ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 2023 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Maryland 30-0870244 (State or Other Jurisdiction of (I.R.S. Employer 120 Passaic Avenue, 07004 (Address of Principal Executive Offices) (Zip Code) Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, $0.01 par value KRNY The NASDAQ Stock Market LLC Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company Emerging growth company o x No 2023 Focus on Relationship Banking and Core Deposits At June 30, 2022 2021 Amount Percent Amount Percent (Dollars In Thousands) Commercial loans: Multi-family mortgage $ 2,409,090 44.31 % $ 2,039,260 41.79 % Nonresidential mortgage 1,019,838 18.76 1,079,444 22.12 Commercial business 176,807 3.25 168,951 3.46 Construction 140,131 2.58 93,804 1.92 One- to four-family residential mortgage 1,645,816 30.27 1,447,721 29.66 Consumer loans: Home equity loans 42,028 0.78 47,871 0.98 Other consumer 2,866 0.05 3,259 0.07 Total loans 5,436,576 100.00 % 4,880,310 100.00 % Less: Allowance for credit losses 47,058 58,165 Unaccreted yield adjustments 18,731 28,916 Total adjustments 65,789 87,081 Total loans, net $ 5,370,787 $ 4,793,229 June 30, 2022 June 30, 2021 Balance LTV Balance LTV (Dollars in Thousands) Commercial mortgage loans: Multi-family mortgage $ 2,409,090 64 % $ 2,039,260 64 % Nonresidential mortgage 1,019,838 54 % 1,079,444 54 % Construction 140,131 61 % 93,804 61 % Total commercial mortgage loans 3,569,059 61 % 3,212,508 61 % One- to four-family residential mortgage 1,645,816 62 % 1,447,721 59 % Consumer loans: Home equity loans 42,028 46 % 47,871 47 % Total mortgage loans $ 5,256,903 61 % $ 4,708,100 60 % 2022: Amounts Due Within 1 to 5 5 to 15 Over 15 Total Due Total (In Thousands) Multi-family mortgage $ 43,931 $ 718,154 $ 1,514,579 $ 132,426 $ 2,365,159 $ 2,409,090 Nonresidential mortgage 98,771 302,804 498,078 120,185 921,067 1,019,838 Commercial business 78,656 34,981 58,400 4,770 98,151 176,807 Construction 102,518 33,966 608 3,039 37,613 140,131 One- to four-family residential mortgage 5,296 37,174 261,128 1,342,218 1,640,520 1,645,816 Home equity loans 508 4,314 25,979 11,227 41,520 42,028 Other consumer 967 496 40 1,363 1,899 2,866 Total loans $ 330,647 $ 1,131,889 $ 2,358,812 $ 1,615,228 $ 5,105,929 $ 5,436,576 Fixed Rates Floating or Adjustable Rates Total (In Thousands) Multi-family mortgage $ 1,547,264 $ 817,895 $ 2,365,159 Nonresidential mortgage 513,472 407,595 921,067 Commercial business 60,385 37,766 98,151 Construction 801 36,812 37,613 One- to four-family residential mortgage 1,501,319 139,201 1,640,520 Home equity loans 19,431 22,089 41,520 Other consumer 779 1,120 1,899 Total loans $ 3,643,451 $ 1,462,478 $ 5,105,929 For the Years Ended June 30, 2022 2021 2020 (In Thousands) Loan originations: (1) Commercial loans: Multi-family mortgage $ 911,021 $ 256,223 $ 193,158 Nonresidential mortgage 231,159 96,238 65,357 Commercial business 140,051 104,628 108,546 Construction 86,448 50,382 7,192 One- to four-family residential mortgage 415,602 553,194 197,825 Consumer loans: Home equity loans 18,634 15,804 16,396 Other consumer 1,167 1,227 1,312 Total loan originations 1,804,082 1,077,696 589,786 Loan purchases: Commercial loans: Multi-family mortgage 55,847 - 2,500 Nonresidential mortgage - 21,351 53,043 Commercial business 146 251 2,671 One- to four-family residential mortgage 67,396 60,105 15,048 Total loan purchases 123,389 81,707 73,262 Loans acquired from MSB (2) - 530,693 - Loan sales: (1) Commercial business (1,035 ) (44,450 ) (470 ) Total loans sold (1,035 ) (44,450 ) (470 ) Loan repayments (1,343,081 ) (1,311,576 ) (849,249 ) (Decrease) increase due to other items (5,797 ) (1,911 ) 2,087 Net increase (decrease) in loan