FAIRFIELD, N.J., Jan. 30, 2020 (GLOBE NEWSWIRE) -- Kearny Financial Corp. (NASDAQ GS: KRNY) (the “Company”), the holding company of Kearny Bank (the “Bank”), today reported net income for the quarter ended December 31, 2019 of $10.7 million, or $0.13 per basic and diluted share.  The results represent a decrease of $718,000 compared to net income of $11.4 million, or $0.13 per basic and diluted share, for the quarter ended September 30, 2019.

The decrease in net income partially reflected the Company’s recognition of certain merger-related expenses totaling $219,000 related to its proposed acquisition of MSB Financial Corp. (NASDAQ: MSBF) (“MSBF”), the holding company for Millington Bank (“Millington”). The Company previously announced on December 18, 2019, that it had entered into a definitive agreement to acquire MSBF in a cash and stock transaction. Net income for the quarter ended December 31, 2019 was also impacted by a non-recurring increase of $153,000 in non-interest expense and a non-recurring decrease of $236,000 in non-interest income which were recognized in conjunction with the Company’s previously completed branch consolidations.  Adjusting for the impact of such charges, net of tax benefit, the Company’s adjusted net income for the quarter ended December 31, 2019 was $11.1 million or $0.13 per basic and diluted share.  This compares to adjusted net income of $11.8 million or $0.14 per basic and diluted share for the quarter ended September 30, 2019.

Craig L. Montanaro, President and Chief Executive Officer, commented, “I am very pleased to report another quarter of solid core earnings coupled with exceptionally strong core deposit growth.  During the quarter, we grew core deposits by $147.3 million while facilitating the outflow of $120.5 million in wholesale funding.  Our recently announced acquisition of MSB Financial Corp. will accelerate our funding realignment strategy as a majority of Millington’s deposits are comprised of core transaction accounts, while the Morris and Somerset county markets they serve offer tremendous opportunity for further growth in both deposits and loans.  On the technology front, we continue to seek out, and partner with, best of breed technology providers as a means of strengthening our digital banking presence.  Toward that end, we have committed to invest a total of $1.25 million in two separate FinTech firms whose product and service offerings will allow us to continue to provide our clients with the very best in digital banking solutions.  As we move ahead our digital strategy focuses on the evaluation and implementation of technology solutions that leverage artificial intelligence, machine learning, robotic process automation and open API architecture.”

Balance Sheet Highlights

• Deposits decreased by $8.4 million to $4.19 billion at December 31, 2019 from $4.20 billion at September 30, 2019.  This net decrease in deposits was attributable to a decrease of $115.9 million in wholesale deposits that was largely offset by an increase of $107.5 million in retail deposits.  The reallocation of deposits for the quarter ended December 31, 2019 reflected the Company’s continuing effort to realign its funding mix in favor of core deposits.
  
  
• Loans receivable decreased by $112.0 million to $4.49 billion, or 68.0% of total assets, at December 31, 2019 from $4.60 billion, or 69.3% of total assets, at September 30, 2019.  The decrease in loans receivable was attributable to an accelerated level of loan prepayment activity which outpaced loan origination volume.
  
  
• Borrowings decreased by $6.1 million to $1.28 billion, or 19.3% of total assets, at December 31, 2019.  As noted above, the decrease in borrowings for the quarter ended December 31, 2019 reflected the Company’s continuing effort to realign its funding mix in favor of core deposits.
  
  
• Investment securities increased by $168.7 million to $1.44 billion, or 21.8% of total assets, at December 31, 2019 from $1.27 billion, or 19.1% of total assets, at September 30, 2019.

Earnings Highlights

Net Interest Income, Spread and Margin

• Net interest income decreased by $2.1 million to $34.6 million for the quarter ended December 31, 2019, from $36.7 million for the quarter ended September 30, 2019.  The decrease in net interest income was the result of a decrease of $2.7 in interest income partially offset by a decrease of $637,000 in interest expense.
  
  
• Net interest spread decreased 11 basis points to 2.04% for the quarter ended December 31, 2019 from 2.15% for the quarter ended September 30, 2019.  The decrease in spread primarily reflected a 16 basis point decrease in the yield on interest-earning assets that was partially offset by a five basis point decrease in the cost of interest-bearing liabilities.
  
  
• The factors that contributed to the quarterly change in net interest spread also contributed to a 13 basis point decrease in net interest margin to 2.29% for the quarter ended December 31, 2019 from 2.42% for the quarter ended September 30, 2019.

Non-Interest Income

• Fees and service charges increased by $677,000 to $2.1 million for the quarter ended December 31, 2019 compared to $1.5 million for the quarter ended September 30, 2019.  This increase was largely attributable to loan pre-payment penalty income associated with the accelerated loan pre-payment activity noted above.

• Aggregate loan sale gains once again attained record levels increasing by $63,000 to $668,000 for the quarter ended December 31, 2019 from $605,000 for the quarter ended September 30, 2019.  The increase in loan sale gains largely reflected an increase in the volume of residential mortgage loans sold during the period.
  
  
• Miscellaneous non-interest income decreased by $116,000, to a net loss of $111,000 for the quarter ended December 31, 2019 from $5,000 for the quarter ended September 30, 2019.  This decrease was attributable to a non-recurring loss on asset disposals associated with the branch consolidations noted above.

Non-Interest Expense

• Non-interest expense increased by $183,000 to $26.4 million for the quarter ended December 31, 2019 compared to $26.2 million for the quarter ended September 30, 2019.  The net increase was largely attributable to increases in advertising and marketing, net occupancy expense of premises, miscellaneous expense and non-recurring merger-related expenses.  Partially offsetting these increases were decreases in salaries and employee benefits and equipment and systems expense.
  
  For the quarters ended December 31, 2019 and September 30, 2019, the Company recorded no expense associated with FDIC insurance premiums as a result of the FDIC’s Deposit Insurance Fund Reserve Ratio having reached a pre-established threshold defined by federal regulation.  Upon reaching this threshold qualifying banks with total consolidated assets of less than $10 billion are awarded assessment credits to be utilized towards their FDIC insurance premiums.

