FAIRFIELD, N.J., Oct. 29, 2020 (GLOBE NEWSWIRE) -- Kearny Financial Corp. (NASDAQ GS: KRNY) (the “Company”), the holding company of Kearny Bank (the “Bank”), reported net income for the first quarter ended September 30, 2020 of $11.4 million, or $0.13 per diluted share. These results represent a decrease of $2.3 million from $13.7 million, or $0.17 per diluted share, for the fourth quarter ended June 30, 2020.

Reported net income for the quarters ended September 30, 2020 and June 30, 2020 was impacted by various non-recurring items which were recognized in conjunction with the Company’s July 10, 2020 acquisition of MSB Financial Corp. (“MSB”) and its subsidiary Millington Bank. Excluding the effects of these non-recurring items, net of tax, net income would have been $15.0 million, or $0.17 per diluted share for the quarter ended September 30, 2020 compared to $14.1 million or $0.17 per diluted share for the quarter ended June 30, 2020.

Craig L. Montanaro, President and Chief Executive Officer, commented, “I am pleased to report that core earnings remain strong and our level of active COVID-19 related loan modifications has declined to $76.9 million, or 1.5% of total loans. While challenges related to the pandemic persist, we remain completely focused on expanding our relationships with our clients and executing our strategic plan.”

With regard to the recently completed MSB acquisition, Mr. Montanaro further commented, “With nearly a full quarter of combined operations behind us, I can confidently state that this merger has been a success. The expansion into Somerset and Morris counties presents an excellent growth opportunity for our lending and deposit teams. From an operational perspective, the conversion of MSB’s technology systems simultaneous with the closing will allow us to recognize our anticipated cost savings more quickly than in our prior transactions.”

MSB Acquisition Highlights

• On July 10, 2020, the Company completed its acquisition of MSB which increased total assets by $581.9 million, net loans by $530.2 million and total deposits by $460.2 million.
• Of the $530.2 million of loans acquired, $65.3 million, or 12.3%, were classified as Purchased Credit Deteriorated (“PCD”) and had associated credit reserves of $3.9 million. Provision for credit losses attributable to non-PCD acquired loans totaled $5.1 million.
• As the fair value of the net assets acquired exceeded the purchase price, a bargain purchase gain of $3.1 million was recognized.
• Tangible book value dilution totaled 1.4%, or 1.8% inclusive of the impact of the provision for credit losses on the acquired loans.
• Integration of MSB’s technology systems and the re-branding of all Millington Bank branches was completed simultaneous with the closing of the transaction, thereby accelerating non-interest expense reductions, which are expected to exceed 45%.
  

Balance Sheet

• Deposits increased by $609.6 million to $5.04 billion at September 30, 2020 from $4.43 billion at June 30, 2020, largely reflecting the impact of $460.2 million of deposits acquired from MSB coupled with organic growth of $179.0 million in core non-maturity deposits.
• Loans receivable increased by $456.4 million to $4.95 billion at September 30, 2020 from $4.50 billion at June 30, 2020. The net increase in loans reflected the impact of $530.2 million of loans that were acquired in conjunction with the acquisition of MSB, partially offset by a net decline in non-acquired loan balances, driven largely by accelerated loan pre-payment activity, as compared to the prior quarter.
• Investment securities increased to $1.54 billion, or 21.1% of total assets, at September 30, 2020 from $1.42 billion at June 30, 2020, while borrowings decreased to $1.08 billion, or 14.7% of total assets, from $1.17 billion, for those same comparative periods.
  

Earnings

Net Interest Income, Spread and Margin

• Net interest income for the quarter ended September 30, 2020 increased by $3.7 million to $44.2 million from $40.5 million for the quarter ended June 30, 2020. This increase reflected growth in interest income of $3.5 million coupled with a reduction in interest expense of $179,000. Included in net interest income was purchase accounting accretion of $4.2 million and $3.0 million, for the quarters ended September 30, 2020 and June 30, 2020, respectively.
• Net interest margin, for the quarter ended September 30, 2020, increased by four basis points to 2.66%. This increase primarily reflected a reduction in the cost of interest-bearing liabilities, partially offset by a reduction in the yield on interest-earning assets.
• Yield on interest-earning assets, for the quarter ended September 30, 2020, decreased by five basis points to 3.67% which was largely attributable to a 68 basis point decrease in the yield on taxable investment securities partially offset by a 16 basis point increase in the yield on loans. Cost of interest-bearing liabilities decreased by nine basis points to 1.20% which was attributable to a 27 basis point decrease in the cost of interest-bearing deposits partially offset by a 63 basis point increase in the cost of borrowings.
  

Non-Interest Income

• For the quarter ended September 30, 2020, a non-recurring bargain purchase gain of $3.1 million was recognized in conjunction with the acquisition of MSB, as noted above.
• Fees and service charges totaled $1.1 million for the quarter ended September 30, 2020, compared to $1.7 million for the quarter ended June 30, 2020. The decrease was largely attributable to a decline of $703,000 in loan pre-payment penalty income to $647,000.
• Loan sale gains achieved record levels, totaling $1.9 million for the quarter ended September 30, 2020 as compared to $1.3 million for the quarter ended June 30, 2020. The increase in loan sale gains primarily reflected growth in the volume of residential mortgage loans sold coupled with an increase in the margin at which such loans were sold.
• Gain (loss) on sale and call of securities reflected a loss of $377,000 for the quarter ended September 30, 2020 compared to a gain of $19,000 for the quarter ended June 30, 2020.