portfolio $ 577,558 $ 332,159 $ (184,584 ) At June 30, 2022 2021 (Dollars In Thousands) Nonaccrual loans (1) $ 70,321 $ 79,767 Accruing loans 90 days or more past due - - Total nonperforming loans 70,321 79,767 Nonaccrual loans held-for-sale 21,745 - Other real estate owned 178 178 Total nonperforming assets $ 92,244 $ 79,945 Total nonaccrual loans to total loans 1.30 % 1.64 % Total nonperforming loans to total loans 1.30 % 1.64 % Total nonperforming loans to total assets 0.91 % 1.10 % Total nonperforming assets to total assets 1.19 % 1.10 % At June 30, 2022 2021 (In Thousands) Special mention $ 12,740 $ 84,981 Substandard 81,650 95,394 Doubtful 165 516 Total classified loans $ 94,555 $ 180,891 Losses.” At June 30, 2022 2021 (Dollars in Thousands) Allowance for credit losses - loans $ 47,058 $ 58,165 Total loans outstanding $ 5,436,576 $ 4,880,310 Total non-performing loans $ 70,321 $ 79,767 Allowance for credit losses as a percent of total loans outstanding 0.87 % 1.19 % Allowance for credit losses to non-performing loans 66.92 % 72.92 % For the Years Ended June 30, 2022 2021 2020 Net Average Net charge- Net Average Net charge- Net Average Net charge- (Dollars in Thousands) Multi-family $ 1,896 $ 2,056,595 0.09 % $ - $ 2,075,450 0.00 % $ - $ 1,894,548 0.00 % Nonresidential 1,834 1,036,205 0.18 % 80 1,104,052 0.01 % (10 ) 1,188,862 0.00 % Commercial 33 190,023 0.02 % 1,429 223,518 0.64 % 48 79,704 0.06 % Construction - 105,095 0.00 % - 76,309 0.00 % - 21,050 0.00 % One- to four-family (147 ) 1,487,208 -0.01 % 9 1,331,779 0.00 % - 1,335,798 0.00 % Home equity loans (27 ) 67,849 -0.04 % 32 88,961 0.04 % - 90,070 0.00 % Other consumer - 2,993 0.00 % 32 4,048 0.79 % 106 4,880 2.17 % Unaccreted yield - (23,568 ) 0.00 % - (37,681 ) 0.00 % - (46,096 ) 0.00 % Total $ 3,589 $ 4,922,400 0.07 % $ 1,582 $ 4,866,436 0.03 % $ 144 $ 4,568,816 0.00 % At June 30, 2022 2021 Amount Percent of Loans Amount Percent of Loans (Dollars In Thousands) Multi-family mortgage $ 25,321 44.31 % $ 28,450 41.79 % Nonresidential mortgage 10,590 18.76 16,243 22.12 Commercial business 1,792 3.25 2,086 3.46 Construction 1,486 2.58 1,170 1.92 One- to four-family residential mortgage 7,540 30.27 9,747 29.66 Home equity loans 245 0.78 433 0.98 Other consumer 84 0.05 36 0.07 Total $ 47,058 100.00 % $ 58,165 100.00 % $810,000. 2022. At June 30, 2022 2021 (In Thousands) Debt securities available for sale: Obligations of state and political subdivisions $ 28,435 $ 34,603 Asset-backed securities 166,557 242,989 Collateralized loan obligations 307,813 189,880 Corporate bonds 153,397 158,351 Total debt securities available for sale 656,202 625,823 Mortgage-backed securities available for sale: Collateralized mortgage obligations 7,122 13,739 Residential pass-through securities 514,758 744,491 Commercial pass-through securities 166,011 292,811 Total mortgage-backed securities available for sale 687,891 1,051,041 Total securities available for sale 1,344,093 1,676,864 Debt securities held to maturity: Obligations of state and political subdivisions 21,159 25,824 Total debt securities held to maturity 21,159 25,824 Mortgage-backed securities held to maturity: Residential pass-through securities 84,851 - Commercial pass-through securities 12,281 12,314 Total mortgage-backed securities held to maturity 97,132 12,314 Total securities held to maturity 118,291 38,138 Total securities $ 1,462,384 $ 1,715,002 At June 30, 2022 One Year or Less One to Five Years Five to Ten Years More Than Ten Years Total Securities Carrying Weighted Carrying Weighted Carrying Weighted Carrying Weighted Carrying Weighted Fair Market (Dollars In Thousands) Debt securities: Obligations of state and political $ 7,673 2.10 % $ 33,134 2.32 % $ 8,787 2.50 % $ - - % $ 