• The Company’s non-interest expense ratio totaled 1.60% for the quarter ended December 31, 2019 compared to 1.58% for the prior quarter ended September 30, 2019.  Adjusting for the impact of the non-recurring expenses, noted earlier, the Company’s non-interest expense ratio would have been 1.57% for the quarter ended December 31, 2019.
  
  
• The Company’s efficiency ratio was 67.5% for the quarter ended December 31, 2019 compared to 64.6% for the prior quarter ended September 30, 2019.  Adjusting for the impact of the non-recurring expenses, noted earlier, the Company’s efficiency ratio would have been 66.1% for the quarter ended December 31, 2019.

Income Taxes

• Income tax expense totaled $3.5 million for the quarter ended December 31, 2019 compared to $3.8 million for the quarter ended September 30, 2019 resulting in effective tax rates of 25.0% and 25.1%, respectively.  The decrease in income tax expense largely reflected a lower level of pre-tax net income as compared to the prior period.

Performance Ratios

• Return on average assets for the quarter ended December 31, 2019 decreased to 0.64% from 0.68% for the quarter ended September 30, 2019.  Adjusting for the impact of the non-recurring expenses noted earlier, the Company’s return on average assets would have been 0.67% for the quarter ended December 31, 2019.
  
  
• Return on average equity decreased to 3.86% for the quarter ended December 31, 2019 from 4.08% for the quarter ended September 30, 2019.  Adjusting for the impact of the non-recurring expenses noted earlier, the Company’s return on average equity would have been 4.02% for the quarter ended December 31, 2019.
  
  
• Return on average tangible equity decreased to 4.80% for the quarter ended December 31, 2019 from 5.06% for the quarter ended September 30, 2019.  Adjusting for the impact of the non-recurring expenses noted earlier, the Company’s return on average tangible equity would have been 5.00% for the quarter ended December 31, 2019.

Asset Quality Highlights

• Asset quality remained strong throughout the quarter ended December 31, 2019.  The outstanding balance of non-performing loans totaled $22.0 million, or 0.49% of total loans, at December 31, 2019 as compared to $21.8 million, or 0.47% of total loans, at September 30, 2019.
  
  
• The allowance for loan losses (“ALLL”) decreased to $30.9 million at December 31, 2019 from $32.4 million at September 30, 2019, resulting in an ALLL to total loans ratio of 0.68% and 0.70%, respectively. The balance of the allowance for loan losses reflects the impact of purchase accounting which generally precludes acquired loan balances from being considered in the balance of the allowance for loan losses at the time of their acquisition and thereafter.

• Net charge offs totaled $30,000 for the quarter ended December 31, 2019, reflecting an annualized net charge off rate of 0.00% on the average balance of total loans for the period.  By comparison, net charge offs totaled $60,000 for the quarter ended September 30, 2019, reflecting an annualized net charge off rate of 0.01%.
  
  
• The Company recorded a loan loss provision reversal of $1.5 million for the quarter ended December 31, 2019 compared to a loan loss provision reversal of $782,000 for the quarter ended September 30, 2019.  The increase in provision reversal was largely attributable to a comparatively larger decrease in the balance of the loan portfolio that was collectively evaluated for impairment during the quarter ended December 31, 2019 compared to the quarter ended September 30, 2019.

Capital Highlights

• During the quarter ended December 31, 2019, the Company repurchased 1,574,500 shares of its common stock at a total cost of $21.7 million and an average cost of $13.76 per share.  Through December 31, 2019, the Company repurchased a total of 6,982,294 shares, or 75.7% of the shares authorized for repurchase under the current repurchase program, at a total cost of $93.6 million and at an average cost of $13.40 per share.
  
  
• The Company increased its regular quarterly cash dividend by $0.01 to $0.07 per share during the quarter ended December 31, 2019.  The Company continually evaluates its dividend policies in relation to its overall capital management and shareholder value objectives.
  
  
• Book value per share increased by $0.05 to $12.85 at December 31, 2019, from $12.80 at September 30, 2019.  Tangible book value per share increased by $0.01 to $10.32 at December 31, 2019, from $10.31 at September 30, 2019.
  
  
• The Company’s and Bank’s regulatory capital ratios at December 31, 2019 were in excess of the levels required by federal banking regulators to be classified as “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 the Company 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.

Linked-Quarter Comparative Financial Analysis
Summary Balance Sheet	At									Variance
(Dollars and Shares in Thousands,	December 31,			September 30,			Variance			or Change
Except Per Share Data, Unaudited)	2019			2019			or Change			Pct.
Assets
Cash and cash equivalents	$	41,796		$	129,305		$	(87,509	)		-67.7	%
Securities available for sale		1,402,206			1,231,691			170,515			13.8	%
Securities held to maturity		36,073			37,888			(1,815	)		-4.8	%
Loans held-for-sale		5,952			10,495			(4,543	)		-43.3	%
Loans receivable, including yield adjustments		4,492,697			4,604,738			(112,041	)		-2.4	%
Less allowance for loan losses		(30,937	)		(32,432	)		1,495			-4.6	%
Net loans receivable		4,461,760			4,572,306			(110,546	)		-2.4	%
Premises and equipment		56,542			56,599			(57	)		-0.1	%
Federal Home Loan Bank stock		62,838			63,739			(901	)		-1.4	%
Accrued interest receivable		18,261			19,393			(1,132	)		-5.8	%
Goodwill		210,895			210,895			-			0.0	%
Core deposit intangible		4,545			4,852			(307	)		-6.3	%
Bank owned life insurance		259,312			257,735			1,577			0.6	%
Deferred income taxes, net		20,438			21,742			(1,304	)		-6.0	%
Other real estate owned		178			-			178			0.0	%
Other assets		29,605			24,366			5,239			21.5	%
Total assets	$	6,610,401		$	6,641,006		$	(30,605	)		-0.5	%
Liabilities
Deposits	$	4,188,822		$	4,197,250		$	(8,428	)		-0.2	%
Borrowings		1,275,049			1,281,118			(6,069	)		-0.5	%
Advance payments by borrowers for taxes		16,585			16,102			483			3.0	%
Other liabilities		35,375			35,747			(372	)		-1.0	%
Total liabilities		5,515,831			5,530,217			(14,386	)		-0.3	%
Stockholders' Equity
Common stock		851			868			(17	)		-2.0	%
Paid-in capital		737,539			758,385			(20,846	)		-2.7	%
Retained earnings		377,896			373,004			4,892			1.3	%
Unearned ESOP shares		(29,671	)		(30,158	)		487			-1.6	%
Accumulated other comprehensive income, net		7,955			8,690			(735	)		-8.5	%
Total stockholders' equity		1,094,570			1,110,789			(16,219	)		-1.5	%
Total liabilities and stockholders' equity	$	6,610,401		$	6,641,006		$	(30,605	)		-0.5	%
Consolidated capital ratios
Equity to assets		16.56	%		16.73	%		-0.17	%
Tangible equity to tangible assets		13.75	%		13.93	%		-0.18	%
Share data
Outstanding shares		85,150			86,786			(1,636	)		-1.9	%
Book value per share	$	12.85		$	12.80		$	0.05			0.4	%
Tangible book value per share (1)	$	10.32		$	10.31		$	0.01			0.1	%

