TOWNSHIP OF WASHINGTON, N.J., April 30, 2007 (PRIME NEWSWIRE) -- Oritani Financial Corp. (Nasdaq:ORIT) (the "Company"), the holding company for Oritani Savings Bank (the "Bank"), reported a net loss of $1.1 million, or $0.09 per share, for the three months ended March 31, 2007, as compared to net income of $2.2 million for the corresponding 2006 period. The Company also reported net income of $3.3 million for the nine months ended March 31, 2007, as compared to net income of $6.1 million for the corresponding 2006 period.
The Company's decreased results of operations for the three- and nine-month periods ended March 31, 2007 are attributable to the $9.1 million pre-tax charitable contribution to the OritaniSavingsBank Charitable Foundation. The results for these periods were also positively affected by two non-recurring items. The first such item was the reinvestment of the proceeds related to the subscription stock offering. Cash orders for stock received in the subscription offering totaled $413.0 million. These funds were received and maintained by the Company beginning with the stock order period through the closing of the stock transaction. This occurred primarily over December, 2006 and January, 2007. The average balance of stock subscriptions over that two-month period was $308.2 million. Such funds were invested in short term investments and the Company was able to realize a return that was slightly higher than the federal funds rate. The Company paid interest on these funds at the Bank's passbook rate of interest, and the difference between the interest earned and the interest paid increased results for the three- and nine-month periods ended March 31, 2007 by $1.1 million and $1.5 million, respectively. The second such item was the recognition of a pre-tax gain of $514,000 regarding the sale of the Company's former headquarters in Hackensack, NJ (see Other Income for additional information regarding this transaction). After adjusting for these items, net income for the three months ended March 31, 2007 was $3.2 million, and net income for the nine months ended March 31, 2007 was $7.2 million.
The Company's initial public offering closed on January 23, 2007 and the newly issued shares of common stock commenced trading on the Nasdaq Global Market under the symbol "ORIT" on January 24, 2007. Accordingly, the earnings per share calculations for the 2007 periods only use the results of operations from January 24, 2007 forward. Common stock was sold in the subscription offering at $10.00 per share. The share price closed at $15.00 on March 31, 2007.
"From the high level of subscription orders in our community offering, to the post IPO performance of our stock, we are very appreciative of the strong support we have received from both our customers and the investment community," said Kevin J. Lynch, the Company's Chairman, President and CEO. "We are doing our best to reward our shareholders' confidence in us. While the current interest rate environment is certainly challenging, we are still accomplishing objectives. In particular, we were able to achieve loan growth of $33.8 million during the quarter." The Company's loan originations totaled $58.2 million and $143.8 million for the three and nine months ended March 31, 2007, respectively. Loans, net grew by $79.3 million over the nine month period ended March 31, 2007. The majority of the loan growth has occurred in the multifamily/commercial real estate loan portfolio. Such loans comprised 66.8% of the loan portfolio at March 31, 2007.
Mr. Lynch also commented on the Company's charitable contribution: "It is gratifying that the Company will be able to support the local neighborhoods through the OritaniSavingsBank Charitable Foundation. Although the contribution had a one time impact on our earnings, the Foundation will now be able to provide positive assistance to the communities where we operate for a substantial period of time."
Comparison of Operating Results
Interest Income
Total interest income increased by $4.6 million, or 35.2%, to $17.8 million for the three months ended March 31, 2007, from $13.1 million for the three months ended March 31, 2006. The largest increase was in interest on fed funds and short term investments. Interest on federal funds sold and short term investments increased to $3.3 million for the three months ended March 31, 2007, from $15,000 for the three months ended March 31, 2006. The increase in interest income is related to an increase in the average balance of fed funds sold and short term investments as a result of the funds received associated with the stock subscriptions and the proceeds from the stock offering. The Company has decided to maintain relatively high balances in fed funds and short term investments as the available returns on longer lived assets have, thus far, been deemed insufficient to justify the interest rate risk inherent in such assets. Interest income on mortgage loans also contributed to the increase in overall interest income. The Company continued its previously described strategic plan of redeploying cash flows from investments into mortgage loans. Interest on mortgage loans increased by $1.8 million, or 18.7%, to $11.4 million for the three months ended March 31, 2007, from $9.6 million for the three months ended March 31, 2006. Interest on the investment related captions of securities held to maturity ("HTM"), securities available for sale ("AFS"), mortgage-backed securities ("MBS") HTM and MBS AFS decreased by $452,000, or 12.9%, to $3.0 million for the three months ended March 31, 2007, from $3.5 million for the three months ended March 31, 2006. The decrease in these investment captions was partially mitigated as purchases totaling $10.0 million were deployed in very short term securities classified as AFS over the quarter ended March 31, 2007.
