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Kearny Financial Corp. Revises Second Quarter Fiscal 2024 Results

FAIRFIELD, N.J., Jan. 31, 2024 (GLOBE NEWSWIRE) -- Kearny Financial Corp. (NASDAQ GS: KRNY) (the “Company”), the holding company of Kearny Bank (the “Bank”), revised the Company’s earnings release for the quarter ended December 31, 2023 (the “Revised Earnings Release”), which was issued on January 25, 2024 (the “Original Earnings Release”), to adjust the timing of income recognition associated with a $4.8 million non-recurring increase in cash surrender value (the “enhancement fee”) associated with restructuring of its Bank-Owned Life Insurance (“BOLI”) portfolio that was originally recognized as non-interest income during the quarter.

During the quarter ended December 31, 2023, the Company recorded a $4.8 million non-recurring increase in BOLI cash surrender value and recognized the enhancement fee within non-interest income. Subsequent to the issuance of the Original Earnings Release, the Company continued to evaluate the matter and determined it was necessary to revise its accounting for the enhancement fee and derecognize the enhancement fee and the increase in BOLI cash surrender value initially recorded in the financial statements as of and for the quarter ended December 31, 2023. As a result, the $4.8 million enhancement fee will be recognized prospectively as non-interest income in future periods.

The impact to the Company’s income statement, as a result of this revision, was to increase the Company’s net loss for the quarter ended December 31, 2023 by $4.8 million, resulting in a net loss of $13.8 million, or $0.22 per diluted share.

Other than the $4.8 million revision discussed above, all of the financial results of the BOLI portfolio restructuring transaction remain the same as reported on January 25, 2024.

The Company also announced that its Board of Directors has declared a quarterly cash dividend of $0.11 per share, payable on February 21, 2024, to stockholders of record as of February 7, 2024.

Craig L. Montanaro, President and Chief Executive Officer, commented, “This quarter we executed strategies, as described in further detail below, to enhance our balance sheet, liquidity position, risk profile and asset quality metrics. In addition, we have begun to see deposit pressures ease, while run-rate non-interest expense remains very well controlled. As we look ahead, we remain laser-focused on sustainable growth in core loan and deposit relationships, while continuing to further leverage our recently implemented, best-in-class, digital banking platform.”

Strategic Actions Taken During the Quarter Ended December 31, 2023

Investment Securities Repositioning

As previously announced, the Company executed the sale of $122.2 million of its available-for-sale (“AFS”) debt securities. The sale resulted in a pre-tax net loss of $18.1 million and had a nominal impact on tangible book value, as the loss was previously reflected in capital via accumulated other comprehensive loss. Proceeds from the sale were utilized to retire higher-cost wholesale funding and to reinvest in loans yielding approximately 7.0%.

Bank-Owned Life Insurance (“BOLI”) Restructuring

The Company initiated a restructuring of its BOLI portfolio in which $103.4 million of policies yielding 2.1% were exchanged or surrendered and replaced with policies yielding 5.1%. As a result of this restructure, the Company recognized tax expense of $5.7 million and exchange charges of $573 thousand.

Resolution of Non-performing Assets (“NPAs”)

At December 31, 2023, the Company was under contract to sell a $12.0 million Other Real Estate Owned (“OREO”) asset that was subsequently sold in January 2024. Proceeds from the sale were immediately redeployed into interest earning assets and will improve forward-looking earnings thru the reduction of net OREO expenses, which totaled approximately $469 thousand for the quarter ended December 31, 2023.

In addition, the Company reclassified three non-performing commercial real estate loans to loans held-for-sale as a result of its intent to sell these assets in the near term. These loans are attributable to one borrower relationship and had a fair value of $9.7 million at December 31, 2023.

Hedging Activities

As part of the ongoing strategy to manage interest rate risk and support earnings, the Company added $500.0 million of derivative notional, comprised of $200.0 million of cash flow swaps and $300.0 million of interest rate floor spreads, all of which mature in two years or less. Collectively, these derivatives hedge a portion of the Company’s wholesale funding position and mitigate the interest rate risk associated with a modest decrease in short-term interest rates.

Balance Sheet

  • Total assets were $7.90 billion at December 31, 2023, a decrease of $77.0 million, or 1.0%, from September 30, 2023.
  • Investment securities totaled $1.29 billion at December 31, 2023, a decrease of $73.2 million, or 5.4%, from September 30, 2023. The decrease for the quarter was largely driven by the sale of available-for-sale debt securities, as discussed above.
  • Loans receivable totaled $5.75 billion at December 31, 2023, an increase of $9.6 million, or 0.2%, from September 30, 2023.
  • BOLI totaled $256.1 million at December 31, 2023, a decrease of $38.4 million, or 13.0%, from September 30, 2023. The decrease for the quarter was largely attributable to the surrender of $43.2 million of BOLI policies, as discussed above, that did not settle until January 2024.
  • Deposits were $5.32 billion at December 31, 2023, a decrease of $114.5 million, or 2.1%, from September 30, 2023. Excluding a decrease of $154.5 million in brokered certificates of deposits, deposits increased $40.0 million, or 0.8%, from September 30, 2023.
  • The aggregate amount of uninsured deposits at the Bank was $1.81 billion at December 31, 2023. Excluding collateralized deposits of state and local governments and deposits of the Bank’s wholly-owned subsidiary and holding company, the aggregate amount of uninsured deposits was $694.5 million, or 13.1% of total deposits.
  • Borrowings were $1.67 billion at December 31, 2023, an increase of $40.1 million, or 2.5%, from September 30, 2023.
  • At December 31, 2023, the Company maintained available secured borrowing capacity of $1.78 billion, of which $1.38 billion was immediately accessible via in-place collateral and $400.8 million represented the market value of unpledged securities.

