ORIT » Topics » Comparison of Operating Results for the Quarters Ended September 30, 2007 and 2006.

This excerpt taken from the ORIT 10-Q filed Feb 8, 2008.

Comparison of Operating Results for the Six Months Ended December 31, 2007 and 2006.

Net Income. Net income increased $720,000 or 16.2%, to $5.2 million for the six months ended December 31, 2007, from net income of $4.4 million for the corresponding 2006 period. This increase was primarily due to increased net interest income partially offset by increased operating expenses and provision for loan losses, as well as an increased effective tax rate. Over the period, our annualized return on average assets increased to 0.83% for the 2007 period compared to 0.80% for the 2006 period.

The net interest income in the 2007 period was positively impacted by the deployment of the funds raised by the Company’s initial public offering, which closed on January 23, 2007. Results for the 2006 periods were enhanced through the reinvestment of the proceeds received from the subscription stock offering.

Total Interest Income. Total interest income increased by $5.7 million, or 19.5%, to $34.8 million for the six months ended December 31, 2007, from $29.1 million for the six months ended December 31, 2006. The largest increase occurred in interest on loans, which increased $5.3 million or 25.2%, to $26.2 million for the six months ended December 31, 2007, from $21.0 million for the six months ended

 

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December 31, 2006. Over that same period, the average balance of loans increased $136.5 million and the yield on the portfolio increased 24 basis points. Interest on securities available for sale increased by $752,000, to $1.0 million for the six months ended December 31, 2007, from $293,000 for the six months ended December 31, 2006. The average balance increased $28.6 million and the yield decreased 20 basis points over the period. Interest on mortgage-backed securities held to maturity decreased by $993,000, to $4.0 million for the six months ended December 31, 2007, from $5.0 million for the six months ended December 31, 2006. The average balance decreased $52.2 million and the yield increased 1 basis point over the period. The average balance decrease was due to paydowns in the portfolio as no new investment purchases of this type were made. Interest on MBS AFS increased by $1.5 million to $1.9 million for the six months ended December 31, 2007, from $395,000 for the six months ended December 31, 2006. The average balance of MBS AFS increased $52.7 million and the yield on the portfolio increased 50 basis points over that same period. Interest on federal funds sold and short term investments decreased by $898,000 for the six months ended December 31, 2007, to $1.1 million from $1.9 million for the six months ended December 31, 2006. The average balance of this portfolio decreased $31.9 million and the yield decreased 18 basis points over the period.

Total Interest Expense. Total interest expense increased by $2.4 million, or 15.4%, to $18.1 million for the six months ended December 31, 2007, from $15.7 million for the six months ended December 31, 2006. The factors described above for the three month period also affected the six month period. Interest expense on deposits increased by $1.3 million, or 11.5%, to $12.5 million for the six months ended December 31, 2007, from $11.2 million for the six months ended December 31, 2006. The average balance of interest bearing deposits decreased $38.6 million and the average cost of these funds increased 54 basis points over this period. Interest expense on borrowings increased by $1.1 million, or 25.2%, to $5.6 million for the six months ended December 31, 2007, from $4.4 million for the six months ended December 31, 2006. The average balance of borrowings increased $45.9 million and the cost increased 10 basis points over this period.

Net Interest Income Before Provision for Loan Losses. Net interest income increased by $3.3 million, or 24.3%, to $16.7 million for the six months ended December 31, 2007, from $13.4 million for the six months ended December 31, 2006. The Company’s net interest rate spread decreased to 2.07% for the six months ended December 31, 2007, from 2.21% for the six months ended December 31, 2006. The Company’s net interest margin increased to 2.84% for the six months ended December 31, 2007, from 2.57% for the six months ended December 31, 2006. The increased margin is directly attributable to the deployment of the net proceeds raised in the initial public offering.

