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

FAIRFIELD, N.J., Jan. 26, 2023 (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 December 31, 2022 of $2.0 million, or $0.03 per diluted share, compared to $16.5 million, or $0.25 per diluted share, for the quarter ended September 30, 2022. The decrease in net income and earnings per share for the quarter was largely attributable to a previously announced after-tax loss of $10.8 million on the sale of securities.

The Company also announced that its Board of Directors has declared a quarterly cash dividend of $0.11 per share, payable on February 22, 2023 to stockholders of record as of February 8, 2023.

Craig L. Montanaro, President and Chief Executive Officer, commented, "During the quarter ended December 31, 2022, in light of the challenges presented by the prevailing economic and interest rate environment, we completed the restructuring of a portion of our investment securities portfolio and adopted a company-wide operating efficiency initiative targeting a five to ten percent reduction in our annual operating expense. While these initiatives resulted in the recognition of various non-recurring charges, which adversely impacted this quarter's net income, they are a part of our strategy to position ourselves for future earnings improvement, irrespective of the macro-economic environment."

Balance Sheet

• Total assets increased $399.7 million, or 5.1%, to $8.29 billion at December 31, 2022, from $7.89 billion at September 30, 2022.
• Loans receivable increased $327.8 million, or 5.8%, to $5.98 billion at December 31, 2022, from $5.66 billion at September 30, 2022.
• Investment securities increased $61.0 million to $1.44 billion, or 17.4% of total assets, at December 31, 2022, from $1.38 billion, or 17.5% of total assets, at September 30, 2022.
• Deposits decreased $136.9 million, or 2.2%, to $5.97 billion at December 31, 2022, from $6.11 billion at September 30, 2022.
• Borrowings increased $532.1 million to $1.38 billion, or 16.7% of total assets, at December 31, 2022, from $851.5 million, or 10.8% of total assets, at September 30, 2022.
  
  

Earnings

Performance Highlights

• Return on average assets was 0.10% for the quarter ended December 31, 2022 compared to 0.85% for the quarter ended September 30, 2022.
• Return on average equity was 0.90% and 7.38% for the quarters ended December 31, 2022 and September 30, 2022, respectively. Return on average tangible equity was 1.20% and 9.70% for those same comparative periods.

Net Interest Income and Net Interest Margin

• Net interest margin contracted 31 basis points to 2.38% for the quarter ended December 31, 2022, from 2.69% for the quarter ended September 30, 2022. The decrease was due largely to increases in the cost and average balance of interest-bearing liabilities, partially offset by increases in the yield and average balance of interest-earning assets.
• Net interest income decreased $3.7 million to $44.8 million for the quarter ended December 31, 2022, from $48.5 million for the quarter ended September 30, 2022. Included in net interest income for the quarters ended December 31, 2022 and September 30, 2022, respectively, was purchase accounting accretion of $1.9 million and $1.8 million, and loan prepayment penalty income of $166,000 and $441,000.

Non-Interest Income

• Non-interest income decreased $14.4 million to a loss of $8.5 million for the quarter ended December 31, 2022, from income of $5.9 million for the quarter ended September 30, 2022. The decrease was primarily attributable to a loss of $15.2 million on the sale of securities for the quarter ended December 31, 2022.
• Income from bank owned life insurance decreased $1.9 million for the quarter ended December 31, 2022 as a result of $2.1 million in payouts on life insurance policies in the prior comparative period.
• Included in other income, during the quarter ended December 31, 2022, was a non-recurring gain of $2.9 million attributable to the sale of a former branch location.
  
  

Non-Interest Expense

• Non-interest expense increased $662,000 to $32.7 million for the quarter ended December 31, 2022, from $32.0 million for the quarter ended September 30, 2022. The increase was primarily attributable to $757,000 of non-recurring severance expense resulting from a workforce realignment.
• Other expense increased $684,000, largely due to a $353,000 increase in the provision for credit losses on unfunded commitments, a $230,000 increase in professional fees and a $147,000 increase in OREO expenses.
• Federal deposit insurance premium expense increased $320,000 to $1.2 million for the quarter ended December 31, 2022, largely driven by asset growth.
• Salaries and benefits expense decreased $427,000 to $19.9 million for the quarter ended December 31, 2022. This decrease was driven by lower salary, payroll tax and incentive compensation expense. Partially offsetting these decreases were non-recurring severance expense resulting from a workforce realignment and an increase in incentive payments tied to loan origination volume.
• The efficiency and non-interest expense ratios were 89.93% and 1.62%, respectively, for the quarter ended December 31, 2022, as compared to 58.75% and 1.65%, respectively, for the quarter ended September 30, 2022.
  