Earnings

Net Interest Income and Net Interest Margin

  • Net interest margin contracted 16 basis point to 1.94% for the quarter ended December 31, 2023. The decrease for the quarter was driven by an increase in the cost of interest-bearing liabilities and a decrease in the average balance of interest-earning assets, partially offset by a higher yield on interest-earning assets.
  • For the quarter ended December 31, 2023, net interest income decreased $3.3 million to $35.8 million from $39.2 million for the quarter ended September 30, 2023. Included in net interest income for the quarters ended December 31, 2023 and September 30, 2023, respectively, was purchase accounting accretion of $640,000 and $650,000, and loan prepayment penalty income of $185,000 and $267,000.

Non-Interest Income

  • For the quarter ended December 31, 2023, non-interest income decreased $20.0 million from the quarter ended September 30, 2023 to a loss of $16.0 million. The decrease was primarily attributable to a pre-tax loss of $18.1 million related to the investment securities portfolio repositioning, as discussed above.
  • Income from BOLI decreased $504,000 to $1.2 million for the quarter ended December 31, 2023 from $1.7 million for the quarter ended September 30, 2023, due to non-recurring exchange charges related to the BOLI restructure, as discussed above.
  • Included in other income for the quarter ended December 31, 2023 were non-recurring losses of $974,000 attributable to the write-down of one OREO property, as discussed above. No such losses were recorded during the quarter ended September 30, 2023. OREO income for the quarter ended December 31, 2023 was $182,000.

Non-Interest Expense

  • For the quarter ended December 31, 2023, non-interest expense remained flat at $29.8 million compared to the quarter ended September 30, 2023.
  • Included in other expenses for the quarter ended December 31, 2023 were OREO expenses totaling $651,000.

Income Taxes

  • Income tax expense totaled $1.8 million for the quarter ended December 31, 2023 compared to $3.3 million for the quarter ended September 30, 2023. The decrease in income tax expense was due to lower pre-tax income, primarily attributable to realized losses on the sale of securities, as discussed above, partially offset by $5.7 million of tax expense related to the surrender of BOLI policies, as discussed above.

Asset Quality

  • The balance of non-performing assets decreased $1.1 million to $49.8 million, or 0.63% of total assets, at December 31, 2023, from $50.9 million, or 0.64% of total assets, at September 30, 2023. Adjusting for the sale of the OREO asset completed in January 2024, the non-performing assets decrease to $37.8 million, or 0.48% of total assets.
  • Net charge-offs totaled $4.1 million, or 0.29% of average loans, on an annualized basis, for the quarter ended December 31, 2023, compared to $2.1 million, or 0.15% of average loans, on an annualized basis, for the quarter ended September 30, 2023. The charge-offs recorded during the quarter ended December 31, 2023 were primarily driven by the reclassification of three non-performing loans to held-for-sale status, reflecting the Company’s intent to sell these assets, as discussed above. Of the $4.1 million of net charge-offs recorded during the quarter ended December 31, 2023, $1.7 million had previously been individually reserved for within the allowance for credit losses.
  • For the quarter ended December 31, 2023, the Company recorded a provision for credit losses of $2.1 million, compared to $245,000 for the quarter ended September 30, 2023. The provision for credit loss expense for the quarter ended December 31, 2023 was primarily attributable to charge-offs on the three commercial real estate loans, as discussed above.
  • The allowance for credit losses (“ACL”) was $44.9 million, or 0.78% of total loans, at December 31, 2023, compared to $46.9 million, or 0.81% of total loans, at September 30, 2023. The decrease in the ACL was largely attributable to a reduction in reserves for individually evaluated loans, resulting from the charge-offs noted above.

Capital

  • During the quarter ended December 31, 2023, the Company repurchased 687,140 shares of common stock at a cost of $4.7 million, or $6.88 per share.
  • On November 7, 2023, the Company announced the completion of its ninth stock repurchase plan which authorized the repurchase of 4,000,000 shares. Such shares were repurchased at a cost of $34.9 million, or $8.74 per share.
  • For the quarter ended December 31, 2023, book value per share increased $0.12, or 0.9%, to $13.16 while tangible book value per share increased $0.08, or 0.8%, to $9.85. These increases were largely driven by a decrease in accumulated other comprehensive loss.
  • At December 31, 2023, total stockholders’ equity included after-tax net unrealized losses on securities available for sale of $88.6 million, partially offset by after-tax unrealized gains on derivatives of $24.6 million. After-tax net unrecognized losses on securities held to maturity of $10.0 million were not reflected in total stockholders’ equity.
  • At December 31, 2023, the Company’s tangible equity to tangible assets ratio equaled 8.26% and the regulatory capital ratios of both the Company and the Bank were in excess of the levels required by federal banking regulators to be classified as “well-capitalized” under regulatory guidelines.

This earnings release should be read in conjunction with Kearny Financial Corp.’s Q2 2024 Investor Presentation, a copy of which is available through the Investor Relations link located at the bottom of the page of our website at www.kearnybank.com and via a Current Report on Form 8-K on the website of the Securities and Exchange Commission at www.sec.gov

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.

