Kearny Financial Corp. (NASDAQ: KRNY) (the "Company"), the holding
company of Kearny Federal Savings Bank (the "Bank"), today reported
net income for the quarter ended June 30, 2010 of $2,012,000, or
$0.03 per diluted share.
The results represent an increase of $148,000 compared to net
income of $1,864,000, or $0.03 per diluted share, for the quarter
ended March 31, 2010. The increase in net income between linked
quarters was primarily attributable to an increase in noninterest
income and a reduction in the provision for loan loss which were
partially offset by a decline in net interest income and an
increase in noninterest expense. In total, these factors resulted
in an overall increase in pre-tax income and the provision for
income taxes.
Net income for the quarter ended June 30, 2010 represented an
increase of $899,000 compared to net income of $1,113,000, or $0.02
per diluted share, for the year ago quarter ended June 30, 2009.
The increase in year-over-year quarterly net income reflected
increases in net interest income and noninterest income coupled
with a decline in noninterest expense which were partially offset
by an increase in the provision for loan loss. In total, these
factors resulted in an overall increase in pre-tax income and the
provision for income taxes.
For the fiscal year ended June 30, 2010, the Company reported
net income of $6,812,000 or $0.10 per diluted share representing an
increase of $421,000 compared to net income of $6,391,000 or $0.09
per diluted share for the fiscal year ended June 30, 2009. The
increase in net income reflected increases in net interest income
and noninterest income that were partially offset by increases in
the provision for loan loss and noninterest expense. In total,
these factors resulted in an overall increase in pre-tax income and
the provision for income taxes.
Kearny Federal Savings Bank operates from its administrative
headquarters in Fairfield, New Jersey, and 27 retail branch offices
located in Bergen, Hudson, Passaic, Morris, Middlesex, Essex, Union
and Ocean Counties, New Jersey. At June 30, 2010, Kearny Financial
Corp. had total assets of $2.34 billion which included net loans
receivable of $1.01 billion and total investment securities,
including mortgage-backed and non-mortgage-backed securities, of
$989.7 million. As of that same date, deposits and borrowings
totaled $1.62 billion and $210.0 million, respectively, while
stockholders' equity totaled $485.9 million or 20.8% of total
assets.
The following is an overview of the Company's financial results
for the quarter ended June 30, 2010:
Net Interest Income
Net interest income during the quarter ended June 30, 2010 was
$14.4 million, a decrease of $390,000 compared to net interest
income of $14.8 million during the quarter ended March 31, 2010 and
an increase of $1.1 million compared to net interest income of
$13.3 million during the quarter ended June 30, 2009. The Company's
net interest margin decreased by 17 basis point to 2.75% for the
quarter ended June 30, 2010 from 2.92% during the prior linked
quarter ended March 31, 2010. The net interest margin decreased one
basis point from 2.76% for the same quarter one year earlier ended
June 30, 2009.
The decrease in net interest income between linked quarters
resulted from a decrease in interest income exacerbated by a
concurrent increase in interest expense. The decrease in interest
income between linked quarters was primarily attributable to
declines in the average yields across most categories of
interest-earning assets. The impact on interest income attributable
to the decline in average yields was partially offset by an
increase in the overall average balance of interest-earning assets.
However, the components of that growth between linked quarters
included an increase in the average balance of lower yielding
non-mortgage-backed securities which was partially offset by
reductions in the average balance of comparatively higher yielding
loans and mortgage-backed securities. The decline in interest
income between linked quarters also reflected an increase in the
average balance of non-interest-earning assets during the more
recent comparative period.
The concurrent increase in interest expense was primarily
attributable to an increase in the average balances of all
categories of interest-bearing deposits. The impact on interest
expense attributable to the increase in average balances was
partially offset by a decline in the average cost of
interest-bearing deposits. However, the rate of decline in the cost
of interest-bearing deposits slowed during the quarter compared
with that of recent quarters reflecting a slower rate of decline in
the cost of certificates of deposit coupled with an increase in the
cost of interest-bearing checking accounts. The slowing decline in
certificate of deposit costs reflects the growing portion of the
portfolio whose rates have adjusted downward to current market
levels. By contrast, the increase in the cost of interest-bearing
checking accounts primarily reflected the promotion of the Bank's
"High Yield Checking" product which is designed to attract core
deposits in the form of customers' primary checking accounts
through interest rate and fee reimbursement incentives to
qualifying customers. The explicit increase in interest expense
associated with the "High Yield Checking" product is expected to be
partially offset by an associated increase in transaction fee
income.
In contrast to the linked quarter comparison above, net interest
income increased between the year-over-year quarters ended June 30,
2010 and June 30, 2009 resulting from a decrease in interest
expense that outpaced a concurrent decrease in interest income. The
decrease in interest income was generally attributable to the same
factors noted in the linked period comparison. That is, the
reduction in interest income reflected declines in the overall
average yield of interest-earning assets resulting from declines in
the average yields of most of its component categories. Similarly,
the impact on interest income attributable to the decline in
average yields was partially offset by an increase in the overall
average balance of interest-earning assets. However, the components
of that growth between year-over-year quarters was mainly due to an
increase in the average balance of lower yielding
non-mortgage-backed securities while the average balance of
comparatively higher yielding loans and mortgage-backed securities
declined. The decline in interest income between year-over-year
quarters also reflected an increase in the average balance of
non-interest-earning assets during the more recent comparative
period.
