Kearny Financial Corp. Announces First Quarter Fiscal 2023 Results and Declaration of Cash Dividend

FAIRFIELD, N.J., Oct. 27, 2022 (GLOBE NEWSWIRE) -- Kearny Financial Corp. (NASDAQ GS: KRNY) (the "Company"), the holding company of Kearny Bank (the "Bank"), reported net income for the quarter ended September 30, 2022 of $16.5 million, or $0.25 per diluted share, compared to $11.4 million, or $0.17 per diluted share, for the quarter ended June 30, 2022.

The Company also announced that its Board of Directors has declared a quarterly cash dividend of $0.11 per share, payable on November 23, 2022 to stockholders of record as of November 9, 2022.

Craig L. Montanaro, President and Chief Executive Officer, commented, "Despite pressure on net interest margin, attributable to the rapidly rising interest rate environment, we delivered impressive results for the quarter. Growth in loans and deposits remained strong, expenses were well controlled and asset quality metrics notably improved. Over the past two quarters, our loan portfolio has grown at a 26% annualized rate, driven by strong origination volume and slowing prepayment activity. Looking ahead to the remainder of fiscal 2023, we expect loan growth to moderate, as we have right-sized our loan pipeline and are focusing our origination efforts on those loan segments which provide the greatest risk-adjusted returns."

Mr. Montanaro further noted, "In recognition of the risks presented by the prevailing economic and interest rate environment we continue to position our balance sheet to support net interest income, and margin, in a variety of interest rate scenarios. To that end we have, since the start of this fiscal year, added $600 million of derivative notional and made targeted adjustments to our wholesale balance sheet designed to reduce risk and support future earnings."

Balance Sheet

• Total assets increased $169.7 million, or 2.2%, to $7.89 billion at September 30, 2022, from $7.72 billion at June 30, 2022.
• Loans receivable increased $238.5 million, or 4.4%, to $5.66 billion at September 30, 2022, from $5.42 billion at June 30, 2022.
• Deposits increased $246.0 million, or 4.2%, to $6.11 billion at September 30, 2022, from $5.86 billion at June 30, 2022. Non-interest-bearing deposits increased $29.5 million, or 4.5%, for the quarter ended September 30, 2022.
• Investment securities decreased $83.3 million to $1.38 billion, or 17.5% of total assets, at September 30, 2022, from $1.46 billion, or 18.9% of total assets, at June 30, 2022.
• Borrowings decreased $49.9 million to $851.5 million, or 10.8% of total assets, at September 30, 2022, from $901.3 million, or 11.7% of total assets, at June 30, 2022.
  
  

Earnings

Performance Highlights

• Return on average assets was 0.85% for the quarter ended September 30, 2022 compared to 0.61% for the quarter ended June 30, 2022.
• Return on average equity was 7.38% and 4.92% for the quarters ended September 30, 2022 and June 30, 2022, respectively. Return on average tangible equity was 9.70% and 6.40% for those same comparative periods.

Net Interest Income and Net Interest Margin

• Net interest margin contracted 23 basis points to 2.69% for the quarter ended September 30, 2022, from 2.92% for the quarter ended June 30, 2022. The decrease was due largely to an increase in the cost of interest-bearing liabilities, partially offset by increases in the average balance and yield on interest-earning assets.
• Net interest income decreased $2.1 million to $48.5 million for the quarter ended September 30, 2022, from $50.6 million for the quarter ended June 30, 2022. Included in net interest income for the quarters ended September 30, 2022 and June 30, 2022, respectively, was purchase accounting accretion of $1.8 million and $1.6 million, and loan prepayment penalty income of $441,000 and $869,000.

Non-Interest Income

• Non-interest income increased $3.1 million to $5.9 million for the quarter ended September 30, 2022, from $2.8 million for the quarter ended June 30, 2022. The increase was largely attributable to higher income from bank owned life insurance that resulted from $2.1 million in payouts on life insurance policies.
• Non-interest income included no gain or loss on the sale of securities for the quarter ended September 30, 2022 compared to a loss of $563,000 on the sale of securities for the quarter ended June 30, 2022.

Non-Interest Expense

• Non-interest expense decreased $1.6 million to $32.0 million for the quarter ended September 30, 2022, from $33.6 million for the quarter ended June 30, 2022. The decrease was primarily attributable to $1.0 million of non-recurring expenses recorded in the prior quarter.
• The provision for credit losses on unfunded commitments, included in other expense, decreased $387,000 for the quarter ended September 30, 2022.
• The efficiency and non-interest expense ratios were 58.75% and 1.65%, respectively, for the quarter ended September 30, 2022, as compared to 62.93% and 1.79%, respectively, for the quarter ended June 30, 2022.
  