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

Category: Earnings

Linked-Quarter Comparative Financial Analysis

Kearny Financial Corp.
Consolidated Balance Sheets
(Unaudited)

(Dollars and Shares in Thousands,
Except Per Share Data)
December 31,
2023 (3)
September 30,
2023
Variance
or Change
Variance
or Change Pct.
Assets        
Cash and cash equivalents $ 73,860   $ 57,219   $ 16,641   29.1 %
Securities available for sale   1,144,175     1,215,633     (71,458 ) -5.9 %
Securities held to maturity   141,959     143,730     (1,771 ) -1.2 %
Loans held-for-sale   14,030     3,934     10,096   256.6 %
Loans receivable   5,745,629     5,736,049     9,580   0.2 %
Less: allowance for credit losses on loans   (44,867 )   (46,872 )   (2,005 ) -4.3 %
Net loans receivable   5,700,762     5,689,177     11,585   0.2 %
Premises and equipment   45,928     46,868     (940 ) -2.0 %
Federal Home Loan Bank stock   83,372     81,509     1,863   2.3 %
Accrued interest receivable   30,258     29,766     492   1.7 %
Goodwill   210,895     210,895       %
Core deposit intangible   2,189     2,323     (134 ) -5.8 %
Bank owned life insurance   256,064     294,491     (38,427 ) -13.0 %
Deferred income taxes, net   46,116     56,500     (10,384 ) -18.4 %
Other real estate owned   11,982     12,956     (974 ) -7.5 %
Other assets   136,242     129,865     6,377   4.9 %
Total assets $ 7,897,832   $ 7,974,866   $ (77,034 ) -1.0 %
         
Liabilities        
Deposits:        
Non-interest-bearing $ 584,130   $ 595,141   $ (11,011 ) -1.9 %
Interest-bearing   4,735,500     4,839,027     (103,527 ) -2.1 %
Total deposits   5,319,630     5,434,168     (114,538 ) -2.1 %
Borrowings   1,667,055     1,626,933     40,122   2.5 %
Advance payments by borrowers for taxes   16,742     16,907     (165 ) -1.0 %
Other liabilities   46,427     47,324     (897 ) -1.9 %
Total liabilities   7,049,854     7,125,332     (75,478 ) -1.1 %
         
Stockholders' Equity        
Common stock   645     652     (7 ) -1.1 %
Paid-in capital   493,297     497,269     (3,972 ) -0.8 %
Retained earnings   439,755     460,464     (20,709 ) -4.5 %
Unearned ESOP shares   (21,889 )   (22,375 )   486   2.2 %
Accumulated other comprehensive loss   (63,830 )   (86,476 )   22,646   26.2 %
Total stockholders' equity   847,978     849,534     (1,556 ) -0.2 %
Total liabilities and stockholders' equity $ 7,897,832   $ 7,974,866   $ (77,034 ) -1.0 %
         
Consolidated capital ratios        
Equity to assets   10.74 %   10.65 %   0.09 %  
Tangible equity to tangible assets(1)   8.26 %   8.20 %   0.06 %  
         
Share data        
Outstanding shares   64,445     65,132     (687 ) -1.1 %
Book value per share $ 13.16   $ 13.04   $ 0.12   0.9 %
Tangible book value per share(2) $ 9.85   $ 9.77   $ 0.08   0.8 %

_________________________
(1) Tangible equity equals total stockholders' equity reduced by goodwill and core deposit intangible assets. Tangible assets equals total assets reduced by goodwill and core deposit intangible assets.
(2) Tangible book value equals total stockholders' equity reduced by goodwill and core deposit intangible assets.
(3) December 31, 2023 amounts include the impact of the revision previously mentioned in this earnings release.
 

Kearny Financial Corp.
Consolidated Statements of Income (Loss)
(Unaudited)

(Dollars and Shares in Thousands,
Except Per Share Data)

Three Months Ended Variance
or Change
Variance
or Change Pct.
December 31,
2023 (1)
September 30,
2023
Interest income        
Loans $ 63,384   $ 62,769   $ 615   1.0 %
Taxable investment securities   16,756     16,265     491   3.0 %
Tax-exempt investment securities   84     87     (3 ) -3.4 %
Other interest-earning assets   2,401     2,047     354   17.3 %
Total interest income   82,625     81,168     1,457   1.8 %
         
Interest expense        
Deposits   30,340     27,567     2,773   10.1 %
Borrowings   16,446     14,441     2,005   13.9 %
Total interest expense   46,786     42,008     4,778   11.4 %
Net interest income   35,839     39,160     (3,321 ) -8.5 %
Provision for credit losses   2,105     245     1,860   759.2 %
Net interest income after provision for credit losses   33,734     38,915     (5,181 ) -13.3 %
         
Non-interest income        
Fees and service charges   624     748     (124 ) -16.6 %
Loss on sale and call of securities   (18,135 )       (18,135 ) %
Gain on sale of loans   104     215     (111 ) -51.6 %
Loss on sale of other real estate owned   (974 )       (974 ) %
Income from bank owned life insurance   1,162     1,666     (504 ) -30.3 %
Electronic banking fees and charges   396     367     29   7.9 %
Other income   811     1,014     (203 ) -20.0 %
Total non-interest income   (16,012 )   4,010     (20,022 ) -499.3 %
         
Non-interest expense        
Salaries and employee benefits   17,282     17,761     (479 ) -2.7 %
Net occupancy expense of premises   2,674     2,758     (84 ) -3.0 %
Equipment and systems   3,814     3,801     13   0.3 %
Advertising and marketing   301     228     73   32.0 %
Federal deposit insurance premium   1,495     1,524     (29 ) -1.9 %
Directors' compensation   393     393       %
Other expense   3,808     3,309     499   15.1 %
Total non-interest expense   29,767     29,774     (7 ) %
(Loss) income before income taxes   (12,045 )   13,151     (25,196 ) -191.6 %
Income taxes   1,782     3,309     (1,527 ) -46.1 %
Net (loss) income $ (13,827 ) $ 9,842   $ (23,669 ) -240.5 %
         
Net (loss) income per common share (EPS)        
Basic $ (0.22 ) $ 0.16   $ (0.38 )  
Diluted $ (0.22 ) $ 0.16   $ (0.38 )  
         
Dividends declared        
Cash dividends declared per common share $ 0.11   $ 0.11   $    
Cash dividends declared $ 6,882   $ 6,989   $ (107 )  
Dividend payout ratio   -49.8 %   71.0 %   -120.8 %  
         
Weighted average number of common shares outstanding        
Basic   62,299     63,014     (715 )  
Diluted   62,367     63,061     (694 )  

_________________________
(1) December 31, 2023 amounts include the impact of the revision previously mentioned in this earnings release.
   

