TOWNSHIP OF WASHINGTON, N.J., Aug. 1 /PRNewswire-FirstCall/ -- OritaniFinancial Corp. (Nasdaq: ORIT) (the "Company"), the holding company forOritani Savings Bank (the "Bank") reported net income of $7.7 million or $0.20per share, for the three months ended June 30, 2007, as compared to net incomeof $2.4 million for the corresponding 2006 period. The Company also reportednet income of $11.0 million for the twelve months ended June 30, 2007, ascompared to net income of $8.5 million for the corresponding 2006 period. There were several non-recurring items that affected the Company's resultsof operations for the three- and twelve-month periods ended June 30, 2007.The primary item affecting both of these periods pertained to the reversal ofa previously established deferred tax asset valuation allowance. As of June30, 2007, the Company decided to liquidate one of its subsidiaries. Theliquidation of this subsidiary will result in an increase in future New JerseyState taxable income at its Bank subsidiary. The Company had previouslyestablished a valuation allowance for New Jersey net operating losscarryforwards incurred at its Bank subsidiary. Due to the expectedutilization of the loss carryforwards in the foreseeable future the relatedvaluation allowance of $3.1 million was reversed. The results for the twelve month period ended June 30, 2007 were impactedby additional non-recurring items. The first such item was the reinvestmentof the proceeds related to the subscription stock offering, includingoversubscriptions. Such funds were invested in short term investments and thedifference between the interest earned and the interest paid positivelyimpacted earnings. The second item was the recognition of a pre-tax gain of$514,000 regarding the previous transfer of the Company's former headquartersin Hackensack, NJ. Lastly, earnings were negatively impacted due to a $9.1million pre-tax charitable contribution to the OritaniSavingsBank CharitableFoundation. This contribution occurred in conjunction with the Company'sinitial public offering and was detailed in the Company's prospectus. The Company's initial public offering closed on January 23, 2007 and thenewly issued shares of common stock commenced trading on the Nasdaq GlobalMarket under the symbol "ORIT" on January 24, 2007. Accordingly, the earningsper share calculations are only presented for the three month period endedJune 30, 2007. Common stock was sold in the subscription offering at $10.00per share. The share price closed at $14.29 on June 30, 2007 and at $13.25 onJuly 31, 2007. "While the stock market has been reassessing its valuation of the bankingsector, Oritani has focused on variables we can control. We have continued toconcentrate on our core competencies, and that is evident in our coreresults." said Kevin J. Lynch, the Company's Chairman, President and CEO."Although the competition for loans has been ever-increasing, we were able toachieve loan portfolio growth of $36.2 million for the quarter and $115.5million for the year." Mr. Lynch also commented on the quality of theCompany's loan portfolio. "We achieved this growth without sacrificingquality. We do not underwrite or hold any sub-prime loans and ourdelinquencies remain well below peer levels." Comparison of Operating Results Interest Income Total interest income increased by $3.3 million, or 24.9%, to $16.5million for the three months ended June 30, 2007, from $13.2 million for thethree months ended June 30, 2006. The largest increase was in interest onmortgage loans. The Company continued its strategic plan of redeploying themajority of cash flows from investments into mortgage loans. Interest onmortgage loans increased by $2.0 million, or 20.3%, to $11.9 million for thethree months ended June 30, 2007, from $9.9 million for the three months endedJune 30, 2006. Interest on federal funds sold and short-term investmentsincreased to $1.6 million for the three months ended June 30, 2007, from$10,000 for the three months ended June 30, 2006. The increase is related toan increase in the average balance of fed funds sold and short terminvestments as well as higher returns. The increase in the average balance offed funds sold and short term investments is primarily attributable toproceeds from the stock offering. The Company has maintained relatively highbalances in liquid investments as the available returns on longer lived assetshave, thus far, been deemed insufficient to justify significant investment.