  

Income Taxes

• Income tax expense totaled $33,000 for the quarter ended December 31, 2022 compared to $5.3 million for the quarter ended September 30, 2022, resulting in an effective tax rate of 1.7% and 24.1%, respectively. The decrease in the effective tax rate was primarily due to a year-to-date tax rate true-up which resulted from the loss on the sale of securities during the current quarter. The loss lowered the Company's full year projected taxable income and income tax provision.
  
  

Asset Quality

• The balance of non-performing assets decreased $14.8 million to $62.6 million, or 0.76% of total assets, at December 31, 2022, from $77.4 million, or 0.98% of total assets, at September 30, 2022. The decrease in non-performing assets was primarily attributable to loans previously on non-accrual returning to accrual status. During the current period, the Company acquired a $13.0 million nonresidential real estate property through foreclosure, which is included in the balance of non-performing assets.
• Net charge-offs totaled $407,000, or 0.03% of average loans, on an annualized basis, for the quarter ended December 31, 2022, compared to $115,000, or 0.01% of average loans, on an annualized basis, for the quarter ended September 30, 2022.
• For the quarter ended December 31, 2022, the Company recorded a provision for credit losses of $1.7 million, compared to $670,000 for the quarter ended September 30, 2022. The provision for the quarter ended December 31, 2022 was largely driven by loan growth, partially offset by a reduction in the qualitative component of the Company's allowance for credit losses.
• The allowance for credit losses was $48.9 million, or 0.81% of total loans, at December 31, 2022, compared to $47.6 million, or 0.84% of total loans, at September 30, 2022.

Capital

• For the quarter ended December 31, 2022, book value per share increased $0.07, or 0.5%, to $12.95 and tangible book value per share increased $0.05, or 0.5%, to $9.78.
• During the quarter ended December 31, 2022, the Company repurchased 549,800 shares of common stock at a cost of $5.7 million, or $10.45 per share.
• At December 31, 2022, the Company's tangible equity to tangible assets ratio equaled 8.16% 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

(Unaudited)

(Dollars and Shares in Thousands, Except Per Share Data)	December 31, 2022			September 30, 2022			Variance or Change			Variance or Change Pct.
Assets
Cash and cash equivalents	$	75,660		$	96,076		$	(20,416	)	-21.2	%
Securities available for sale		1,286,354			1,263,176			23,178		1.8	%
Securities held to maturity		153,786			115,943			37,843		32.6	%
Loans held-for-sale		12,940			12,936			4		—	%
Loans receivable		5,984,133			5,656,370			327,763		5.8	%
Less: allowance for credit losses on loans		(48,877	)		(47,613	)		1,264		2.7	%
Net loans receivable		5,935,256			5,608,757			326,499		5.8	%
Premises and equipment		50,953			52,642			(1,689	)	-3.2	%
Federal Home Loan Bank stock		69,022			44,957			24,065		53.5	%
Accrued interest receivable		27,368			23,817			3,551		14.9	%
Goodwill		210,895			210,895			—		—	%
Core deposit intangible		2,732			2,876			(144	)	-5.0	%
Bank owned life insurance		289,673			289,690			(17	)	—	%
Deferred income taxes, net		51,107			54,278			(3,171	)	-5.8	%
Other real estate owned		13,410			178			13,232		7433.7	%
Other assets		110,162			113,369			(3,207	)	-2.8	%
Total assets	$	8,289,318		$	7,889,590		$	399,728		5.1	%
Liabilities
Deposits:
Non-interest-bearing	$	650,950		$	683,406		$	(32,456	)	-4.7	%
Interest-bearing		5,320,421			5,424,872			(104,451	)	-1.9	%
Total deposits		5,971,371			6,108,278			(136,907	)	-2.2	%
Borrowings		1,383,573			851,454			532,119		62.5	%
Advance payments by borrowers for taxes		17,307			16,555			752		4.5	%
Other liabilities		44,427			38,329			6,098		15.9	%
Total liabilities		7,416,678			7,014,616			402,062		5.7	%
Stockholders' Equity
Common stock		674			680			(6	)	-0.9	%
Paid-in capital		515,332			520,245			(4,913	)	-0.9	%
Retained earnings		449,489			454,710			(5,221	)	-1.1	%
Unearned ESOP shares		(23,834	)		(24,321	)		487		2.0	%
Accumulated other comprehensive loss		(69,021	)		(76,340	)		7,319		9.6	%
Total stockholders' equity		872,640			874,974			(2,334	)	-0.3	%
Total liabilities and stockholders' equity	$	8,289,318		$	7,889,590		$	399,728		5.1	%
Consolidated capital ratios
Equity to assets		10.53	%		11.09	%		-0.56	%
Tangible equity to tangible assets (1)		8.16	%		8.61	%		-0.45	%
Share data
Outstanding shares		67,388			67,938			(550	)	-0.8	%
Book value per share	$	12.95		$	12.88		$	0.07		0.5	%
Tangible book value per share (2)	$	9.78		$	9.73		$	0.05		0.5	%