Non-Interest Expense

• Non-interest expense increased by $6.7 million to $33.6 million for the quarter ended September 30, 2020 compared to $26.9 million for the quarter ended June 30, 2020. The increase in non-interest expense was partly attributable to an increase of $3.9 million in merger-related expense which was recognized in conjunction with the Company’s acquisition of MSB. The remaining change in non-interest expense included increases in salaries and employee benefits, net occupancy expense of premises, equipment and systems expense, FDIC insurance premiums and miscellaneous expense. A substantial portion of these increases were attributable to the additional infrastructure and personnel acquired from MSB.
• As part of the Company’s ongoing initiative to improve operating efficiency, two additional branch locations will be consolidated during the Company’s second and third fiscal quarters. Once completed, this will bring the total number of consolidations to 12 over the past 24 months.

Income Taxes

• Income tax expense totaled $2.9 million for the quarter ended September 30, 2020 compared to $4.7 million for the quarter ended June 30, 2020, resulting in effective tax rates of 20.2% and 25.6%, respectively.
• The decrease in effective income tax rate for the quarter ended September 30, 2020 reflected the effects of various non-recurring items recorded in conjunction with the Company’s acquisition of MSB, as noted above.

Performance Ratios

• Return on average assets declined to 0.63% for the quarter ended September 30, 2020 from 0.81% for the quarter ended June 30, 2020. Adjusting for the impact of non-recurring items, as noted above, the return on average assets was unchanged at 0.83% for the quarters ended September 30, 2020 and June 30, 2020.
• Return on average equity declined to 4.10% for the quarter ended September 30, 2020 from 5.08% for the quarter ended June 30, 2020 while return on average tangible equity decreased to 5.08% from 6.35% for those same comparative periods, respectively. Adjusting for the impact of non-recurring items, as noted above, the return on average equity increased to 5.40% for the quarter ended September 30, 2020 from 5.24% for the quarter ended June 30, 2020 while the return on average tangible equity increased to 6.70% from 6.55% for those same comparative periods.

Asset Quality

• On July 1, 2020, the Company adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), also known as the Current Expected Credit Loss (“CECL”) standard. CECL requires the measurement of all expected credit losses over the life of financial instruments held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. In connection with the adoption of CECL, the Company recognized a cumulative effect adjustment that reduced stockholders’ equity by $14.2 million, net of tax. At adoption, the Company increased its allowance for credit losses (“ACL”) by $19.6 million and $536,000, respectively, for loans and unfunded commitments.
• On July 10, 2020 the Company completed its acquisition of MSB, which resulted in an increase to the ACL of $9.0 million. Of this increase, $3.9 million was attributable to PCD loans and was recorded as an adjustment to their amortized cost basis. The remaining $5.1 million increase was attributable to non-PCD loans and was recorded via a provision for credit losses.
• The outstanding balance of non-performing loans totaled $45.1 million, or 0.91% of total loans, at September 30, 2020 compared to $36.7 million, or 0.82% of total loans, at June 30, 2020. The increase was largely attributable to non-performing loans acquired from MSB that totaled $5.8 million at September 30, 2020.  
• Based on Section 4013 of the CARES Act and the related guidance promulgated by federal banking regulators, qualifying short-term loan modifications are not considered to be troubled debt restructurings. As of September 30, 2020, the Company had active payment deferrals on 63 loans totaling $76.9 million, representing 1.5% of total loans. This represents a small portion of the total deferrals granted and a substantial decrease in the number and amount of active deferrals at June 30, 2020.

The following table identifies the level of active and total non-TDR loan modifications at September 30, 2020:

	September 30, 2020
	Active Modifications (1)								Total Modifications (1)								Increase/(Decrease)
	# of Loans				Balance				# of Loans				Balance				# of Loans				Balance
	(Dollars In Thousands)
Commercial loans:
Multi-family mortgage		7			$	15,910				143			$	393,156				(136	)		$	(377,246	)
Nonresidential mortgage		11				41,660				168				305,841				(157	)			(264,181	)
Commercial business		4				2,684				60				10,107				(56	)			(7,423	)
Construction		1				2,537				5				12,240				(4	)			(9,703	)
Total commercial loans		23				62,791				376				721,344				(353	)			(658,553	)
Residential mortgage		36				13,866				420				156,963				(384	)			(143,097	)
Consumer loans:
Home equity loans		4				252				47				4,603				(43	)			(4,351	)
Total		63			$	76,909				843			$	882,910				(780	)		$	(806,001	)

______________________
(1)    Includes loans acquired in conjunction with the Company’s acquisition of MSB Financial Corp. on July 10, 2020.

• Net charge offs totaled $67,000 for the quarter ended September 30, 2020 compared to $38,000 for the quarter ended June 30, 2020 reflecting an annualized net charge off rate of 0.01% and 0.00% for those same comparative periods.  
• Provision for credit losses totaled $4.1 million for the quarter ended September 30, 2020 and largely reflected $5.1 million of provision attributable to the acquired MSB loans, as noted above, partially offset by the effects of a decrease in the overall balance of the portion of the loan portfolio that was collectively evaluated for impairment. By comparison, the provision for loan losses for the quarter ended June 30, 2020, under prior accounting guidance, totaled $174,000.  
• The ACL increased to $64.9 million, or 1.30% of total loans, at September 30, 2020 from $37.3 million, or 0.82% of total loans, at June 30, 2020. This increase was the result of the combined effects of the CECL adoption-date cumulative effect adjustment, reserves for PCD loans acquired from MSB and quarter-to-date provisions for credit losses, net of quarter-to-date charge-offs.
  