Kearny Financial Corp.
Average Balance Sheet Data
(Unaudited)

(Dollars in Thousands)

Three Months Ended Variance
or Change
Variance
or Change Pct.
December 31,
2023 (1)
September 30,
2023
Assets        
Interest-earning assets:        
Loans receivable, including loans held for sale $ 5,726,321   $ 5,788,074   $ (61,753 ) -1.1 %
Taxable investment securities   1,509,165     1,516,393     (7,228 ) -0.5 %
Tax-exempt investment securities   15,025     15,483     (458 ) -3.0 %
Other interest-earning assets   139,740     130,829     8,911   6.8 %
Total interest-earning assets   7,390,251     7,450,779     (60,528 ) -0.8 %
Non-interest-earning assets   554,335     568,723     (14,388 ) -2.5 %
Total assets $ 7,944,586   $ 8,019,502   $ (74,916 ) -0.9 %
         
Liabilities and Stockholders' Equity        
Interest-bearing liabilities:        
Deposits:        
Interest-bearing demand $ 2,301,169   $ 2,245,831   $ 55,338   2.5 %
Savings   664,926     719,508     (54,582 ) -7.6 %
Certificates of deposit   1,824,316     1,968,512     (144,196 ) -7.3 %
Total interest-bearing deposits   4,790,411     4,933,851     (143,440 ) -2.9 %
Borrowings:        
Federal Home Loan Bank advances   1,513,497     1,386,473     127,024   9.2 %
Other borrowings   142,283     158,098     (15,815 ) -10.0 %
Total borrowings   1,655,780     1,544,571     111,209   7.2 %
Total interest-bearing liabilities   6,446,191     6,478,422     (32,231 ) -0.5 %
Non-interest-bearing liabilities:        
Non-interest-bearing deposits   597,294     612,251     (14,957 ) -2.4 %
Other non-interest-bearing liabilities   62,387     66,701     (4,314 ) -6.5 %
Total non-interest-bearing liabilities   659,681     678,952     (19,271 ) -2.8 %
Total liabilities   7,105,872     7,157,374     (51,502 ) -0.7 %
Stockholders' equity   838,714     862,128     (23,414 ) -2.7 %
Total liabilities and stockholders' equity $ 7,944,586   $ 8,019,502   $ (74,916 ) -0.9 %
         
Average interest-earning assets to average interest-bearing liabilities   114.65 %   115.01 %   -0.36 % -0.3 %

_________________________
(1) December 31, 2023 amounts include the impact of the revision previously mentioned in this earnings release.

Kearny Financial Corp.
Performance Ratio Highlights
(Unaudited)

  Three Months Ended Variance
or Change
  December 31,
2023 (6)
September 30,
2023
Average yield on interest-earning assets:      
Loans receivable, including loans held for sale 4.43 % 4.34 % 0.09 %
Taxable investment securities 4.44 % 4.29 % 0.15 %
Tax-exempt investment securities (1) 2.25 % 2.25 % %
Other interest-earning assets 6.87 % 6.26 % 0.61 %
Total interest-earning assets 4.47 % 4.36 % 0.11 %
       
Average cost of interest-bearing liabilities:      
Deposits:      
Interest-bearing demand 2.91 % 2.58 % 0.33 %
Savings 0.44 % 0.47 % -0.03 %
Certificates of deposit 2.82 % 2.49 % 0.33 %
Total interest-bearing deposits 2.53 % 2.23 % 0.30 %
Borrowings:      
Federal Home Loan Bank advances 3.82 % 3.54 % 0.28 %
Other borrowings 5.65 % 5.46 % 0.19 %
Total borrowings 3.97 % 3.74 % 0.23 %
Total interest-bearing liabilities 2.90 % 2.59 % 0.31 %
       
Interest rate spread (2) 1.57 % 1.77 % -0.20 %
Net interest margin (3) 1.94 % 2.10 % -0.16 %
       
Non-interest income to average assets (annualized) -0.81 % 0.20 % -1.01 %
Non-interest expense to average assets (annualized) 1.50 % 1.49 % 0.01 %
       
Efficiency ratio (4) 150.13 % 68.97 % 81.16 %
       
Return on average assets (annualized) -0.70 % 0.49 % -1.19 %
Return on average equity (annualized) -6.59 % 4.57 % -11.16 %
Return on average tangible equity (annualized) (5) -8.84 % 6.07 % -14.91 %

_________________________
(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.
(6) December 31, 2023 amounts include the impact of the revision previously mentioned in this earnings release.

 
Five-Quarter Financial Trend Analysis

Kearny Financial Corp.
Consolidated Balance Sheets

(Dollars and Shares in Thousands,
Except Per Share Data)
December 31,
2023 (3)
September 30,
2023
June 30,
2023
March 31,
2023
December 31,
2022
  (Unaudited) (Unaudited) (Audited) (Unaudited) (Unaudited)
Assets          
Cash and cash equivalents $ 73,860   $ 57,219   $ 70,515   $ 194,568   $ 75,660  
Securities available for sale   1,144,175     1,215,633     1,227,729     1,267,066     1,286,354  
Securities held to maturity   141,959     143,730     146,465     149,764     153,786  
Loans held-for-sale   14,030     3,934     9,591     5,401     12,940  
Loans receivable   5,745,629     5,736,049     5,829,421     5,966,325     5,984,133  
Less: allowance for credit losses on loans   (44,867 )   (46,872 )   (48,734 )   (49,122 )   (48,877 )
Net loans receivable   5,700,762     5,689,177     5,780,687     5,917,203     5,935,256  
Premises and equipment   45,928     46,868     48,309     49,589     50,953  
Federal Home Loan Bank stock   83,372     81,509     71,734     76,319     69,022  
Accrued interest receivable   30,258     29,766     28,133     28,794     27,368  
Goodwill   210,895     210,895     210,895     210,895     210,895  
Core deposit intangible   2,189     2,323     2,457     2,590     2,732  
Bank owned life insurance   256,064     294,491     292,825     291,220     289,673  
Deferred income taxes, net   46,116     56,500     51,973     53,151     51,107  
Other real estate owned   11,982     12,956     12,956     13,410     13,410  
Other assets   136,242     129,865     110,546     89,366     110,162  
Total assets $ 7,897,832   $ 7,974,866   $ 8,064,815   $ 8,349,336   $ 8,289,318  
           