_________________________

(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.
	December 31, 2022			September 30, 2022
Interest income
Loans	$	57,996		$	52,935		$	5,061		9.6	%
Taxable investment securities		13,221			10,439			2,782		26.7	%
Tax-exempt investment securities		219			285			(66	)	-23.2	%
Other interest-earning assets		1,005			761			244		32.1	%
Total interest income		72,441			64,420			8,021		12.5	%
Interest expense
Deposits		18,822			10,869			7,953		73.2	%
Borrowings		8,836			5,020			3,816		76.0	%
Total interest expense		27,658			15,889			11,769		74.1	%
Net interest income		44,783			48,531			(3,748	)	-7.7	%
Provision for credit losses		1,671			670			1,001		149.4	%
Net interest income after provision for credit losses		43,112			47,861			(4,749	)	-9.9	%
Non-interest income
Fees and service charges		734			763			(29	)	-3.8	%
Loss on sale and call of securities		(15,227	)		—			(15,227	)	—	%
Gain on sale of loans		134			395			(261	)	-66.1	%
Income from bank owned life insurance		1,761			3,698			(1,937	)	-52.4	%
Electronic banking fees and charges		397			506			(109	)	-21.5	%
Other income		3,723			555			3,168		570.8	%
Total non-interest income		(8,478	)		5,917			(14,395	)	-243.3	%
Non-interest expense
Salaries and employee benefits		19,921			20,348			(427	)	-2.1	%
Net occupancy expense of premises		2,987			3,090			(103	)	-3.3	%
Equipment and systems		3,867			3,662			205		5.6	%
Advertising and marketing		731			747			(16	)	-2.1	%
Federal deposit insurance premium		1,226			906			320		35.3	%
Directors' compensation		339			340			(1	)	-0.3	%
Other expense		3,579			2,895			684		23.6	%
Total non-interest expense		32,650			31,988			662		2.1	%
Income before income taxes		1,984			21,790			(19,806	)	-90.9	%
Income taxes		33			5,255			(5,222	)	-99.4	%
Net income	$	1,951		$	16,535		$	(14,584	)	-88.2	%
Net income per common share (EPS)
Basic	$	0.03		$	0.25		$	(0.22	)
Diluted	$	0.03		$	0.25		$	(0.22	)
Dividends declared
Cash dividends declared per common share	$	0.11		$	0.11		$	—
Cash dividends declared	$	7,172		$	7,276		$	(104	)
Dividend payout ratio		367.6	%		44.0	%		323.6	%
Weighted average number of common shares outstanding
Basic		65,030			65,737			(707	)
Diluted		65,038			65,756			(718	)

Kearny Financial Corp.

Average Balance Sheet Data

(Unaudited)

(Dollars in Thousands)	Three Months Ended						Variance or Change			Variance or Change Pct.
	December 31, 2022			September 30, 2022
Assets
Interest-earning assets:
Loans receivable, including loans held for sale	$	5,839,903		$	5,553,996		$	285,907		5.1	%
Taxable investment securities		1,527,578			1,516,974			10,604		0.7	%
Tax-exempt investment securities		37,917			48,973			(11,056	)	-22.6	%
Other interest-earning assets		114,175			88,038			26,137		29.7	%
Total interest-earning assets		7,519,573			7,207,981			311,592		4.3	%
Non-interest-earning assets		550,519			570,225			(19,706	)	-3.5	%
Total assets	$	8,070,092		$	7,778,206		$	291,886		3.8	%
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Deposits:
Interest-bearing demand	$	2,359,977		$	2,354,340		$	5,637		0.2	%
Savings		931,584			1,019,343			(87,759	)	-8.6	%
Certificates of deposit		2,192,722			2,014,922			177,800		8.8	%
Total interest-bearing deposits		5,484,283			5,388,605			95,678		1.8	%
Borrowings:
Federal Home Loan Bank advances		997,148			642,399			354,749		55.2	%
Other borrowings		—			127,456			(127,456	)	-100.0	%
Total borrowings		997,148			769,855			227,293		29.5	%
Total interest-bearing liabilities		6,481,431			6,158,460			322,971		5.2	%
Non-interest-bearing liabilities:
Non-interest-bearing deposits		666,846			667,624			(778	)	-0.1	%
Other non-interest-bearing liabilities		56,721			56,431			290		0.5	%
Total non-interest-bearing liabilities		723,567			724,055			(488	)	-0.1	%
Total liabilities		7,204,998			6,882,515			322,483		4.7	%
Stockholders' equity		865,094			895,691			(30,597	)	-3.4	%
Total liabilities and stockholders' equity	$	8,070,092		$	7,778,206		$	291,886		3.8	%
Average interest-earning assets to average interest-bearing liabilities		116.02	%		117.04	%		-1.02	%	-0.9	%

Kearny Financial Corp.