The decrease in interest expense between the year-over-year
quarters reflected the effects of the decline in the overall
average cost of interest-bearing deposits partially offset by
increases in each of their respective average balances between
comparative periods. As in the linked period comparison above, the
overall decline in the average cost of interest-bearing deposits
reflected reductions in the cost of certificates of deposit that
were partially offset by an increase in the cost of
interest-bearing checking accounts for the reasons noted
earlier.
More specifically, total interest income decreased $271,000 to
$23.0 million during the quarter ended June 30, 2010 compared to
$23.3 million during the quarter ended March 31, 2010 while
decreasing $570,000 compared to $23.6 million during the quarter
ended June 30, 2009.
Interest income from loans decreased $389,000 to $14.1 million
during the quarter ended June 30, 2010 compared to $14.4 million
during the quarter ended March 31, 2010. By comparison, interest
income on loans decreased $724,000 during the quarter ended June
30, 2010 compared to $14.8 million during the quarter ended June
30, 2009. The decrease in interest income on loans between both
sets of comparative periods resulted from decreases in both their
average balance and average yield. During the quarter ended June
30, 2010, average loans receivable were $1.01 billion with an
average yield of 5.58%. By comparison, during the quarters ended
March 31, 2010 and June 30, 2009, average loans receivable were
$1.02 billion and $1.05 billion, respectively, with average yields
of 5.67% and 5.65%, respectively.
The Bank continued to experience a reduction in the aggregate
outstanding balance of residential first mortgages, home equity
loans and home equity lines of credit, whose combined average
outstanding balances declined $7.1 million to $770.0 million
between the quarters ended March 31, 2010 and June 30, 2010 due
primarily to continuing depressed residential loan demand. The
average balances of commercial loans, including non-residential
mortgages, multi-family mortgages and commercial business loans
also decreased by $2.7 million in aggregate to $218.6 million over
the same period.
Interest income from mortgage-backed securities decreased
$418,000 to $7.1 million during the quarter ended June 30, 2010
from $7.5 million during the quarter ended March 31, 2010 while
decreasing $1.3 million from $8.3 million during the quarter ended
June 30, 2009. The decline in interest income between linked and
year-over-year periods was attributable to decreases in both the
average balance and average yield of mortgage-backed securities
between comparative periods. During the quarter ended June 30,
2010, average mortgage-backed securities, excluding net unrealized
gains, were $659.1 million with an average yield of 4.28%. By
comparison, during the quarters ended March 31, 2010 and June 30,
2009, the average balances of mortgage-backed securities were
$689.1 million and $684.2 million, respectively, with average
yields of 4.34% and 4.86%, respectively.
The average yield on mortgage-backed securities has been
decreasing due primarily to the repayment of higher coupon mortgage
loans in the pools underlying the securities coupled with the
effect of the Company reinvesting incoming cash flows, including
sale proceeds, into securities whose comparatively lower yields
reflect the overall decline in market interest rates.
Interest income from non-mortgage-backed securities increased
$585,000 to $1.7 million during the quarter ended June 30, 2010
compared to $1.1 million during the quarter ended March 31, 2010
and increased $1.5 million from $226,000 during the quarter ended
June 30, 2009. The increase in interest income between both sets of
comparative periods resulted from an increase in the average
balance of non-mortgage-backed securities which was partially
offset by declines in their average yields. During the quarter
ended June 30, 2010, average non-mortgage-backed securities totaled
$288.2 million with an average yield of 2.40%. By comparison,
during the quarters ended March 31, 2010 and June 30, 2009, the
average balances of non-mortgage-backed securities totaled $160.1
million and $31.8 million, respectively, with average yields of
2.86% and 2.84%, respectively.
Interest income from other interest-earning assets, comprised
primarily of interest-earning cash and cash equivalents, decreased
$49,000 to $167,000 during the quarter ended June 30, 2010 compared
to $216,000 during the quarter ended March 31, 2010 and decreased
$87,000 from $254,000 for the quarter ended June 30, 2009. The
decline in interest income between both sets of comparative periods
resulted from decreases in both the average balance and average
yield of other interest-earning assets. During the quarter ended
June 30, 2010, the average balance of other interest-earning assets
totaled $133.4 million with an average yield of 0.50%. By
comparison, during the quarters ended March 31, 2010 and June 30,
2009, the average balances of other interest-earning assets totaled
$155.0 million and $170.6 million, respectively, with average
yields of 0.56% and 0.60%, respectively.
