Kearny Financial Corp. Reports Third Quarter 2012 Operating Results
(firmenpresse) - FAIRFIELD, NJ -- (Marketwire) -- 05/03/12 -- 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 March 31, 2012 of $1,392,000 or $0.02 per diluted share.
The results represent an increase of $922,000 compared to net income of $470,000, or $0.01 per diluted share, for the quarter ended December 31, 2011. The increase in net income between linked quarters reflected increases in net interest income and non-interest income coupled with declines in noninterest expense and the provision for loan losses. 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 41 retail branch offices located in Bergen, Essex, Hudson, Middlesex, Monmouth, Morris, Ocean, Passaic and Union Counties, New Jersey, including 14 branches operated under the Central Jersey Bank, a division of Kearny Federal Savings Bank brand. At March 31, 2012, Kearny Financial Corp. had total assets of $2.91 billion which included net loans receivable of $1.25 billion and total investment securities, including mortgage-backed and non-mortgage-backed securities, of $1.34 billion. As of that same date, deposits and borrowings totaled $2.15 billion and $247.6 million, respectively, while stockholders' equity totaled $486.2 million or 16.7% of total assets.
The following is a discussion and tabular presentation of the Company's financial results for the quarter ended March 31, 2012 in comparison to those for the prior linked quarter ended December 31, 2011. Comparative statement of condition information for June 30, 2011 and statement of operations information for the three and nine months ended March 31, 2011 are also presented in tabular form in the Financial Highlights section at the end of this discussion.
Net interest income during the quarter ended March 31, 2012 was $17.7 million, an increase of $252,000 compared to net interest income of $17.4 million during the quarter ended December 31, 2011. For those same comparative periods, the Company's net interest margin increased by four basis points to 2.69% from 2.65%.
The increase in net interest income between linked quarters resulted from a decrease in interest expense that was partially offset by a smaller decline in interest income. The decrease in interest income between linked periods was primarily attributable to a two basis point decline in the average yield on interest-earning assets to 3.73% for the quarter ended March 31, 2012 from 3.75% for the quarter ended December 31, 2011. The net decline in average yield reflected decreases in the average yield on loans and mortgage-backed securities that were partially offset by increases in the average yield on non-mortgage-backed securities and other interest-earning assets. The decline in average yield on loans and mortgage-backed securities between linked periods primarily resulted from the reinvestment of cash and cash equivalents and principal amortization, maturities and prepayments from higher yielding earning assets into comparatively lower yielding loans and securities. The increase in the yield on non-mortgage-backed securities generally reflected the repayment of comparatively lower yielding municipal securities and agency debentures that matured during the quarter. Finally, the increase in the average yield on other interest earning assets generally reflected proportionally greater average balances during the current quarter allocated to the higher yielding assets within that category.
The impact on interest income from the net decline in the average yield on interest-earning assets was exacerbated by an overall net decrease of $5.1 million in their average balance. However, the net decrease reflected declines in the average balances of comparatively lower yielding non-mortgage-backed securities and other interest-earning assets that were partially offset by increases in the average balances of comparatively higher yielding mortgage-backed securities and loans.
As noted, the decrease in net interest income attributable to the decline in interest income between linked quarters was more than offset by a decrease in interest expense between the same comparative periods. The decrease in interest expense between linked quarters was attributable, in part, to a seven basis point decline in the average cost of interest-bearing liabilities which decreased to 1.23% for the quarter ended March 31, 2012 from 1.30% for the quarter ended December 31, 2011. The reduction in average cost reflected a decline in the average cost of interest-bearing deposits that was reflected across all categories including interest-bearing checking accounts, savings accounts and certificates of deposit. For those same comparative periods, the cost of Federal Home Loan Bank ("FHLB") borrowings as well as other borrowings, comprised primarily of depositor sweep accounts, also declined.
The impact on interest expense from the decline in the average cost of interest-bearing liabilities was augmented by a decrease of $6.8 million in their average balance between linked quarters. The net decrease in average balance was primarily attributable to declines in the average balances of certificates of deposit and depositor sweep accounts that were partially offset by increases in the average balances of savings accounts, interest-bearing checking accounts and FHLB borrowings.
The provision for loan losses totaled $1,257,000 for the quarter ended March 31, 2012 compared to a provision of $1,323,000 during the quarter ended December 31, 2011. The provision in the current period reflected additions to valuation allowances attributable to impairment losses identified on specific impaired loans as well as the effect of the overall increase in the balance of the non-impaired portion of the loan portfolio.
Non-interest income, excluding losses attributable to real estate owned ("REO") operations and sales, increased by $341,000 to $1,560,000 for the quarter ended March 31, 2012 from $1,219,000 for the quarter ended December 31, 2011. The noted increase in non-interest income was partly attributable to the recognition of a $245,000 payment received by the Bank from a tenant in return for the discharge of their future obligations under the terms of a commercial lease agreement where the Bank served as lessor. The increase in non-interest income also reflected an increase in the gain on sale of loans to $217,000 from $123,000 between comparative periods. The increase in loan sale gains was primarily attributable to an increase in the volume of Small Business Administration ("SBA") loan originations sold during the current quarter.