Liquidity & Capital

• At September 30, 2020, the Company’s liquid assets included $145.8 million of short-term cash and equivalents supplemented by $1.51 billion of investment securities classified as available for sale. In addition, the Company had the capacity to borrow additional funds totaling $615.0 million via unsecured lines of credit and $1.57 billion and $296.3 million, without pledging additional collateral, from the Federal Home Loan Bank of New York and Federal Reserve Bank, respectively.
• On October 19, 2020, the Company announced the resumption of its current stock repurchase plan, which has 761,030 shares of common stock remaining to be repurchased. In addition, the Company announced the approval of a new repurchase plan totaling 4,475,523 shares, or 5% of the Company’s outstanding common stock. Through September 30, 2020, the Company had repurchased 8,457,294 shares, or 91.7% of the shares authorized for repurchase under the current repurchase plan, at a cost of $111.1 million, or an average of $13.14 per share.
• For the quarter ended September 30, 2020, the Company maintained its quarterly cash dividend of $0.08 per share.
• Tangible book value per share decreased by $0.24 to $10.15 at September 30, 2020. This decrease was largely attributable to the combined effects of the July 1, 2020 adoption of CECL and the July 10, 2020 acquisition of MSB.
• At September 30, 2020 the Company’s ratio of tangible equity to tangible assets equaled 12.81%.  The regulatory capital ratios, of both the Company and the Bank, at September 30, 2020, 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.

In addition, the COVID-19 pandemic is having an adverse impact on the Company, its customers and the communities it serves. Given its ongoing and dynamic nature, it is difficult to predict the full impact of the COVID-19 outbreak on our business. The extent of such impact will depend on future developments, which are highly uncertain, including when the coronavirus can be controlled and abated and when and how the economy may be reopened or remain open. As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, we could be subject to any of the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations: the demand for our products and services may decline, making it difficult to grow assets and income; if the economy is unable to substantially reopen or remain open, and high levels of unemployment continue for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income; collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase; our allowance for loan losses may increase if borrowers experience financial difficulties, which will adversely affect our net income; the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us; as the result of the decline in the Federal Reserve Board’s target federal funds rate to near 0%, the yield on our assets may decline to a greater extent than the decline in our cost of interest-bearing liabilities, reducing our net interest margin and spread and reducing net income; due to a decline in our stock price or other factors, goodwill may become impaired and be required to be written down; and our cyber security risks are increased as the result of an increase in the number of employees working remotely.

Category: Earnings

Linked-Quarter Comparative Financial Analysis
Summary Balance Sheet	At									Variance
(Dollars and Shares in Thousands,	September 30,			June 30,			Variance			or Change
Except Per Share Data, Unaudited)	2020			2020			or Change			Pct.
Assets
Cash and cash equivalents	$	145,818		$	180,967		$	(35,149	)		-19.4	%
Securities available for sale		1,508,542			1,385,703			122,839			8.9	%
Securities held to maturity		31,576			32,556			(980	)		-3.0	%
Loans held-for-sale		20,170			20,789			(619	)		-3.0	%
Loans receivable, including yield adjustments		4,954,750			4,498,397			456,353			10.1	%
Less allowance for credit losses on loans		(64,860	)		(37,327	)		(27,533	)		73.8	%
Net loans receivable		4,889,890			4,461,070			428,820			9.6	%
Premises and equipment		61,808			57,389			4,419			7.7	%
Federal Home Loan Bank stock		55,118			58,654			(3,536	)		-6.0	%
Accrued interest receivable		20,368			17,373			2,995			17.2	%
Goodwill		210,895			210,895			-			0.0	%
Core deposit intangible		4,420			3,995			425			10.6	%
Bank owned life insurance		278,639			262,380			16,259			6.2	%
Deferred income taxes, net		33,319			25,480			7,839			30.8	%
Other real estate owned		178			178			-			0.0	%
Other assets		49,468			40,746			8,722			21.4	%
Total assets	$	7,310,209		$	6,758,175		$	552,034			8.2	%
Liabilities
Deposits	$	5,039,912		$	4,430,282		$	609,630			13.8	%
Borrowings		1,077,540			1,173,165			(95,625	)		-8.2	%
Advance payments by borrowers for taxes		17,008			16,569			439			2.6	%
Other liabilities		51,689			53,982			(2,293	)		-4.2	%
Total liabilities		6,186,149			5,673,998			512,151			9.0	%
Stockholders' Equity
Common stock		895			837			58			6.9	%
Paid-in capital		769,269			722,871			46,398			6.4	%
Retained earnings		378,134			387,911			(9,777	)		-2.5	%
Unearned ESOP shares		(28,212	)		(28,699	)		487			-1.7	%
Accumulated other comprehensive income, net		3,974			1,257			2,717			216.1	%
Total stockholders' equity		1,124,060			1,084,177			39,883			3.7	%
Total liabilities and stockholders' equity	$	7,310,209		$	6,758,175		$	552,034			8.2	%
Consolidated capital ratios
Equity to assets		15.38	%		16.04	%		-0.66	%
Tangible equity to tangible assets		12.81	%		13.29	%		-0.48	%
Share data
Outstanding shares		89,510			83,663			5,847			7.0	%
Book value per share	$	12.56		$	12.96		$	(0.40	)		-3.1	%
Tangible book value per share (1)	$	10.15		$	10.39		$	(0.24	)		-2.3	%