 (1)   Tangible book value equals total stockholders' equity reduced by goodwill and core deposit intangible assets.

Summary Income Statement	For the three months ended									Variance
(Dollars and Shares in Thousands,	December 31,			September 30,			Variance			or Change
Except Per Share Data, Unaudited)	2019			2019			or Change			Pct.
Interest income
Loans	$	45,608		$	48,600		$	(2,992	)		-6.2	%
Taxable investment securities		9,698			9,328			370			4.0	%
Tax-exempt investment securities		666			693			(27	)		-3.9	%
Other interest-earning assets		1,210			1,278			(68	)		-5.3	%
Total Interest Income		57,182			59,899			(2,717	)		-4.5	%
Interest expense
Deposits		15,590			16,055			(465	)		-2.9	%
Borrowings		6,985			7,157			(172	)		-2.4	%
Total interest expense		22,575			23,212			(637	)		-2.7	%
Net interest income		34,607			36,687			(2,080	)		-5.7	%
Reversal of loan losses		(1,465	)		(782	)		(683	)		87.3	%
Net interest income after reversal of  loan losses		36,072			37,469			(1,397	)		-3.7	%
Non-interest income
Fees and service charges		2,145			1,468			677			46.1	%
Gain (loss) on sale and call of securities		11			(14	)		25			-178.6	%
Gain on sale of loans		668			605			63			10.4	%
Loss on sale and write down of other real estate owned		(28	)		-			(28	)		-100.0	%
Income from bank owned life insurance		1,576			1,580			(4	)		-0.3	%
Electronic banking fees and charges		293			318			(25	)		-7.9	%
Miscellaneous		(111	)		5			(116	)		-2320.0	%
Total non-interest income		4,554			3,962			592			14.9	%
Non-interest expense
Salaries and employee benefits		15,174			15,777			(603	)		-3.8	%
Net occupancy expense of premises		3,082			2,969			113			3.8	%
Equipment and systems		3,046			3,089			(43	)		-1.4	%
Advertising and marketing		890			535			355			66.4	%
Directors' compensation		769			770			(1	)		-0.1	%
Merger-related expenses		219			-			219			0.0	%
Miscellaneous		3,247			3,104			143			4.6	%
Total non-interest expense		26,427			26,244			183			0.7	%
Income before income taxes		14,199			15,187			(988	)		-6.5	%
Income taxes		3,547			3,817			(270	)		-7.1	%
Net income	$	10,652		$	11,370		$	(718	)		-6.3	%
Net income per common share (EPS)
Basic	$	0.13		$	0.13		$	-
Diluted	$	0.13		$	0.13		$	-
Dividends declared
Cash dividends declared per common share	$	0.07		$	0.06		$	0.01
Cash dividends declared	$	5,760		$	5,045		$	715
Dividend payout ratio		54.1	%		44.4	%		9.7	%
Weighted average number of  common  shares outstanding
Basic		82,831			84,756			(1,925	)
Diluted		82,876			84,793			(1,917	)

	For the three months ended									Variance
Average Balance Sheet Data	December 31,			September 30,			Variance			or Change
(Dollars in Thousands, Unaudited)	2019			2019			or Change			Pct.
Assets
Interest-earning assets:
Loans receivable, including loans held for sale		4,547,126		$	4,656,192		$	(109,066	)		-2.3	%
Taxable investment securities		1,244,475			1,147,698			96,777			8.4	%
Tax-exempt investment securities		125,187			129,339			(4,152	)		-3.2	%
Other interest-earning assets		117,811			125,114			(7,303	)		-5.8	%
Total interest-earning assets		6,034,599			6,058,343			(23,744	)		-0.4	%
Non-interest-earning assets		590,746			585,826			4,920			0.8	%
Total assets	$	6,625,345		$	6,644,169		$	(18,824	)		-0.3	%
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Deposits:
Interest-bearing demand	$	982,163		$	883,843		$	98,320			11.1	%
Savings		813,626			799,181			14,445			1.8	%
Certificates of deposit		2,063,066			2,179,333			(116,267	)		-5.3	%
Total interest-bearing deposits		3,858,855			3,862,357			(3,502	)		-0.1	%
Borrowings:
Federal Home Loan Bank advances		1,255,597			1,277,145			(21,548	)		-1.7	%
Other borrowings		34,733			10,012			24,721			246.9	%
Total borrowings		1,290,330			1,287,157			3,173			0.2	%
Total interest-bearing liabilities		5,149,185			5,149,514			(329	)		0.0	%
Non-interest-bearing liabilities:
Non-interest-bearing deposits		320,161			320,641			(480	)		-0.1	%
Other non-interest-bearing liabilities		53,479			60,078			(6,599	)		-11.0	%
Total non-interest-bearing liabilities		373,640			380,719			(7,079	)		-1.9	%
Total liabilities		5,522,825			5,530,233			(7,408	)		-0.1	%
Stockholders' equity		1,102,520			1,113,936			(11,416	)		-1.0	%
Total liabilities and stockholders' equity	$	6,625,345		$	6,644,169		$	(18,824	)		-0.3	%
Average interest-earning assets to average  interest-bearing liabilities		117.20	%		117.65	%		-0.45	%		-0.4	%