Losses attributable to REO operations and sales decreased by $692,000 to $1,357,000 for the quarter ended March 31, 2012 from $2,049,000 for the quarter ended December 31, 2011. REO-related losses for the current period included approximately $1,215,000 attributable to writing down the carrying value of various REO properties to reflect reductions in expected sales prices below the fair values at which the properties were previously being carried. The remaining $142,000 of REO-related operating losses reflected the ongoing net carrying costs of foreclosed properties recognized by the Bank during the quarter.
At March 31, 2012, the Bank held a total of ten REO properties with an aggregate carrying value of $5,160,000. Five properties with carrying values totaling $3,636,000 are under contract for sale at March 31, 2012 with such values reflecting the net sale proceeds that the Bank expects to receive based upon the terms of those contracts.
Non-interest expense decreased by $41,000 to $14.6 million for the quarter ended March 31, 2012. The decrease in non-interest expense primarily reflected declines in equipment and systems expense, advertising and marketing expense and miscellaneous expense that were partially offset by increases in salaries and employee benefit expenses, premises occupancy expenses and deposit insurance expense.
The decline in equipment and systems expenses primarily reflected final adjustments to certain estimated expenses relating to the conversion and integration of systems and data acquired from Central Jersey Bancorp, Inc. ("Central Jersey"). The decline in advertising and marketing expense reflected reduced print and electronic media expenditures while the decline in miscellaneous expenses primarily reflected a reduction in legal expense resulting primarily from the recovery of collection and foreclosure costs recognized during prior periods relating to certain nonperforming loans.
The increase in salaries and employee benefits primarily reflected annual wage and salary increases to staff and non-senior officers of the Bank as well as the resulting increase in payroll tax expense. The increase in premises occupancy expense reflected comparatively higher facility-related repairs and maintenance costs relating to a number of Bank's retail branches as well as its corporate headquarters. Finally, the increase in deposit insurance expense reflected the combined effects of changes in the Bank's assessment basis and assessment rate as calculated and charged by the FDIC.
The provision for income taxes increased by $470,000 to $642,000 for the quarter ended March 31, 2012 from $172,000 for the quarter ended December 31, 2011. The variance in income taxes between comparative quarters was largely attributable to the underlying differences in the taxable portion of pre-tax income between comparative periods.
Cash and cash equivalents, which consist primarily of interest-earning and non-interest-earning deposits in other banks, decreased by $34.5 million to $112.1 million at March 31, 2012 from $146.6 million at December 31, 2011.
Management had previously determined that the opportunity cost to earnings of maintaining a growing level of short-term liquid assets to fund its growing loan origination pipeline outweighed the related benefits. Consequently, a significant portion of the Company's excess liquidity that had accumulated earlier in the fiscal year continued to be deployed into comparatively higher yielding mortgage-backed securities during the quarter ending March 31, 2012. The Company expects to continue to maintain the average balance of interest-earning cash and equivalents at comparatively lower levels than had been previously reported during recent preceding quarters. Management will continue to monitor the level of short term, liquid assets in relation to the expected need for such liquidity to fund the Company's strategic initiatives. The Company may alter its liquidity reinvestment strategies based upon the timing and relative success of those initiatives.
The outstanding balance of loans receivable at March 31, 2012, excluding deferred fees and costs and the allowance for loan losses, increased by $32.4 million to $1.26 billion at March 31, 2012 from $1.23 billion at December 31, 2011. The overall increase in the loan portfolio during the current quarter reflected an aggregate increase in commercial loans, including non-residential mortgages, multi-family mortgages and commercial business loans, and land loans, of $41.7 million that was partially offset by a net decline in the balance of one-to-four family mortgage loans, comprising residential first mortgages, home equity loans and home equity lines of credit, of $13.6 million. For those same comparative periods, the outstanding balance of construction and consumer loans increased $3.7 million and $591,000, respectively.
The Company's growing strategic focus in commercial lending -- through which it has increased its commercial loan origination and support staff and expanded relationships with loan participants and other external loan origination resources -- resulted in the reported growth in the commercial loan portfolio. The Company expects to continue expanding its commercial loan origination and acquisition resources in the coming quarters as part of the Bank's ongoing evolution from a traditional thrift institution into a full service community bank.
By contrast, the aggregate decline in the residential mortgage loan portfolio for the quarter ended March 31, 2012 generally reflects the continuing diminished level of loan demand resulting from a weak economy and declining real estate values exacerbated by aggressive pricing for certain loan products that are available in the marketplace to a reduced number of qualified borrowers.
For the quarter ended March 31, 2012, the balance of the Company's non-performing assets decreased to a total of $43.5 million or 1.49% of total assets and comprised non-performing loans totaling $38.3 million, or 3.04% of total loans, plus ten REO properties totaling $5.2 million. By comparison, at December 31, 2011, non-performing assets totaled $45.5 million or 1.59% of total assets and comprised non-performing loans totaling $39.1 million, or 3.18% of total loans, plus ten REO properties totaling $6.4 million.