______________________
(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,	September 30,			June 30,			Variance			or Change
Except Per Share Data, Unaudited)	2020			2020			or Change			Pct.
Interest income
Loans	$	52,180		$	46,192		$	5,988			13.0	%
Taxable investment securities		7,336			9,769			(2,433	)		-24.9	%
Tax-exempt investment securities		454			487			(33	)		-6.8	%
Other interest-earning assets		914			903			11			1.2	%
Total Interest Income		60,884			57,351			3,533			6.2	%
Interest expense
Deposits		11,062			12,439			(1,377	)		-11.1	%
Borrowings		5,660			4,462			1,198			26.8	%
Total interest expense		16,722			16,901			(179	)		-1.1	%
Net interest income		44,162			40,450			3,712			9.2	%
Provision for credit losses on loans		4,059			174			3,885			2232.8	%
Net interest income after provision for credit losses on loans		40,103			40,276			(173	)		-0.4	%
Non-interest income
Fees and service charges		1,076			1,696			(620	)		-36.6	%
(Loss) gain on sale and call of securities		(377	)		19			(396	)		-2084.2	%
Gain on sale of loans		1,890			1,348			542			40.2	%
Income from bank owned life insurance		1,596			1,537			59			3.8	%
Electronic banking fees and charges		405			325			80			24.6	%
Bargain purchase gain		3,053			-			3,053			0.0	%
Other income		90			77			13			16.9	%
Total non-interest income		7,733			5,002			2,731			54.6	%
Non-interest expense
Salaries and employee benefits		16,977			15,527			1,450			9.3	%
Net occupancy expense of premises		3,122			2,688			434			16.1	%
Equipment and systems		3,570			2,948			622			21.1	%
Advertising and marketing		500			751			(251	)		-33.4	%
Federal deposit insurance premium		472			286			186			65.0	%
Directors' compensation		748			769			(21	)		-2.7	%
Merger-related expenses		4,349			447			3,902			872.9	%
Other expense		3,835			3,475			360			10.4	%
Total non-interest expense		33,573			26,891			6,682			24.8	%
Income before income taxes		14,263			18,387			(4,124	)		-22.4	%
Income taxes		2,884			4,698			(1,814	)		-38.6	%
Net income	$	11,379		$	13,689		$	(2,310	)		-16.9	%
Net income per common share (EPS)
Basic	$	0.13		$	0.17		$	(0.04	)
Diluted	$	0.13		$	0.17		$	(0.04	)
Dividends declared
Cash dividends declared per common share	$	0.08		$	0.08		$	-
Cash dividends declared	$	6,917		$	6,449		$	468
Dividend payout ratio		60.8	%		47.1	%		13.7	%
Weighted average number of common shares outstanding
Basic		86,008			80,678			5,330
Diluted		86,009			80,680			5,329

	For the three months ended									Variance
Average Balance Sheet Data	September 30,			June 30,			Variance			or Change
(Dollars in Thousands, Unaudited)	2020			2020			or Change			Pct.
Assets
Interest-earning assets:
Loans receivable, including loans held for sale	$	4,958,293		$	4,567,229		$	391,064			8.6	%
Taxable investment securities		1,350,511			1,369,014			(18,503	)		-1.4	%
Tax-exempt investment securities		82,603			89,263			(6,660	)		-7.5	%
Other interest-earning assets		247,543			141,964			105,579			74.4	%
Total interest-earning assets		6,638,950			6,167,470			471,480			7.6	%
Non-interest-earning assets		624,252			605,876			18,376			3.0	%
Total assets	$	7,263,202		$	6,773,346		$	489,856			7.2	%
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Deposits:
Interest-bearing demand	$	1,464,238		$	1,189,044		$	275,194			23.1	%
Savings		1,006,075			876,580			129,495			14.8	%
Certificates of deposit		1,988,689			1,879,039			109,650			5.8	%
Total interest-bearing deposits		4,459,002			3,944,663			514,339			13.0	%
Borrowings:
Federal Home Loan Bank advances		1,130,836			1,202,522			(71,686	)		-6.0	%
Other borrowings		3,568			96,770			(93,202	)		-96.3	%
Total borrowings		1,134,404			1,299,292			(164,888	)		-12.7	%
Total interest-bearing liabilities		5,593,406			5,243,955			349,451			6.7	%
Non-interest-bearing liabilities:
Non-interest-bearing deposits		479,141			380,067			99,074			26.1	%
Other non-interest-bearing liabilities		79,620			72,007			7,613			10.6	%
Total non-interest-bearing liabilities		558,761			452,074			106,687			23.6	%
Total liabilities		6,152,167			5,696,029			456,138			8.0	%
Stockholders' equity		1,111,035			1,077,317			33,718			3.1	%
Total liabilities and stockholders' equity	$	7,263,202		$	6,773,346		$	489,856			7.2	%
Average interest-earning assets to average interest-bearing liabilities		118.69	%		117.61	%		1.08	%		0.9	%

	For the three months ended
	September 30,			June 30,			Variance
Performance Ratio Highlights	2020			2020			or Change
Average yield on interest-earning assets:
Loans receivable, including loans held for sale		4.21	%		4.05	%		0.16	%
Taxable investment securities		2.17	%		2.85	%		-0.68	%
Tax-exempt investment securities (1)		2.20	%		2.18	%		0.02	%
Other interest-earning assets		1.48	%		2.54	%		-1.06	%
Total interest-earning assets		3.67	%		3.72	%		-0.05	%
Average cost of interest-bearing liabilities:
Deposits:
Interest-bearing demand		0.60	%		0.72	%		-0.12	%
Savings		0.57	%		0.81	%		-0.24	%
Certificates of deposit		1.50	%		1.82	%		-0.32	%
Total interest-bearing deposits		0.99	%		1.26	%		-0.27	%
Borrowings:
Federal Home Loan Bank advances		2.00	%		1.47	%		0.53	%
Other borrowings		0.04	%		0.13	%		-0.09	%
Total borrowings		2.00	%		1.37	%		0.63	%
Total interest-bearing liabilities		1.20	%		1.29	%		-0.09	%
Interest rate spread (2)		2.47	%		2.43	%		0.04	%
Net interest margin (3)		2.66	%		2.62	%		0.04	%
Non-interest income to average assets (annualized)		0.43	%		0.30	%		0.13	%
Non-interest expense to average assets (annualized)		1.85	%		1.59	%		0.26	%
Efficiency ratio (4)		64.69	%		59.16	%		5.53	%
Return on average assets (annualized)		0.63	%		0.81	%		-0.18	%
Return on average equity (annualized)		4.10	%		5.08	%		-0.98	%
Return on average tangible equity (annualized) (5)		5.08	%		6.35	%		-1.27	%