Total interest expense increased $119,000 to $8.6 million during
the quarter ended June 30, 2010 compared to $8.5 million during the
quarter ended March 31, 2010 while decreasing $1.6 million compared
to $10.3 million during the quarter ended June 30, 2009.
Interest expense attributed to deposits increased $97,000 to
$6.6 million during the quarter ended June 30, 2010 from $6.5
million during the quarter ended March 31, 2010 but decreased $1.6
million compared to $8.2 million during the quarter ended June 30,
2009. The changes in interest expense between both sets of
comparative quarters reflected increases in the average balance of
interest-bearing deposits. In comparison to the prior linked
quarter, the impact on interest expense attributable to the
increase in the average balance of interest-bearing deposits was
only partially offset by a concurrent decline in their average
cost. For the quarter ended June 30, 2010, the average balance of
interest-bearing deposits increased to $1.53 billion from $1.46
billion for the quarter ended March 31, 2010 while their average
cost declined to 1.72% from 1.78% for those same comparative
periods. As noted earlier, the decrease in the overall cost of
interest-bearing deposits for the linked quarters reflects a
continuing, but slowing, rate of decline in the cost of
certificates of deposit that was partially offset by an increase in
the cost of interest-bearing checking accounts primarily
attributable to the Bank's promotion of its "High Yield Checking"
product.
For the year-over-year comparative periods, the impact on
interest expense attributable to the increase in the average
balance of interest-bearing deposits was more than offset by the
overall decline in their average cost. The average balance and
average cost of interest-bearing deposits for the earlier
comparative quarter ended June 30, 2009 totaled $1.36 billion and
2.41%, respectively. As discussed above, the overall decline in the
cost of interest-bearing deposits between the year-over-year
comparative quarters also reflects the decline in the cost of
certificates of deposit that were partially offset by an increase
in the cost of interest-bearing checking accounts for the reasons
noted.
Finally, interest expense attributed to Federal Home Loan Bank
("FHLB") advances increased $22,000 to $2.1 million during the
quarter ended June 30, 2010 from $2.0 million during the quarter
ended March 31, 2010 while remaining unchanged at $2.1 million from
the quarter ended June 30, 2009. During both linked quarters ended
June 30, 2010 and March 31, 2010, the average balance of FHLB
advances was $210.0 million with average costs of 3.91% and 3.87%,
respectively. The average balance and average cost of FHLB advances
were unchanged from the quarter ended June 30, 2009 at $210.0
million and 3.91%, respectively.
Provision for Loan Losses
The provision for loan losses totaled $262,000 during the
quarter ended June 30, 2010 compared to a provision of $891,000 for
the linked quarter ended March 31, 2010. No provision for loan loss
was recorded for the quarter ended June 30, 2009. The provision in
the current period reflected required net increases to the
allowance for additional estimated specific losses on several
impaired mortgage loans and one construction loan participation on
residential properties located in New Jersey. All 1-4 family
residential mortgage loans with specific losses identified during
the quarter were originated by Countrywide Home Loans, Inc.
("Countrywide") and purchased by the Bank during prior years. The
one construction loan participation requiring a specific loss
provision during the current quarter was originally acquired
through the Thrift Institutions Community Investment Corporation of
New Jersey ("TICIC"), a subsidiary of the New Jersey Bankers
Association. The provision also reflected changes to balances of
general valuation allowances attributable to the application of
historical and environmental loss factors to the remaining
non-impaired portion of the loan portfolio in accordance with the
Company's allowance for loan loss calculation methodology. Further
discussion of the allowance for loan losses is presented in the
Loans and Credit Quality section below.
Noninterest Income
Noninterest income attributed to fees, service charges and
miscellaneous income, including real estate owned ("REO")
operations, increased $81,000 to $644,000 during the quarter ended
June 30, 2010 from $563,000 during the quarter ended March 31, 2010
while increasing $43,000 from $601,000 during the quarter ended
June 30, 2009. The increase in noninterest income between both sets
of comparative quarters was attributable to several factors
including increases in income from bank owned life insurance as
well as increases in loan-related and deposit and branch-related
fees and charges.
Noninterest income for the quarter ended June 30, 2010 also
reflects net gains totaling $509,000 on the sale of mortgage-backed
securities for which no such income was recorded during the
comparative quarters ended March 31, 2010 or June 30, 2009. The net
security sale gains resulted, in part, from the sale of agency,
pass-through securities during the current quarter. These gains
were partially offset by losses on the sale of the Company's
outstanding balance of non-investment grade, non-agency
collateralized mortgage obligations ("CMOs"). The CMOs sold were
originally acquired as investment grade securities upon the in-kind
redemption of the Bank's interest in the AMF Ultra Short Mortgage
Fund ("AMF Fund") during the quarter ended September 30, 2008. The
ratings of these securities subsequently declined below investment
grade with most ultimately being identified as
other-than-temporarily impaired ("OTTI") requiring the recognition
of impairment charges through earnings in prior periods.
Other-then-temporary impairment charges recognized in non-interest
income for the comparative quarters ended March 31, 2010 and June
30, 2009 totaled $53,000 and $144,000, respectively, with all such
charges relating to these securities.