Performance Ratio Highlights

(Unaudited)

	Three Months Ended				Variance or Change
	December 31, 2022		September 30, 2022
Average yield on interest-earning assets:
Loans receivable, including loans held for sale	3.97	%	3.81	%	0.16	%
Taxable investment securities	3.46	%	2.75	%	0.71	%
Tax-exempt investment securities (1)	2.32	%	2.33	%	-0.01	%
Other interest-earning assets	3.52	%	3.46	%	0.06	%
Total interest-earning assets	3.85	%	3.57	%	0.28	%
Average cost of interest-bearing liabilities:
Deposits:
Interest-bearing demand	1.63	%	0.92	%	0.71	%
Savings	0.41	%	0.23	%	0.18	%
Certificates of deposit	1.50	%	0.97	%	0.53	%
Total interest-bearing deposits	1.37	%	0.81	%	0.56	%
Borrowings:
Federal Home Loan Bank advances	3.54	%	2.68	%	0.86	%
Other borrowings	—	%	2.26	%	-2.26	%
Total borrowings	3.54	%	2.61	%	0.93	%
Total interest-bearing liabilities	1.71	%	1.03	%	0.68	%
Interest rate spread (2)	2.14	%	2.54	%	-0.40	%
Net interest margin (3)	2.38	%	2.69	%	-0.31	%
Non-interest income to average assets (annualized)	-0.42	%	0.30	%	-0.72	%
Non-interest expense to average assets (annualized)	1.62	%	1.65	%	-0.03	%
Efficiency ratio (4)	89.93	%	58.75	%	31.18	%
Return on average assets (annualized)	0.10	%	0.85	%	-0.75	%
Return on average equity (annualized)	0.90	%	7.38	%	-6.48	%
Return on average tangible equity (annualized) (5)	1.20	%	9.70	%	-8.50	%

_________________________

(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)	December 31, 2022			September 30, 2022			June 30, 2022			March 31, 2022			December 31, 2021
	(Unaudited)			(Unaudited)			(Audited)			(Unaudited)			(Unaudited)
Assets
Cash and cash equivalents	$	75,660		$	96,076		$	101,615		$	62,379		$	60,452
Securities available for sale		1,286,354			1,263,176			1,344,093			1,526,086			1,591,066
Securities held to maturity		153,786			115,943			118,291			121,853			53,142
Loans held-for-sale		12,940			12,936			28,874			2,822			12,549
Loans receivable		5,984,133			5,656,370			5,417,845			5,003,201			4,826,404
Less: allowance for credit losses on loans		(48,877	)		(47,613	)		(47,058	)		(43,860	)		(48,216	)
Net loans receivable		5,935,256			5,608,757			5,370,787			4,959,341			4,778,188
Premises and equipment		50,953			52,642			53,281			53,727			54,067
Federal Home Loan Bank stock		69,022			44,957			47,144			30,997			36,622
Accrued interest receivable		27,368			23,817			20,466			19,517			18,495
Goodwill		210,895			210,895			210,895			210,895			210,895
Core deposit intangible		2,732			2,876			3,020			3,166			3,344
Bank owned life insurance		289,673			289,690			289,177			287,644			286,433
Deferred income taxes, net		51,107			54,278			49,350			34,349			25,709
Other real estate owned		13,410			178			178			401			658
Other assets		110,162			113,369			82,712			76,714			54,603
Total assets	$	8,289,318		$	7,889,590		$	7,719,883		$	7,389,891		$	7,186,223
Liabilities
Deposits:
Non-interest-bearing	$	650,950		$	683,406		$	653,899		$	621,954		$	604,805
Interest-bearing		5,320,421			5,424,872			5,208,357			4,906,708			4,849,220
Total deposits		5,971,371			6,108,278			5,862,256			5,528,662			5,454,025
Borrowings		1,383,573			851,454			901,337			851,220			686,105
Advance payments by borrowers for taxes		17,307			16,555			16,746			16,979			16,772
Other liabilities		44,427			38,329			45,544			37,861			33,851
Total liabilities		7,416,678			7,014,616			6,825,883			6,434,722			6,190,753
Stockholders' Equity
Common stock		674			680			687			714			735
Paid-in capital		515,332			520,245			528,396			561,176			587,392
Retained earnings		449,489			454,710			445,451			441,522			431,549
Unearned ESOP shares		(23,834	)		(24,321	)		(24,807	)		(25,294	)		(25,780	)
Accumulated other comprehensive (loss) income		(69,021	)		(76,340	)		(55,727	)		(22,949	)		1,574
Total stockholders' equity		872,640			874,974			894,000			955,169			995,470
Total liabilities and stockholders' equity	$	8,289,318		$	7,889,590		$	7,719,883		$	7,389,891		$	7,186,223
Consolidated capital ratios
Equity to assets		10.53	%		11.09	%		11.58	%		12.93	%		13.85	%
Tangible equity to tangible assets (1)		8.16	%		8.61	%		9.06	%		10.33	%		11.21	%
Share data
Outstanding shares		67,388			67,938			68,666			71,424			73,453
Book value per share	$	12.95		$	12.88		$	13.02		$	13.37		$	13.55
Tangible book value per share (2)	$	9.78		$	9.73		$	9.90		$	10.38		$	10.64