______________________
(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,	September 30,			June 30,			March 31,			December 31,			September 30,
Except Per Share Data, Unaudited)	2020			2020			2020			2019			2019
Assets
Cash and cash equivalents	$	145,818		$	180,967		$	59,452		$	41,796		$	129,305
Securities available for sale		1,508,542			1,385,703			1,476,344			1,402,206			1,231,691
Securities held to maturity		31,576			32,556			34,618			36,073			37,888
Loans held-for-sale		20,170			20,789			11,245			5,952			10,495
Loans receivable, including yield adjustments		4,954,750			4,498,397			4,562,512			4,492,697			4,604,738
Less allowance for credit losses on loans		(64,860	)		(37,327	)		(37,191	)		(30,937	)		(32,432	)
Net loans receivable		4,889,890			4,461,070			4,525,321			4,461,760			4,572,306
Premises and equipment		61,808			57,389			58,985			56,542			56,599
Federal Home Loan Bank stock		55,118			58,654			59,324			62,838			63,739
Accrued interest receivable		20,368			17,373			19,036			18,261			19,393
Goodwill		210,895			210,895			210,895			210,895			210,895
Core deposit intangible		4,420			3,995			4,242			4,545			4,852
Bank owned life insurance		278,639			262,380			260,843			259,312			257,735
Deferred income taxes, net		33,319			25,480			27,150			20,438			21,742
Other real estate owned		178			178			178			178			-
Other assets		49,468			40,746			26,200			29,605			24,366
Total assets	$	7,310,209		$	6,758,175		$	6,773,833		$	6,610,401		$	6,641,006
Liabilities
Deposits	$	5,039,912		$	4,430,282		$	4,253,254		$	4,188,822		$	4,197,250
Borrowings		1,077,540			1,173,165			1,384,025			1,275,049			1,281,118
Advance payments by borrowers for taxes		17,008			16,569			16,492			16,585			16,102
Other liabilities		51,689			53,982			50,390			35,375			35,747
Total liabilities		6,186,149			5,673,998			5,704,161			5,515,831			5,530,217
Stockholders' Equity
Common stock		895			837			837			851			868
Paid-in capital		769,269			722,871			721,474			737,539			758,385
Retained earnings		378,134			387,911			380,671			377,896			373,004
Unearned ESOP shares		(28,212	)		(28,699	)		(29,185	)		(29,671	)		(30,158	)
Accumulated other comprehensive income (loss), net		3,974			1,257			(4,125	)		7,955			8,690
Total stockholders' equity		1,124,060			1,084,177			1,069,672			1,094,570			1,110,789
Total liabilities and stockholders' equity	$	7,310,209		$	6,758,175		$	6,773,833		$	6,610,401		$	6,641,006
Consolidated capital ratios
Equity to assets		15.38	%		16.04	%		15.79	%		16.56	%		16.73	%
Tangible equity to tangible assets		12.81	%		13.29	%		13.03	%		13.75	%		13.93	%
Share data
Outstanding shares		89,510			83,663			83,664			85,150			86,786
Book value per share	$	12.56		$	12.96		$	12.79		$	12.85		$	12.80
Tangible book value per share (1)	$	10.15		$	10.39		$	10.21		$	10.32		$	10.31

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

	At
Supplemental Balance Sheet Highlights	September 30,			June 30,			March 31,			December 31,			September 30,
(Dollars in Thousands, Unaudited)	2020			2020			2020			2019			2019
Cash and cash equivalents
Cash and due from depository institutions	$	18,628		$	20,391		$	20,200		$	17,843		$	16,106
Interest-bearing deposits in other banks		127,190			160,576			39,252			23,953			113,199
Total cash and cash equivalents	$	145,818		$	180,967		$	59,452		$	41,796		$	129,305
Securities available for sale
Debt securities:
U.S. agency securities	$	-		$	-		$	-		$	606		$	694
Municipal and state obligations		50,877			54,054			58,151			88,057			91,050
Asset-backed securities		258,801			172,447			169,102			177,676			181,068
Collateralized loan obligations		196,398			193,788			189,565			198,324			198,549
Corporate bonds		122,276			143,639			163,715			192,074			191,241
Trust preferred securities		2,773			2,627			2,852			3,795			3,775
Debt securities		631,125			566,555			583,385			660,532			666,377
Mortgage-backed securities:
Collateralized mortgage obligations		25,770			30,903			34,671			57,839			63,594
Residential pass-through securities		625,715			561,954			607,113			360,900			202,858
Commercial pass-through securities		225,932			226,291			251,175			322,935			298,862
Mortgage-backed securities		877,417			819,148			892,959			741,674			565,314
Total securities available for sale	$	1,508,542		$	1,385,703		$	1,476,344		$	1,402,206		$	1,231,691
Securities held to maturity
Debt securities:
Municipal and state obligations	$	31,576		$	32,556		$	34,618		$	36,073		$	37,888
Debt securities		31,576			32,556			34,618			36,073			37,888
Total securities held to maturity	$	31,576		$	32,556		$	34,618		$	36,073		$	37,888
Total securities	$	1,540,118		$	1,418,259		$	1,510,962		$	1,438,279		$	1,269,579