Noninterest Expense
Noninterest expense increased by $512,000 to $11.7 million for
the quarter ended June 30, 2010 from $11.2 million for the quarter
ended March 31, 2010 but decreased $88,000 from $11.8 million for
the quarter ended June 30, 2009.
The increase in noninterest expense between linked quarters was
largely attributable to $373,000 of expenses recorded during the
quarter ended June 30, 2010 relating to the Company's proposed
acquisition of Central Jersey Bancorp (NASDAQ: CJBK) as announced
on May 25, 2010. The acquisition-related expenses recorded during
the current quarter included a portion of the professional service
fees expected to be paid relating to the transaction including, but
not limited to, investment banking, legal and due diligence
consulting services.
The remaining $139,000 increase in noninterest expense between
comparative quarters included increases in expenses during the
quarter ended June 30, 2010 relating to salaries and employee
benefits, equipment and systems, advertising and marketing and
deposit insurance as well as a variety of other miscellaneous
expenses. Such increases were offset by a reduction in
occupancy-related expenses. Increases in compensation-related
expenses reflected increases in wages and salaries and medical
benefits costs that went into effect at the beginning of the 2010
calendar year that were partially offset by a reduction in employee
stock ownership plan ("ESOP") expense resulting from declines in
the Company's share value. Increases in equipment and systems
expenses primarily reflected increases in service provider charges
including core processing costs, electronic banking/bill payment
services and merchant processing charges. The increase in service
provider systems expenses also reflected costs associated with the
implementation of the Bank's "High Yield Checking" product
discussed earlier. Such implementation costs were also reflected in
the reported increase in advertising and marketing expense.
The increase in cost of FDIC deposit insurance compared to the
linked quarter ended March 31, 2010 primarily reflected the
continued growth in the Bank's balance of insurable deposits while
the increase in miscellaneous expense included less noteworthy
increases in professional services, loan expense, audit and
accounting expense, corporate insurance expense and other general
and administrative expenses.
The net decrease of $88,000 in year-over-year quarterly
noninterest expense was largely attributable to a reduction in
deposit insurance expense of $947,000 that reflected the FDIC
special assessment recorded during the earlier comparative period.
Offsetting a significant portion of this reduction in noninterest
expense were increases in most of the remaining categories of
noninterest expense. Such increases, most notably those relating to
salaries and employee benefits, advertising and marketing and
merger related expenses, were largely attributable to the same
factors as those described for the linked quarter comparison
above.
Provision for Income Taxes
The provision for income taxes increased by $222,000 to $1.5
million for the quarter ended June 30, 2010 from $1.3 million for
the quarter ended March 31, 2010 and increased $679,000 from
$867,000 for the quarter ended June 30, 2009. The increase in
income taxes between both sets of comparative quarters was
primarily attributable to increases in pre-tax income. The
Company's effective tax rates during the quarters ended June 30,
2010, March 31, 2010 and June 30, 2009 were 43.4%, 41.5% and 43.8%,
respectively.
Cash and Cash Equivalents
Cash and cash equivalents, which consist primarily of
interest-earning deposits in other banks, increased by $74.7
million to $181.4 million at June 30, 2010 from $106.7 million at
March 31, 2010. The increase in short term, liquid assets was
largely attributable to cash inflows from continued growth in
deposits outpacing the reinvestment of such funds into loans and
investment securities during the quarter.
In accordance with the overall goals of its strategic business
plan, the Company may, at times, defer the reinvestment of excess
liquidity into the investment portfolio in favor of retaining
comparatively higher average balances of short term, liquid assets
as a funding source for future loan originations. Due, in large
part, to the significant economic challenges and declining real
estate values that recently characterized the lending marketplace,
the Company's loan origination volume generally declined during
most of fiscal 2010 compared to the prior year. As such, a portion
of the Company's excess liquidity had been reinvested into
investment securities during prior quarters. However, during the
quarter ended June 30, 2010, the Bank's pipeline of "in process"
loans increased due, in part, to continued expansion of the Bank's
loan origination staff. Moreover, the Bank is currently evaluating
various pricing strategies to expand the origination of certain
loan types in select markets during the first half of fiscal 2011.
In light of these considerations, the Company elected to accumulate
a growing balance of short term, liquid assets during the quarter
ended June 30, 2010 as a funding source for potential loan growth
as well as the proposed acquisition of Central Jersey Bancorp.
Management will continue to monitor the opportunity cost to near
term earnings resulting from the accumulation of short term, liquid
assets in relation to the expected need for such liquidity to fund
the Company's strategic initiatives. The Company may ultimately
redeploy a portion of its excess liquidity into higher yielding
investments based upon the timing and relative success of those
initiatives.
Coupled with the related activity from the prior quarters of
fiscal 2010, the balance of the Company's cash and cash equivalents
has decreased approximately $30.1 million from $211.5 million at
the end of the prior year ended June 30, 2009.