Provision for Loan Losses. The Company recorded provisions for loan losses of $1.3 million for the six months ended December 31, 2007 as compared to $425,000 for the six months ended December 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 factor contributing to the increase in the provision for loan losses between 2007 and 2006 was an increase in loan growth over the periods, particularly in the multifamily, commercial real estate and construction loan portfolios. Loans, net increased $107.3 million during the six months ended December 31, 2007 and $45.5 million during the six months ended December 31, 2006.

Other Income. Other income increased by $249,000, or 11.0%, to $2.5 million for the six months ended December 31, 2007, from $2.3 million for the six months ended December 31, 2006. The primary change was again in the real estate investment captions of net real estate operations and income from investments in real estate joint ventures, which increased by $228,000, or 20.1%, to $1.4 million for the six months ended December 31, 2007, from $1.1 million for the six months ended December 31, 2006.

 

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Other Expenses. Operating expenses increased by $891,000 or 10.8% to $9.1 million for the six months ended December 31, 2007, from $8.2 million for the six months ended December 31, 2006. The increase was again primarily due to compensation, payroll taxes and fringe benefits which increased $793,000, or 13.7%, over the periods. This increase was primarily comprised of a $517,000 increase in compensation, $695,000 in costs associated with the ESOP and a $60,000 increase in payroll taxes partially reduced by a decrease in costs for the defined benefit plan of $498,000.

Income Tax Expense. Income tax expense increased $1.0 million, or 40.4%, to $3.6 million for the six months ended December 31, 2007 versus $2.5 million for the six months ended December 31, 2006. The primary reason for the increase in income tax expense was an increase in income before income tax expense. For the reasons described above, income before income tax expense increased $1.7 million, or 25.0%, to $8.7 million for the six months ended December 31, 2007 versus $7.0 million for the six months ended December 31, 2006. The Company’s effective tax rates for the six months ended December 31, 2007 and 2006 were 40.9% and 36.4%, respectively. The Company’s effective tax rate increased in 2007 due to changes in New Jersey tax law.

This excerpt taken from the ORIT 10-Q filed Nov 13, 2007.

Comparison of Operating Results for the Quarters Ended September 30, 2007 and 2006.

Net Income. Net income increased $981,000 or 49.2%, to $3.0 million for the quarter ended September 30, 2007, from net income of $2.0 million for the corresponding 2006 quarter. This increase was primarily due to increased net interest income partially offset by increased income taxes. Over the period, our annualized return on average assets increased to 0.98% for the 2007 quarter compared to 0.76% for the 2006 quarter and the annualized return on average equity was 4.35% for the 2007 quarter compared to 5.29% for the 2006 quarter. These ratios were impacted by the funds raised from the initial public offering in January, 2007.

Total Interest Income. Total interest income increased by $3.4 million, or 25.1%, to $17.0 million for the three months ended September 30, 2007, from $13.6 million for the three months ended September 30, 2006. The largest increase occurred in interest on loans, which increased $2.5 million or 24.9%, to $12.8 million for the three months ended September 30, 2007, from $10.2 million for the three months ended September 30, 2006. Over that same period, the average balance of loans increased $123.5 million and the yield on the portfolio increased 32 basis points. 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 increased by $314,000, or 10.0%, to $3.5 million for the three months ended September 30, 2007, from $3.1 million for the three months ended September 30, 2006. The combined average balances of these portfolios decreased $3.4 million over the period while the combined average yield increased 15 basis points. The decrease in the average balance of these investment captions was partially mitigated by purchases totaling $48.6 million during the quarter ended September 30, 2007. Interest on federal funds sold and short term investments increased to $820,000 for the three months ended September 30, 2007, from $266,000 for the three months ended September 30, 2006. The increase in interest income was due to a $41.0 million increase in the average balance of fed funds sold and short term investments and a 4 basis point increase in yield.