  

Income Taxes

• Income tax expense totaled $5.3 million for the quarter ended September 30, 2022 compared to $4.2 million for the quarter ended June 30, 2022, resulting in an effective tax rate of 24.1% and 27.0%, respectively. The decrease in the effective tax rate primarily resulted from the payouts on life insurance policies, noted above, which were not taxable.
  
  

Asset Quality

• The balance of non-performing assets decreased $14.8 million to $77.4 million, or 0.98% of total assets, at September 30, 2022, from $92.2 million, or 1.19% of total assets, at June 30, 2022. The decrease in non-performing assets was primarily attributable to the sale of two non-accrual loans that were recorded as held-for-sale at June 30, 2022.
• Net charge-offs totaled $115,000, or 0.01% of average loans, on an annualized basis, for the quarter ended September 30, 2022, compared to $1.0 million, or 0.08% of average loans, on an annualized basis, for the quarter ended June 30, 2022.
• For the quarter ended September 30, 2022, the Company recorded a provision for credit losses of $670,000, compared to $4.2 million for the quarter ended June 30, 2022. The provision for the quarter ended September 30, 2022 was largely driven by loan growth of $238.5 million, partially offset by a reduction in the expected life of the loan portfolio.
• The allowance for credit losses was $47.6 million, or 0.84% of total loans, at September 30, 2022, compared to $47.1 million, or 0.87% of total loans, at June 30, 2022.

Capital

• For the quarter ended September 30, 2022, book value per share decreased $0.14, or 1.1%, to $12.88 and tangible book value per share decreased $0.17, or 1.7%, to $9.73.
• On August 1, 2022, the Company announced the authorization of a new stock repurchase plan, which authorized the repurchase of up to 4,000,000 shares. During the quarter ended September 30, 2022, the Company repurchased 759,806 shares of common stock at a cost of $8.7 million, or $11.44 per share.
• At September 30, 2022, the Company's tangible equity to tangible assets ratio equaled 8.61% 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.
  
  

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 has had, and may continue to have, an adverse impact on the Company, its clients and the communities it serves. Given its dynamic nature, it is difficult to predict the full impact of the COVID-19 pandemic on our business.

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

(Dollars and Shares in Thousands, Except Per Share Data)	September 30, 2022			June 30, 2022			Variance or Change			Variance or Change Pct.
	(Unaudited)			(Audited)
Assets
Cash and cash equivalents	$	96,076		$	101,615		$	(5,539	)	-5.5	%
Securities available for sale		1,263,176			1,344,093			(80,917	)	-6.0	%
Securities held to maturity		115,943			118,291			(2,348	)	-2.0	%
Loans held-for-sale		12,936			28,874			(15,938	)	-55.2	%
Loans receivable		5,656,370			5,417,845			238,525		4.4	%
Less: allowance for credit losses on loans		(47,613	)		(47,058	)		555		1.2	%
Net loans receivable		5,608,757			5,370,787			237,970		4.4	%
Premises and equipment		52,642			53,281			(639	)	-1.2	%
Federal Home Loan Bank stock		44,957			47,144			(2,187	)	-4.6	%
Accrued interest receivable		23,817			20,466			3,351		16.4	%
Goodwill		210,895			210,895			—		—	%
Core deposit intangible		2,876			3,020			(144	)	-4.8	%
Bank owned life insurance		289,690			289,177			513		0.2	%
Deferred income taxes, net		54,278			49,350			4,928		10.0	%
Other real estate owned		178			178			—		—	%
Other assets		113,369			82,712			30,657		37.1	%
Total assets	$	7,889,590		$	7,719,883		$	169,707		2.2	%
Liabilities
Deposits:
Non-interest-bearing	$	683,406		$	653,899		$	29,507		4.5	%
Interest-bearing		5,424,872			5,208,357			216,515		4.2	%
Total deposits		6,108,278			5,862,256			246,022		4.2	%
Borrowings		851,454			901,337			(49,883	)	-5.5	%
Advance payments by borrowers for taxes		16,555			16,746			(191	)	-1.1	%
Other liabilities		38,329			45,544			(7,215	)	-15.8	%
Total liabilities		7,014,616			6,825,883			188,733		2.8	%
Stockholders' Equity
Common stock		680			687			(7	)	-1.0	%
Paid-in capital		520,245			528,396			(8,151	)	-1.5	%
Retained earnings		454,710			445,451			9,259		2.1	%
Unearned ESOP shares		(24,321	)		(24,807	)		486		2.0	%
Accumulated other comprehensive loss		(76,340	)		(55,727	)		(20,613	)	-37.0	%
Total stockholders' equity		874,974			894,000			(19,026	)	-2.1	%
Total liabilities and stockholders' equity	$	7,889,590		$	7,719,883		$	169,707		2.2	%
Consolidated capital ratios
Equity to assets		11.09	%		11.58	%		-0.49	%
Tangible equity to tangible assets(1)		8.61	%		9.06	%		-0.45	%
Share data
Outstanding shares		67,938			68,666			(728	)	-1.1	%
Book value per share	$	12.88		$	13.02		$	(0.14	)	-1.1	%
Tangible book value per share(2)	$	9.73		$	9.90		$	(0.17	)	-1.7	%

_________________________

(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.