_________________________

(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)	December 31, 2022			September 30, 2022			June 30, 2022			March 31, 2022			December 31, 2021
Loan portfolio composition:
Commercial loans:
Multi-family mortgage	$	2,851,721		$	2,570,297		$	2,409,090		$	2,076,003		$	2,007,431
Nonresidential mortgage		1,017,341			1,040,688			1,019,838			1,085,988			1,026,447
Commercial business		177,530			186,361			176,807			169,551			180,429
Construction		186,663			166,052			140,131			121,137			110,703
Total commercial loans		4,233,255			3,963,398			3,745,866			3,452,679			3,325,010
One- to four-family residential mortgage		1,719,514			1,666,730			1,645,816			1,527,980			1,477,267
Consumer loans:
Home equity loans		45,690			43,269			42,028			41,501			43,934
Other consumer		2,648			2,869			2,866			2,755			3,040
Total consumer loans		48,338			46,138			44,894			44,256			46,974
Total loans, excluding yield adjustments		6,001,107			5,676,266			5,436,576			5,024,915			4,849,251
Unaccreted yield adjustments		(16,974	)		(19,896	)		(18,731	)		(21,714	)		(22,847	)
Loans receivable, net of yield adjustments		5,984,133			5,656,370			5,417,845			5,003,201			4,826,404
Less: allowance for credit losses on loans		(48,877	)		(47,613	)		(47,058	)		(43,860	)		(48,216	)
Net loans receivable	$	5,935,256		$	5,608,757		$	5,370,787		$	4,959,341		$	4,778,188
Asset quality:
Nonperforming assets:
Accruing loans - 90 days and over past due	$	—		$	—		$	—		$	—		$	—
Nonaccrual loans		40,549			68,574			70,321			80,595			72,138
Total nonperforming loans		40,549			68,574			70,321			80,595			72,138
Nonaccrual loans held-for-sale		8,650			8,650			21,745			—			—
Other real estate owned		13,410			178			178			401			658
Total nonperforming assets	$	62,609		$	77,402		$	92,244		$	80,996		$	72,796
Nonperforming loans (% total loans)		0.68	%		1.21	%		1.30	%		1.61	%		1.49	%
Nonperforming assets (% total assets)		0.76	%		0.98	%		1.19	%		1.10	%		1.01	%
Classified loans	$	86,069		$	92,610		$	94,555		$	163,621		$	162,174
Allowance for credit losses on loans (ACL):
ACL to total loans		0.81	%		0.84	%		0.87	%		0.87	%		0.99	%
ACL to nonperforming loans		120.54	%		69.43	%		66.92	%		54.42	%		66.84	%
Net charge-offs	$	407		$	115		$	1,024		$	436		$	1,149
Average net charge-off rate (annualized)		0.03	%		0.01	%		0.08	%		0.04	%		0.10	%
Funding composition:
Deposits:
Non-interest-bearing deposits	$	650,950		$	683,406		$	653,899		$	621,954		$	604,805
Interest-bearing demand		2,316,485			2,382,411			2,265,597			2,154,488			2,106,693
Savings		901,514			982,916			1,053,198			1,088,974			1,087,740
Certificates of deposit (retail)		1,354,907			1,263,124			1,116,035			1,122,228			1,184,530
Certificates of deposit (brokered and listing service)		747,515			796,421			773,527			541,018			470,257
Interest-bearing deposits		5,320,421			5,424,872			5,208,357			4,906,708			4,849,220
Total deposits		5,971,371			6,108,278			5,862,256			5,528,662			5,454,025
Borrowings:
Federal Home Loan Bank advances		1,256,573			796,454			651,337			541,220			666,105
Overnight borrowings		127,000			55,000			250,000			310,000			20,000
Total borrowings		1,383,573			851,454			901,337			851,220			686,105
Total funding	$	7,354,944		$	6,959,732		$	6,763,593		$	6,379,882		$	6,140,130
Loans as a % of deposits		99.6	%		92.0	%		92.1	%		89.8	%		87.8	%
Deposits as a % of total funding		81.2	%		87.8	%		86.7	%		86.7	%		88.8	%
Borrowings as a % of total funding		18.8	%		12.2	%		13.3	%		13.3	%		11.2	%

Kearny Financial Corp.