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 $313,000, or 9.4%, to $3.0 million forthe three months ended June 30, 2007, from $3.3 million for the three monthsended June 30, 2006. For the twelve months ended June 30, 2007, total interest income increasedby $12.1 million, or 23.5%, to $63.3 million, from $51.3 million for thetwelve months ended June 30, 2006. The largest increase was in interest onmortgage loans while interest on most investment related categories decreased.Interest on mortgage loans increased by $8.1 million, or 22.3%, to $44.3million for the twelve months ended June 30, 2007, from $36.2 million for thetwelve months ended June 30, 2006. Interest on the captions of securitiesHTM, securities AFS, MBS HTM and MBS AFS decreased by $2.8 million, or 18.5%,to $12.2 million for the twelve months ended June 30, 2007, from $15.0 millionfor the twelve months ended June 30, 2006. Interest on federal funds sold andshort-term investments increased to $6.8 million for the twelve months endedJune 30, 2007, from $82,000 for the twelve months ended June 30, 2006. Asdescribed above, the average asset balances in federal funds sold and short-term investments were higher due to stock offering proceeds (includingoversubscriptions), and the returns were positively impacted by higher fedfund rates in the 2007 period. Interest Expense Interest expense continues to be affected by the current interest rateenvironment. Short-term rates have increased, and the Bank has increasedrates on deposit products in order to minimize outflows and attract newdeposit accounts. Borrowings have increased in order to offset the decreasein deposit growth. Total interest expense increased by $2.1 million, or33.3%, to $8.5 million for the three months ended June 30, 2007, from $6.4million for the three months ended June 30, 2006. Interest expense ondeposits increased by $1.5 million, or 32.3%, to $6.2 million for the threemonths ended June 30, 2007, from $4.7 million for the three months ended June30, 2006. Interest expense on borrowings was affected by the higher interestrate environment as well as an increase in the average balance. Interestexpense on borrowings increased by $610,000, or 35.9%, to $2.3 million for thethree months ended June 30, 2007, from $1.7 million for the three months endedJune 30, 2006. The same factors described for the three-month period also affected theresults for interest expense during the twelve month period. Total interestexpense increased by $9.3 million, or 39.6%, to $32.8 million for the twelvemonths ended June 30, 2007, from $23.5 million for the twelve months endedJune 30, 2006. Interest expense on deposits and stock subscription proceedsincreased by $7.2 million, or 43.7%, to $23.7 million for the twelve monthsended June 30, 2007, from $16.5 million for the twelve months ended June 30,2006. The 2007 results for this caption include $517,000 of interest paid onstock subscription proceeds. Interest expense on borrowings increased by $2.1million, or 29.9%, to $9.1 million for the twelve months ended June 30, 2007,from $7.0 million for the twelve months ended June 30, 2006. Net Interest Income Net interest income was negatively impacted by the current interest rateenvironment. Typically, the Company's interest income is influenced by longerterm interest rates while the Company's interest expense is influenced byshorter term interest rates. The interest rate yield curve has remainedinverted, meaning that short-term market interest rates have been higher thanlong term rates. This unusual situation has persisted and negatively impactedthe Company's ability to maximize the spread between its interest-earningassets and interest-bearing liabilities, which ultimately impactsprofitability. Although the inverted yield curve has been recently somewhatmitigated, short-term rates continue to be higher than long term rates. TheCompany has offset some of the effect of the inverted yield curve byredeploying the cash flows from its investment security and MBS portfoliosinto higher yielding loans. The effect of the inverted yield curve has beenfurther negated due to the Company's ability to redeploy the funds from thesubscription and stock offering into short-term investments and realize apositive spread as compared to the interest expense paid on these funds. Theproceeds from the stock offering, in particular, positively impact theCompany's net interest income as these proceeds do not generate a relatedinterest expense. Because of the inverted yield curve, the Company hasmaintained relatively high balances in short term liquid assets. The returnson such assets have been only slightly less than the available returns onlonger term assets, with significantly less interest rate risk. Longer termrates have increased at various times over the past four months and theCompany has used those periods as opportunities to deploy limited funds inlonger term investments. Net interest income increased by $1.2 million, or17.2%, to $8.0 million for the three months ended June 30, 2007, from $6.8million for the three months ended June 30, 2006. Net interest incomeincreased by $2.8 million, or 10.0%, to $30.5 million for the twelve monthsended June 30, 2007, from $27.8 million