Kearny Financial Corp.

Consolidated Statements of Income

(Unaudited)

(Dollars and Shares in Thousands, Except Per Share Data)	Three Months Ended						Variance or Change			Variance or Change Pct.
	September 30, 2022			June 30, 2022
Interest income
Loans	$	52,935		$	48,869		$	4,066		8.3	%
Taxable investment securities		10,439			8,915			1,524		17.1	%
Tax-exempt investment securities		285			297			(12	)	-4.0	%
Other interest-earning assets		761			472			289		61.2	%
Total interest income		64,420			58,553			5,867		10.0	%
Interest expense
Deposits		10,869			3,915			6,954		177.6	%
Borrowings		5,020			4,039			981		24.3	%
Total interest expense		15,889			7,954			7,935		99.8	%
Net interest income		48,531			50,599			(2,068	)	-4.1	%
Provision for credit losses		670			4,222			(3,552	)	-84.1	%
Net interest income after provision for credit losses		47,861			46,377			1,484		3.2	%
Non-interest income
Fees and service charges		763			658			105		16.0	%
Loss on sale and call of securities		—			(563	)		563		100.0	%
Gain on sale of loans		395			187			208		111.2	%
Loss on sale of other real estate owned		—			(9	)		9		100.0	%
Income from bank owned life insurance		3,698			1,533			2,165		141.2	%
Electronic banking fees and charges		506			366			140		38.3	%
Other income		555			638			(83	)	-13.0	%
Total non-interest income		5,917			2,810			3,107		110.6	%
Non-interest expense
Salaries and employee benefits		20,348			20,367			(19	)	-0.1	%
Net occupancy expense of premises		3,090			3,188			(98	)	-3.1	%
Equipment and systems		3,662			4,516			(854	)	-18.9	%
Advertising and marketing		747			703			44		6.3	%
Federal deposit insurance premium		906			762			144		18.9	%
Directors' compensation		340			340			—		—	%
Other expense		2,895			3,736			(841	)	-22.5	%
Total non-interest expense		31,988			33,612			(1,624	)	-4.8	%
Income before income taxes		21,790			15,575			6,215		39.9	%
Income taxes		5,255			4,205			1,050		25.0	%
Net income	$	16,535		$	11,370		$	5,165		45.4	%
Net income per common share (EPS)
Basic	$	0.25		$	0.17		$	0.08
Diluted	$	0.25		$	0.17		$	0.08
Dividends declared
Cash dividends declared per common share	$	0.11		$	0.11		$	—
Cash dividends declared	$	7,276		$	7,441		$	(165	)
Dividend payout ratio		44.0	%		65.4	%	(21.4)%
Weighted average number of common shares outstanding
Basic		65,737			67,240			(1,503	)
Diluted		65,756			67,276			(1,520	)

Kearny Financial Corp.

Average Balance Sheet Data

(Unaudited)

(Dollars in Thousands)	Three Months Ended						Variance or Change			Variance or Change Pct.
	September 30, 2022			June 30, 2022
Assets
Interest-earning assets:
Loans receivable, including loans held for sale	$	5,553,996		$	5,181,983		$	372,013		7.2	%
Taxable investment securities		1,516,974			1,608,372			(91,398	)	-5.7	%
Tax-exempt investment securities		48,973			51,672			(2,699	)	-5.2	%
Other interest-earning assets		88,038			87,990			48		0.1	%
Total interest-earning assets		7,207,981			6,930,017			277,964		4.0	%
Non-interest-earning assets		570,225			564,734			5,491		1.0	%
Total assets	$	7,778,206		$	7,494,751		$	283,455		3.8	%
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Deposits:
Interest-bearing demand	$	2,354,340		$	2,155,946		$	198,394		9.2	%
Savings		1,019,343			1,077,631			(58,288	)	-5.4	%
Certificates of deposit		2,014,922			1,701,725			313,197		18.4	%
Total interest-bearing deposits		5,388,605			4,935,302			453,303		9.2	%
Borrowings:
Federal Home Loan Bank advances		642,399			752,579			(110,180	)	-14.6	%
Other borrowings		127,456			185,901			(58,445	)	-31.4	%
Total borrowings		769,855			938,480			(168,625	)	-18.0	%
Total interest-bearing liabilities		6,158,460			5,873,782			284,678		4.8	%
Non-interest-bearing liabilities:
Non-interest-bearing deposits		667,624			640,200			27,424		4.3	%
Other non-interest-bearing liabilities		56,431			56,636			(205	)	-0.4	%
Total non-interest-bearing liabilities		724,055			696,836			27,219		3.9	%
Total liabilities		6,882,515			6,570,618			311,897		4.7	%
Stockholders' equity		895,691			924,133			(28,442	)	-3.1	%
Total liabilities and stockholders' equity	$	7,778,206		$	7,494,751		$	283,455		3.8	%
Average interest-earning assets to average interest-bearing liabilities		117.04	%		117.98	%		-0.94	%	-0.8	%

Kearny Financial Corp.