	For the three months ended
	December 31,			September 30,			Variance
Performance Ratio Highlights	2019			2019			or Change
Average yield on interest-earning assets:
Loans receivable, including loans held for sale		4.01	%		4.18	%		-0.17	%
Taxable investment securities		3.12	%		3.25	%		-0.13	%
Tax-exempt investment securities (1)		2.13	%		2.14	%		-0.01	%
Other interest-earning assets		4.11	%		4.09	%		0.02	%
Total interest-earning assets		3.79	%		3.95	%		-0.16	%
Average cost of interest-bearing liabilities:
Deposits:
Interest-bearing demand		1.29	%		1.30	%		-0.01	%
Savings		0.81	%		0.77	%		0.04	%
Certificates of deposit		2.09	%		2.14	%		-0.05	%
Total interest-bearing deposits		1.62	%		1.66	%		-0.04	%
Borrowings:
Federal Home Loan Bank advances		2.19	%		2.24	%		-0.05	%
Other borrowings		1.36	%		0.66	%		0.70	%
Total borrowings		2.17	%		2.22	%		-0.05	%
Total interest-bearing liabilities		1.75	%		1.80	%		-0.05	%
Interest rate spread (2)		2.04	%		2.15	%		-0.11	%
Net interest margin (3)		2.29	%		2.42	%		-0.13	%
Non-interest income to average assets  (annualized)		0.27	%		0.24	%		0.03	%
Non-interest expense to average assets  (annualized)		1.60	%		1.58	%		0.02	%
Efficiency ratio (4)		67.48	%		64.56	%		2.92	%
Return on average assets (annualized)		0.64	%		0.68	%		-0.04	%
Return on average equity (annualized)		3.86	%		4.08	%		-0.22	%
Return on average tangible equity (annualized) (5)		4.80	%		5.06	%		-0.26	%

(1)   The yield on tax-exempt investment securities has not been adjusted to reflect their tax-effective yield.
(2)   Interest income divided by average interest-earning assets less interest expense divided by average interest-bearing liabilities.
(3)   Net interest income divided by average interest-earning assets.
(4)   Non-interest expense divided by the sum of net interest income and non-interest income.
(5)   Average tangible equity equals total average stockholders’ equity reduced by average goodwill and average core deposit intangible assets.

Five-Quarter Financial Trend Analysis
Summary Balance Sheet	At
(Dollars and Shares in Thousands,	December 31,			September 30,			June 30,			March 31,			December 31,
Except Per Share Data, Unaudited)	2019			2019			2019			2019			2018
Assets
Cash and cash equivalents	$	41,796		$	129,305		$	38,935		$	54,160		$	51,483
Securities available for sale		1,402,206			1,231,691			714,263			726,920			666,602
Securities held to maturity		36,073			37,888			576,652			592,199			598,318
Loans held-for-sale		5,952			10,495			12,267			997			1,001
Loans receivable, including yield adjustments		4,492,697			4,604,738			4,678,928			4,659,804			4,753,392
Less allowance for loan losses		(30,937	)		(32,432	)		(33,274	)		(33,105	)		(33,526	)
Net loans receivable		4,461,760			4,572,306			4,645,654			4,626,699			4,719,866
Premises and equipment		56,542			56,599			56,854			58,274			58,414
Federal Home Loan Bank stock		62,838			63,739			64,190			64,288			64,514
Accrued interest receivable		18,261			19,393			19,360			20,326			19,435
Goodwill		210,895			210,895			210,895			210,895			210,895
Core deposit intangible		4,545			4,852			5,160			5,470			5,743
Bank owned life insurance		259,312			257,735			256,155			254,569			253,009
Deferred income taxes, net		20,438			21,742			25,367			24,182			24,692
Other real estate owned		178			-			-			209			508
Other assets		29,605			24,366			9,077			19,563			27,960
Total assets	$	6,610,401		$	6,641,006		$	6,634,829		$	6,658,751		$	6,702,440
Liabilities
Deposits		4,188,822		$	4,197,250		$	4,147,610		$	4,137,573		$	4,173,434
Borrowings		1,275,049			1,281,118			1,321,982			1,326,216			1,310,547
Advance payments by borrowers for taxes		16,585			16,102			16,887			17,208			17,201
Other liabilities		35,375			35,747			21,191			19,643			17,997
Total liabilities		5,515,831			5,530,217			5,507,670			5,500,640			5,519,179
Stockholders' Equity
Common stock		851			868			891			915			938
Paid-in capital		737,539			758,385			787,394			817,675			848,145
Retained earnings		377,896			373,004			366,679			363,072			356,993
Unearned ESOP shares		(29,671	)		(30,158	)		(30,644	)		(31,130	)		(31,617	)
Accumulated other comprehensive income, net		7,955			8,690			2,839			7,579			8,802
Total stockholders' equity		1,094,570			1,110,789			1,127,159			1,158,111			1,183,261
Total liabilities and stockholders' equity	$	6,610,401		$	6,641,006		$	6,634,829		$	6,658,751		$	6,702,440
Consolidated capital ratios
Equity to assets		16.56	%		16.73	%		16.99	%		17.39	%		17.65	%
Tangible equity to tangible assets		13.75	%		13.93	%		14.19	%		14.62	%		14.90	%
Share data
Outstanding shares		85,150			86,786			89,126			91,495			93,772
Book value per share	$	12.85		$	12.80		$	12.65		$	12.66		$	12.62
Tangible book value per share (1)	$	10.32		$	10.31		$	10.22		$	10.29		$	10.31

 (1)   Tangible book value equals total stockholders' equity reduced by goodwill and core deposit intangible assets.