	At
Supplemental Balance Sheet Highlights	September 30,			June 30,			March 31,			December 31,			September 30,
(Dollars in Thousands, Unaudited)	2020			2020			2020			2019			2019
Loan portfolio composition:
Commercial loans:
Multi-family	$	2,110,300		$	2,059,568		$	1,879,907		$	1,856,591		$	1,922,968
Nonresidential		1,124,330			960,853			1,202,652			1,172,213			1,230,963
Commercial business		255,888			138,788			73,922			67,887			66,889
Construction		79,178			20,961			17,880			16,221			14,637
Total commercial loans		3,569,696			3,180,170			3,174,361			3,112,912			3,235,457
One- to four-family residential mortgage loans		1,353,197			1,273,022			1,338,099			1,331,301			1,319,750
Consumer loans:
Home equity loans and lines of credit		71,540			82,920			87,909			89,916			93,304
Other consumer loans		4,136			3,991			4,604			4,908			5,209
Total consumer loans		75,676			86,911			92,513			94,824			98,513
Total loans, excluding yield adjustments		4,998,569			4,540,103			4,604,973			4,539,037			4,653,720
Unaccreted yield adjustments		(43,819	)		(41,706	)		(42,461	)		(46,340	)		(48,982	)
Loans receivable, net of yield adjustments		4,954,750			4,498,397			4,562,512			4,492,697			4,604,738
Less allowance for credit losses on loans		(64,860	)		(37,327	)		(37,191	)		(30,937	)		(32,432	)
Net loans receivable	$	4,889,890		$	4,461,070		$	4,525,321		$	4,461,760		$	4,572,306
Loan portfolio allocation:
Commercial loans:
Multi-family		42.2	%		45.3	%		40.8	%		40.9	%		41.3	%
Nonresidential		22.5	%		21.2	%		26.1	%		25.8	%		26.5	%
Commercial business		5.1	%		3.1	%		1.6	%		1.5	%		1.4	%
Construction		1.6	%		0.4	%		0.4	%		0.4	%		0.3	%
Total commercial loans		71.4	%		70.0	%		68.9	%		68.6	%		69.5	%
One- to four-family residential mortgage loans		27.1	%		28.1	%		29.1	%		29.3	%		28.4	%
Consumer loans:
Home equity loans and lines of credit		1.4	%		1.8	%		1.9	%		2.0	%		2.0	%
Other consumer loans		0.1	%		0.1	%		0.1	%		0.1	%		0.1	%
Total consumer loans		1.5	%		1.9	%		2.0	%		2.1	%		2.1	%
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	$	238		$	5		$	12		$	19		$	15
Nonaccrual loans		44,837			36,691			35,384			21,935			21,766
Total nonperforming loans		45,075			36,696			35,396			21,954			21,781
Other real estate owned		178			178			178			178			-
Total nonperforming assets	$	45,253		$	36,874		$	35,574		$	22,132		$	21,781
Nonperforming loans (% total loans)		0.91	%		0.82	%		0.78	%		0.49	%		0.47	%
Nonperforming assets (% total assets)		0.62	%		0.55	%		0.53	%		0.33	%		0.33	%
Allowance for credit losses on loans (ACL):
ACL to total loans		1.30	%		0.82	%		0.81	%		0.68	%		0.70	%
ACL to nonperforming loans		143.89	%		101.72	%		105.07	%		140.92	%		148.90	%
Net charge offs	$	67		$	38		$	16		$	30		$	60
Average net charge off rate (annualized)		0.01	%		0.00	%		0.00	%		0.00	%		0.01	%

	At
Supplemental Balance Sheet Highlights	September 30,			June 30,			March 31,			December 31,			September 30,
(Dollars in Thousands, Unaudited)	2020			2020			2020			2019			2019
Funding by type:
Deposits:
Non-interest-bearing deposits	$	487,710		$	419,138		$	321,824		$	312,098		$	322,846
Interest-bearing demand		1,561,135			1,264,151			1,134,420			1,060,434			931,188
Savings		1,025,245			906,597			848,950			829,321			800,514
Certificates of deposit		1,965,822			1,840,396			1,948,060			1,986,969			2,142,702
Interest-bearing deposits		4,552,202			4,011,144			3,931,430			3,876,724			3,874,404
Total deposits		5,039,912			4,430,282			4,253,254			4,188,822			4,197,250
Borrowings:
Federal Home Loan Bank advances		1,077,540			1,167,429			1,177,319			1,253,958			1,273,618
Overnight borrowings		-			-			200,000			15,000			-
Depositor sweep accounts		-			5,736			6,706			6,091			7,500
Total borrowings		1,077,540			1,173,165			1,384,025			1,275,049			1,281,118
Total funding	$	6,117,452		$	5,603,447		$	5,637,279		$	5,463,871		$	5,478,368
Loans as a % of deposits		97.4	%		101.2	%		106.7	%		106.7	%		109.2	%
Deposits as a % of total funding		82.4	%		79.1	%		75.4	%		76.7	%		76.6	%
Borrowings as a % of total funding		17.6	%		20.9	%		24.6	%		23.3	%		23.4	%
Funding by source:
Retail funding:
Non-interest-bearing deposits	$	487,710		$	419,138		$	321,824		$	312,098		$	322,846
Interest-bearing demand		1,561,135			1,264,151			1,134,420			1,060,434			931,188
Savings		1,025,245			906,597			848,950			829,321			800,514
Certificates of deposit		1,775,189			1,773,257			1,833,081			1,876,280			1,916,132
Total retail deposits		4,849,279			4,363,143			4,138,275			4,078,133			3,970,680
Depositor sweep accounts		-			5,736			6,706			6,091			7,500
Total retail funding		4,849,279			4,368,879			4,144,981			4,084,224			3,978,180
Wholesale funding:
Certificates of deposit (listing service)	$	57,251		$	35,760		$	33,608		$	42,119		$	57,534
Certificates of deposit (brokered)		133,382			31,379			81,371			68,570			169,036
Total wholesale deposits		190,633			67,139			114,979			110,689			226,570
FHLB advances		1,077,540			1,167,429			1,177,319			1,253,958			1,273,618
Overnight borrowings		-			-			200,000			15,000			-
Total wholesale funding		1,268,173			1,234,568			1,492,298			1,379,647			1,500,188
Total funding	$	6,117,452		$	5,603,447		$	5,637,279		$	5,463,871		$	5,478,368
Retail funding as a % of total funding		79.3	%		78.0	%		73.5	%		74.7	%		72.6	%
Wholesale funding as a % of total funding		20.7	%		22.0	%		26.5	%		25.3	%		27.4	%