Performance Ratio Highlights

(Unaudited)

	Three Months Ended				Variance or Change
	September 30, 2022		June 30, 2022
Average yield on interest-earning assets:
Loans receivable, including loans held for sale	3.81	%	3.77	%	0.04	%
Taxable investment securities	2.75	%	2.22	%	0.53	%
Tax-exempt investment securities (1)	2.33	%	2.30	%	0.03	%
Other interest-earning assets	3.46	%	2.15	%	1.31	%
Total interest-earning assets	3.57	%	3.38	%	0.19	%
Average cost of interest-bearing liabilities:
Deposits:
Interest-bearing demand	0.92	%	0.31	%	0.61	%
Savings	0.23	%	0.11	%	0.12	%
Certificates of deposit	0.97	%	0.46	%	0.51	%
Total interest-bearing deposits	0.81	%	0.32	%	0.49	%
Borrowings:
Federal Home Loan Bank advances	2.68	%	1.96	%	0.72	%
Other borrowings	2.26	%	0.77	%	1.49	%
Total borrowings	2.61	%	1.72	%	0.89	%
Total interest-bearing liabilities	1.03	%	0.54	%	0.49	%
Interest rate spread (2)	2.54	%	2.84	%	-0.30	%
Net interest margin (3)	2.69	%	2.92	%	-0.23	%
Non-interest income to average assets (annualized)	0.30	%	0.15	%	0.15	%
Non-interest expense to average assets (annualized)	1.65	%	1.79	%	-0.14	%
Efficiency ratio (4)	58.75	%	62.93	%	-4.18	%
Return on average assets (annualized)	0.85	%	0.61	%	0.24	%
Return on average equity (annualized)	7.38	%	4.92	%	2.46	%
Return on average tangible equity (annualized) (5)	9.70	%	6.40	%	3.30	%

_________________________

(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

Kearny Financial Corp.

Consolidated Balance Sheets

(Dollars and Shares in Thousands, Except Per Share Data)	September 30, 2022			June 30, 2022			March 31, 2022			December 31, 2021			September 30, 2021
	(Unaudited)			(Audited)			(Unaudited)			(Unaudited)			(Unaudited)
Assets
Cash and cash equivalents	$	96,076		$	101,615		$	62,379		$	60,452		$	54,070
Securities available for sale		1,263,176			1,344,093			1,526,086			1,591,066			1,651,156
Securities held to maturity		115,943			118,291			121,853			53,142			37,497
Loans held-for-sale		12,936			28,874			2,822			12,549			12,884
Loans receivable		5,656,370			5,417,845			5,003,201			4,826,404			4,789,339
Less: allowance for credit losses on loans		(47,613	)		(47,058	)		(43,860	)		(48,216	)		(51,785	)
Net loans receivable		5,608,757			5,370,787			4,959,341			4,778,188			4,737,554
Premises and equipment		52,642			53,281			53,727			54,067			55,236
Federal Home Loan Bank stock		44,957			47,144			30,997			36,622			36,615
Accrued interest receivable		23,817			20,466			19,517			18,495			19,541
Goodwill		210,895			210,895			210,895			210,895			210,895
Core deposit intangible		2,876			3,020			3,166			3,344			3,524
Bank owned life insurance		289,690			289,177			287,644			286,433			284,871
Deferred income taxes, net		54,278			49,350			34,349			25,709			27,771
Other real estate owned		178			178			401			658			178
Other assets		113,369			82,712			76,714			54,603			51,896
Total assets	$	7,889,590		$	7,719,883		$	7,389,891		$	7,186,223		$	7,183,688
Liabilities
Deposits:
Non-interest-bearing	$	683,406		$	653,899		$	621,954		$	604,805		$	631,344
Interest-bearing		5,424,872			5,208,357			4,906,708			4,849,220			4,763,795
Total deposits		6,108,278			5,862,256			5,528,662			5,454,025			5,395,139
Borrowings		851,454			901,337			851,220			686,105			720,990
Advance payments by borrowers for taxes		16,555			16,746			16,979			16,772			16,222
Other liabilities		38,329			45,544			37,861			33,851			36,914
Total liabilities		7,014,616			6,825,883			6,434,722			6,190,753			6,169,265
Stockholders' Equity
Common stock		680			687			714			735			758
Paid-in capital		520,245			528,396			561,176			587,392			616,894
Retained earnings		454,710			445,451			441,522			431,549			420,701
Unearned ESOP shares		(24,321	)		(24,807	)		(25,294	)		(25,780	)		(26,266	)
Accumulated other comprehensive (loss) income		(76,340	)		(55,727	)		(22,949	)		1,574			2,336
Total stockholders' equity		874,974			894,000			955,169			995,470			1,014,423
Total liabilities and stockholders' equity	$	7,889,590		$	7,719,883		$	7,389,891		$	7,186,223		$	7,183,688
Consolidated capital ratios
Equity to assets		11.09	%		11.58	%		12.93	%		13.85	%		14.12	%
Tangible equity to tangible assets(1)		8.61	%		9.06	%		10.33	%		11.21	%		11.48	%
Share data
Outstanding shares		67,938			68,666			71,424			73,453			75,800
Book value per share	$	12.88		$	13.02		$	13.37		$	13.55		$	13.38
Tangible book value per share(2)	$	9.73		$	9.90		$	10.38		$	10.64		$	10.55

