Oritani Financial Corp. Announces Quarterly and Annual Results

TOWNSHIP OF WASHINGTON, N.J., Aug. 1 /PRNewswire-FirstCall/ -- OritaniFinancial Corp. (the "Company"), the holding company for Oritani SavingsBank (the "Bank") reported net income of $7.7 million or $0.20 per share,for the three months ended June 30, 2007, as compared to net income of $2.4million for the corresponding 2006 period. The Company also reported netincome 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'sresults of operations for the three- and twelve-month periods ended June30, 2007. The primary item affecting both of these periods pertained to thereversal of a previously established deferred tax asset valuationallowance. As of June 30, 2007, the Company decided to liquidate one of itssubsidiaries. The liquidation of this subsidiary will result in an increasein future New Jersey State taxable income at its Bank subsidiary. TheCompany had previously established a valuation allowance for New Jersey netoperating loss carryforwards incurred at its Bank subsidiary. Due to theexpected utilization of the loss carryforwards in the foreseeable futurethe related valuation allowance of $3.1 million was reversed. The results for the twelve month period ended June 30, 2007 wereimpacted by additional non-recurring items. The first such item was thereinvestment of the proceeds related to the subscription stock offering,including oversubscriptions. Such funds were invested in short terminvestments and the difference between the interest earned and the interestpaid positively impacted earnings. The second item was the recognition of apre-tax gain of $514,000 regarding the previous transfer of the Company'sformer headquarters in Hackensack, NJ. Lastly, earnings were negativelyimpacted due to a $9.1 million pre-tax charitable contribution to theOritaniSavingsBank Charitable Foundation. This contribution occurred inconjunction with the Company's initial public offering and was detailed inthe Company's prospectus. The Company's initial public offering closed on January 23, 2007 andthe newly issued shares of common stock commenced trading on the NasdaqGlobal Market under the symbol "ORIT" on January 24, 2007. Accordingly, theearnings per share calculations are only presented for the three monthperiod ended June 30, 2007. Common stock was sold in the subscriptionoffering at $10.00 per share. The share price closed at $14.29 on June 30,2007 and at $13.25 on July 31, 2007. "While the stock market has been reassessing its valuation of thebanking sector, Oritani has focused on variables we can control. We havecontinued to concentrate on our core competencies, and that is evident inour core results." said Kevin J. Lynch, the Company's Chairman, Presidentand CEO. "Although the competition for loans has been ever-increasing, wewere able to achieve loan portfolio growth of $36.2 million for the quarterand $115.5 million for the year." Mr. Lynch also commented on the qualityof the Company's loan portfolio. "We achieved this growth withoutsacrificing quality. We do not underwrite or hold any sub-prime loans andour delinquencies 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 forthe three months ended June 30, 2006. The largest increase was in intereston mortgage loans. The Company continued its strategic plan of redeployingthe majority of cash flows from investments into mortgage loans. Intereston mortgage loans increased by $2.0 million, or 20.3%, to $11.9 million forthe three months ended June 30, 2007, from $9.9 million for the threemonths ended June 30, 2006. Interest on federal funds sold and short terminvestments increased to $1.6 million for the three months ended June 30,2007, from $10,000 for the three months ended June 30, 2006. The increaseis related to an increase in the average balance of fed funds sold andshort term investments as well as higher returns. The increase in theaverage balance of fed funds sold and short term investments is primarilyattributable to proceeds from the stock offering. The Company hasmaintained relatively high balances in liquid investments as the availablereturns on longer lived assets have, thus far, been deemed insufficient tojustify significant investment. Interest on the investment related captionsof 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 for the three months ended June 30,2007, from $3.3 million for the three months ended June 30, 2006. For the twelve months ended June 30, 2007, total interest incomeincreased by $12.1 million, or 23.5%, to $63.3 million, from $51.3 millionfor the twelve months ended June 30, 2006. The largest increase was ininterest on mortgage loans while interest on most investment relatedcategories decreased. Interest on mortgage loans increased by $8.1 million,or 22.3%, to $44.3 million for the twelve months ended June 30, 2007, from$36.2 million for the twelve months ended June 30, 2006. Interest on thecaptions of securities HTM, securities AFS, MBS HTM and MBS AFS decreasedby $2.8 million, or 18.5%, to $12.2 million for the twelve months endedJune 30, 2007, from $15.0 million for the twelve months ended June 30,2006. Interest on federal funds sold and short term investments increasedto $6.8 million for the twelve months ended June 30, 2007, from $82,000 forthe twelve months ended June 30, 2006. As described above, the averageasset balances in federal funds sold and short term investments were higherdue to stock offering proceeds (including oversubscriptions), and thereturns were positively impacted by higher fed fund rates in the 2007period. 