	At
Supplemental Balance Sheet Highlights	December 31,			September 30,			June 30,			March 31,			December 31,
(Dollars in Thousands, Unaudited)	2019			2019			2019			2019			2018
Cash and cash equivalents
Cash and due from depository institutions	$	17,843		$	16,106		$	19,032		$	15,943		$	24,361
Interest-bearing deposits in other banks		23,953			113,199			19,903			38,217			27,122
Total cash and cash equivalents	$	41,796		$	129,305		$	38,935		$	54,160		$	51,483
Securities available for sale
Debt securities:
U.S. agency securities	$	606		$	694		$	3,678		$	3,737		$	3,942
Municipal and state obligations		88,057			91,050			26,951			26,731			26,205
Asset-backed securities		177,676			181,068			179,313			180,145			180,828
Collateralized loan obligations		198,324			198,549			208,611			207,906			184,439
Corporate bonds		192,074			191,241			122,024			121,597			144,692
Trust preferred securities		3,795			3,775			3,756			3,775			3,726
Debt securities		660,532			666,377			544,333			543,891			543,832
Mortgage-backed securities:
Collateralized mortgage obligations		57,839			63,594			21,390			21,660			23,019
Residential pass-through securities		360,900			202,858			44,303			70,513			91,918
Commercial pass-through securities		322,935			298,862			104,237			90,856			7,833
Mortgage-backed securities		741,674			565,314			169,930			183,029			122,770
Total securities available for sale	$	1,402,206		$	1,231,691		$	714,263		$	726,920		$	666,602
Securities held to maturity
Debt securities:
Municipal and state obligations	$	36,073		$	37,888		$	104,086		$	107,375		$	107,826
Corporate bonds		-			-			63,086			63,107			56,255
Debt securities		36,073			37,888			167,172			170,482			164,081
Mortgage-backed securities:
Collateralized mortgage obligations		-			-			46,381			49,368			51,540
Residential pass-through securities		-			-			166,283			174,338			182,335
Commercial pass-through securities		-			-			196,816			198,011			200,362
Mortgage-backed securities		-			-			409,480			421,717			434,237
Total securities held to maturity	$	36,073		$	37,888		$	576,652		$	592,199		$	598,318
Total securities	$	1,438,279		$	1,269,579		$	1,290,915		$	1,319,119		$	1,264,920

	At
Supplemental Balance Sheet Highlights	December 31,			September 30,			June 30,			March 31,			December 31,
(Dollars in Thousands, Unaudited)	2019			2019			2019			2019			2018
Loan portfolio composition:
Residential first mortgage loans	$	1,331,301		$	1,319,750		$	1,344,044		$	1,325,105		$	1,334,284
Home equity loans and lines of credit		89,916			93,304			96,165			97,788			96,001
Residential mortgage loans		1,421,217			1,413,054			1,440,209			1,422,893			1,430,285
Multifamily mortgage loans		1,856,591			1,922,968			1,946,391			1,956,571			1,974,409
Nonresidential and mixed use mortgage loans		1,172,213			1,230,963			1,258,869			1,249,215			1,302,583
Commercial mortgage loans		3,028,804			3,153,931			3,205,260			3,205,786			3,276,992
Commercial business loans		67,887			66,889			65,763			66,476			70,059
Construction loans		16,221			14,637			13,907			14,377			28,405
Account loans		3,581			3,530			3,732			3,360			3,310
Other consumer loans		1,327			1,679			2,082			2,624			3,524
Consumer loans		4,908			5,209			5,814			5,984			6,834
Total loans, excluding yield adjustments		4,539,037			4,653,720			4,730,953			4,715,516			4,812,575
Unamortized yield adjustments		(46,340	)		(48,982	)		(52,025	)		(55,712	)		(59,183	)
Loans receivable, including yield adjustments		4,492,697			4,604,738			4,678,928			4,659,804			4,753,392
Less allowance for loan losses		(30,937	)		(32,432	)		(33,274	)		(33,105	)		(33,526	)
Net loans receivable	$	4,461,760		$	4,572,306		$	4,645,654		$	4,626,699		$	4,719,866
Loan portfolio allocation:
Residential first mortgage loans		29.3	%		28.4	%		28.4	%		28.1	%		27.7	%
Home equity loans and lines of credit		2.0	%		2.0	%		2.0	%		2.1	%		2.0	%
Residential mortgage loans		31.3	%		30.4	%		30.4	%		30.2	%		29.7	%
Multifamily mortgage loans		40.9	%		41.3	%		41.2	%		41.5	%		41.0	%
Nonresidential and mixed use mortgage loans		25.8	%		26.5	%		26.6	%		26.5	%		27.1	%
Commercial mortgage loans		66.7	%		67.8	%		67.8	%		68.0	%		68.1	%
Commercial business loans		1.5	%		1.4	%		1.4	%		1.3	%		1.4	%
Construction loans		0.4	%		0.3	%		0.3	%		0.3	%		0.6	%
Account loans		0.1	%		0.1	%		0.1	%		0.1	%		0.1	%
Other consumer loans		0.0	%		0.0	%		0.0	%		0.1	%		0.1	%
Consumer loans		0.1	%		0.1	%		0.1	%		0.2	%		0.2	%
Total loans, excluding yield adjustments		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Asset quality:
Nonperforming assets:
Accruing loans - 90 days and over past due	$	19		$	15		$	22		$	24		$	32
Nonaccrual loans		21,935			21,766			20,248			21,297			20,743
Total nonperforming loans		21,954			21,781			20,270			21,321			20,775
Other real estate owned		178			-			-			209			508
Total nonperforming assets	$	22,132		$	21,781		$	20,270		$	21,530		$	21,283
Nonperforming loans (% total loans)		0.49	%		0.47	%		0.43	%		0.46	%		0.44	%
Nonperforming assets (% total assets)		0.33	%		0.33	%		0.31	%		0.32	%		0.32	%
Allowance for loan losses (ALLL):
ALLL to total loans		0.68	%		0.70	%		0.70	%		0.70	%		0.70	%
ALLL to nonperforming loans		140.92	%		148.90	%		164.15	%		155.27	%		161.38	%
Net charge offs	$	30		$	60		$	495		$	242		$	176
Average net charge off rate (annualized)		0.00	%		0.01	%		0.04	%		0.02	%		0.01	%