_________________________

(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.

Kearny Financial Corp.

Supplemental Balance Sheet Highlights

(Unaudited)

(Dollars in Thousands)	September 30, 2022			June 30, 2022			March 31, 2022			December 31, 2021			September 30, 2021
Loan portfolio composition:
Commercial loans:
Multi-family mortgage	$	2,570,297		$	2,409,090		$	2,076,003		$	2,007,431		$	1,978,681
Nonresidential mortgage		1,040,688			1,019,838			1,085,988			1,026,447			1,023,391
Commercial business		186,361			176,807			169,551			180,429			169,392
Construction		166,052			140,131			121,137			110,703			112,226
Total commercial loans		3,963,398			3,745,866			3,452,679			3,325,010			3,283,690
One- to four-family residential mortgage		1,666,730			1,645,816			1,527,980			1,477,267			1,483,106
Consumer loans:
Home equity loans		43,269			42,028			41,501			43,934			44,912
Other consumer		2,869			2,866			2,755			3,040			3,020
Total consumer loans		46,138			44,894			44,256			46,974			47,932
Total loans, excluding yield adjustments		5,676,266			5,436,576			5,024,915			4,849,251			4,814,728
Unaccreted yield adjustments		(19,896	)		(18,731	)		(21,714	)		(22,847	)		(25,389	)
Loans receivable, net of yield adjustments		5,656,370			5,417,845			5,003,201			4,826,404			4,789,339
Less: allowance for credit losses on loans		(47,613	)		(47,058	)		(43,860	)		(48,216	)		(51,785	)
Net loans receivable	$	5,608,757		$	5,370,787		$	4,959,341		$	4,778,188		$	4,737,554
Asset quality:
Nonperforming assets:
Accruing loans - 90 days and over past due	$	—		$	—		$	—		$	—		$	—
Nonaccrual loans		68,574			70,321			80,595			72,138			72,945
Total nonperforming loans		68,574			70,321			80,595			72,138			72,945
Nonaccrual loans held-for-sale		8,650			21,745			—			—			—
Other real estate owned		178			178			401			658			178
Total nonperforming assets	$	77,402		$	92,244		$	80,996		$	72,796		$	73,123
Nonperforming loans (% total loans)		1.21	%		1.30	%		1.61	%		1.49	%		1.52	%
Nonperforming assets (% total assets)		0.98	%		1.19	%		1.10	%		1.01	%		1.02	%
Classified loans	$	92,610		$	94,555		$	163,621		$	162,174		$	170,449
Allowance for credit losses on loans (ACL):
ACL to total loans		0.84	%		0.87	%		0.87	%		0.99	%		1.08	%
ACL to nonperforming loans		69.43	%		66.92	%		54.42	%		66.84	%		70.99	%
Net charge-offs	$	115		$	1,024		$	436		$	1,149		$	980
Average net charge-off rate (annualized)		0.01	%		0.08	%		0.04	%		0.10	%		0.08	%
Funding composition:
Deposits:
Non-interest-bearing deposits	$	683,406		$	653,899		$	621,954		$	604,805		$	631,344
Interest-bearing demand		2,382,411			2,265,597			2,154,488			2,106,693			1,937,661
Savings		982,916			1,053,198			1,088,974			1,087,740			1,089,699
Certificates of deposit (retail)		1,263,124			1,116,035			1,122,228			1,184,530			1,264,016
Certificates of deposit (brokered and listing service)		796,421			773,527			541,018			470,257			472,419
Interest-bearing deposits		5,424,872			5,208,357			4,906,708			4,849,220			4,763,795
Total deposits		6,108,278			5,862,256			5,528,662			5,454,025			5,395,139
Borrowings:
Federal Home Loan Bank advances		796,454			651,337			541,220			666,105			665,990
Overnight borrowings		55,000			250,000			310,000			20,000			55,000
Total borrowings		851,454			901,337			851,220			686,105			720,990
Total funding	$	6,959,732		$	6,763,593		$	6,379,882		$	6,140,130		$	6,116,129
Loans as a % of deposits		92.0	%		92.1	%		89.8	%		87.8	%		88.1	%
Deposits as a % of total funding		87.8	%		86.7	%		86.7	%		88.8	%		88.2	%
Borrowings as a % of total funding		12.2	%		13.3	%		13.3	%		11.2	%		11.8	%