Total Interest Expense. Total interest expense increased by $1.5 million, or 21.2%, to $8.8 million for the three months ended September 30, 2007, from $7.2 million for the three months ended September 30, 2006. Interest expense continues to be substantially affected by the current interest rate environment. Market rates for consumer deposits have remained high, and the Bank has increased rates on deposit products in order to minimize outflows and attract new deposit accounts. Interest expense on deposits increased by $1.1 million, or 20.5%, to $6.3 million for the three months ended September 30, 2007, from $5.2 million for the three months ended September 30, 2006. The average balance of deposits increased $8.0 million and the average cost of these funds increased 58 basis points over these periods. 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 $459,000, or 22.9%, to $2.5 million for the three months ended September 30, 2007, from $2.0 million for the three months ended September 30, 2006. The average balance of borrowings increased $35.5 million and the cost increased 14 basis points for the three months ended September 30, 2007, versus the corresponding 2006 period.

Net Interest Income Before Provision for Loan Losses. As discussed in prior public releases, the Company’s net interest income continues to be negatively impacted by margin compression due to the recent interest rate environment. 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. Longer term interest rates are typically higher than shorter term rates, and this spread contributes to the Company’s profitability. During 2005, the spread between long term rates and short term rates began to compress significantly. During 2006, these rates were flat to inverted (meaning that short term interest rates were higher than long term rates). Also during 2006, the fed funds rate became higher than both

 

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short and long term treasury rates. That development was particularly damaging to the Company’s net interest spread as the fed funds rate is widely referenced by consumers for their rate expectations on bank deposit products. In 2007, treasury rates have remained relatively flat and the fed funds rate has exceeded all short term and most long term treasury rates, negatively impacting the Company’s ability to maximize the spread between interest-earning assets and interest-bearing liabilities. The Company has offset some of the effect of the interest rate environment by redeploying much of the cash flows from its investment security and MBS portfolios into higher yielding loans. The Company’s net interest income and margin was further aided through the use of the funds from the stock offering. The stock offering proceeds are equity of the Company and do not generate a related interest expense. Because of the interest rate environment, the Company has maintained comparably high balances in short-term, liquid assets. The returns on such assets had been comparable to the available returns on longer term assets, with less risk. The fed funds rate was decreased to 4.75% on September 18, 2007, decreasing the return on short-term, liquid assets. Since the decrease in this rate was anticipated, some funds were deployed over the quarter out of short-term, liquid investments and, primarily, into short term mortgage backed securities.

Net interest income increased by $1.9 million, or 29.5%, to $8.3 million for the three months ended September 30, 2007, from $6.4 million for the three months ended September 30, 2006. The Company’s net interest rate spread decreased to 2.11% for the three months ended September 30, 2007, from 2.21% for the three months ended September 30, 2006. The Company’s net interest margin increased to 2.89% for the three months ended September 30, 2007, from 2.59% for the three months ended September 30, 2006. On a linked quarter comparison, the Company’s net interest rate spread increased 4 basis points to 2.11% from 2.07% for the three months ended June 30, 2007 and the Company’s net interest margin increased 8 basis points to 2.89% from 2.81% for the three months ended June 30, 2007. The quarterly increases in spread and margin were primarily due to increased prepayment penalties received during the three months ended September 30, 2007.

Provision for Loan Losses. The Company recorded provisions for loan losses of $350,000 for the three months ended September 30, 2007 as compared to $150,000 for the three months ended September 30, 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. Loans, net grew by $32.6 million during the three months ended September 30, 2007 and by $23.9 million over the comparable 2006 period.

Other Income. Other income increased by $148,000, or 12.5%, to $1.3 million for the three months ended September 30, 2007, from $1.2 million for the three months ended September 30, 2006. Income on the real estate investment captions of net real estate operations and income from investments in real estate joint ventures increased by $142,000, or 22.4%, to $776,000 for the three months ended September 30, 2007, from $634,000 for the three months ended September 30, 2006. The income reported in these captions is dependent upon the operations of various properties and is subject to fluctuation.