	At
Supplemental Balance Sheet Highlights	December 31,			September 30,			June 30,			March 31,			December 31,
(Dollars in Thousands, Unaudited)	2019			2019			2019			2019			2018
Funding by type:
Deposits:
Non-interest-bearing deposits	$	312,098		$	322,846		$	309,063		$	303,713		$	305,392
Interest-bearing demand		1,060,434			931,188			843,432			800,023			807,389
Savings		829,321			800,514			790,658			777,678			760,499
Certificates of deposit		1,986,969			2,142,702			2,204,457			2,256,159			2,300,154
Interest-bearing deposits		3,876,724			3,874,404			3,838,547			3,833,860			3,868,042
Total deposits		4,188,822			4,197,250			4,147,610			4,137,573			4,173,434
Borrowings:
Federal Home Loan Bank advances		1,253,958			1,273,618			1,283,211			1,289,285			1,293,845
Overnight borrowings		15,000			-			30,000			-			-
Depositor sweep accounts		6,091			7,500			8,771			36,931			16,702
Total borrowings		1,275,049			1,281,118			1,321,982			1,326,216			1,310,547
Total funding	$	5,463,871		$	5,478,368		$	5,469,592		$	5,463,789		$	5,483,981
Loans as a % of deposits		106.7	%		109.2	%		112.3	%		111.8	%		113.1	%
Deposits as a % of total funding		76.7	%		76.6	%		75.8	%		75.7	%		76.1	%
Borrowings as a % of total funding		23.3	%		23.4	%		24.2	%		24.3	%		23.9	%
Funding by source:
Retail funding:
Non-interest-bearing deposits	$	312,098		$	322,846		$	309,063		$	303,713		$	305,392
Interest-bearing demand		1,060,434			931,188			843,432			800,023			807,389
Savings		829,321			800,514			790,658			777,678			760,499
Certificates of deposit		1,876,280			1,916,132			1,902,542			1,925,630			1,922,287
Total retail deposits		4,078,133			3,970,680			3,845,695			3,807,044			3,795,567
Depositor sweep accounts		6,091			7,500			8,771			36,931			16,702
Total retail funding		4,084,224			3,978,180			3,854,466			3,843,975			3,812,269
Wholesale funding:
Certificates of deposit (listing service)	$	42,119		$	57,534		$	66,110		$	78,704		$	108,067
Certificates of deposit (brokered)		68,570			169,036			235,805			251,825			269,800
Total wholesale deposits		110,689			226,570			301,915			330,529			377,867
FHLB advances		1,253,958			1,273,618			1,283,211			1,289,285			1,293,845
Overnight borrowings		15,000			-			30,000			-			-
Total wholesale funding		1,379,647			1,500,188			1,615,126			1,619,814			1,671,712
Total funding	$	5,463,871		$	5,478,368		$	5,469,592		$	5,463,789		$	5,483,981
Retail funding as a % of total funding		74.7	%		72.6	%		70.5	%		70.4	%		69.5	%
Wholesale funding as a % of total funding		25.3	%		27.4	%		29.5	%		29.6	%		30.5	%

Summary Income Statement	For the three months ended
(Dollars and Shares in Thousands,	December 31,			September 30,			June 30,			March 31,			December 31,
Except Per Share Data, Unaudited)	2019			2019			2019			2019			2018
Interest income
Loans	$	45,608		$	48,600		$	47,818		$	48,116		$	49,015
Taxable investment securities		9,698			9,328			9,772			9,511			9,051
Tax-exempt investment securities		666			693			700			710			713
Other interest-earning assets		1,210			1,278			1,158			1,320			1,243
Total interest income		57,182			59,899			59,448			59,657			60,022
Interest expense
Deposits		15,590			16,055			15,131			14,114			12,727
Borrowings		6,985			7,157			7,171			6,905			7,946
Total interest expense		22,575			23,212			22,302			21,019			20,673
Net interest income		34,607			36,687			37,146			38,638			39,349
(Reversal of) provision for loan losses		(1,465	)		(782	)		664			(179	)		971
Net interest income after (reversal of)  provision for loan losses		36,072			37,469			36,482			38,817			38,378
Non-interest income
Fees and service charges		2,145			1,468			1,340			1,674			1,258
Gain (loss) on sale and call of securities		11			(14	)		(141	)		(182	)		-
Gain on sale of loans		668			605			196			151			101
(Loss) gain on sale and write down of other real estate owned		(28	)		-			9			(6	)		36
Income from bank owned life insurance		1,576			1,580			1,586			1,560			1,599
Electronic banking fees and charges		293			318			270			253			277
Miscellaneous		(111	)		5			128			226			38
Total non-interest income		4,554			3,962			3,388			3,676			3,309
Non-interest expense
Salaries and employee benefits		15,174			15,777			16,338			15,350			15,699
Net occupancy expense of premises		3,082			2,969			2,744			2,979			2,761
Equipment and systems		3,046			3,089			2,917			3,053			3,377
Advertising and marketing		890			535			948			739			787
Federal deposit insurance premium		-			-			438			455			421
Directors' compensation		769			770			770			770			746
Merger-related expenses		219			-			-			-			-
Miscellaneous		3,247			3,104			4,590			3,425			3,479
Total non-interest expense		26,427			26,244			28,745			26,771			27,270
Income before income taxes		14,199			15,187			11,125			15,722			14,417
Income taxes		3,547			3,817			2,314			4,305			3,649
Net income	$	10,652		$	11,370		$	8,811		$	11,417		$	10,768
Net income per common share (EPS)
Basic	$	0.13		$	0.13		$	0.10		$	0.13		$	0.12
Diluted	$	0.13		$	0.13		$	0.10		$	0.13		$	0.12
Dividends declared (1)
Cash dividends declared per common share	$	0.07		$	0.06		$	0.06		$	0.06		$	0.05
Cash dividends declared	$	5,760		$	5,045		$	5,204		$	5,338		$	4,082
Dividend payout ratio		54.1	%		44.4	%		59.1	%		46.8	%		37.9	%
Weighted average number of  common  shares outstanding
Basic		82,831			84,756			87,090			89,488			92,434
Diluted		82,876			84,793			87,132			89,532			92,480