Liabilities          
Deposits:          
Non-interest-bearing $ 584,130   $ 595,141   $ 609,999   $ 617,778   $ 650,950  
Interest-bearing   4,735,500     4,839,027     5,019,184     5,185,626     5,320,421  
Total deposits   5,319,630     5,434,168     5,629,183     5,803,404     5,971,371  
Borrowings   1,667,055     1,626,933     1,506,812     1,611,692     1,383,573  
Advance payments by borrowers for taxes   16,742     16,907     18,338     18,706     17,307  
Other liabilities   46,427     47,324     41,198     49,304     44,427  
Total liabilities   7,049,854     7,125,332     7,195,531     7,483,106     7,416,678  
           
Stockholders' Equity          
Common stock   645     652     659     667     674  
Paid-in capital   493,297     497,269     503,332     509,359     515,332  
Retained earnings   439,755     460,464     457,611     452,605     449,489  
Unearned ESOP shares   (21,889 )   (22,375 )   (22,862 )   (23,348 )   (23,834 )
Accumulated other comprehensive loss   (63,830 )   (86,476 )   (69,456 )   (73,053 )   (69,021 )
Total stockholders' equity   847,978     849,534     869,284     866,230     872,640  
Total liabilities and stockholders' equity $ 7,897,832   $ 7,974,866   $ 8,064,815   $ 8,349,336   $ 8,289,318  
           
Consolidated capital ratios          
Equity to assets   10.74 %   10.65 %   10.78 %   10.37 %   10.53 %
Tangible equity to tangible assets(1)   8.26 %   8.20 %   8.35 %   8.02 %   8.16 %
           
Share data          
Outstanding shares   64,445     65,132     65,864     66,680     67,388  
Book value per share $ 13.16   $ 13.04   $ 13.20   $ 12.99   $ 12.95  
Tangible book value per share(2) $ 9.85   $ 9.77   $ 9.96   $ 9.79   $ 9.78  

_________________________
(1) Tangible equity equals total stockholders' equity reduced by goodwill and core deposit intangible assets. Tangible assets equals total assets reduced by goodwill and core deposit intangible assets.
(2) Tangible book value equals total stockholders' equity reduced by goodwill and core deposit intangible assets.
(3) December 31, 2023 amounts include the impact of the revision previously mentioned in this earnings release.
 

Kearny Financial Corp.
Supplemental Balance Sheet Highlights
(Unaudited)

(Dollars in Thousands) December 31,
2023
September 30,
2023
June 30,
2023
March 31,
2023
December 31,
2022
Loan portfolio composition:          
Commercial loans:          
Multi-family mortgage $ 2,651,274   $ 2,699,151   $ 2,761,775   $ 2,835,852   $ 2,851,721  
Nonresidential mortgage   947,287     946,801     968,574     1,002,643     1,017,341  
Commercial business   144,134     149,229     146,861     162,038     177,530  
Construction   221,933     230,703     226,609     215,524     186,663  
Total commercial loans   3,964,628     4,025,884     4,103,819     4,216,057     4,233,255  
One- to four-family residential mortgage   1,746,065     1,689,051     1,700,559     1,713,343     1,719,514  
Consumer loans:          
Home equity loans   43,517     42,896     43,549     44,376     45,690  
Other consumer   2,728     2,644     2,549     2,592     2,648  
Total consumer loans   46,245     45,540     46,098     46,968     48,338  
Total loans, excluding yield adjustments   5,756,938     5,760,475     5,850,476     5,976,368     6,001,107  
Unaccreted yield adjustments   (11,309 )   (24,426 )   (21,055 )   (10,043 )   (16,974 )
Loans receivable, net of yield adjustments   5,745,629     5,736,049     5,829,421     5,966,325     5,984,133  
Less: allowance for credit losses on loans   (44,867 )   (46,872 )   (48,734 )   (49,122 )   (48,877 )
Net loans receivable $ 5,700,762   $ 5,689,177   $ 5,780,687   $ 5,917,203   $ 5,935,256  
           
Asset quality:          
Nonperforming assets:          
Accruing loans - 90 days and over past due $   $   $   $   $  
Nonaccrual loans   28,089     37,912     42,627     44,026     40,549  
Total nonperforming loans   28,089     37,912     42,627     44,026     40,549  
Nonaccrual loans held-for-sale   9,700                 8,650  
Other real estate owned   11,982     12,956     12,956     13,410     13,410  
Total nonperforming assets $ 49,771   $ 50,868   $ 55,583   $ 57,436   $ 62,609  
           
Nonperforming loans (% total loans)   0.49 %   0.66 %   0.73 %   0.74 %   0.68 %
Nonperforming assets (% total assets)   0.63 %   0.64 %   0.69 %   0.69 %   0.76 %
           
Classified loans $ 94,676   $ 98,616   $ 93,526   $ 103,461   $ 86,069  
           
Allowance for credit losses on loans (ACL):          
ACL to total loans   0.78 %   0.81 %   0.83 %   0.82 %   0.81 %
ACL to nonperforming loans   159.73 %   123.63 %   114.33 %   111.57 %   120.54 %
Net charge-offs $ 4,110   $ 2,107   $ 82   $ 206   $ 407  
Average net charge-off rate (annualized)   0.29 %   0.15 %   0.01 %   0.01 %   0.03 %
                               