Consolidated Statements of Income

(Unaudited)

	Three Months Ended
(Dollars and Shares in Thousands, Except Per Share Data)	December 31, 2022			September 30, 2022			June 30, 2022			March 31, 2022			December 31, 2021
Interest income
Loans	$	57,996		$	52,935		$	48,869		$	45,846		$	47,575
Taxable investment securities		13,221			10,439			8,915			8,024			7,595
Tax-exempt investment securities		219			285			297			316			327
Other interest-earning assets		1,005			761			472			415			415
Total interest income		72,441			64,420			58,553			54,601			55,912
Interest expense
Deposits		18,822			10,869			3,915			3,565			3,663
Borrowings		8,836			5,020			4,039			3,309			3,562
Total interest expense		27,658			15,889			7,954			6,874			7,225
Net interest income		44,783			48,531			50,599			47,727			48,687
Provision for (reversal of) credit losses		1,671			670			4,222			(3,920	)		(2,420	)
Net interest income after provision for (reversal of) credit losses		43,112			47,861			46,377			51,647			51,107
Non-interest income
Fees and service charges		734			763			658			617			698
(Loss) gain on sale and call of securities		(15,227	)		—			(563	)		3			—
Gain on sale of loans		134			395			187			376			970
(Loss) gain on sale of other real estate owned		—			—			(9	)		14			—
Income from bank owned life insurance		1,761			3,698			1,533			1,511			1,562
Electronic banking fees and charges		397			506			366			432			421
Other income		3,723			555			638			238			482
Total non-interest income		(8,478	)		5,917			2,810			3,191			4,133
Non-interest expense
Salaries and employee benefits		19,921			20,348			20,367			19,184			18,096
Net occupancy expense of premises		2,987			3,090			3,188			3,223			3,156
Equipment and systems		3,867			3,662			4,516			3,822			3,723
Advertising and marketing		731			747			703			516			448
Federal deposit insurance premium		1,226			906			762			480			721
Directors' compensation		339			340			340			340			649
Other expense		3,579			2,895			3,736			3,058			2,877
Total non-interest expense		32,650			31,988			33,612			30,623			29,670
Income before income taxes		1,984			21,790			15,575			24,215			25,570
Income taxes		33			5,255			4,205			6,522			6,801
Net income	$	1,951		$	16,535		$	11,370		$	17,693		$	18,769
Net income per common share (EPS)
Basic	$	0.03		$	0.25		$	0.17		$	0.25		$	0.26
Diluted	$	0.03		$	0.25		$	0.17		$	0.25		$	0.26
Dividends declared
Cash dividends declared per common share	$	0.11		$	0.11		$	0.11		$	0.11		$	0.11
Cash dividends declared	$	7,172		$	7,276		$	7,441		$	7,720		$	7,921
Dividend payout ratio		367.6	%		44.0	%		65.4	%		43.6	%		42.2	%
Weighted average number of common shares outstanding
Basic		65,030			65,737			67,240			69,790			72,011
Diluted		65,038			65,756			67,276			69,817			72,037

Kearny Financial Corp.

Average Balance Sheet Data

(Unaudited)