Kearny Financial Corp.

Consolidated Statements of Income

(Unaudited)

	Three Months Ended
(Dollars and Shares in Thousands, Except Per Share Data)	September 30, 2022			June 30, 2022			March 31, 2022			December 31, 2021			September 30, 2021
Interest income
Loans	$	52,935		$	48,869		$	45,846		$	47,575		$	48,230
Taxable investment securities		10,439			8,915			8,024			7,595			8,212
Tax-exempt investment securities		285			297			316			327			333
Other interest-earning assets		761			472			415			415			431
Total interest income		64,420			58,553			54,601			55,912			57,206
Interest expense
Deposits		10,869			3,915			3,565			3,663			4,065
Borrowings		5,020			4,039			3,309			3,562			3,551
Total interest expense		15,889			7,954			6,874			7,225			7,616
Net interest income		48,531			50,599			47,727			48,687			49,590
Provision for (reversal of) credit losses		670			4,222			(3,920	)		(2,420	)		(5,400	)
Net interest income after provision for (reversal of) credit losses		47,861			46,377			51,647			51,107			54,990
Non-interest income
Fees and service charges		763			658			617			698			607
(Loss) gain on sale and call of securities		—			(563	)		3			—			1
Gain on sale of loans		395			187			376			970			1,006
(Loss) gain on sale of other real estate owned		—			(9	)		14			—			—
Income from bank owned life insurance		3,698			1,533			1,511			1,562			1,561
Electronic banking fees and charges		506			366			432			421			407
Other income		555			638			238			482			218
Total non-interest income		5,917			2,810			3,191			4,133			3,800
Non-interest expense
Salaries and employee benefits		20,348			20,367			19,184			18,096			18,617
Net occupancy expense of premises		3,090			3,188			3,223			3,156			4,547
Equipment and systems		3,662			4,516			3,822			3,723			3,825
Advertising and marketing		747			703			516			448			392
Federal deposit insurance premium		906			762			480			721			492
Directors' compensation		340			340			340			649			803
Other expense		2,895			3,736			3,058			2,877			3,127
Total non-interest expense		31,988			33,612			30,623			29,670			31,803
Income before income taxes		21,790			15,575			24,215			25,570			26,987
Income taxes		5,255			4,205			6,522			6,801			7,272
Net income	$	16,535		$	11,370		$	17,693		$	18,769		$	19,715
Net income per common share (EPS)
Basic	$	0.25		$	0.17		$	0.25		$	0.26		$	0.26
Diluted	$	0.25		$	0.17		$	0.25		$	0.26		$	0.26
Dividends declared
Cash dividends declared per common share	$	0.11		$	0.11		$	0.11		$	0.11		$	0.10
Cash dividends declared	$	7,276		$	7,441		$	7,720		$	7,921		$	7,381
Dividend payout ratio		44.0	%		65.4	%		43.6	%		42.2	%		37.4	%
Weighted average number of common shares outstanding
Basic		65,737			67,240			69,790			72,011			74,537
Diluted		65,756			67,276			69,817			72,037			74,556

Kearny Financial Corp.

Average Balance Sheet Data

(Unaudited)