Summary Income Statement	For the three months ended
(Dollars and Shares in Thousands,	September 30,			June 30,			March 31,			December 31,			September 30,
Except Per Share Data, Unaudited)	2020			2020			2020			2019			2019
Interest income
Loans	$	52,180		$	46,192		$	46,603		$	45,608		$	48,600
Taxable investment securities		7,336			9,769			10,526			9,698			9,328
Tax-exempt investment securities		454			487			547			666			693
Other interest-earning assets		914			903			1,100			1,210			1,278
Total interest income		60,884			57,351			58,776			57,182			59,899
Interest expense
Deposits		11,062			12,439			14,768			15,590			16,055
Borrowings		5,660			4,462			6,398			6,985			7,157
Total interest expense		16,722			16,901			21,166			22,575			23,212
Net interest income		44,162			40,450			37,610			34,607			36,687
Provision for (reversal of) credit losses on loans		4,059			174			6,270			(1,465	)		(782	)
Net interest income after provision for  (reversal of) credit losses on loans		40,103			40,276			31,340			36,072			37,469
Non-interest income
Fees and service charges		1,076			1,696			1,338			2,145			1,468
(Loss) gain on sale and call of securities		(377	)		19			2,234			11			(14	)
Gain on sale of loans		1,890			1,348			565			668			605
Loss on sale and write down of other real estate  owned		-			-			-			(28	)		-
Income from bank owned life insurance		1,596			1,537			1,532			1,576			1,580
Electronic banking fees and charges		405			325			309			293			318
Bargain purchase gain		3,053			-			-			-			-
Other income		90			77			223			(111	)		5
Total non-interest income		7,733			5,002			6,201			4,554			3,962
Non-interest expense
Salaries and employee benefits		16,977			15,527			15,537			15,174			15,777
Net occupancy expense of premises		3,122			2,688			2,685			3,082			2,969
Equipment and systems		3,570			2,948			2,672			3,046			3,089
Advertising and marketing		500			751			612			890			535
Federal deposit insurance premium		472			286			-			-			-
Directors' compensation		748			769			771			769			770
Merger-related expenses		4,349			447			285			219			-
Debt extinguishment expenses		-			-			2,156			-			-
Other expense		3,835			3,475			3,344			3,247			3,104
Total non-interest expense		33,573			26,891			28,062			26,427			26,244
Income before income taxes		14,263			18,387			9,479			14,199			15,187
Income taxes		2,884			4,698			225			3,547			3,817
Net income	$	11,379		$	13,689		$	9,254		$	10,652		$	11,370
Net income per common share (EPS)
Basic	$	0.13		$	0.17		$	0.11		$	0.13		$	0.13
Diluted	$	0.13		$	0.17		$	0.11		$	0.13		$	0.13
Dividends declared (1)
Cash dividends declared per common share	$	0.08		$	0.08		$	0.08		$	0.07		$	0.06
Cash dividends declared	$	6,917		$	6,449		$	6,479		$	5,760		$	5,045
Dividend payout ratio		60.8	%		47.1	%		70.0	%		54.1	%		44.4	%
Weighted average number of common shares outstanding
Basic		86,008			80,678			81,339			82,831			84,756
Diluted		86,009			80,680			81,358			82,876			84,793

	For the three months ended
Average Balance Sheet Data	September 30,			June 30,			March 31,			December 31,			September 30,
(Dollars in Thousands, Unaudited)	2020			2020			2020			2019			2019
Assets
Interest-earning assets:
Loans receivable, including loans held for sale	$	4,958,293		$	4,567,229		$	4,503,996		$	4,547,126		$	4,656,192
Taxable investment securities		1,350,511			1,369,014			1,406,973			1,244,475			1,147,698
Tax-exempt investment securities		82,603			89,263			101,771			125,187			129,339
Other interest-earning assets		247,543			141,964			104,241			117,811			125,114
Total interest-earning assets		6,638,950			6,167,470			6,116,981			6,034,599			6,058,343
Non-interest-earning assets		624,252			605,876			598,335			590,746			585,826
Total assets	$	7,263,202		$	6,773,346		$	6,715,316		$	6,625,345		$	6,644,169
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Deposits:
Interest-bearing demand	$	1,464,238		$	1,189,044		$	1,112,080		$	982,163		$	883,843
Savings		1,006,075			876,580			838,501			813,626			799,181
Certificates of deposit		1,988,689			1,879,039			2,004,785			2,063,066			2,179,333
Total interest-bearing deposits		4,459,002			3,944,663			3,955,366			3,858,855			3,862,357
Borrowings:
Federal Home Loan Bank advances		1,130,836			1,202,522			1,208,627			1,255,597			1,277,145
Other borrowings		3,568			96,770			87,072			34,733			10,012
Total borrowings		1,134,404			1,299,292			1,295,699			1,290,330			1,287,157
Total interest-bearing liabilities		5,593,406			5,243,955			5,251,065			5,149,185			5,149,514
Non-interest-bearing liabilities:
Non-interest-bearing deposits		479,141			380,067			317,530			320,161			320,641
Other non-interest-bearing liabilities		79,620			72,007			55,456			53,479			60,078
Total non-interest-bearing liabilities		558,761			452,074			372,986			373,640			380,719
Total liabilities		6,152,167			5,696,029			5,624,051			5,522,825			5,530,233
Stockholders' equity		1,111,035			1,077,317			1,091,265			1,102,520			1,113,936
Total liabilities and stockholders' equity	$	7,263,202		$	6,773,346		$	6,715,316		$	6,625,345		$	6,644,169
Average interest-earning assets to average  interest-bearing liabilities		118.69	%		117.61	%		116.49	%		117.20	%		117.65	%