for the twelve months ended June 30,2006. Provision for Loan Losses The Company recorded provisions for loan losses of $435,000 for the threemonths ended June 30, 2007 as compared to $307,000 for the three months endedJune 30, 2006. There were no recoveries or charge-offs in either period anddelinquencies were minimal. The Company's allowance for loan losses isanalyzed quarterly and many factors are considered, including comparison topeer reserve levels. The primary reason for the provisions was loan growthduring the three month periods. Loans, net increased $36.2 million during thethree months ended June 30, 2007 and $20.0 million during the three monthsended June 30, 2006. The Company recorded provisions for loan losses of $1.2million for the twelve months ended June 30, 2007 as compared to $1.5 millionfor the twelve months ended June 30, 2006. There were no recoveries orcharge-offs in either period and delinquencies were minimal. The primaryreason for the provisions in the twelve month period was, again, loan growth.Loans, net increased $115.5 million during the twelve months ended June 30,2007 and $149.5 million during the twelve months ended June 30, 2006. Other Income Other income decreased by $510,000, or 27.5%, to $1.3 million for thethree months ended June 30, 2007, from $1.9 million for the three months endedJune 30, 2006. The primary reason for the decrease was a $799,000 gainrecognized in the 2006 period on the sale of a former branch building in the2006 period. Income from investments in real estate joint ventures and realestate operations, net increased by $119,000, or 22.1%, to $658,000 for thethree months ended June 30, 2007, from $539,000 for the three months endedJune 30, 2006. The income reported in this caption is dependent upon theoperations of various properties and is subject to fluctuation. Other incomeincreased by $751,000, or 16.5%, to $5.3 million for the twelve months endedJune 30, 2007, from $4.6 million for the twelve months ended June 30, 2006.The 2006 period includes the $799,000 gain described above and also includesan impairment charge of $355,000 recognized on an investment that weconsidered to be other than temporarily impaired. The 2007 period includes a$514,000 gain regarding the transfer of the Company's former headquarters inHackensack, NJ; an increase of $271,000 in income from investments in realestate joint ventures and real estate operations, net; $114,000 increase inincome on bank-owned life insurance and a $218,000 increase in the "other"caption within other income. The increase in this caption was primarily dueto float earnings on the oversubscription funds returned to subscribers. Operating Expenses Operating expenses decreased by $697,000, or 15.3%, to $3.9 million forthe three months ended June 30, 2007, from $4.6 million for the three monthsended June 30, 2006. The primary reason for the decrease pertained tocompensation, payroll taxes and fringe benefits. Expenses in this categorydecreased by $947,000, or 27.1%, to $2.5 million for the three months endedJune 30, 2007, from $3.5 million for the three months ended June 30, 2006.The 2006 expenses in this caption were higher due to costs associated with theCompany's retirement plans, particularly the Company's defined benefit pensionplan. The decreased retirement plan expenses were partially offset by normalincreases in compensation. Operating expenses increased by $7.7 million, or44.1%, to $25.2 million for the twelve months ended June 30, 2007, from $17.5million for the twelve months ended June 30, 2006. The primary reason for theincrease was the $9.1 million contribution to the OritaniSavingsBankCharitable Foundation. This contribution was executed in conjunction with thestock offering and was detailed in the Company's prospectus. Compensation,payroll taxes and fringe benefits decreased by $1.0 million, or 8.3%, to $11.2million for the twelve months ended June 30, 2007, from $12.2 million for thetwelve months ended June 30, 2006. These results were affected by the samefactors described above for the three month period. Office occupancy andequipment expense decreased by $445,000, or 22.0%, to $1.6 million for thetwelve months ended June 30, 2007, from $2.0 million for the twelve monthsended June 30, 2006. This decrease was primarily due to decreased real estatetax expense, as well as smaller decreases in depreciation and maintenanceexpenses, and snow removal expenses. The decreased real estate tax expensewas primarily due to successful appeals of assessed values. Income Taxes Income tax benefit of $2.7 million was recognized for the three monthsended June 30, 2007. This compares to income tax expense of $1.4 million forthe three months ended June 30, 2006 (against pre-tax income of $3.8 million).The benefit recognized in the 2007 period was due to the reversal of thevaluation