	Three Months Ended
(Dollars in Thousands)	September 30, 2022			June 30, 2022			March 31, 2022			December 31, 2021			September 30, 2021
Assets
Interest-earning assets:
Loans receivable, including loans held-for-sale	$	5,553,996		$	5,181,983		$	4,850,236		$	4,822,959		$	4,835,676
Taxable investment securities		1,516,974			1,608,372			1,620,996			1,610,395			1,649,953
Tax-exempt investment securities		48,973			51,672			55,390			57,686			59,115
Other interest-earning assets		88,038			87,990			79,644			77,811			85,749
Total interest-earning assets		7,207,981			6,930,017			6,606,266			6,568,851			6,630,493
Non-interest-earning assets		570,225			564,734			601,684			611,390			616,735
Total assets	$	7,778,206		$	7,494,751		$	7,207,950		$	7,180,241		$	7,247,228
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Deposits:
Interest-bearing demand	$	2,354,340		$	2,155,946		$	2,133,977		$	2,027,021		$	1,954,271
Savings		1,019,343			1,077,631			1,088,351			1,086,903			1,102,865
Certificates of deposit		2,014,922			1,701,725			1,650,048			1,693,423			1,798,473
Total interest-bearing deposits		5,388,605			4,935,302			4,872,376			4,807,347			4,855,609
Borrowings:
Federal Home Loan Bank advances		642,399			752,579			632,811			666,029			665,915
Other borrowings		127,456			185,901			51,667			26,033			28,532
Total borrowings		769,855			938,480			684,478			692,062			694,447
Total interest-bearing liabilities		6,158,460			5,873,782			5,556,854			5,499,409			5,550,056
Non-interest-bearing liabilities:
Non-interest-bearing deposits		667,624			640,200			624,152			624,200			610,271
Other non-interest-bearing liabilities		56,431			56,636			49,455			50,870			56,893
Total non-interest-bearing liabilities		724,055			696,836			673,607			675,070			667,164
Total liabilities		6,882,515			6,570,618			6,230,461			6,174,479			6,217,220
Stockholders' equity		895,691			924,133			977,489			1,005,762			1,030,008
Total liabilities and stockholders' equity	$	7,778,206		$	7,494,751		$	7,207,950		$	7,180,241		$	7,247,228
Average interest-earning assets to average interest-bearing liabilities		117.04	%		117.98	%		118.89	%		119.45	%		119.47	%

Kearny Financial Corp.

Performance Ratio Highlights

	Three Months Ended
	September 30, 2022		June 30, 2022		March 31, 2022		December 31, 2021		September 30, 2021
Average yield on interest-earning assets:
Loans receivable, including loans held-for-sale	3.81	%	3.77	%	3.78	%	3.95	%	3.99	%
Taxable investment securities	2.75	%	2.22	%	1.98	%	1.89	%	1.99	%
Tax-exempt investment securities (1)	2.33	%	2.30	%	2.28	%	2.26	%	2.25	%
Other interest-earning assets	3.46	%	2.15	%	2.08	%	2.13	%	2.01	%
Total interest-earning assets	3.57	%	3.38	%	3.31	%	3.40	%	3.45	%
Average cost of interest-bearing liabilities:
Deposits:
Interest-bearing demand	0.92	%	0.31	%	0.22	%	0.22	%	0.23	%
Savings	0.23	%	0.11	%	0.10	%	0.11	%	0.12	%
Certificates of deposit	0.97	%	0.46	%	0.52	%	0.53	%	0.57	%
Total interest-bearing deposits	0.81	%	0.32	%	0.29	%	0.30	%	0.33	%
Borrowings:
Federal Home Loan Bank advances	2.68	%	1.96	%	2.08	%	2.14	%	2.13	%
Other borrowings	2.26	%	0.77	%	0.17	%	0.09	%	0.10	%
Total borrowings	2.61	%	1.72	%	1.93	%	2.06	%	2.05	%
Total interest-bearing liabilities	1.03	%	0.54	%	0.49	%	0.53	%	0.55	%
Interest rate spread (2)	2.54	%	2.84	%	2.82	%	2.87	%	2.90	%
Net interest margin (3)	2.69	%	2.92	%	2.89	%	2.96	%	2.99	%
Non-interest income to average assets (annualized)	0.30	%	0.15	%	0.18	%	0.23	%	0.21	%
Non-interest expense to average assets (annualized)	1.65	%	1.79	%	1.70	%	1.65	%	1.76	%
Efficiency ratio (4)	58.75	%	62.93	%	60.14	%	56.17	%	59.57	%
Return on average assets (annualized)	0.85	%	0.61	%	0.98	%	1.05	%	1.09	%
Return on average equity (annualized)	7.38	%	4.92	%	7.24	%	7.46	%	7.66	%
Return on average tangible equity (annualized) (5)	9.70	%	6.40	%	9.27	%	9.49	%	9.67	%

_________________________

(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.