	Three Months Ended
(Dollars in Thousands)	December 31, 2022			September 30, 2022			June 30, 2022			March 31, 2022			December 31, 2021
Assets
Interest-earning assets:
Loans receivable, including loans held-for-sale	$	5,839,903		$	5,553,996		$	5,181,983		$	4,850,236		$	4,822,959
Taxable investment securities		1,527,578			1,516,974			1,608,372			1,620,996			1,610,395
Tax-exempt investment securities		37,917			48,973			51,672			55,390			57,686
Other interest-earning assets		114,175			88,038			87,990			79,644			77,811
Total interest-earning assets		7,519,573			7,207,981			6,930,017			6,606,266			6,568,851
Non-interest-earning assets		550,519			570,225			564,734			601,684			611,390
Total assets	$	8,070,092		$	7,778,206		$	7,494,751		$	7,207,950		$	7,180,241
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Deposits:
Interest-bearing demand	$	2,359,977		$	2,354,340		$	2,155,946		$	2,133,977		$	2,027,021
Savings		931,584			1,019,343			1,077,631			1,088,351			1,086,903
Certificates of deposit		2,192,722			2,014,922			1,701,725			1,650,048			1,693,423
Total interest-bearing deposits		5,484,283			5,388,605			4,935,302			4,872,376			4,807,347
Borrowings:
Federal Home Loan Bank advances		997,148			642,399			752,579			632,811			666,029
Other borrowings		—			127,456			185,901			51,667			26,033
Total borrowings		997,148			769,855			938,480			684,478			692,062
Total interest-bearing liabilities		6,481,431			6,158,460			5,873,782			5,556,854			5,499,409
Non-interest-bearing liabilities:
Non-interest-bearing deposits		666,846			667,624			640,200			624,152			624,200
Other non-interest-bearing liabilities		56,721			56,431			56,636			49,455			50,870
Total non-interest-bearing liabilities		723,567			724,055			696,836			673,607			675,070
Total liabilities		7,204,998			6,882,515			6,570,618			6,230,461			6,174,479
Stockholders' equity		865,094			895,691			924,133			977,489			1,005,762
Total liabilities and stockholders' equity	$	8,070,092		$	7,778,206		$	7,494,751		$	7,207,950		$	7,180,241
Average interest-earning assets to average interest-bearing liabilities		116.02	%		117.04	%		117.98	%		118.89	%		119.45	%

Kearny Financial Corp.

Performance Ratio Highlights

	Three Months Ended
	December 31, 2022		September 30, 2022		June 30, 2022		March 31, 2022		December 31, 2021
Average yield on interest-earning assets:
Loans receivable, including loans held-for-sale	3.97	%	3.81	%	3.77	%	3.78	%	3.95	%
Taxable investment securities	3.46	%	2.75	%	2.22	%	1.98	%	1.89	%
Tax-exempt investment securities (1)	2.32	%	2.33	%	2.30	%	2.28	%	2.26	%
Other interest-earning assets	3.52	%	3.46	%	2.15	%	2.08	%	2.13	%
Total interest-earning assets	3.85	%	3.57	%	3.38	%	3.31	%	3.40	%
Average cost of interest-bearing liabilities:
Deposits:
Interest-bearing demand	1.63	%	0.92	%	0.31	%	0.22	%	0.22	%
Savings	0.41	%	0.23	%	0.11	%	0.10	%	0.11	%
Certificates of deposit	1.50	%	0.97	%	0.46	%	0.52	%	0.53	%
Total interest-bearing deposits	1.37	%	0.81	%	0.32	%	0.29	%	0.30	%
Borrowings:
Federal Home Loan Bank advances	3.54	%	2.68	%	1.96	%	2.08	%	2.14	%
Other borrowings	—	%	2.26	%	0.77	%	0.17	%	0.09	%
Total borrowings	3.54	%	2.61	%	1.72	%	1.93	%	2.06	%
Total interest-bearing liabilities	1.71	%	1.03	%	0.54	%	0.49	%	0.53	%
Interest rate spread (2)	2.14	%	2.54	%	2.84	%	2.82	%	2.87	%
Net interest margin (3)	2.38	%	2.69	%	2.92	%	2.89	%	2.96	%
Non-interest income to average assets (annualized)	-0.42	%	0.30	%	0.15	%	0.18	%	0.23	%
Non-interest expense to average assets (annualized)	1.62	%	1.65	%	1.79	%	1.70	%	1.65	%
Efficiency ratio (4)	89.93	%	58.75	%	62.93	%	60.14	%	56.17	%
Return on average assets (annualized)	0.10	%	0.85	%	0.61	%	0.98	%	1.05	%
Return on average equity (annualized)	0.90	%	7.38	%	4.92	%	7.24	%	7.46	%
Return on average tangible equity (annualized) (5)	1.20	%	9.70	%	6.40	%	9.27	%	9.49	%