allowance related to the New Jersey State tax net operating losscarryforward described previously. For the twelve months ended June 30,2007, income tax benefit of $1.7 million was recognized against pre-tax incomeof $9.4 million. The tax benefit was due to the $3.1 million valuationallowance reversal as well as a decreased effective tax rate. Thecontribution to OritaniSavingsBank Charitable Foundation resulted in adecrease in the effective tax rate for 2007. For the twelve months ended June30, 2006, income tax expense of $4.8 million was recorded against pre-taxincome of $13.3 million. Balance Sheet Summary Total assets increased $163.0 million, or 15.8%, to $1.19 billion at June30, 2007, from $1.03 billion at June 30, 2006. The increase is primarily dueto the increase in capital from the stock offering and increased borrowings. The largest asset increase occurred in loans, net. Loans, net increased$115.5 million, or 18.0%, to $758.5 million at June 30, 2007, from $643.1million at June 30, 2006. The Company continued its emphasis on loanoriginations, particularly multifamily and commercial real estate loans. Loanoriginations for the twelve months ended June 30, 2007 totaled $214.0 millionand an additional $7.0 million of loans were purchased. The Company alsocontinued the trend of redeploying most cash flows from the securities and MBSportfolios into loan originations. There were minimal asset purchases, andthe combined securities and MBS portfolios decreased $19.0 million, or 6.0%,over the year. The Company also experienced substantial growth in cash and cashequivalents (which includes fed funds and short term investments). Thiscategory increased $56.3 million to $63.5 million at June 30, 2007, from $7.3million at June 30, 2006. The Company concentrated on loan originations. Themajority of the remaining available funds of the Company were invested in fedfunds and short-term investments. As described under "interest income" and"net interest income," the Company has maintained high balances in thiscategory primarily due to the inverted yield curve. The Company's other assets increased substantially, to $17.3 million atJune 30, 2007 from $8.8 million at June 30, 2006. The majority of thisincrease is due to the aforementioned reversal of a deferred tax asset taxvaluation allowance. Federal Home Loan Bank of New York ("FHLB-NY") stock increased $1.3million, or 13.4%, to $10.6 million at June 30, 2007, from $9.4 million atJune 30, 2006. Additional purchases of this stock were required due toadditional advances obtained from FHLB-NY. Office properties and equipment, net decreased $1.8 million, or 17.8%,to $8.4 million at June 30, 2007, from $10.2 million at June 30, 2006. Thisdecrease is primarily due to the sale of the Company's former headquarters,which decreased office properties and equipment, net by $1.5 million. Deposits increased $7.1 million, or 1.0%, to $695.8 million at June 30,2007, from $688.6 million at June 30, 2006. Deposit growth has beendifficult, but results for the current fiscal year have reversed a recenttrend of deposit erosion. Borrowings increased $26.9 million, or 15.8%, to $196.7 million at June30, 2007, from $169.8 million at June 30, 2006. The Company committed tovarious advances from the FHLB-NY over the period with terms considered tobe favorable. Stockholders' equity increased $122.4 million, or 81.5%, to $272.6 millionat June 30, 2007, from $150.1 million at June 30, 2006. The net proceeds fromthe stock offering, after deductions for the unallocated stock held by theESOP, were $112.3 million. The balance of the increase is primarily due tonet income for the period. About the Company Oritani Financial Corp. is the holding company for Oritani Savings Bank, asavings bank offering a full range of retail and commercial loan and depositproducts. The Bank currently operates its main office and 18 full servicebranches 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 Section21E of the Securities Exchange Act of 1934. Such forward-looking statementsmay be identified by reference to a future period or periods, or by the use offorward-looking terminology, such as "may," "will," "believe," "expect,""estimate," "anticipate," "continue," or similar terms or variations onthose terms, or the negative of those terms. Forward-looking statements aresubject to numerous risks and uncertainties, including, but not limited to,those related to the economic environment, particularly in the market areas inwhich the Company operates, competitive products and pricing, fiscal andmonetary policies of the U.S. Government, changes in government regulationsaffecting financial institutions, including regulatory fees and capitalrequirements, changes in prevailing interest rates, acquisitions and theintegration of acquired businesses, credit risk management, asset-liabilitymanagement, the