Other Expenses. Operating expenses decreased by $36,000 or 0.8% to $4.2 million for the three months ended September 30, 2007, from $4.3 million for the three months ended September 30, 2006. Compensation, payroll taxes and fringe benefits decreased $19,000 over the periods. For the three months ended September 30, 2006 there was a $500,000 expense associated with the Company’s defined benefit pension plan. There was no such expense in the comparable 2007 period. This decrease, along with decreased cost on other retirement plans, was partially offset by $286,000 of expense associated with our employee stock ownership plan and a $198,000 increase in compensation expense. Other expenses decreased $25,000 primarily due to decreased donations during the 2007 quarter. Various other expenses in this category decreased slightly but these decreases were offset by increased expenses associated with being a public company.

 

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Income Tax Expense. Income tax expense for the three months ended September 30, 2007, was $2.1 million, due to pre-tax income of $5.0 million, resulting in an effective tax rate of 41.1%. For the three months ended September 30, 2006, income tax expense was $1.2 million, due to pre-tax income of $3.2 million, resulting in an effective tax rate of 37.3%. The Company’s effective tax rate increased due to changes in New Jersey tax law.

This excerpt taken from the ORIT 10-K filed Sep 28, 2007.

Comparison of Operating Results for the Years Ended June 30, 2007 and June 30, 2006

Net Income. Net income increased $2.6 million, or 30.4%, to $11.0 million for the twelve months ended June 30, 2007, versus $8.5 million for the corresponding 2006 period. There were several non-recurring items that affected the Company’s results of operations in 2007. Earnings were negatively impacted due to a $9.1 million pre-tax charitable contribution to the OritaniSavingsBank Charitable Foundation. This contribution occurred in conjunction with the Company’s initial public offering. Earnings were positively impacted by three other non-recurring items:

1) The reversal of a previously established deferred tax asset valuation allowance. During the quarter ended June 30, 2007, the Company decided to liquidate one of its subsidiaries. The liquidation of this subsidiary will result in an increase in future New Jersey State taxable income at its Bank subsidiary. The Company had previously established a valuation allowance for New Jersey net operating loss carryforwards incurred at its Bank subsidiary. Due to the expected utilization of the loss carryforwards in the foreseeable future the related valuation allowance of $3.2 million was reversed.

2) The reinvestment of the proceeds related to the subscription stock offering, including oversubscriptions. Such funds were invested in short term investments and the difference between the interest earned and the interest paid positively impacted earnings.

3) The recognition of a pre-tax gain of $514,000 regarding the previous transfer of the Company’s former headquarters in Hackensack, NJ. This transaction is discussed further in “Other Income.”

Total interest income. For the twelve months ended June 30, 2007, total interest income increased by $12.1 million, or 23.5%, to $63.3 million, from $51.3 million for the twelve months ended June 30, 2006. The largest increase was in interest on mortgage loans while interest on most investment related categories 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. The average balance of the loan portfolio increased $70.8 million and the yield on the portfolio increased 57 basis points. The market rate for new originations allowed the Company to increase the overall yield on the portfolio. Interest on the captions of securities HTM, 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 million for the twelve months ended June 30, 2006. The decrease was due to a decrease in the combined average balance of $80.7 million partially offset by an increase in yield. Interest on federal funds sold and short term investments increased to $6.8 million for the twelve months ended June 30, 2007, from $82,000 for the twelve months ended June 30, 2006. The increase is related to a $125.3 million increase in the average balance and an increase in yield of 102 basis points. The increase in the average balance of fed funds sold and short term investments is primarily attributable to proceeds from the stock offering. The Company has maintained relatively high balances in liquid investments as the available returns on longer lived assets have, thus far, been deemed insufficient to justify significant investment.

Interest Expense. Total interest expense increased by $9.3 million, or 39.6%, to $32.8 million for the twelve months ended June 30, 2007, from $23.5 million for the corresponding 2006 period. Interest expense on deposits and stock subscription proceeds increased by $7.2 million, or 43.7%, to $23.7 million for the twelve months ended June 30, 2007, from $16.5 million for the corresponding 2006 period. The 2007 results for this caption include $517,000 of interest paid on stock subscription proceeds. The average balance of deposits increased $49.0 million and the cost increased 81 basis points. The vast majority of the increase in the average balance of deposits was due to stock subscription proceeds, which had an average balance of $48.4 million for the year. Interest expense on borrowings increased by $2.1 million, 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. The average balance of borrowings increased $35.2 million and the cost increased 33 basis points. Interest expense continues to be affected by the current interest rate environment. Short term rates have increased, and the Bank has increased rates on deposit products in order to minimize outflows and attract new deposit accounts. Borrowings have increased in order to fund asset growth.