	For the three months ended
Average Balance Sheet Data	December 31,			September 30,			June 30,			March 31,			December 31,
(Dollars in Thousands, Unaudited)	2019			2019			2019			2019			2018
Assets
Interest-earning assets:
Loans receivable, including loans held for sale	$	4,547,126		$	4,656,192		$	4,648,362		$	4,709,052		$	4,758,587
Taxable investment securities		1,244,475			1,147,698			1,184,401			1,161,492			1,158,720
Tax-exempt investment securities		125,187			129,339			132,110			134,309			135,453
Other interest-earning assets		117,811			125,114			98,374			107,554			87,916
Total interest-earning assets		6,034,599			6,058,343			6,063,247			6,112,407			6,140,676
Non-interest-earning assets		590,746			585,826			572,218			574,921			587,921
Total assets	$	6,625,345		$	6,644,169		$	6,635,465		$	6,687,328		$	6,728,597
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Deposits:
Interest-bearing demand	$	982,163		$	883,843		$	815,624		$	790,567		$	792,989
Savings		813,626			799,181			780,558			773,308			743,676
Certificates of deposit		2,063,066			2,179,333			2,229,723			2,288,836			2,214,932
Total interest-bearing deposits		3,858,855			3,862,357			3,825,905			3,852,711			3,751,597
Borrowings:
Federal Home Loan Bank advances		1,255,597			1,277,145			1,284,427			1,292,168			1,293,470
Other borrowings		34,733			10,012			29,439			26,037			119,281
Total borrowings		1,290,330			1,287,157			1,313,866			1,318,205			1,412,751
Total interest-bearing liabilities		5,149,185			5,149,514			5,139,771			5,170,916			5,164,348
Non-interest-bearing liabilities:
Non-interest-bearing deposits		320,161			320,641			311,648			307,645			315,165
Other non-interest-bearing liabilities		53,479			60,078			39,294			35,930			37,374
Total non-interest-bearing liabilities		373,640			380,719			350,942			343,575			352,539
Total liabilities		5,522,825			5,530,233			5,490,713			5,514,491			5,516,887
Stockholders' equity		1,102,520			1,113,936			1,144,752			1,172,837			1,211,710
Total liabilities and stockholders' equity	$	6,625,345		$	6,644,169		$	6,635,465		$	6,687,328		$	6,728,597
Average interest-earning assets to average  interest-bearing liabilities		117.20	%		117.65	%		117.97	%		118.21	%		118.91	%

	For the three months ended
	December 31,			September 30,			June 30,			March 31,			December 31,
Performance Ratio Highlights	2019			2019			2019			2019			2018
Average yield on interest-earning assets:
Loans receivable, including loans held for sale		4.01	%		4.18	%		4.11	%		4.09	%		4.12	%
Taxable investment securities		3.12	%		3.25	%		3.30	%		3.28	%		3.12	%
Tax-exempt investment securities (1)		2.13	%		2.14	%		2.12	%		2.12	%		2.11	%
Other interest-earning assets		4.11	%		4.09	%		4.71	%		4.91	%		5.66	%
Total interest-earning assets		3.79	%		3.95	%		3.92	%		3.91	%		3.91	%
Average cost of interest-bearing liabilities:
Deposits:
Interest-bearing demand		1.29	%		1.30	%		1.19	%		1.06	%		0.97	%
Savings		0.81	%		0.77	%		0.68	%		0.60	%		0.49	%
Certificates of deposit		2.09	%		2.14	%		2.04	%		1.90	%		1.79	%
Total interest-bearing deposits		1.62	%		1.66	%		1.58	%		1.47	%		1.36	%
Borrowings:
Federal Home Loan Bank advances		2.19	%		2.24	%		2.21	%		2.13	%		2.27	%
Other borrowings		1.36	%		0.66	%		0.99	%		0.35	%		1.99	%
Total borrowings		2.17	%		2.22	%		2.18	%		2.10	%		2.25	%
Total interest-bearing liabilities		1.75	%		1.80	%		1.74	%		1.63	%		1.60	%
Interest rate spread (2)		2.04	%		2.15	%		2.18	%		2.28	%		2.31	%
Net interest margin (3)		2.29	%		2.42	%		2.45	%		2.53	%		2.56	%
Non-interest income to average assets  (annualized)		0.27	%		0.24	%		0.20	%		0.22	%		0.20	%
Non-interest expense to average assets  (annualized)		1.60	%		1.58	%		1.73	%		1.60	%		1.62	%
Efficiency ratio (4)		67.48	%		64.56	%		70.91	%		63.27	%		63.93	%
Return on average assets (annualized)		0.64	%		0.68	%		0.53	%		0.68	%		0.64	%
Return on average equity (annualized)		3.86	%		4.08	%		3.08	%		3.89	%		3.55	%
Return on average tangible equity (annualized) (5)		4.80	%		5.06	%		3.80	%		4.78	%		4.33	%

(1)   The yield on tax-exempt investment securities has not been adjusted to reflect their tax-effective yield.
(2)   Interest income divided by average interest-earning assets less interest expense divided by average interest-bearing liabilities.
(3)   Net interest income divided by average interest-earning assets.
(4)   Non-interest expense divided by the sum of net interest income and non-interest income.
(5)   Average tangible equity equals total average stockholders’ equity reduced by average goodwill and average core deposit intangible assets.

This document contains certain non-GAAP financial measures in addition to results presented in accordance with Generally Accepted Accounting Principles (“GAAP”). These non-GAAP measures provide additional information which allow readers to evaluate the ongoing performance of the Company. They are not a substitute for GAAP measures; they should be read and used in conjunction with the Company’s GAAP financial information. A reconciliation of non-GAAP financial measures to GAAP measures is included below. In all cases, it should be understood that non-GAAP per share measures do not depict amounts that accrue directly to the benefit of shareholders.