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 endedJune 30, 2006. Interest expense on borrowings was affected by the higherinterest rate environment as well as an increase in the average balance.Interest expense on borrowings increased by $610,000, or 35.9%, to $2.3million for the three months ended June 30, 2007, from $1.7 million for thethree months ended June 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 thetwelve months ended June 30, 2007, from $23.5 million for the twelve monthsended June 30, 2006. Interest expense on deposits and stock subscriptionproceeds increased by $7.2 million, or 43.7%, to $23.7 million for thetwelve months ended June 30, 2007, from $16.5 million for the twelve monthsended June 30, 2006. The 2007 results for this caption include $517,000 ofinterest paid on stock subscription proceeds. Interest expense onborrowings increased by $2.1 million, or 29.9%, to $9.1 million for thetwelve months ended June 30, 2007, from $7.0 million for the twelve monthsended June 30, 2006. Net Interest Income Net interest income was negatively impacted by the current interestrate environment. Typically, the Company's interest income is influenced bylonger term interest rates while the Company's interest expense isinfluenced by shorter term interest rates. The interest rate yield curvehas remained inverted, meaning that short term market interest rates havebeen higher than long term rates. This unusual situation has persisted andnegatively impacted the Company's ability to maximize the spread betweenits interest-earning assets and interest-bearing liabilities, whichultimately impacts profitability. Although the inverted yield curve hasbeen recently somewhat mitigated, short term rates continue to be higherthan long term rates. The Company has offset some of the effect of theinverted yield curve by redeploying the cash flows from its investmentsecurity and MBS portfolios into higher yielding loans. The effect of theinverted yield curve has been further negated due to the Company's abilityto redeploy the funds from the subscription and stock offering into shortterm investments and realize a positive spread as compared to the interestexpense paid on these funds. The proceeds from the stock offering, inparticular, positively impact the Company's net interest income as theseproceeds do not generate a related interest expense. Because of theinverted yield curve, the Company has maintained relatively high balancesin short term liquid assets. The returns on such assets have been onlyslightly less than the available returns on longer term assets, withsignificantly less interest rate risk. Longer term rates have increased atvarious times over the past four months and the Company has used thoseperiods as opportunities to deploy limited funds in longer terminvestments. Net interest income increased by $1.2 million, or 17.2%, to$8.0 million for the three months ended June 30, 2007, from $6.8 millionfor the three months ended June 30, 2006. Net interest income increased by$2.8 million, or 10.0%, to $30.5 million for the twelve months ended June30, 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 thethree months ended June 30, 2007 as compared to $307,000 for the threemonths ended June 30, 2006. There were no recoveries or charge-offs ineither period and delinquencies were minimal. The Company's allowance forloan losses is analyzed quarterly and many factors are considered,including comparison to peer reserve levels. The primary reason for theprovisions was loan growth during the three month periods. Loans, netincreased $36.2 million during the three months ended June 30, 2007 and$20.0 million during the three months ended June 30, 2006. The Companyrecorded provisions for loan losses of $1.2 million for the twelve monthsended June 30, 2007 as compared to $1.5 million for the twelve months endedJune 30, 2006. There were no recoveries or charge-offs in either period anddelinquencies were minimal. The primary reason for the provisions in thetwelve month period was, again, loan growth. Loans, net increased $115.5million during the twelve months ended June 30, 2007 and $149.5 millionduring 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 monthsended June 30, 2006. The primary reason for the decrease was a $799,000gain recognized in the 2006 period on the sale of a former branch buildingin the 2006 period. Income from investments in real estate joint venturesand real estate operations, net increased by $119,000, or 22.1%, to$658,000 for the three months ended June 30, 2007, from $539,000 for thethree months ended June 30, 2006. The income reported in this caption isdependent upon the operations of various properties and is subject tofluctuation. Other income increased by $751,000, or 16.5%, to $5.3 millionfor the twelve months ended June 30, 2007, from $4.6 million for the twelvemonths ended June 30, 2006. The 2006 period includes the $799,000 gaindescribed above and also includes an impairment charge of $355,000recognized on an investment that we considered to be other than temporarilyimpaired. The 2007 period includes a $514,000 gain regarding the transferof the Company's former headquarters in Hackensack, NJ; an increase of$271,000 in income from investments in real estate joint ventures and realestate operations, net; $114,000 increase