For the nine months ended March 31, 2007, total interest income increased by $8.8 million, or 23.1%, to $46.9 million, from $38.1 million for the nine months ended March 31, 2006. The largest increase was in interest on mortgage loans while interest on most investment related categories decreased. Interest on mortgage loans increased by $6.1 million, or 23.1%, to $32.4 million for the nine months ended March 31, 2007, from $26.3 million for the nine months ended March 31, 2006. Interest on the captions of securities HTM, securities AFS, MBS HTM and MBS AFS decreased by $2.5 million, or 21.0%, to $9.2 million for the nine months ended March 31, 2007, from $11.7 million for the nine months ended March 31, 2006. Interest on federal funds sold and short term investments increased to $5.2 million for the nine months ended March 31, 2007, from $72,000 for the nine months ended March 31, 2006. As described above, the average asset balances in federal funds sold and short term investments were higher due to funds from stock subscriptions and the stock offering proceeds, and the returns were positively impacted by higher fed fund rates in the 2007 period.
Interest Expense
Total interest expense increased by $2.7 million, or 45.0%, to $8.7 million for the three months ended March 31, 2007, from $6.0 million for the three months ended March 31, 2006. Interest expense continues to be substantially affected by the current interest rate environment. Short term rates have increased over the period, as a result the Bank has increased rates on deposit products in order to minimize outflows and attract new deposit accounts. In addition, the interest paid on the stock subscription proceeds is included within interest on deposits. Interest expense on these proceeds was computed at the Bank's passbook rate and totaled $270,000 during the three months ended March 31, 2007. Interest expense on deposits and stock subscription proceeds increased by $2.0 million, or 48.0%, to $6.3 million for the three months ended March 31, 2007, from $4.2 million for the three months ended March 31, 2006. Interest expense on borrowings was affected by the higher interest rate environment as well as an increase in the average balance. Interest expense on borrowings increased by $658,000, or 37.9%, to $2.4 million for the three months ended March 31, 2007, from $1.7 million for the three months ended March 31, 2006.
The same factors described for the three month period also affected the results for interest expense during the nine month period. Total interest expense increased by $7.2 million, or 41.9%, to $24.3 million for the nine months ended March 31, 2007, from $17.2 million for the nine months ended March 31, 2006. Interest expense on deposits and stock subscription proceeds increased by $5.7 million, or 48.2%, to $17.5 million for the nine months ended March 31, 2007, from $11.8 million for the nine months ended March 31, 2006. The 2007 period includes $517,000 of interest paid on stock subscription proceeds. Interest expense on borrowings increased by $1.5 million, or 28.0%, to $6.8 million for the nine months ended March 31, 2007, from $5.3 million for the nine months ended March 31, 2006.
Net Interest Income
Net interest income was negatively impacted by the current interest rate environment. Typically, the Company's interest income is influenced more by longer term interest rates while the Company's interest expense is influenced more by shorter term interest rates. The interest rate yield curve has remained inverted, meaning that short term market interest rates have been higher than long term rates. This unusual situation has persisted, which negatively impacts the Company's ability to maximize the spread between the interest-earning assets and interest-bearing liabilities, which ultimately impacts profitability. The Company has offset some of the effect of the inverted yield curve by redeploying the cash flows from its investment security and MBS portfolios into higher yielding loans. The effect of the inverted yield curve has been further negated due to the Company's ability to redeploy the funds from the subscription and stock offering into short term investments and realize a positive spread as compared to the interest expense paid on these funds. The proceeds from the stock offering, in particular, positively impact the Company's net interest income as these proceeds do not generate a related interest expense. Because of the inverted yield curve, the Company has maintained comparably high balances in short term assets. The returns on such assets have been comparable to the available returns on longer term assets with less risk. Net interest income increased by $1.9 million, or 26.9%, to $9.1 million for the three months ended March 31, 2007, from $7.2 million for the three months ended March 31, 2006. Net interest income increased by $1.6 million, or 7.6%, to $22.5 million for the nine months ended March 31, 2007, from $20.9 million for the nine months ended March 31, 2006.
