321 70,465
Stockholders' equity 505,598 296,396
------------ ------------
Total liabilities and stockholders' equity $ 2,087,553 $ 1,912,771
============ ============
For the Six Months Ended
----------------------------------
December 31, December 31,
2005 2004
---- ----
Spread and Margin Analysis:
Average yield on:
Loans receivable, net 5.61% 5.65%
Mortgage-backed securities held to maturity 4.54% 4.60%
Investment securities held to maturity and securities
available for sale 3.51% 3.34%
Other interest-earning assets 3.55% 1.47%
Average cost of:
Deposits 2.34% 1.68%
FHLB advances 5.56% 4.68%
Net interest rate spread 2.09% 2.65%
Net interest margin 2.62% 2.88%
Average interest-earning assets to average
interest-bearing liabilities 127.70% 114.27%
10