Loans and Credit Quality
Loans receivable, excluding deferred fees and costs and the
allowance for loan losses, remained generally stable at $1.01
billion at June 30, 2010 compared to March 31, 2010. Growth in
loans was limited to $4.4 million for the quarter ended June 30,
2010 reflecting the continuing diminished level of loan demand from
qualified borrowers coupled with aggressive pricing in the
marketplace for certain loan products. These factors impacted the
Company's commercial loan portfolio which generally includes
non-residential mortgages, multi-family mortgages and commercial
business loans. This segment of the loan portfolio declined $3.8
million to $217.4 million at June 30, 2010 from $221.2 million at
March 31, 2010. The declines in commercial loan balances were more
than offset by growth in one-to-four family mortgages which
increased by $8.2 million to $776.8 million at June 30, 2010 from
$768.7 million at March 31, 2010. Aggregate declines in the
outstanding balance of consumer and other loans totaled $21,000
while the outstanding balance of construction loans remained stable
at $14.7 million at both June 30, 2010 and March 31, 2010.
Coupled with the related activity from the prior quarters of
fiscal 2010, the balance of the Company's loans receivable,
excluding deferred fees and costs and the allowance for loan
losses, has decreased approximately $31.7 million from $1.04
billion at the end of the prior year ended June 30, 2009.
At June 30, 2010, non-performing assets totaled $21.7 million or
0.93% of total assets and comprised 54 nonperforming loans totaling
$21.6 million, or 2.13% of total loans, plus two REO properties
totaling $146,000. By comparison, at March 31, 2010 non-performing
assets totaled $19.0 million or 0.84% of total assets and comprised
55 nonperforming loans totaling $18.6 million, or 1.84% of total
loans, plus three REO properties totaling $390,000.
The increase in the balance of non-performing loans for the
quarter ended June 30, 2010 was primarily attributable to the
addition of one $2.2 million nonaccrual commercial business loan.
The loan, which is secured by land with approvals for residential
development, was placed on nonaccrual at June 30, 2010 based upon
its past due status. However, no specific valuation allowance for
impairment was required to be established against the loan as of
that date based upon the adequacy of the Bank's collateral as well
as an existing contract for the sale of the underlying property
which is expected to close in the quarter ending September 30,
2010.
Loans reported as non-performing at June 30, 2010, include 27
mortgage loans totaling $11.7 million on residential properties
located in New Jersey originally acquired from Countrywide. At June
30, 2010, the Bank owned a total of 170 residential mortgage loans
with an aggregate outstanding balance of $84.9 million that were
originally acquired from Countrywide and continue to be serviced by
their acquirer, Bank of America through its subsidiary, BAC Home
Loans Servicing, LP. Of these loans, an additional 11 loans
totaling $4.2 million are 30-89 days past due and are in various
stages of collection.
Coupled with the related activity from the prior quarters of
fiscal 2010, the balance of the Company's nonperforming assets has
increased approximately $8.4 million from $13.3 million or 0.62% of
total assets at the end of the prior year ended June 30, 2009.
Charge offs, net of recoveries, against the allowance for loan
loss during the current quarter ended June 30, 2010 resulted in
nominal net aggregate charge offs of less than $1,000. The
allowance for loan losses as a percentage of total loans
outstanding was 0.84% at June 30, 2010 compared with 0.82% at March
31, 2010 reflecting total allowances of $8.6 million and $8.3
million, respectively, at the close of each quarter.
Coupled with the related activity from the prior quarters of
fiscal 2010, the balance of the Company's allowance for loan losses
has increased by $2.1 million from $6.4 million or 0.62% of total
loans at June 30, 2009.
Securities and Mortgage-backed Securities
Mortgage-backed securities available for sale, all of which are
government agency pass-through certificates, increased $18.9
million to $703.5 million at June 30, 2010 from $684.5 million at
March 31, 2010. The net increase reflected security purchases
totaling $107.1 million which were partially offset by security
sales of $32.7 million and principal repayments totaling
approximately $64.0 million. The increase also reflected an
increase in the unrealized gain within the portfolio of $8.8
million to $30.0 million at June 30, 2010 from $21.3 million at
March 31, 2010. Of the securities purchased, $7.1 million represent
issues eligible to meet the Community Reinvestment Act investment
test. Based on its evaluation, management concluded that no
other-than-temporary impairment was present within this segment of
the investment portfolio at June 30, 2010.
Mortgage-backed securities held to maturity decreased $1.8
million to $1.7 million at June 30, 2010 from $3.5 million at March
31, 2010. The reduction was primarily attributable to the sale of
the Company's non-investment grade, non-agency CMOs. At the time of
sale, the securities had a book value, excluding
other-than-temporary impairments, of $2.7 million. Net of OTTI, the
securities had an amortized cost and total net book value of $2.2
million and $1.5 million, respectively, reflecting the impact of
prior credit-related and noncredit-related OTTI charges relating to
the securities. As discussed above, these securities were
originally acquired as investment grade securities upon the in-kind
redemption of the Bank's interest in the AMF Fund during the
quarter ended September 30, 2008. Since that time, the ratings of
these securities declined below investment grade with most
ultimately being identified as other-than-temporarily impaired
resulting in their eligibility for sale from the held-to-maturity
portfolio.