The category of non-performing loans generally includes loans reported as "accruing loans over 90 days past due" as well as loans reported as "nonaccrual." At March 31, 2012, the balance of non-performing loans included approximately $3.1 million of accruing loans over 90 days past due which included one commercial loan totaling $2.2 million that paid off in full in April 2012. Nonperforming loans at March 31, 2012 also included $35.2 million of nonaccrual loans. By comparison, at December 31, 2011, the balance of non-performing loans included approximately $1.1 million of accruing loans over 90 days past due and $38.0 million of nonaccrual loans.
The aggregate balance of mortgage-backed securities, which are predominantly government agency pass-through certificates and collateralized mortgage obligations, increased by $63.6 million to $1.29 billion at March 31, 2012 from $1.23 billion at December 31, 2011. The net increase reflected, in part, security purchases totaling $143.6 million. This increase was partially offset by principal repayments and sales, net of premium and discount amortization and accretion, totaling approximately $76.9 million and a decrease in the unrealized gain within the available for sale portion of the portfolio of approximately $461,000 to $34.8 million at March 31, 2012 from $35.2 million at December 31, 2011. The overall increase in the balance of mortgage-backed securities resulted from the deployment of a portion of the Bank's excess liquidity as discussed earlier. Securities purchased were predominantly fixed rate, agency pass-through securities with 15-year original terms to maturity. The Bank also purchased a small quantity of 30-year, fixed rate agency pass-through securities that were acquired based upon their Community Reinvestment Act eligibility.
The aggregate balance of non-mortgage backed securities decreased by $10.9 million to $47.6 million at March 31, 2012 from $58.5 million at December 31, 2011. The net decrease primarily reflected principal repayments and maturities for the quarter ended March 31, 2012 that were partially offset by a net decrease of $495,000 in the unrealized loss on available for sale non-mortgage-backed securities to $1.9 million at March 31, 2012 from $2.4 million at December 31, 2011.
The aggregate balance of other assets, including premises and equipment, Federal Home Loan Bank stock, interest receivable, goodwill, bank owned life insurance, deferred income taxes and other miscellaneous assets, decreased by $2.7 million to $208.8 million at March 31, 2012 from $211.4 million at December 31, 2011. The net change in other assets primarily reflected decreases in income taxes receivable and real estate owned in conjunction with normal fluctuations in the balances of other assets.
The balance of total deposits increased by $37.2 million to $2.15 billion at March 31, 2012 from $2.12 billion at December 31, 2011. The net increase in deposit balances reflected an increase in the balance of non-interest bearing deposits of $13.9 million. Of this increase, approximately $4.7 million was attributable to an increase in internal "on us" account balances resulting from a change in the Bank's official check rendering and accounting process that went into effect during the quarter ended March 31, 2012. The remaining $9.2 million of growth in non-interest bearing deposits was attributable to an increase in the aggregate balance of customer accounts.
The reported growth in total deposits for the quarter ended March 31, 2012 also included net growth in interest-bearing deposits of $23.3 million. The increase in interest-bearing deposit accounts reflected growth in interest-bearing checking accounts and savings accounts totaling $9.1 million and $17.9 million, respectively, which was partially offset by a decline in the balance of certificates of deposit of $3.7 million. The decline in balance of certificates of deposit was largely attributable to the Company's active management of deposit pricing during the quarter ended March 31, 2012 to support net interest spread and margin which allowed for some degree of controlled outflow of non-core deposits.
The Company reported a net increase in borrowings of $9.6 million to $247.6 million at March 31, 2012 from $238.0 million at December 31, 2011. The reported increase primarily reflected a $9.7 million increase in the balance of outstanding overnight "sweep account" balances linked to customer demand deposits that was partially offset by the scheduled principal repayment of an amortizing advance from the FHLB.
During the quarter ended March 31, 2012, stockholders' equity decreased $373,000 to $486.2 million from $486.6 million at December 31, 2011. The net decrease was attributable, in part, to a $1.0 million increase in Treasury stock reflecting the Company's repurchase of 108,531 shares of its common stock during the period at an average price of $9.54 per share coupled with dividends paid of approximately $1.2 million for the quarter ended March 31, 2012. These reductions in equity were partially offset by net income of $1.4 million for the quarter ended March 31, 2012 coupled with a reduction of unearned ESOP shares for plan shares earned during the period.
At March 31, 2012, the Company's total equity to asset ratio was 16.71% while the equity to assets ratio of the Bank was 16.12%. As of that same date, the Bank's Tier 1 leverage ratio was 12.29% while its Tier 1 risk-based capital ratio and Total risk-based capital ratio were 25.45% and 26.13%, respectively, far in excess of the levels required by federal banking regulators 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.
For further information contact:
Eric B. Heyer
Senior Vice President and Chief Financial Officer
Kearny Financial Corp.
(973) 244-4024
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Datum: 03.05.2012 - 19:00 Uhr
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News-ID 142602
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