	For the three months ended
	September 30,			June 30,			March 31,			December 31,			September 30,
Performance Ratio Highlights	2020			2020			2020			2019			2019
Average yield on interest-earning assets:
Loans receivable, including loans held for sale		4.21	%		4.05	%		4.14	%		4.01	%		4.18	%
Taxable investment securities		2.17	%		2.85	%		2.99	%		3.12	%		3.25	%
Tax-exempt investment securities (1)		2.20	%		2.18	%		2.15	%		2.13	%		2.14	%
Other interest-earning assets		1.48	%		2.54	%		4.22	%		4.11	%		4.09	%
Total interest-earning assets		3.67	%		3.72	%		3.84	%		3.79	%		3.95	%
Average cost of interest-bearing liabilities:
Deposits:
Interest-bearing demand		0.60	%		0.72	%		1.17	%		1.29	%		1.30	%
Savings		0.57	%		0.81	%		0.85	%		0.81	%		0.77	%
Certificates of deposit		1.50	%		1.82	%		1.94	%		2.09	%		2.14	%
Total interest-bearing deposits		0.99	%		1.26	%		1.49	%		1.62	%		1.66	%
Borrowings:
Federal Home Loan Bank advances		2.00	%		1.47	%		2.03	%		2.19	%		2.24	%
Other borrowings		0.04	%		0.13	%		1.17	%		1.36	%		0.66	%
Total borrowings		2.00	%		1.37	%		1.98	%		2.17	%		2.22	%
Total interest-bearing liabilities		1.20	%		1.29	%		1.61	%		1.75	%		1.80	%
Interest rate spread (2)		2.47	%		2.43	%		2.23	%		2.04	%		2.15	%
Net interest margin (3)		2.66	%		2.62	%		2.46	%		2.29	%		2.42	%
Non-interest income to average assets  (annualized)		0.43	%		0.30	%		0.37	%		0.27	%		0.24	%
Non-interest expense to average assets  (annualized)		1.85	%		1.59	%		1.67	%		1.60	%		1.58	%
Efficiency ratio (4)		64.69	%		59.16	%		64.05	%		67.48	%		64.56	%
Return on average assets (annualized)		0.63	%		0.81	%		0.55	%		0.64	%		0.68	%
Return on average equity (annualized)		4.10	%		5.08	%		3.39	%		3.86	%		4.08	%
Return on average tangible equity (annualized) (5)		5.08	%		6.35	%		4.23	%		4.80	%		5.06	%

______________________
(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,	September 30,			June 30,			March 31,			December 31,			September 30,
Except Per Share Data, Unaudited)	2020			2020			2020			2019			2019
Adjusted net income:
Net income (GAAP)	$	11,379		$	13,689		$	9,254		$	10,652		$	11,370
Non-recurring transactions - net of tax:
Bargain purchase gain		(3,053	)		-			-			-			-
Provision for credit losses on non-PCD loans		3,563			-			-			-			-
Merger-related expenses		3,123			426			269			183			-
Branch consolidation expenses		-			-			-			274			475
Net effect of wholesale restructuring transaction		-			-			(55	)		-			-
Reversal of income tax valuation allowance		-			-			(591	)		-			-
Tax benefit arising from adoption of the CARES Act provisions		-			-			(1,624	)		-			-
Net income (non-GAAP)	$	15,012		$	14,115		$	7,253		$	11,109		$	11,845
Calculation of pre-tax, pre-provision income:
Net income (GAAP)	$	11,379		$	13,689		$	9,254		$	10,652		$	11,370
Adjustments to net income (GAAP):
Provision for income taxes		2,884			4,698			225			3,547			3,817
Provision for (reversal of) credit losses on loans		4,059			174			6,270			(1,465	)		(782	)
Pre-tax, pre-provision income (non-GAAP)	$	18,322		$	18,561		$	15,749		$	12,734		$	14,405
Adjusted earnings per share:
Weighted average common shares - basic		86,008			80,678			81,339			82,831			84,756
Weighted average common shares - diluted		86,009			80,680			81,358			82,876			84,793
Earnings per share - basic (GAAP)	$	0.13		$	0.17		$	0.11		$	0.13		$	0.13
Earnings per share - diluted (GAAP)	$	0.13		$	0.17		$	0.11		$	0.13		$	0.13
Adjusted earnings per share - basic (non-GAAP)	$	0.17		$	0.17		$	0.09		$	0.13		$	0.14
Adjusted earnings per share - diluted (non-GAAP)	$	0.17		$	0.17		$	0.09		$	0.13		$	0.14
Adjusted return on average assets:
Total average assets	$	7,263,202		$	6,773,346		$	6,715,316		$	6,625,345		$	6,644,169
Return on average assets (GAAP)		0.63	%		0.81	%		0.55	%		0.64	%		0.68	%
Adjusted return on average assets (non-GAAP)		0.83	%		0.83	%		0.43	%		0.67	%		0.71	%
Adjusted return on average equity:
Total average equity	$	1,111,035		$	1,077,317		$	1,091,265		$	1,102,520		$	1,113,936
Return on average equity (GAAP)		4.10	%		5.08	%		3.39	%		3.86	%		4.08	%
Adjusted return on average equity (non-GAAP)		5.40	%		5.24	%		2.66	%		4.03	%		4.25	%

Reconciliation of GAAP to Non-GAAP	For the three months ended
(Dollars in Thousands,	September 30,			June 30,			March 31,			December 31,			September 30,
Except Per Share Data, Unaudited)	2020			2020			2020			2019			2019
Adjusted return on average tangible equity:
Total average equity	$	1,111,035		$	1,077,317		$	1,091,265		$	1,102,520		$	1,113,936
Less: average goodwill		(210,895	)		(210,895	)		(210,895	)		(210,895	)		(210,895	)
Less: average other intangible assets		(4,341	)		(4,124	)		(4,408	)		(4,711	)		(5,006	)
	$	895,799		$	862,298		$	875,962		$	886,914		$	898,035
Return on average tangible equity (non-GAAP)		5.08	%		6.35	%		4.23	%		4.80	%		5.06	%
Adjusted return on average tangible equity  (non-GAAP)		6.70	%		6.55	%		3.31	%		5.01	%		5.28	%

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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