Provision for Loan Losses
The Company recorded provisions for loan losses of $350,000 for the three months ended March 31, 2007 as compared to $393,000 for the three months ended March 31, 2006. There were no recoveries or charge-offs in either period and delinquencies were minimal. The Company's allowance for loan losses is analyzed quarterly and many factors are considered. The primary reason for the provisions was loan growth during the three month periods. The Company recorded provisions for loan losses of $775,000 for the nine months ended March 31, 2007 as compared to $1.2 million for the nine months ended March 31, 2006. There were no recoveries or charge-offs in either period and delinquencies were minimal. The primary reason for the provisions in the nine month periods was, again, loan growth during the period. The main factor for the decreased provision for loan losses in the 2007 period was a decrease in the rate of loan growth. Loans, net increased $79.3 million during the nine months ended March 31, 2007 and $129.5 million during the nine months ended March 31, 2006.
Other Income
Other income increased by $767,000, or 81.2%, to $1.7 million for the three months ended March 31, 2007, from $945,000 for the three months ended March 31, 2006. The primary reason for the increase was a $514,000 gain recognized on the previous sale of the Company's former headquarters in Hackensack, NJ. The asset was sold in December, 2005 and the Company initially accounted for the transaction as a finance obligation due to the Company's continuing involvement with the sold property. The Company leased back a portion of the premises and provided the buyer with non recourse financing. During the March 31, 2007 quarter, the non recourse note was sold to another financial institution which permitted the Company to utilize sale/leaseback accounting in accordance with FASB statement No. 98. In accordance with this guidance, $514,000 of the gain on the sale was recognized in the current quarter and the remaining deferred gain of $519,000 will be recognized ratably over the remaining term of the lease. Income from investments in real estate joint ventures increased by $138,000, or 73.0%, to $327,000 for the three months ended March 31, 2007, from $189,000 for the three months ended March 31, 2006. The income reported in this caption is dependent upon the operations of various properties and is subject to fluctuation. The "other" caption within other income also contributed to the increase. This caption increased by $143,000, to $194,000 for the three months ended March 31, 2007, from $51,000 for the three months ended March 31, 2006. This increase is primarily due to float earnings on the oversubscription funds returned to subscribers. Other income increased by $1.3 million, or 46.6%, to $4.0 million for the nine months ended March 31, 2007, from $2.7 million for the nine months ended March 31, 2006. The primary items affecting the three month comparison also affected the nine month comparison. For the comparable nine month periods, gain on sale of assets increased $514,000; income from investments in real estate joint ventures increased by $165,000 and other income increased by $157,000. In addition, the results for the 2006 period were impacted by a $321,000 loss recognized on the sale of a security.