_________________________

(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)	December 31, 2022			September 30, 2022			June 30, 2022			March 31, 2022			December 31, 2021
Adjusted net income:
Net income (GAAP)	$	1,951		$	16,535		$	11,370		$	17,693		$	18,769
Non-recurring transactions - net of tax:
Net effect of sale and call of securities		10,811			—			400			(2	)		—
Net effect of sale of other assets		(2,081	)		—			—			—			(251	)
Severance expense from workforce realignment		538			—			—			—			—
Branch consolidation expenses and impairment charges		—			—			—			—			132
Adjusted net income	$	11,219		$	16,535		$	12,338		$	17,691		$	18,650
Calculation of pre-tax, pre-provision net revenue:
Net income (GAAP)	$	1,951		$	16,535		$	11,370		$	17,693		$	18,769
Adjustments to net income (GAAP):
Provision for income taxes		33			5,255			4,205			6,522			6,801
Provision for (reversal of) credit losses		1,671			670			4,222			(3,920	)		(2,420	)
Pre-tax, pre-provision net revenue (non-GAAP)	$	3,655		$	22,460		$	19,797		$	20,295		$	23,150
Adjusted earnings per share:
Weighted average common shares - basic		65,030			65,737			67,240			69,790			72,011
Weighted average common shares - diluted		65,038			65,756			67,276			69,817			72,037
Earnings per share - basic (GAAP)	$	0.03		$	0.25		$	0.17		$	0.25		$	0.26
Earnings per share - diluted (GAAP)	$	0.03		$	0.25		$	0.17		$	0.25		$	0.26
Adjusted earnings per share - basic (non-GAAP)	$	0.17		$	0.25		$	0.18		$	0.25		$	0.26
Adjusted earnings per share - diluted (non-GAAP)	$	0.17		$	0.25		$	0.18		$	0.25		$	0.26
Pre-tax, pre-provision net revenue per share:
Pre-tax, pre-provision net revenue per share - basic (non-GAAP)	$	0.06		$	0.34		$	0.29		$	0.29		$	0.32
Pre-tax, pre-provision net revenue per share - diluted (non-GAAP)	$	0.06		$	0.34		$	0.29		$	0.29		$	0.32
Adjusted return on average assets:
Total average assets	$	8,070,092		$	7,778,206		$	7,494,751		$	7,207,950		$	7,180,241
Return on average assets (GAAP)		0.10	%		0.85	%		0.61	%		0.98	%		1.05	%
Adjusted return on average assets (non-GAAP)		0.56	%		0.85	%		0.66	%		0.98	%		1.04	%
Adjusted return on average equity:
Total average equity	$	865,094		$	895,691		$	924,133		$	977,489		$	1,005,762
Return on average equity (GAAP)		0.90	%		7.38	%		4.92	%		7.24	%		7.46	%
Adjusted return on average equity (non-GAAP)		5.19	%		7.38	%		5.34	%		7.24	%		7.42	%

Kearny Financial Corp.

Reconciliation of GAAP to Non-GAAP

(Unaudited)

	Three Months Ended
(Dollars and Shares in Thousands, Except Per Share Data)	December 31, 2022			September 30, 2022			June 30, 2022			March 31, 2022			December 31, 2021
Adjusted return on average tangible equity:
Total average equity	$	865,094		$	895,691		$	924,133		$	977,489		$	1,005,762
Less: average goodwill		(210,895	)		(210,895	)		(210,895	)		(210,895	)		(210,895	)
Less: average other intangible assets		(2,826	)		(2,971	)		(3,116	)		(3,282	)		(3,462	)
Total average tangible equity	$	651,373		$	681,825		$	710,122		$	763,312		$	791,405
Return on average tangible equity (non-GAAP)		1.20	%		9.70	%		6.40	%		9.27	%		9.49	%
Adjusted return on average tangible equity (non-GAAP)		6.89	%		9.70	%		6.95	%		9.27	%		9.43	%
Adjusted non-interest expense ratio:
Non-interest expense (GAAP)	$	32,650		$	31,988		$	33,612		$	30,623		$	29,670
Non-recurring transactions:
Severance expense from workforce realignment		(757	)		—			—			—			—
Early contract termination		—			—			(800	)		—			—
Branch consolidation expenses and impairment charges		—			—			—			—			(187	)
Non-interest expense (non-GAAP)	$	31,893		$	31,988		$	32,812		$	30,623		$	29,483
Non-interest expense ratio (GAAP)		1.62	%		1.65	%		1.79	%		1.70	%		1.65	%
Adjusted non-interest expense ratio (non-GAAP)		1.58	%		1.65	%		1.75	%		1.70	%		1.64	%
Adjusted efficiency ratio:
Non-interest expense (non-GAAP)	$	31,893		$	31,988		$	32,812		$	30,623		$	29,483
Net interest income (GAAP)	$	44,783		$	48,531		$	50,599		$	47,727		$	48,687
Total non-interest income (GAAP)		(8,478	)		5,917			2,810			3,191			4,133
Non-recurring transactions:
Net effect of sale and call of securities		15,227			—			563			(3	)		—
Net effect of sale of other assets		(2,931	)		—			—			—			(356	)
Total revenue (non-GAAP)	$	48,601		$	54,448		$	53,972		$	50,915		$	52,464
Efficiency ratio (GAAP)		89.93	%		58.75	%		62.93	%		60.14	%		56.17	%
Adjusted efficiency ratio (non-GAAP)		65.62	%		58.75	%		60.79	%		60.15	%		56.20	%