Net interest income. Net interest income increased by $2.8 million, or 10.0%, to $30.5 million for the twelve months ended June 30, 2007, from $27.8 million for the twelve months ended June 30, 2006. Net interest income

 

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was negatively impacted by the current interest rate environment. Typically, the Company’s interest income is influenced by longer term interest rates while the Company’s interest expense is influenced by shorter term interest rates. The interest rate yield curve remained inverted for the majority of the fiscal year, meaning that short term market interest rates were higher than long term rates. This unusual situation has persisted and negatively impacted the Company’s ability to maximize the spread between its interest-earning assets and interest-bearing liabilities, which ultimately impacts profitability. Although the inverted yield curve has been recently somewhat mitigated, overnight rates continue to be higher than long term rates. 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 capital raised from the stock offering also positively impacted the Company’s net interest margin as these funds do not generate a related interest expense. Because of the inverted yield curve, the Company has maintained relatively high balances in short term liquid assets. The returns on such assets have been only slightly less than the available returns on longer term assets, with significantly less interest rate risk. Longer term rates have increased at various times over the past four months and the Company has used those periods as opportunities to deploy limited funds in longer term investments.

Provision for Loan Losses. The Company recorded provisions for loan losses of $1.2 million for the twelve months ended June 30, 2007 as compared to $1.5 million for the twelve months ended June 30, 2006. There were no recoveries or charge-offs in either period and delinquencies were minimal. The primary reason for the decrease in the provision for the year ending June 30, 2007, as compared to the prior year, was a decrease in the amount of 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 increased by $749,000, or 16.4%, to $5.3 million for the twelve months ended June 30, 2007, from $4.6 million for the twelve months ended June 30, 2006. The 2006 period includes a $799,000 gain on the sale of a former branch building and also includes an impairment charge of $355,000 recognized on an investment that we considered to be other than temporarily impaired. The 2007 period includes a $514,000 gain regarding the transfer of the Company’s former headquarters in Hackensack, NJ. Although this asset was sold in December, 2005 the Company could not account for the transaction as a sale due to the Company’s continuing involvement with the sold property in the form of a non-recourse note. The subsequent sale of the non-recourse note during the March 31, 2007 quarter permitted the Company to utilize sale/leaseback accounting in accordance with FASB Statement No. 98, causing a portion of the gain to be recognized. The transaction was previously accounted for as a finance obligation. Income from investments in real estate joint ventures and real estate operations, net increased $271,000 for the twelve months ended June 30, 2007 versus the corresponding 2006 period. The income reported in this caption is dependent upon the operations of various properties and is subject to fluctuation. The 2007 period also included a $113,000 increase in income on bank-owned life insurance and a $219,000 increase in the “other” caption within other income. The increase in this caption was primarily due to float earnings on the oversubscription funds returned to subscribers.

Operating Expenses. Operating expenses increased by $7.7 million, or 44.1%, to $25.2 million for the twelve months ended June 30, 2007, from $17.5 million for the twelve months ended June 30, 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. Compensation, payroll taxes and fringe benefits decreased by $1.0 million, or 8.3%, to $11.2 million for the twelve months ended June 30, 2007, from $12.2 million for the twelve months ended June 30, 2006. The 2006 expenses in this caption were higher due to costs associated with the Company’s retirement plans, particularly the Company’s defined benefit pension plan. The decreased retirement plan expenses were partially offset by normal increases in compensation. Office occupancy and equipment expense decreased by $445,000, or 22.0%, to $1.6 million for the twelve months ended June 30, 2007, from $2.0 million for the twelve months ended June 30, 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.