Reconciliation of GAAP to Non-GAAP	For the three months ended
(Dollars in Thousands,	December 31,			September 30,			June 30,			March 31,			December 31,
Except Per Share Data, Unaudited)	2019			2019			2019			2019			2018
Adjusted Net Income
Net income (GAAP)	$	10,652		$	11,370		$	8,811		$	11,417		$	10,768
Add: Merger-related expenses - net of tax		154			-			-			-			-
Add: Branch consolidation expenses - net of tax		274			475			1,216			-			-
Adjusted net income (non-GAAP)	$	11,080		$	11,845		$	10,027		$	11,417		$	10,768
Adjusted Net Income per Common Share (EPS)
Net income per common share Basic and  Diluted (GAAP)	$	0.13		$	0.13		$	0.10		$	0.13		$	0.12
Add: Merger-related expenses - net of tax		-			-			-			-			-
Add: Branch consolidation expenses - net of tax		-			0.01			0.01			-			-
Adjusted net income per common share Basic  and Diluted (non-GAAP)	$	0.13		$	0.14		$	0.11		$	0.13		$	0.12
Adjusted Non-Interest Expense
Non-interest expense (GAAP)	$	26,427		$	26,244		$	28,745		$	26,771		$	27,270
Less: Merger-related expenses		(219	)		-			-			-			-
Less: Branch consolidation expenses		(153	)		(567	)		(1,725	)		-			-
Adjusted non-interest expense (non-GAAP)	$	26,055		$	25,677		$	27,020		$	26,771		$	27,270
Adjusted Non-Interest Income
Non-interest income (GAAP)	$	4,554		$	3,962		$	3,388		$	3,676		$	3,309
Add: Branch consolidation expenses		236			106			-			-			-
Adjusted non-interest income (non-GAAP)	$	4,790		$	4,068		$	3,388		$	3,676		$	3,309
Adjusted Non-Interest Expense Ratio
Non-interest expense to average assets (GAAP)		1.60	%		1.58	%		1.73	%		1.60	%		1.62	%
Less: Merger-related expenses		-0.01	%		0.00	%		0.00	%		0.00	%		0.00	%
Less: Branch consolidation expenses		-0.01	%		-0.03	%		-0.10	%		0.00	%		0.00	%
Adjusted non-interest expense ratio (non-GAAP)		1.57	%		1.55	%		1.63	%		1.60	%		1.62	%
Adjusted Efficiency Ratio
Non-interest expense / (Net interest income  + non-interest income) (GAAP)		67.5	%		64.6	%		70.9	%		63.3	%		63.9	%
Calculation of Adjusted Efficiency Ratio  (non-GAAP)
Non-interest expense (GAAP)	$	26,427		$	26,244		$	28,745		$	26,771		$	27,270
Less: Merger-related expenses		(219	)		-			-			-			-
Less: Branch consolidation expenses		(153	)		(567	)		(1,725	)		-			-
Non-interest expense (non-GAAP)	$	26,055		$	25,677		$	27,020		$	26,771		$	27,270
Net interest income (GAAP)		34,607			36,687			37,146			38,638			39,349
Total non-interest income (GAAP)		4,554			3,962			3,388			3,676			3,309
Add: Branch consolidation expenses		236			106			-			-			-
Total revenue (non-GAAP)	$	39,397		$	40,755		$	40,534		$	42,314		$	42,658
Adjusted efficiency ratio (non-GAAP)		66.1	%		63.0	%		66.6	%		63.3	%		63.9	%

	For the three months ended
Reconciliation of GAAP to Non-GAAP	December 31,			September 30,			June 30,			March 31,			December 31,
(Dollars in Thousands, Unaudited)	2019			2019			2019			2019			2018
Adjusted Return on Average Assets
Return on average assets (GAAP)		0.64	%		0.68	%		0.53	%		0.68	%		0.64	%
Add: Merger-related expenses - net of tax		0.01	%		0.00	%		0.00	%		0.00	%		0.00	%
Add: Branch consolidation expenses - net of tax		0.02	%		0.03	%		0.07	%		0.00	%		0.00	%
Adjusted return on average assets (non-GAAP)		0.67	%		0.71	%		0.60	%		0.68	%		0.64	%
Adjusted Return on Average Equity
Return on average equity (GAAP)		3.86	%		4.08	%		3.08	%		3.89	%		3.55	%
Add: Merger-related expenses - net of tax		0.06	%		0.00	%		0.00	%		0.00	%		0.00	%
Add: Branch consolidation expenses - net of tax		0.10	%		0.17	%		0.42	%		0.00	%		0.00	%
Adjusted return on average equity (non-GAAP)		4.02	%		4.25	%		3.50	%		3.89	%		3.55	%
Calculation of Return on Average Tangible  Equity
Net income annualized (GAAP)	$	42,608		$	45,480		$	35,244		$	45,668		$	43,072
Total Average equity (GAAP)	$	1,102,520		$	1,113,936		$	1,144,752		$	1,172,837		$	1,211,710
Less: average goodwill		(210,895	)		(210,895	)		(210,895	)		(210,895	)		(210,895	)
Less: average other intangible assets		(4,711	)		(5,006	)		(5,313	)		(5,606	)		(5,915	)
Average tangible equity (non-GAAP)	$	886,914		$	898,035		$	928,544		$	956,336		$	994,900
Return on average tangible equity (non-GAAP)		4.80	%		5.06	%		3.80	%		4.78	%		4.33	%
Calculation of Adjusted Return on Average  Tangible Equity
Adjusted net income annualized (non-GAAP)	$	44,320		$	47,380		$	40,108		$	45,668		$	43,072
Total Average equity (GAAP)	$	1,102,520		$	1,113,936		$	1,144,752		$	1,172,837		$	1,211,710
Less: average goodwill		(210,895	)		(210,895	)		(210,895	)		(210,895	)		(210,895	)
Less: average other intangible assets		(4,711	)		(5,006	)		(5,313	)		(5,606	)		(5,915	)
Average tangible equity (non-GAAP)	$	886,914		$	898,035		$	928,544		$	956,336		$	994,900
Adjusted return on average tangible equity  (non-GAAP)		5.00	%		5.28	%		4.32	%		4.78	%		4.33	%

For further information contact:
Craig L. Montanaro, President and Chief Executive Officer, or
Keith Suchodolski, Executive Vice President and Chief Financial Officer
Kearny Financial Corp.
(973) 244-4500

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