financial and securities markets and the availability of andcosts associated with sources of liquidity. The Company wishes to caution readers not to place undue reliance on anysuch forward-looking statements, which speak only as of the date made. TheCompany wishes to advise readers that the factors listed above could affectthe Company's financial performance and could cause the Company's actualresults for future periods to differ materially from any opinions orstatements expressed with respect to future periods in any current statements.The Company does not undertake and specifically declines any obligation topublicly release the result of any revisions, which may be made to anyforward-looking statements to reflect events or circumstances after the dateof such statements or to reflect the occurrence of anticipated orunanticipated events. Oritani Financial Corp. and Subsidiaries Township of Washington, New Jersey Consolidated Balance Sheets June 30, 2007 and June 30, 2006 June 30, June 30, Assets 2007 2006 (in thousands) Cash on hand and in banks $7,823 $7,274 Federal funds sold and short term investments 55,703 -- - - Cash and cash equivalents 63,526 7,274 Loans, net 758,542 643,064 Securities held to maturity, estimated market value of $5,347 and $13,186 at June 30, 2007 and 2006, respectively 5,415 13,415 Securities available for sale, at market value 35,443 10,499 Mortgage-backed securities held to maturity, estimated market value of $210,505 and $262,323 at June 30, 2007 and 2006, respectively 217,406 274,695 Mortgage-backed securities available for sale, at market value 38,793 17,426 Bank Owned Life Insurance (at cash surrender value) 25,364 24,381 Federal Home Loan Bank of New York stock, at cost 10,619 9,367 Accrued interest receivable 4,973 3,910 Investments in real estate joint ventures, net 6,200 6,233 Real estate held for investment 2,492 2,223 Office properties and equipment, net 8,36110,171 Other assets 17,309 8,763 $1,194,443 $1,031,421 Liabilities Deposits $695,757 $688,646 Borrowings 196,661 169,780 Advance payments by borrowers for taxes and insurance 5,684 5,107 Accrued taxes payable 1,464 439 Official checks outstanding 5,0504,248 Other liabilities 17,257 13,065 Total liabilities 921,873 881,285 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 June 30, 2007, and 1,000 issued and outstanding at June 30, 2006 130 - Additional paid-in capital 127,710 - Unallocated common stock held by the employee stock ownership plan (15,499) - Retained income 161,300 150,266 Accumulated other comprehensive loss, net of tax (1,071) (130) Total stockholders' equity 272,570 150,136 $1,194,443 $1,031,421 Oritani Financial Corp. and Subsidiaries Township of Washington, New Jersey Consolidated Statements of Operations Three and Twelve Months Ended June 30, 2007 and 2006 Three months Twelve months ended ended June 30, June 30, 2007 2006 2007 2006 (in thousands, except per share data) Interest income: Interest on mortgage loans $11,881 $9,874 $44,278 $36,196 Interest on securities held to maturity 275 227 1,073 1,026 Interest on securities available for sale 312 136 868 1,087 Interest on mortgage-backed securities held to maturity 2,181 2,740 9,475 11,926 Interest on mortgage-backed securities available for sale 240 218 813 959 Interest on federal funds sold and short term investments 1,609 10 6,842 82 Total interest income 16,498 13,205 63,349 51,276 Interest expense: Deposits and stock subscription proceeds 6,178 4,668 23,682 16,482 Borrowings 2,310 1,700 9,147 7,040 Total interest expense 8,488 6,368 32,829 23,522 Net interest income before provision for loan losses 8,010 6,837 30,520 27,754 Provision for loan losses 435 307 1,210 1,500 Net interest income 7,575 6,530 29,310 26,254 Other income: Service charges 325 272 1,119 1,043 Real estate operations, net 501 294 1,204 1,011 Income from investments in real estate joint ventures 157 245 1,085 1,007 Bank-owned life insurance 255 233 983 870 Net gain on sale of assets - 799 514 799 Net loss on the sale and write down of securities - - (35) (355) Other income 105 45 404 185 Total other income 1,343 1,853 5,309 4,560 Operating expenses: Compensation, payroll taxes and fringe benefits 2,546 3,493 11,213 12,233 Advertising 136 (28) 511 394 Office occupancy and equipment expense 441 425 1,575 2,020 Data processing service fees 256 262 1,030 1,085 Federal insurance premiums 25 22 93 93 Telephone, Stationary, Postage and Supplies 109 87 398 391 Insurance, Legal, Audit and Accounting 274 135 779 550 Contribution to charitable foundation - - 9,110 - Other expenses 78 166 540 759 Total operating expenses 3,865 4,562 25,249 17,525 Income before income tax (benefit) expense 5,053 3,821 9,370 13,289 Income tax (benefit) expense (2,663) 1,417 (1,664) 4,827 Net income $7,716 $2,404 $11,034 $8,462 Basic income per common share $0.20 n/a n/a n/a