Income Taxes. For the twelve months ended June 30, 2007, income tax benefit of $1.7 million was recognized against pre-tax income of $9.4 million. The tax benefit was due to the $3.2 million valuation allowance reversal discussed under “Net Income,” as well as a decreased effective tax rate. The contribution to OritaniSavingsBank

 

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Charitable Foundation resulted in a decrease in the effective tax rate for 2007. For the twelve months ended June 30, 2006, income tax expense of $4.8 million was recorded against pre-tax income of $13.3 million.

This excerpt taken from the ORIT 10-Q filed May 14, 2007.

Comparison of Operating Results for the Nine months Ended March 31, 2007 and 2006.

Net Income. Net income decreased $2.7 million, to $3.3 million for the nine month period ended March 31, 2007, from $6.1 million for the corresponding 2006 period. The three non recurring events described above in the quarterly comparison also affected results for the nine month period. The financial statement impact is the same for the contribution to the OritaniSavingsBank Charitable Foundation (pre-tax charge of $9.1 million) and the disposition of the Company’s former headquarters in Hackensack, NJ (pre-tax gain of $514,000). The increase to pre-tax income for the reinvestment of the proceeds related to the subscription stock offering was $2.4 million for the nine month period. Our annualized return on average assets was 0.38% for the nine months ended March 31, 2007, compared to 0.77% for the nine months ended March 31, 2006. Our annualized return on average equity was 2.46% for the nine months ended March 31, 2007, compared to 5.61% for the nine months ended March 31, 2006.

Total Interest Income. 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. Over that same period, the average balance of loans increased $111.4 million and the yield on the portfolio increased 18 basis points. 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. Over that same period, the combined average balance of these portfolios decreased $113.5 million. 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 Company’s decision to maintain higher balances in these assets due to the interest rate environment. The interest income on these investments was positively impacted by higher fed fund rates in the 2007 period.

Total Interest Expense The factors described above for the three month period comparison 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, including stock subscriptions, increased by $5.7 million, or 48.2%, to $17.5 million for the nine months ended March 31, 2007, from

 

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$11.8 million for the nine months ended March 31, 2006. The 2007 period includes $517,000 of interest paid on stock subscriptions. The average balance of deposits, including stock subscriptions, increased $64.3 million and the cost increased 81 basis points for the nine months ended March 31, 2007, versus the corresponding 2006 period. 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. The average balance of borrowings increased $32.0 million and the cost increased 34 basis points for the nine months ended March 31, 2007, versus the corresponding 2006 period.

Net Interest Income Before Provision for Loan Losses. As described in the three month comparison, the current interest rate environment has negatively impacted net interest income and affected the Company’s decisions regarding the deployment of funds into longer-lived assets. 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. The Company’s net interest rate spread decreased to 2.28% for the nine months ended March 31, 2007, from 2.53% for the nine months ended March 31, 2006. The Company’s net interest margin decreased to 2.70% for the nine months ended March 31, 2007, from 2.83% for the nine months ended March 31, 2006. The receipt of the stock offering proceeds positively impacted net interest margin in the 2007 period and partially offset the effects of the current interest rate environment.

Provision for Loan Losses. 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 loan growth during the periods. 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 $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 components of the increase are gain on sale of assets ($514,000 increase), income from investments in real estate joint ventures ($165,000 increase) and other income ($157,000 increase). The reasons for these changes are discussed in the three month period comparison. 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 $8.4 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 the $9.1 million contribution to the OritaniSavingsBank Charitable Foundation. 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 decreased real estate tax expense, as well as smaller decreases in depreciation and maintenance expenses, and snow removal expenses. Compensation, payroll taxes and fringe benefits was stable over the period, decreasing by $74,000. However, there were changes within the components of this caption. 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 cost of these benefit plans was 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.

 

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Income Tax Expense. Income tax expense for the nine months ended March 31, 2007, 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%. 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 larger than the associated book expense, and resulted in the decreased effective rate in the 2007 period.

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