At June 30, 2010, the Company's remaining portfolio of
non-agency CMOs totaled 20 securities with an aggregate outstanding
balance of approximately $310,000. These securities, all of which
were acquired through the AMF Fund redemption and remain in the
held-to-maturity portfolio, were not other-than-temporarily
impaired and were rated as investment grade at June 30, 2010. The
remainder of the held to maturity mortgage-backed securities
portfolio at June 30, 2010 is comprised of government agency
mortgage pass-through securities and collateralized mortgage
obligations that were also not other-than-temporarily impaired
based upon management's evaluation as of that date..
Coupled with the related activity from the prior quarters of
fiscal 2010, the combined balances of the Company's mortgage-backed
securities portfolios totaling $705.2 million at June 30, 2010 have
increased approximately $17.0 million from $688.1 million at the
end of the prior year ended June 30, 2009.
Non-mortgage-backed securities classified as available for sale
increased by $116,000 to $29.5 million at June 30, 2010 from $29.4
million at March 31, 2010. The change in the balance between linked
periods was primarily attributable to an increase in the fair value
of the portfolio partially offset by principal repayments. The net
unrealized loss for this portfolio was reduced by $191,000 to $1.5
million at June 30, 2010 from $1.7 million at March 31, 2010.
Non-mortgage-backed securities classified as held to maturity
decreased by $10.0 million to $255.0 million at June 30, 2010 from
$265.0 million at March 31, 2010. The decrease in the portfolio
during the quarter was attributable to the full repayment at par of
a fixed rate, agency debenture that was called prior to maturity.
Based on its evaluation, management has concluded that no
other-than-temporary impairment is present within either segment of
the non-mortgage backed securities portfolio at June 30, 2010.
Coupled with the related activity from the prior quarters of
fiscal 2010, the combined balances of the Company's
non-mortgage-backed securities portfolios totaling $284.5 million
at June 30, 2010 have increased approximately $256.5 million from
$28.0 million at the end of the prior year ended June 30, 2009.
Deposits
Deposits increased $80.0 million to $1.62 billion at June 30,
2010 from $1.54 billion at March 31, 2010. Growth was reported
across all categories of interest-bearing deposits. For the quarter
ended June 30, 2010, interest-bearing demand deposits increased
$39.1 million to $256.2 million, savings deposits increased $10.2
million to $334.2 million and certificates of deposit increased
$32.4 million to $979.5 million. Non-interest-bearing demand
deposits decreased $1.7 million to $53.7 million during the current
quarter.
As noted earlier, the increase in the cost of interest-bearing
checking accounts primarily reflected the promotion of the Bank's
"High Yield Checking" product which is designed to attract core
deposits in the form of customers' primary checking accounts
through interest rate and fee reimbursement incentives to
qualifying customers. The explicit increase in interest expense
associated with the "High Yield Checking" product is expected to be
partially offset by an associated increase in transaction fee
income.
Coupled with the related activity from the prior quarters of
fiscal 2010, the balance of the Company's deposits has increased
approximately $202.4 million from $1.42 billion at the end of the
prior year ended June 30, 2009. The growth in deposits during the
year ended June 30, 2010 included an increase in the balance of
non-interest-bearing deposits totaling $2.5 million coupled with an
increase in total interest-bearing deposits of $199.9 million.
Depositors have generally been lengthening the maturities of their
time deposits, particularly by transferring maturing certificates
of deposit to accounts with new maturities of greater than 12
months to improve yield. Certificates of deposit with maturities of
greater than 12 months increased by $98.8 million to $263.2 million
at June 30, 2010 from $164.4 million at June 30, 2009 with such
balances representing 26.9% and 18.2% of total certificates of
deposit at the close of each period, respectively.
Federal Home Loan Bank Advances
As a result of the Bank's strong liquidity position, there were
no additional borrowings drawn during fiscal 2010. Moreover, no
borrowings matured during those same periods. Consequently, the
balance of FHLB advances remained unchanged at $210.0 million at
June 30, 2010 from the prior quarter ended March 31, 2010 and the
prior fiscal year ended June 30, 2009.
Stockholders' Equity and Capital Management
During the quarter ended June 30, 2010, stockholders' equity
increased $3.9 million to $485.9 million from $482.0 million at
March 31, 2010. The increase was attributable, in part, to
quarterly net income of $2.0 million, increases to paid-in-capital
totaling $1.3 million attributable primarily to benefit plan
related adjustments and $364,000 of ESOP shares earned. The
increase in stockholders' equity also reflects a $5.7 million
increase in accumulated other comprehensive income resulting
primarily from additional unrealized gain on the available for sale
securities portfolios. Partially offsetting these factors was a
$4.6 million increase in treasury stock resulting from the
repurchase of 494,223 shares of the Company's common stock as well
as an $817,000 cash dividend to shareholders.