49,594 2.32 % $ 49,560 Asset-backed securities - - - - 33,138 2.30 133,419 2.55 166,557 2.50 166,557 Collateralized loan obligations - - - - 143,326 2.75 164,487 3.24 307,813 3.01 307,813 Corporate bonds - - - - 144,188 4.05 9,209 3.72 153,397 4.03 153,397 Mortgage-backed securities: Collateralized mortgage - - 716 1.58 - - 6,406 2.15 7,122 2.09 7,122 Residential pass-through - - 3,431 2.07 8,971 2.39 587,207 2.01 599,609 2.02 591,022 Commercial pass-through - - - - 12,281 1.78 166,011 1.93 178,292 1.92 176,740 Total securities $ 7,673 2.10 % $ 37,281 2.28 % $ 350,691 3.19 % $ 1,066,739 2.27 % $ 1,462,384 2.49 % $ 1,452,211 For the Years Ended June 30, 2022 2021 2020 Average Percent Weighted Average Percent Weighted Average Percent Weighted (Dollars In Thousands) Non-interest-bearing $ 624,666 11.37 % - % $ 518,149 9.88 % - % $ 334,522 7.89 % - % Interest-bearing demand 2,067,200 37.64 0.25 1,726,190 32.92 0.41 1,041,188 24.56 1.10 Savings 1,088,971 19.83 0.11 1,066,794 20.35 0.31 831,832 19.62 0.81 Certificates of deposit 1,711,276 31.16 0.52 1,931,887 36.85 1.10 2,032,046 47.93 2.00 . Total average deposits $ 5,492,113 100.00 % 0.28 % $ 5,243,020 100.00 % 0.60 % $ 4,239,588 100.00 % 1.39 % At June 30, 2022 (In Thousands) Maturity Period Within three months $ 559,234 Three through six months 27,042 Six through twelve months 125,093 Over twelve months 186,064 Total certificates of deposit $ 897,433 2023: At June 30, 2022 Within Over One Over Two Over Over Four Over Five Total (In Thousands) Interest Rate 0.00 - 0.99% $ 1,132,482 $ 65,952 $ 16,186 $ 27,198 $ 30,079 $ - $ 1,271,897 1.00 - 1.99% 223,393 78,371 16,159 933 229 - 319,085 2.00 - 2.99% 112,690 163,657 15,484 322 168 8 292,329 3.00 - 3.99% - 565 - - - 5,686 6,251 Total certificates of deposit $ 1,468,565 $ 308,545 $ 47,829 $ 28,453 $ 30,476 $ 5,694 $ 1,889,562 2023: At June 30, 2022 2021 (In Thousands) By remaining period to maturity: Less than one year $ 520,000 $ 390,000 One to two years 22,500 145,000 Two to three years 103,500 22,500 Three to four years 6,500 103,500 Four to five years - 6,500 Greater than five years - - Total advances 652,500 667,500 Fair value adjustments (1,163 ) (1,624 ) Total advances, net of fair value adjustments $ 651,337 $ 665,876 2023. 2023. 189-245 Berdan Avenue LLC was formed during the year ended June 30, 2023 for the purpose of ownership and operation of commercial real estate. Bank’s size ranged from 2.5 to 32 basis points. 2023. . The federal banking agencies have issued guidance on sound risk management practices for concentrations in commercial real estate lending. The particular focus is on exposure to commercial real estate loans that are dependent on the cash flow from the real estate held as collateral and that are likely to be sensitive to conditions in the commercial real estate market (as opposed to real estate collateral held as a secondary source of repayment or as an abundance of caution). The purpose of the guidance is not to limit a bank’s commercial real estate lending but to guide banks in developing risk management practices and capital levels commensurate with the level and nature of real estate concentrations. The guidance directs the FDIC and other federal bank regulatory agencies to focus their supervisory resources on institutions that may have significant commercial real estate loan concentration risk. A bank that has experienced rapid growth in commercial real estate lending, has notable exposure to a specific type of commercial real estate loan, or is approaching or exceeding the following supervisory criteria may be identified for further supervisory analysis with respect to real estate concentration risk: . In October 2022, the SEC adopted a final rule implementing