Kearny Financial Corp.
Supplemental Balance Sheet Highlights
(Unaudited)

(Dollars in Thousands) December 31,
2023
September 30,
2023
June 30,
2023
March 31,
2023
December 31,
2022
Funding composition:          
Deposits:          
Non-interest-bearing deposits $ 584,130   $ 595,141   $ 609,999   $ 617,778   $ 650,950  
Interest-bearing demand   2,347,262     2,236,573     2,252,912     2,285,799     2,316,485  
Savings   646,182     689,163     748,721     811,483     901,514  
Certificates of deposit (retail)   1,283,676     1,300,382     1,377,028     1,327,343     1,354,907  
Certificates of deposit (brokered and listing service)   458,380     612,909     640,523     761,001     747,515  
Interest-bearing deposits   4,735,500     4,839,027     5,019,184     5,185,626     5,320,421  
Total deposits   5,319,630     5,434,168     5,629,183     5,803,404     5,971,371  
           
Borrowings:          
Federal Home Loan Bank advances   1,432,055     1,456,933     1,281,812     1,156,692     1,256,573  
Overnight borrowings   235,000     170,000     225,000     455,000     127,000  
Total borrowings   1,667,055     1,626,933     1,506,812     1,611,692     1,383,573  
           
Total funding $ 6,986,685   $ 7,061,101   $ 7,135,995   $ 7,415,096   $ 7,354,944  
           
Loans as a % of deposits   107.4 %   104.8 %   102.9 %   102.1 %   99.6 %
Deposits as a % of total funding   76.1 %   77.0 %   78.9 %   78.3 %   81.2 %
Borrowings as a % of total funding   23.9 %   23.0 %   21.1 %   21.7 %   18.8 %
           
Uninsured deposits:          
Uninsured deposits (reported)(1) $ 1,813,122   $ 1,734,288   $ 1,771,416   $ 1,678,051   $ 1,815,854  
Uninsured deposits (adjusted)(2) $ 694,510   $ 683,265   $ 710,377   $ 705,727   $ 794,407  

_________________________
(1) Uninsured deposits of Kearny Bank.
(2) Uninsured deposits of Kearny Bank adjusted to exclude deposits of its wholly-owned subsidiary and holding company and collateralized deposits of state and local governments.

Kearny Financial Corp.
Consolidated Statements of Income (Loss)
(Unaudited)

  Three Months Ended
(Dollars and Shares in Thousands,
Except Per Share Data)
December 31,
2023 (1)
September 30,
2023
June 30,
2023
March 31,
2023
December 31,
2022
Interest income          
Loans $ 63,384   $ 62,769   $ 62,044   $ 60,172   $ 57,996  
Taxable investment securities   16,756     16,265     15,736     15,459     13,221  
Tax-exempt investment securities   84     87     91     99     219  
Other interest-earning assets   2,401     2,047     1,821     1,441     1,005  
Total interest income   82,625     81,168     79,692     77,171     72,441  
           
Interest expense          
Deposits   30,340     27,567     26,226     22,246     18,822  
Borrowings   16,446     14,441     13,286     12,554     8,836  
Total interest expense   46,786     42,008     39,512     34,800     27,658  
Net interest income   35,839     39,160     40,180     42,371     44,783  
Provision for (reversal of) credit losses   2,105     245     (306 )   451     1,671  
Net interest income after provision for (reversal of) credit losses   33,734     38,915     40,486     41,920     43,112  
           
Non-interest income          
Fees and service charges   624     748     699     910     734  
Loss on sale and call of securities   (18,135 )               (15,227 )
Gain (loss) on sale of loans   104     215     199     (2,373 )   134  
Loss on sale of other real estate owned   (974 )       (139 )        
Income from bank owned life insurance   1,162     1,666     1,605     1,581     1,761  
Electronic banking fees and charges   396     367     399     457     397  
Other income   811     1,014     903     1,071     3,723  
Total non-interest income   (16,012 )   4,010     3,666     1,646     (8,478 )
           
Non-interest expense          
Salaries and employee benefits   17,282     17,761     17,315     18,005     19,921  
Net occupancy expense of premises   2,674     2,758     2,862     3,097     2,987  
Equipment and systems   3,814     3,801     3,511     3,537     3,867  
Advertising and marketing   301     228     231     413     731  
Federal deposit insurance premium   1,495     1,524     1,455     1,546     1,226  
Directors' compensation   393     393     345     340     339  
Other expense   3,808     3,309     3,042     3,414     3,579  
Total non-interest expense   29,767     29,774     28,761     30,352     32,650  
(Loss) income before income taxes   (12,045 )   13,151     15,391     13,214     1,984  
Income taxes   1,782     3,309     3,378     2,902     33  
Net (loss) income $ (13,827 ) $ 9,842   $ 12,013   $ 10,312   $ 1,951  
           
Net (loss) income per common share (EPS)          
Basic $ (0.22 ) $ 0.16   $ 0.19   $ 0.16   $ 0.03  
Diluted $ (0.22 ) $ 0.16   $ 0.19   $ 0.16   $ 0.03  
           
Dividends declared          
Cash dividends declared per common share $ 0.11   $ 0.11   $ 0.11   $ 0.11   $ 0.11  
Cash dividends declared $ 6,882   $ 6,989   $ 7,007   $ 7,196   $ 7,172  
Dividend payout ratio   -49.8 %   71.0 %   58.3 %   69.8 %   367.6 %
           
Weighted average number of common shares outstanding          
Basic   62,299     63,014     63,667     64,769     65,030  
Diluted   62,367     63,061     63,667     64,783     65,038  

_________________________
(1) December 31, 2023 amounts include the impact of the revision previously mentioned in this earnings release.