At June 30, 2010, the Company's total equity to asset ratio was
20.8% while the equity to assets ratio of the Bank was 19.9%. As of
that same date, the Bank's ratio of tangible equity to tangible
assets was 16.4% while its Tier 1 (Core) Capital and Total
(Risk-based) Capital to risk-weighted assets ratios were 37.4% and
37.8%, respectively, far in excess of the 6.0% and 10.0% levels,
respectively, 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
(Dollars in Thousands, Except Per Share Data, Unaudited)
At
-------------------------------------
June 30, March 31, June 30,
2010 2010 2009
----------- ----------- -----------
Selected Balance Sheet Data:
Assets $ 2,339,813 $ 2,251,900 2,124,921
Cash and cash equivalents 181,422 106,685 211,525
Securities available for sale 29,497 29,381 28,027
Securities held to maturity 255,000 265,000 0
Allowance for loan losses (8,561) (8,298) (6,434)
Net loans receivable 1,005,152 1,001,025 1,039,413
Mortgage-backed securities available
for sale 703,455 684,534 683,785
Mortgage-backed securities held to
maturity 1,700 3,463 4,321
Goodwill 82,263 82,263 82,263
Deposits 1,623,562 1,543,557 1,421,201
Federal Home Loan Bank advances 210,000 210,000 210,000
Total stockholders' equity 485,926 482,005 476,720
Consolidated Capital Ratios:
Equity to assets at period end 20.77% 21.40% 22.43%
Tangible equity to tangible assets
at period end (1) 17.36% 18.08% 18.98%
Share Data:
Outstanding shares (in thousands) 68,344 68,839 69,242
Closing price as reported by NASDAQ $ 9.16 $ 10.43 $ 11.44
Book value per share $ 7.11 $ 7.00 $ 6.88
Tangible book value per share (1) $ 5.66 $ 5.65 $ 5.58
Asset Quality Ratios:
Non-performing loans to total loans 2.13% 1.84% 1.26%
Non-performing assets to total
assets 0.93% 0.84% 0.62%
Allowance for loan losses to total
loans 0.84% 0.82% 0.62%
Allowance for loan losses to
non-performing loans 39.70% 44.64% 48.92%
(1) Tangible equity equals total stockholders' equity reduced by goodwill,
core deposit intangible assets and accumulated other comprehensive
income.
KEARNY FINANCIAL CORP.
FINANCIAL HIGHLIGHTS
(Dollars in Thousands, Except Per Share Data, Unaudited)
For the Three Months Ended For the Year Ended
-------------------------------- ---------------------
June 30, March 31, June 30, June 30, June 30,
2010 2010 2009 2010 2009
---------- ---------- ---------- ---------- ----------
Summary of
Operations:
Interest income $ 23,013 $ 23,284 $ 23,583 $ 93,108 $ 97,908
Interest expense 8,637 8,518 10,263 36,321 44,200
---------- ---------- ---------- ---------- ----------
Net interest income 14,376 14,766 13,320 56,787 53,708
Provision for loan
losses 262 891 0 2,616 317
---------- ---------- ---------- ---------- ----------
Net interest income
after provision for
loan losses 14,114 13,875 13,320 54,171 53,391
Noninterest income,
excl gain/(loss) on
securities 644 563 601 2,395 2,648
Gain/(loss) on
securities 509 (53) (144) 303 (1,129)
Noninterest expense 11,709 11,197 11,797 45,094 43,922
---------- ---------- ---------- ---------- ----------
Income before taxes 3,558 3,188 1,980 11,775 10,988
Provision for income
taxes 1,546 1,324 867 4,963 4,597
---------- ---------- ---------- ---------- ----------
Net income $ 2,012 $ 1,864 $ 1,113 $ 6,812 $ 6,391
========== ========== ========== ========== ==========
Per Share Data:
Net income per share
- basic $ 0.03 $ 0.03 $ 0.02 $ 0.10 $ 0.09
Net income per share
- diluted $ 0.03 $ 0.03 $ 0.02 $ 0.10 $ 0.09
Weighted average
number of common
shares
outstanding -
basic (in
thousands) 67,711 67,875 68,310 67,920 68,710
Weighted average
number of common
shares
outstanding -
diluted (in
thousands) 67,711 67,875 68,310 67,920 68,710
Cash dividends per
share (1) $ 0.05 $ 0.05 $ 0.05 $ 0.20 $ 0.20
Dividend payout
ratio (2) 40.6% 45.2% 76.9% 53.7% 54.9%
(1) Represents dividends declared per common share.
(2) Represents dividends declared, excluding dividends waived by Kearny
MHC, divided by net income.