the incentive-based compensation recovery (“clawback”) provisions of the Dodd-Frank Act. The final rule directs national securities exchanges and associations, including NASDAQ, to require listed companies to develop and implement clawback policies to recover erroneously awarded incentive-based compensation from current or former executive officers in the event of a required accounting restatement due to material noncompliance with any financial reporting requirement under the securities laws, and to disclose their clawback policies and any actions taken under these policies. On June 9, 2023, the SEC approved the NASDAQ proposed clawback listing standards, including the amendments that delay the effective date of the rules to October 2, 2023. Each listed issuer, including Kearny Financial, is required to adopt a clawback policy within 60 days after the effective date, or December 1, 2023. rising interest rate environment. Our investment securities totaled $1.37 billion, or 17.0% of total assets, at June 30, 2023. The consolidated financial statements. We have established policies and procedures to prevent or limit the impact of security breaches, but such events may still occur or may not be adequately addressed if they do occur. Although we rely on security safeguards to secure our data, these safeguards may not fully protect our systems from compromises or breaches. We also rely on the integrity and security of a variety of third party processors, payment, clearing and settlement systems, as well as the various participants involved in these systems, many of which have no direct relationship with us. Failure by these participants or their systems to protect our clients' transaction data may put us at risk for possible losses due to fraud or operational disruption. The occurrence of a breach of security involving our clients' information, regardless of its origin, could damage our reputation and result in a loss of clients and business and subject us to additional regulatory scrutiny, and could expose us to litigation and possible financial liability. Any of these events could have a material adverse effect on our financial condition and results of operations. Period Total Number Average Price Total Number Maximum April 1-30, 2022 1,003,199 $ 12.63 1,003,199 2,076,521 May 1-31, 2022 1,233,710 $ 11.93 1,233,710 842,811 June 1-30, 2022 517,666 $ 11.90 517,666 325,145 Total 2,754,575 $ 12.18 2,754,575 325,145 At June 30, 2017 2018 2019 2020 2021 2022 Kearny Financial Corp. $ 100 $ 92 $ 94 $ 59 $ 89 $ 86 NASDAQ Composite 100 124 133 169 246 188 S&P U.S. SmallCap Banks Index 100 111 102 77 129 119 losses and goodwill. At June 30, 2022 2021 2020 (In Thousands) Balance Sheet Data: Cash and equivalents $ 101,615 $ 67,855 $ 180,967 Assets 7,719,883 7,283,735 6,758,175 Net loans receivable 5,370,787 4,793,229 4,461,070 Investment securities available for sale 1,344,093 1,676,864 1,385,703 Investment securities held to maturity 118,291 38,138 32,556 Goodwill 210,895 210,895 210,895 Deposits 5,862,256 5,485,306 4,430,282 Borrowings 901,337 685,876 1,173,165 Stockholders' equity 894,000 1,042,944 1,084,177 For the Years Ended June 30, 2022 2021 2020 (Dollars in Thousands, Except Per Share Amounts) Summary of Operations: Interest income $ 226,272 $ 238,085 $ 237,804 Interest expense 29,669 49,851 83,854 Net interest income 196,603 188,234 153,950 (Reversal of) provision for credit losses (7,518 ) (1,121 ) 4,197 Net interest income after (reversal of) provision for credit losses 204,121 189,355 149,753 Non-interest income 13,934 21,026 15,123 Non-interest expenses 125,708 125,885 107,624 Income before taxes 92,347 84,496 57,252 Income tax expense 24,800 21,263 12,287 Net income $ 67,547 $ 63,233 $ 44,965 