Operating Expenses
Operating expenses increased by $8.8 million to $13.1 million for the three months ended March 31, 2007, from $4.4 million for the three months ended March 31, 2006. The primary reason for the increase was the $9.1 million contribution to the OritaniSavingsBank Charitable Foundation. This contribution was executed in conjunction with the stock offering and was detailed in the Company's prospectus. Excluding the effects of this contribution, operating expenses decreased by $341,000, or 7.8%, to $4.0 million for the three months ended March 31, 2007, from $4.4 million for the three months ended March 31, 2006. Office occupancy and equipment expense decreased by $199,000, or 35.6%, to $360,000 for the three months ended March 31, 2007, from $559,000 for the three months ended March 31, 2006. This decrease was primarily due to decreased real estate tax expense, as well as smaller decreases in depreciation and maintenance expenses, and snow removal expenses. The decreased real estate tax expense was primarily due to successful appeals of assessed values. Compensation, payroll taxes and fringe benefits decreased by $121,000, or 4.0%, to $2.9 million for the three months ended March 31, 2007, from $3.0 million for the three months ended March 31, 2006. The changes in this caption primarily pertained to changes in costs associated with the Company's benefit plans. For the quarter ended March 31, 2006, expenses associated with the Company's defined benefit pension plan ("the DB Plan') totaled $750,000, while no expense was necessary in the comparable 2007 period. Conversely, expenses associated with the Company's ESOP totaled $306,000 for the three months ended March 31, 2007, while no expenses were recorded in the comparable 2006 period. The ESOP was formed in conjunction with the stock offering and was not in existence in 2006. Compensation and health insurance costs also increased slightly in the 2007 period. For the nine month period, operating expenses increased by $8.4 million to $21.4 million for the nine months ended March 31, 2007, from $13.0 million for the nine months ended March 31, 2006. The primary reason for the increase was, again, the $9.1 million contribution to the OritaniSavingsBank Charitable Foundation. Excluding the effects of this contribution, total operating expenses decreased by $688,000, or 5.3%, to $12.3 million for the nine months ended March 31, 2007, from $13.0 million for the nine months ended March 31, 2006. Office occupancy and equipment expense decreased by $461,000, or 28.9%, to $1.1 million for the nine months ended March 31, 2007, from $1.6 million for the nine months ended March 31, 2006. This decrease was primarily due to the reasons described above for this caption. Compensation, payroll taxes and fringe benefits was stable over the period, decreasing by $74,000, with changes within the components contained in this caption. Within this caption (for the comparable nine month periods), expenses associated with the DB Plan decreased $1.5 million, expenses associated with the ESOP increased $306,000 and expenses associated with the other retirement plans increased $537,000. The net decrease in this caption was also partially offset by increases in compensation, health insurance expense and directors' fees. Other expenses decreased by $128,000, or 21.7%, to $462,000 for the nine months ended March 31, 2007, from $590,000 for the nine months ended March 31, 2006. The decrease was primarily due to decreases in correspondent bank service charges and loan related expenses.
Income Taxes
Income tax benefit of $1.5 million was recognized for the three months ended March 31, 2007. This compares to income tax expense of $1.2 million for the three months ended March 31, 2006. The benefit recognized in the 2007 period was due to the pre-tax loss of $2.7 million for the quarter, while the expense recognized in the 2006 period was due to the pre-tax income of $3.4 million for the quarter. For the nine months ended March 31, 2007, income tax expense was $1.0 million, due to pre-tax income of $4.3 million, resulting in an effective tax rate of 23.1%. For the nine months ended March 31, 2006, income tax expense was $3.4 million, due to pre-tax income of $9.5 million, resulting in an effective tax rate of 36.0%. Various factors contribute to differences between pre-tax book income and taxable income. The contribution to OritaniSavingsBank Charitable Foundation created a substantial difference between pre-tax book income and taxable income. The tax deduction generated by this contribution was much larger than the associated book expense, and caused the decreased effective rate in the 2007 periods.
Balance Sheet Summary
Total assets increased $185.6 million, or 18.0%, to $1.22 billion at March 31, 2007, from $1.03 billion at June 30, 2006. The increase is primarily due to the increase in capital from the stock offering and increased borrowings.
The largest asset increase occurred in cash and cash equivalents (which includes fed funds and short term investments). This category increased $152.7 million to $160.0 million at March 31, 2007, from $7.3 million at June 30, 2006. The majority of the net proceeds associated with the stock offering along with the other liquidity of the Company were invested in fed funds and short term investments. As described under "interest income" and "net interest income," the Company has maintained high balances in this category primarily due to the inverted yield curve.
The Company also experienced substantial growth in loans, net. Loans, net increased $79.3 million, or 12.3%, to $722.4 million at March 31, 2007, from $643.1 million at June 30, 2006. The Company continued its emphasis on loan originations, particularly multifamily and commercial real estate loans. Loan originations for the nine months ended March 31, 2007 totaled $58.2 million and an additional $7.0 million of loans were purchased. The Company also continued their trend of redeploying most cash flows from the securities and MBS portfolios into loan originations. There were minimal asset purchases, and the combined securities and MBS portfolios decreased $49.0 million, or 15.5%, over the nine month period.