Kearny Financial Corp.
Average Balance Sheet Data
(Unaudited)

  Three Months Ended
(Dollars in Thousands) December 31,
2023 (1)
September 30,
2023
June 30,
2023
March 31,
2023
December 31,
2022
Assets          
Interest-earning assets:          
Loans receivable, including loans held-for-sale $ 5,726,321   $ 5,788,074   $ 5,932,541   $ 5,986,669   $ 5,839,903  
Taxable investment securities   1,509,165     1,516,393     1,529,582     1,558,222     1,527,578  
Tax-exempt investment securities   15,025     15,483     16,346     17,663     37,917  
Other interest-earning assets   139,740     130,829     128,158     131,682     114,175  
Total interest-earning assets   7,390,251     7,450,779     7,606,627     7,694,236     7,519,573  
Non-interest-earning assets   554,335     568,723     556,962     575,009     550,519  
Total assets $ 7,944,586   $ 8,019,502   $ 8,163,589   $ 8,269,245   $ 8,070,092  
           
Liabilities and Stockholders' Equity          
Interest-bearing liabilities:          
Deposits:          
Interest-bearing demand $ 2,301,169   $ 2,245,831   $ 2,321,120   $ 2,363,762   $ 2,359,977  
Savings   664,926     719,508     774,854     858,673     931,584  
Certificates of deposit   1,824,316     1,968,512     2,057,818     2,069,396     2,192,722  
Total interest-bearing deposits   4,790,411     4,933,851     5,153,792     5,291,831     5,484,283  
Borrowings:          
Federal Home Loan Bank advances   1,513,497     1,386,473     1,374,316     1,402,269     997,148  
Other borrowings   142,283     158,098     100,055     1,611      
Total borrowings   1,655,780     1,544,571     1,474,371     1,403,880     997,148  
Total interest-bearing liabilities   6,446,191     6,478,422     6,628,163     6,695,711     6,481,431  
Non-interest-bearing liabilities:          
Non-interest-bearing deposits   597,294     612,251     608,765     634,324     666,846  
Other non-interest-bearing liabilities   62,387     66,701     64,970     60,327     56,721  
Total non-interest-bearing liabilities   659,681     678,952     673,735     694,651     723,567  
Total liabilities   7,105,872     7,157,374     7,301,898     7,390,362     7,204,998  
Stockholders' equity   838,714     862,128     861,691     878,883     865,094  
Total liabilities and stockholders' equity $ 7,944,586   $ 8,019,502   $ 8,163,589   $ 8,269,245   $ 8,070,092  
           
Average interest-earning assets to average interest-bearing liabilities   114.65 %   115.01 %   114.76 %   114.91 %   116.02 %

_________________________
(1) December 31, 2023 amounts include the impact of the revision previously mentioned in this earnings release.
  

Kearny Financial Corp.
Performance Ratio Highlights

  Three Months Ended
  December 31,
2023 (6)
September 30,
2023
June 30,
2023
March 31,
2023
December 31,
2022
Average yield on interest-earning assets:          
Loans receivable, including loans held-for-sale 4.43 % 4.34 % 4.18 % 4.02 % 3.97 %
Taxable investment securities 4.44 % 4.29 % 4.12 % 3.97 % 3.46 %
Tax-exempt investment securities (1) 2.25 % 2.25 % 2.23 % 2.23 % 2.32 %
Other interest-earning assets 6.87 % 6.26 % 5.68 % 4.38 % 3.52 %
Total interest-earning assets 4.47 % 4.36 % 4.19 % 4.01 % 3.85 %
           
Average cost of interest-bearing liabilities:          
Deposits:          
Interest-bearing demand 2.91 % 2.58 % 2.38 % 2.01 % 1.63 %
Savings 0.44 % 0.47 % 0.48 % 0.41 % 0.41 %
Certificates of deposit 2.82 % 2.49 % 2.24 % 1.84 % 1.50 %
Total interest-bearing deposits 2.53 % 2.23 % 2.04 % 1.68 % 1.37 %
Borrowings:          
Federal Home Loan Bank advances 3.82 % 3.54 % 3.51 % 3.58 % 3.54 %
Other borrowings 5.65 % 5.46 % 4.89 % 5.15 % %
Total borrowings 3.97 % 3.74 % 3.60 % 3.58 % 3.54 %
Total interest-bearing liabilities 2.90 % 2.59 % 2.38 % 2.08 % 1.71 %
           
Interest rate spread (2) 1.57 % 1.77 % 1.81 % 1.93 % 2.14 %
Net interest margin (3) 1.94 % 2.10 % 2.11 % 2.20 % 2.38 %
           
Non-interest income to average assets (annualized) -0.81 % 0.20 % 0.18 % 0.08 % -0.42 %
Non-interest expense to average assets (annualized) 1.50 % 1.49 % 1.41 % 1.47 % 1.62 %
           
Efficiency ratio (4) 150.13 % 68.97 % 65.60 % 68.96 % 89.93 %
           
Return on average assets (annualized) -0.70 % 0.49 % 0.59 % 0.50 % 0.10 %
Return on average equity (annualized) -6.59 % 4.57 % 5.58 % 4.69 % 0.90 %
Return on average tangible equity (annualized) (5) -8.84 % 6.07 % 7.41 % 6.20 % 1.20 %

_________________________
(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.
(6) December 31, 2023 amounts include the impact of the revision previously mentioned in this earnings release.


The following tables provide a reconciliation of certain financial measures calculated in accordance with Generally Accepted Accounting Principles (“GAAP”) (as reported) and non-GAAP measures. 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. 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.