in income on bank-owned lifeinsurance and a $218,000 increase in the "other" caption within otherincome. The increase in this caption was primarily due to float earnings onthe 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 threemonths ended June 30, 2006. The primary reason for the decrease pertainedto compensation, payroll taxes and fringe benefits. Expenses in thiscategory decreased by $947,000, or 27.1%, to $2.5 million for the threemonths ended June 30, 2007, from $3.5 million for the three months endedJune 30, 2006. The 2006 expenses in this caption were higher due to costsassociated with the Company's retirement plans, particularly the Company'sdefined benefit pension plan. The decreased retirement plan expenses werepartially offset by normal increases in compensation. Operating expensesincreased by $7.7 million, or 44.1%, to $25.2 million for the twelve monthsended June 30, 2007, from $17.5 million for the twelve months ended June30, 2006. The primary reason for the increase was the $9.1 millioncontribution to the OritaniSavingsBank Charitable Foundation. Thiscontribution was executed in conjunction with the stock offering and wasdetailed in the Company's prospectus. Compensation, payroll taxes andfringe benefits decreased by $1.0 million, or 8.3%, to $11.2 million forthe twelve months ended June 30, 2007, from $12.2 million for the twelvemonths ended June 30, 2006. These results were affected by the same factorsdescribed above for the three month period. Office occupancy and equipmentexpense decreased by $445,000, or 22.0%, to $1.6 million for the twelvemonths ended June 30, 2007, from $2.0 million for the twelve months endedJune 30, 2006. This decrease was primarily due to decreased real estate taxexpense, 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 millionfor the three months ended June 30, 2006 (against pre-tax income of $3.8million). The benefit recognized in the 2007 period was due to the reversalof the valuation allowance related to the New Jersey State tax netoperating loss carryforward described previously. For the twelve monthsended June 30, 2007, income tax benefit of $1.7 million was recognizedagainst pre-tax income of $9.4 million. The tax benefit was due to the $3.1million valuation allowance reversal as well as a decreased effective taxrate. The contribution to OritaniSavingsBank Charitable Foundation resultedin a decrease in the effective tax rate for 2007. For the twelve monthsended June 30, 2006, income tax expense of $4.8 million was recordedagainst pre-tax income of $13.3 million. Balance Sheet Summary Total assets increased $163.0 million, or 15.8%, to $1.19 billion atJune 30, 2007, from $1.03 billion at June 30, 2006. The increase isprimarily due to the increase in capital from the stock offering andincreased 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.Loan originations for the twelve months ended June 30, 2007 totaled $214.0million and an additional $7.0 million of loans were purchased. The Companyalso continued the trend of redeploying most cash flows from the securitiesand MBS portfolios into loan originations. There were minimal assetpurchases, and the combined securities and MBS portfolios decreased $19.0million, 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$7.3 million at June 30, 2006. The Company concentrated on loanoriginations. The majority of the remaining available funds of the Companywere invested in fed funds and short term investments. As described under"interest income" and "net interest income," the Company has maintainedhigh balances in this category 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 headquarterswhich 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 $272.6million at June 30, 2007, from $150.1 million at June 30, 2006. The netproceeds from the stock offering, after deductions for the unallocatedstock held by the ESOP, were $112.3 million. The balance of the increase isprimarily due to net income for the period. About the Company Oritani Financial Corp. is the holding company for Oritani SavingsBank, a savings bank offering a full range of retail and commercial loanand deposit products. The Bank currently operates its main office and 18full service branches in the New Jersey Counties of Bergen, Hudson andPassaic. 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 useof forward-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 areasin which 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 ofand costs associated with sources of liquidity. The Company wishes to caution readers not to place undue reliance onany such forward-looking statements, which speak only as of the date made.The Company wishes to advise readers that the factors listed above couldaffect the Company's financial performance and could cause the Company'sactual results for future periods to differ materially from any opinions orstatements expressed with respect to future periods in any currentstatements. The Company does not undertake and specifically declines anyobligation to publicly release the result of any revisions, which may bemade to any forward-looking statements to reflect events or circumstancesafter the date of such statements or to reflect the occurrence ofanticipated or unanticipated 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 8,361 10,171 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 5,050 4,248 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