Federal Home Loan Bank of New York ("FHLB-NY") stock increased $2.4 million, or 25.5%, to $11.8 million at March 31, 2007, from $9.4 million at June 30, 2006. Additional purchases of this stock were required due to additional advances obtained from FHLB-NY.
Office properties and equipment, net decreased $1.7 million, or 16.4%, to $8.5 million at March 31, 2007, from $10.2 million at June 30, 2006. As described in "other income," the Company had previously sold its former headquarters and the accounting for the sale changed over the March 31, 2007 quarter due to a subsequent transaction. Due to this change, the headquarters were removed from the books of the Company and office properties and equipment, net decreased by $1.5 million.
Deposits increased $15.9 million, or 2.3%, to $704.5 million at March 31, 2007, from $688.6 million at June 30, 2006. The Company's deposit balances fluctuated over the nine month period. Deposits had increased to $721.3 million at December 31, 2006. However, the Company believed that a portion of that increase pertained to the stock offering subscriptions, which is the primary reason for the decrease from the December 31, 2006 balance. Deposit growth has been difficult, but results for the current fiscal year appear to be reversing a recent trend of deposit erosion.
Borrowings increased $52.6 million, or 31.0%, to $222.4 million at March 31, 2007, from $169.8 million at June 30, 2006. The Company committed to various advances from the FHLB-NY over the period with terms considered to be favorable.
Stockholders' equity increased $115.4 million, or 76.9%, to $265.6 million at March 31, 2007, from $150.1 million at June 30, 2006. The net proceeds from the stock offering, after deductions for the unallocated stock held by the ESOP, were $112.0 million. The balance of the increase is due to net income for the period slightly augmented by an increase in the value of securities classified as available for sale.
About the Company
Oritani Financial Corp. is the holding company for Oritani Savings Bank, a savings bank offering a full range of retail and commercial loan and deposit products. The Bank currently operates its main office and 18 full service branches in the New Jersey Counties of Bergen, Hudson and Passaic.
Forward-Looking Statements
Certain statements contained herein are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements may be identified by reference to a future period or periods, or by the use of forward-looking terminology, such as "may," "will," "believe," "expect," "estimate," "anticipate," "continue," or similar terms or variations on those terms, or the negative of those terms. Forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, those related to the economic environment, particularly in the market areas in which the Company operates, competitive products and pricing, fiscal and monetary policies of the U.S. Government, changes in government regulations affecting financial institutions, including regulatory fees and capital requirements, changes in prevailing interest rates, acquisitions and the integration of acquired businesses, credit risk management, asset-liability management, the financial and securities markets and the availability of and costs associated with sources of liquidity.
The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The Company wishes to advise readers that the factors listed above could affect the Company's financial performance and could cause the Company's actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements. The Company does not undertake and specifically declines any obligation to publicly release the result of any revisions, which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.