  

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)	September 30, 2022			June 30, 2022			March 31, 2022			December 31, 2021			September 30, 2021
Adjusted net income:
Net income (GAAP)	$	16,535		$	11,370		$	17,693		$	18,769		$	19,715
Non-recurring transactions - net of tax:
Early contract termination		—			568			—			—			—
Branch consolidation expenses and impairment charges		—			—			—			132			1,209
Net effect of sale and call of securities		—			400			(2	)		—			(1	)
Net effect of sale of other assets		—			—			—			(251	)		—
Adjusted net income	$	16,535		$	12,338		$	17,691		$	18,650		$	20,923
Calculation of pre-tax, pre-provision net revenue:
Net income (GAAP)	$	16,535		$	11,370		$	17,693		$	18,769		$	19,715
Adjustments to net income (GAAP):
Provision for income taxes		5,255			4,205			6,522			6,801			7,272
Provision for (reversal of) credit losses		670			4,222			(3,920	)		(2,420	)		(5,400	)
Pre-tax, pre-provision net revenue (non-GAAP)	$	22,460		$	19,797		$	20,295		$	23,150		$	21,587
Adjusted earnings per share:
Weighted average common shares - basic		65,737			67,240			69,790			72,011			74,537
Weighted average common shares - diluted		65,756			67,276			69,817			72,037			74,556
Earnings per share - basic (GAAP)	$	0.25		$	0.17		$	0.25		$	0.26		$	0.26
Earnings per share - diluted (GAAP)	$	0.25		$	0.17		$	0.25		$	0.26		$	0.26
Adjusted earnings per share - basic (non-GAAP)	$	0.25		$	0.18		$	0.25		$	0.26		$	0.28
Adjusted earnings per share - diluted (non-GAAP)	$	0.25		$	0.18		$	0.25		$	0.26		$	0.28
Pre-tax, pre-provision net revenue per share:
Pre-tax, pre-provision net revenue per share - basic (non-GAAP)	$	0.34		$	0.29		$	0.29		$	0.32		$	0.29
Pre-tax, pre-provision net revenue per share - diluted (non-GAAP)	$	0.34		$	0.29		$	0.29		$	0.32		$	0.29
Adjusted return on average assets:
Total average assets	$	7,778,206		$	7,494,751		$	7,207,950		$	7,180,241		$	7,247,228
Return on average assets (GAAP)		0.85	%		0.61	%		0.98	%		1.05	%		1.09	%
Adjusted return on average assets (non-GAAP)		0.85	%		0.66	%		0.98	%		1.04	%		1.15	%
Adjusted return on average equity:
Total average equity	$	895,691		$	924,133		$	977,489		$	1,005,762		$	1,030,008
Return on average equity (GAAP)		7.38	%		4.92	%		7.24	%		7.46	%		7.66	%
Adjusted return on average equity (non-GAAP)		7.38	%		5.34	%		7.24	%		7.42	%		8.13	%

Kearny Financial Corp.

Reconciliation of GAAP to Non-GAAP

(Unaudited)

	Three Months Ended
(Dollars and Shares in Thousands, Except Per Share Data)	September 30, 2022			June 30, 2022			March 31, 2022			December 31, 2021			September 30, 2021
Adjusted return on average tangible equity:
Total average equity	$	895,691		$	924,133		$	977,489		$	1,005,762		$	1,030,008
Less: average goodwill		(210,895	)		(210,895	)		(210,895	)		(210,895	)		(210,895	)
Less: average other intangible assets		(2,971	)		(3,116	)		(3,282	)		(3,462	)		(3,641	)
Total average tangible equity	$	681,825		$	710,122		$	763,312		$	791,405		$	815,472
Return on average tangible equity (non-GAAP)		9.70	%		6.40	%		9.27	%		9.49	%		9.67	%
Adjusted return on average tangible equity (non-GAAP)		9.70	%		6.95	%		9.27	%		9.43	%		10.26	%
Adjusted non-interest expense ratio:
Non-interest expense (GAAP)	$	31,988		$	33,612		$	30,623		$	29,670		$	31,803
Non-recurring transactions:
Early contract termination		—			(800	)		—			—			—
Branch consolidation expenses and impairment charges		—			—			—			(187	)		(1,711	)
Non-interest expense (non-GAAP)	$	31,988		$	32,812		$	30,623		$	29,483		$	30,092
Non-interest expense ratio (GAAP)		1.65	%		1.79	%		1.70	%		1.65	%		1.76	%
Adjusted non-interest expense ratio (non-GAAP)		1.65	%		1.75	%		1.70	%		1.64	%		1.66	%
Adjusted efficiency ratio:
Non-interest expense (non-GAAP)	$	31,988		$	32,812		$	30,623		$	29,483		$	30,092
Net interest income (GAAP)	$	48,531		$	50,599		$	47,727		$	48,687		$	49,590
Total non-interest income (GAAP)		5,917			2,810			3,191			4,133			3,800
Non-recurring transactions:
Net effect of sale and call of securities		—			563			(3	)		—			(1	)
Net effect of sale of other assets		—			—			—			(356	)		—
Total revenue (non-GAAP)	$	54,448		$	53,972		$	50,915		$	52,464		$	53,389
Efficiency ratio (GAAP)		58.75	%		62.93	%		60.14	%		56.17	%		59.57	%
Adjusted efficiency ratio (non-GAAP)		58.75	%		60.79	%		60.15	%		56.20	%		56.36	%