Kearny Financial Corp.
Reconciliation of GAAP to Non-GAAP
(Unaudited)

  Three Months Ended
(Dollars and Shares in Thousands,
Except Per Share Data)
December 31,
2023 (1)
September 30,
2023
June 30,
2023
March 31,
2023
December 31,
2022
Adjusted net income:          
Net (loss) income (GAAP) $ (13,827 ) $ 9,842   $ 12,013   $ 10,312   $ 1,951  
Non-recurring transactions - net of tax:          
Branch consolidation expenses               568      
Net effect of sale and call of securities   12,876                 10,811  
Net effect of sale of other assets                   (2,081 )
Severance expense from workforce realignment                   538  
Net effect of bank-owned life insurance restructure   6,286                  
Adjusted net income $ 5,335   $ 9,842   $ 12,013   $ 10,880   $ 11,219  
           
Calculation of pre-tax, pre-provision net revenue:          
Net (loss) income (GAAP) $ (13,827 ) $ 9,842   $ 12,013   $ 10,312   $ 1,951  
Adjustments to net income (GAAP):          
Provision for income taxes   1,782     3,309     3,378     2,902     33  
Provision for (reversal of) credit losses   2,105     245     (306 )   451     1,671  
Pre-tax, pre-provision net revenue (non-GAAP) $ (9,940 ) $ 13,396   $ 15,085   $ 13,665   $ 3,655  
           
Adjusted earnings per share:          
Weighted average common shares - basic   62,299     63,014     63,667     64,769     65,030  
Weighted average common shares - diluted   62,367     63,061     63,667     64,783     65,038  
           
Earnings per share - basic (GAAP) $ (0.22 ) $ 0.16   $ 0.19   $ 0.16   $ 0.03  
Earnings per share - diluted (GAAP) $ (0.22 ) $ 0.16   $ 0.19   $ 0.16   $ 0.03  
           
Adjusted earnings per share - basic (non-GAAP) $ 0.09   $ 0.16   $ 0.19   $ 0.17   $ 0.17  
Adjusted earnings per share - diluted (non-GAAP) $ 0.09   $ 0.16   $ 0.19   $ 0.17   $ 0.17  
           
Pre-tax, pre-provision net revenue per share:          
Pre-tax, pre-provision net revenue per share - basic
(non-GAAP)
$ (0.16 ) $ 0.21   $ 0.24   $ 0.21   $ 0.06  
Pre-tax, pre-provision net revenue per share - diluted
(non-GAAP)
$ (0.16 ) $ 0.21   $ 0.24   $ 0.21   $ 0.06  
           
Adjusted return on average assets:          
Total average assets $ 7,944,586   $ 8,019,502   $ 8,163,589   $ 8,269,245   $ 8,070,092  
           
Return on average assets (GAAP)   -0.70 %   0.49 %   0.59 %   0.50 %   0.10 %
Adjusted return on average assets (non-GAAP)   0.27 %   0.49 %   0.59 %   0.53 %   0.56 %
           
Adjusted return on average equity:          
Total average equity $ 838,714   $ 862,128   $ 861,691   $ 878,883   $ 865,094  
           
Return on average equity (GAAP)   -6.59 %   4.57 %   5.58 %   4.69 %   0.90 %
Adjusted return on average equity (non-GAAP)   2.54 %   4.57 %   5.58 %   4.95 %   5.19 %

_________________________
(1) December 31, 2023 amounts include the impact of the revision previously mentioned in this earnings release.

Kearny Financial Corp.
Reconciliation of GAAP to Non-GAAP
(Unaudited)

  Three Months Ended
(Dollars and Shares in Thousands,
Except Per Share Data)
December 31,
2023 (1)
September 30,
2023
June 30,
2023
March 31,
2023
December 31,
2022
Adjusted return on average tangible equity:          
Total average equity $ 838,714   $ 862,128   $ 861,691   $ 878,883   $ 865,094  
Less: average goodwill   (210,895 )   (210,895 )   (210,895 )   (210,895 )   (210,895 )
Less: average other intangible assets   (2,277 )   (2,411 )   (2,544 )   (2,683 )   (2,826 )
Total average tangible equity $ 625,542   $ 648,822   $ 648,252   $ 665,305   $ 651,373  
           
Return on average tangible equity (non-GAAP)   -8.84 %   6.07 %   7.41 %   6.20 %   1.20 %
Adjusted return on average tangible equity (non-GAAP)   3.41 %   6.07 %   7.41 %   6.54 %   6.89 %
           
Adjusted non-interest expense ratio:          
Non-interest expense (GAAP) $ 29,767   $ 29,774   $ 28,761   $ 30,352   $ 32,650  
Non-recurring transactions:          
Branch consolidation expenses               (800 )    
Severance expense from workforce realignment                   (757 )
Non-interest expense (non-GAAP) $ 29,767   $ 29,774   $ 28,761   $ 29,552   $ 31,893  
           
Non-interest expense ratio (GAAP)   1.50 %   1.49 %   1.41 %   1.47 %   1.62 %
Adjusted non-interest expense ratio (non-GAAP)   1.50 %   1.49 %   1.41 %   1.43 %   1.58 %
           
Adjusted efficiency ratio:          
Non-interest expense (non-GAAP) $ 29,767   $ 29,774   $ 28,761   $ 29,552   $ 31,893  
           
Net interest income (GAAP) $ 35,839   $ 39,160   $ 40,180   $ 42,371   $ 44,783  
Total non-interest income (GAAP)   (16,012 )   4,010     3,666     1,646     (8,478 )
Non-recurring transactions:          
Net effect of sale and call of securities   18,135                 15,227  
Net effect of sale of other assets                   (2,931 )
Net effect of bank-owned life insurance restructure   573                  
Total revenue (non-GAAP) $ 38,535   $ 43,170   $ 43,846   $ 44,017   $ 48,601  
           
Efficiency ratio (GAAP)   150.13 %   68.97 %   65.60 %   68.96 %   89.93 %
Adjusted efficiency ratio (non-GAAP)   77.25 %   68.97 %   65.60 %   67.14 %   65.62 %

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(1) December 31, 2023 amounts include the impact of the revision previously mentioned in this earnings release.


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