Oritani Financial Corp. and Subsidiaries
Township of Washington, New Jersey
Consolidated Balance Sheets
March 31, 2007 (unaudited) and June 30, 2006
March 31, June 30,
2007 2006
---------- ----------
Assets (in thousands)
Cash on hand and in banks $ 8,337 $ 7,274
Federal funds sold and short term investments 151,649 --
---------- ----------
Cash and cash equivalents 159,986 7,274
Loans, net 722,360 643,064
Securities held to maturity, estimated market
value of $5,340 and $13,186 at March 31, 2007
and June 30, 2006, respectively 5,415 13,415
Securities available for sale, at market value 15,453 10,499
Mortgage-backed securities held to maturity,
estimated market value of $226,751 and
$262,323 at March 31,2007 and June 30, 2006,
respectively 232,920 274,695
Mortgage-backed securities available for sale,
at market value 13,296 17,426
Bank Owned Life Insurance (at cash
surrender value) 25,109 24,381
Federal Home Loan Bank of New York stock,
at cost 11,754 9,367
Accrued interest receivable 4,485 3,910
Investments in real estate joint ventures, net 6,360 6,233
Real estate held for investment 2,326 2,223
Office properties and equipment, net 8,498 10,171
Other assets 9,081 8,763
---------- ----------
$1,217,043 $1,031,421
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Liabilities
Deposits $ 704,535 $ 688,646
Borrowings 222,360 169,780
Advance payments by borrowers for taxes
and insurance 5,326 5,107
Accrued taxes payable -- 439
Official checks outstanding 3,889 4,248
Other liabilities 15,370 13,065
---------- ----------
Total liabilities 951,480 881,285
---------- ----------
Stockholders' Equity
Preferred stock, $0.01 par value;
10,000,000 shares authorized-none issued
or outstanding -- --
Common stock, $0.01 par value; 80,000,000 shares
authorized; 40,552,162 issued and outstanding
at March 31, 2007, and 1,000 issued and
outstanding at June 30, 2006 130 --
Additional paid-in capital 127,607 --
Unallocated common stock held by the
employee stock ownership plan (15,698) --
Retained income 153,584 150,266
Accumulated other comprehensive loss,
net of tax (60) (130)
---------- ----------
Total stockholders' equity 265,563 150,136
---------- ----------
$1,217,043 $1,031,421
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Oritani Financial Corp. and Subsidiaries
Township of Washington, New Jersey
Consolidated Statements of Operations
Three and Nine Months Ended March 31, 2007 and 2006 (unaudited)
Three months ended Nine months ended
March 31, March 31,
----------------- -----------------
2007 2006 2007 2006
------- ------- ------- -------
(in thousands, except per share data)
Interest income:
Interest on mortgage loans $11,439 $ 9,635 $32,397 $26,322
Interest on securities held
to maturity 281 250 801 800
Interest on securities available
for sale 260 129 553 951
Interest on mortgage-backed
securities held to maturity 2,322 2,882 7,294 9,187
Interest on mortgage-backed
securities available for sale 178 232 573 741
Interest on federal funds sold
and short term investments 3,285 15 5,233 72
------- ------- ------- -------
Total interest income 17,765 13,143 46,851 38,073
------- ------- ------- -------
Interest expense:
Deposits and stock subscription
proceeds 6,276 4,241 17,504 11,814
Borrowings 2,395 1,737 6,837 5,341
------- ------- ------- -------
Total interest expense 8,671 5,978 24,341 17,155
------- ------- ------- -------
Net interest income before
provision for loan losses 9,094 7,165 22,510 20,918
Provision for loan losses 350 393 775 1,193
------- ------- ------- -------
Net interest income 8,744 6,772 21,735 19,725
------- ------- ------- -------
Other income:
Service charges 261 252 794 770
Real estate operations, net 170 224 703 716
Income from investments in real
estate joint ventures 327 189 928 763
Bank-owned life insurance 246 229 729 636
Net gain on sale of assets 514 -- 514 --
Net loss on the sale of
securities -- -- -- (321)
Other income 194 51 298 141
------- ------- ------- -------
Total other income 1,712 945 3,966 2,705
------- ------- ------- -------
Operating expenses:
Compensation, payroll taxes and
fringe benefits 2,875 2,996 8,667 8,741
Advertising 125 125 375 422
Office occupancy and equipment
expense 360 559 1,134 1,595
Data processing service fees 263 273 774 823
Federal insurance premiums 23 23 68 71
Telephone, Stationary, Postage
and Supplies 104 100 289 304
Insurance, Legal, Audit
and Accounting 141 116 505 416
Contribution to charitable
foundation 9,110 -- 9,110 --
Other expenses 133 173 462 590
------- ------- ------- -------
Total operating expenses 13,134 4,365 21,384 12,962
------- ------- ------- -------
(Loss) income before income
tax (benefit) expense (2,678) 3,352 4,317 9,468
Income tax (benefit) expense (1,548) 1,188 999 3,410
------- ------- ------- -------
Net (loss) income $(1,130) $ 2,164 $ 3,318 $ 6,058
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