For the Three Months Ended For the Year Ended
-------------------------------- ---------------------
June 30, March 31, June 30, June 30, June 30,
2010 2010 2009 2010 2009
---------- ---------- ---------- ---------- ----------
Average Balances:
Loans receivable $1,007,957 $1,018,748 $1,047,017 $1,030,287 $1,064,019
Mortgage-backed
securities:
Mortgage
pass-through
securities 655,668 684,863 679,350 673,318 692,825
Collateralized
mortgage
obligations 3,426 4,229 4,844 4,178 3,847
---------- ---------- ---------- ---------- ----------
Total
mortgage-backed
securities 659,094 689,092 684,194 677,496 696,672
Non-mortgage-backed
securities:
Tax exempt
securities 18,125 18,126 18,167 18,143 18,183
Taxable securities 270,082 141,932 13,658 119,328 15,721
---------- ---------- ---------- ---------- ----------
Total
non-mortgage-
backed securities 288,207 160,058 31,825 137,471 33,904
Other
interest-earning
assets 133,407 155,010 170,592 161,375 115,806
---------- ---------- ---------- ---------- ----------
Total
interest
earning
assets 2,088,665 2,022,908 1,933,628 2,006,629 1,910,401
Non-interest-earning
assets 210,500 194,958 183,956 207,240 169,408
---------- ---------- ---------- ---------- ----------
Total
Assets $2,299,165 $2,217,866 $2,117,584 $2,213,869 $2,079,809
========== ========== ========== ========== ==========
Interest-bearing
deposits
Interest-bearing
checking $ 237,401 $ 200,596 $ 161,370 $ 198,623 $ 156,883
Savings and clubs 329,606 319,202 297,881 315,715 293,483
Certificates of
deposit 963,825 935,664 900,867 935,684 873,257
---------- ---------- ---------- ---------- ----------
Total
interest-bearing
deposits 1,530,832 1,455,462 1,360,118 1,450,022 1,323,623
Federal Home Loan
Bank advances 210,000 210,000 210,000 210,000 215,077
---------- ---------- ---------- ---------- ----------
Total
interest-
bearing
liabilities 1,740,832 1,665,462 1,570,118 1,660,022 1,538,700
Non-interest-bearing
liabilities 77,525 72,319 70,326 74,424 68,441
Stockholders' equity 480,808 480,085 477,140 479,423 472,668
---------- ---------- ---------- ---------- ----------
Total
liabilities
and
stockholders'
equity $2,299,165 $2,217,866 $2,117,584 $2,213,869 $2,079,809
========== ========== ========== ========== ==========
Average interest-
earning assets to
average interest-
bearing liabilities 119.98% 121.46% 123.15% 120.88% 124.16%
KEARNY FINANCIAL CORP.
FINANCIAL HIGHLIGHTS
For the Three Months Ended For the Year Ended
-------------------------------- ---------------------
June 30, March 31, June 30, June 30, June 30,
2010 2010 2009 2010 2009
---------- ---------- ---------- ---------- ----------
Performance ratios:
Yield on average:
Loans receivable 5.58% 5.67% 5.65% 5.64% 5.69%
Mortgage-backed
securities 4.28% 4.34% 4.86% 4.49% 5.02%
Non-mortgage-backed
securities:
Tax exempt
securities 3.47% 3.47% 3.48% 3.48% 3.49%
Taxable securities 2.33% 2.78% 1.99% 2.57% 2.60%
---------- ---------- ---------- ---------- ----------
Total
non-mortgage-
backed securities 2.40% 2.86% 2.84% 2.69% 3.07%
Other
interest-earning
assets 0.50% 0.56% 0.60% 0.51% 1.18%
---------- ---------- ---------- ---------- ----------
Total
interest-earning
assets 4.41% 4.60% 4.88% 4.64% 5.12%
Cost of average:
Interest-bearing
checking 1.25% 1.13% 1.09% 1.17% 1.34%
Savings and clubs 1.02% 1.01% 1.03% 1.03% 1.05%
Certificates of
deposit 2.08% 2.19% 3.11% 2.41% 3.50%
---------- ---------- ---------- ---------- ----------
Interest-bearing
deposits 1.72% 1.78% 2.41% 1.94% 2.70%
Federal Home Loan
Bank advances 3.91% 3.87% 3.91% 3.92% 3.95%
---------- ---------- ---------- ---------- ----------
Total
interest-bearing
liabilities 1.98% 2.05% 2.61% 2.19% 2.87%
Net interest rate
spread (1) 2.43% 2.55% 2.27% 2.45% 2.25%
Net interest
margin (2) 2.75% 2.92% 2.76% 2.83% 2.81%
Noninterest income
to average assets 0.20% 0.09% 0.09% 0.12% 0.07%
Noninterest
expense to
average assets 2.04% 2.02% 2.23% 2.04% 2.11%
Efficiency ratio 75.40% 73.30% 85.63% 75.81% 79.53%
Return on average
assets 0.35% 0.34% 0.21% 0.31% 0.31%
Return on average
equity 1.67% 1.55% 0.93% 1.42% 1.35%
(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.
For further information contact: Craig Montanaro President &
Chief Operating Officer Kearny Financial Corp. (973) 244-4510
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