Per Share Data: Net income per share - Basic and diluted $ 0.95 $ 0.77 $ 0.55 Weighted average number of common shares outstanding (in thousands): Basic 70,911 82,387 82,409 Diluted 70,933 82,391 82,430 Cash dividends per share $ 0.43 $ 0.35 $ 0.29 Dividend payout ratio (1) 45.1 % 45.1 % 52.8 % At or For the Years Ended June 30, 2022 2021 2020 Performance ratios: Return on average assets (net income divided by average total assets) 0.93 % 0.86 % 0.67 % Return on average equity (net income divided by average total equity) 6.86 % 5.79 % 4.10 % Return on average tangible equity (net income divided by average tangible equity) (1) 8.77 % 7.22 % 5.10 % Net interest rate spread 2.86 % 2.61 % 2.22 % Net interest margin 2.94 % 2.75 % 2.45 % Average interest-earning assets to average interest-earning liabilities 118.93 % 118.63 % 117.24 % Efficiency ratio (non-interest expenses divided by the sum of net interest income 59.71 % 60.16 % 63.66 % Non-interest expense to average assets 1.73 % 1.72 % 1.61 % Asset Quality Ratios: Non-performing loans to total loans 1.30 % 1.64 % 0.82 % Non-performing assets to total assets 1.19 % 1.10 % 0.55 % Net charge-offs to average loans outstanding 0.07 % 0.03 % 0.00 % Allowance for credit losses to total loans 0.87 % 1.19 % 0.82 % Allowance for credit losses to non-performing loans 66.92 % 72.92 % 101.72 % Capital Ratios: Average equity to average assets 13.52 % 14.88 % 16.39 % Equity to assets at period end 11.58 % 14.32 % 16.04 % Tangible equity to tangible assets at period end (2) 9.06 % 11.72 % 13.29 % 2022 June 30, June 30, Increase/ 2022 2021 (Decrease) (In Thousands) Commercial loans: Multi-family mortgage $ 2,409,090 $ 2,039,260 $ 369,830 Nonresidential mortgage 1,019,838 1,079,444 (59,606 ) Commercial business 176,807 168,951 7,856 Construction 140,131 93,804 46,327 Total commercial loans 3,745,866 3,381,459 364,407 One- to four-family residential mortgage 1,645,816 1,447,721 198,095 Consumer loans: Home equity loans 42,028 47,871 (5,843 ) Other consumer 2,866 3,259 (393 ) Total consumer loans 44,894 51,130 (6,236 ) Total loans 5,436,576 4,880,310 556,266 Unaccreted yield adjustments (18,731 ) (28,916 ) 10,185 Allowance for credit losses (47,058 ) (58,165 ) 11,107 Net loans receivable $ 5,370,787 $ 4,793,229 $ 577,558 June 30, June 30, Increase/ 2022 2021 (Decrease) (In Thousands) Non-interest-bearing deposits $ 653,899 $ 593,718 $ 60,181 Interest-bearing deposits: Interest-bearing demand 2,265,597 1,902,478 363,119 Savings 1,053,198 1,111,364 (58,166 ) Certificates of deposit 1,889,562 1,877,746 11,816 Interest-bearing deposits 5,208,357 4,891,588 316,769 Total deposits $ 5,862,256 $ 5,485,306 $ 376,950 2023. shares. During the year ended June 30, share. 2022 .Net interest income For the Years Ended June 30, 2022 2021 2020 Average Interest Average Average Interest Average Average Interest Average (Dollars in Thousands) Interest-earning assets: Loans receivable (1) $ 4,922,400 $ 190,520 3.87 % $ 4,866,436 $ 202,240 4.16 % $ 4,568,816 $ 191,599 4.19 % Taxable investment securities (2) 1,622,475 32,746 2.02 1,571,452 31,238 1.99 1,291,516 39,321 3.04 Tax-exempt securities (2) 55,981 1,273 2.27 74,604 1,652 2.21 111,477 2,393 2.15 Other interest-earning assets (3) 82,802 1,733 2.09 200,435 2,955 1.47 122,278 4,491 3.67 Total interest-earning assets 6,683,658 226,272 3.39 6,712,927 238,085 3.55 6,094,087 237,804 3.90 Non-interest-earning assets 598,712 620,934 595,158 Total assets $ 7,282,370 $ 7,333,861 $ 6,689,245 Interest-bearing liabilities: Interest-bearing demand $ 2,067,200 $ 5,123 0.25 $ 1,726,190 $ 7,028 0.41 $ 1,041,188 $ 11,433 1.10 Savings 1,088,971 1,190 0.11 1,066,794 3,299 0.31 831,832 6,735 0.81 Certificates of deposit 1,711,276 8,895 0.52 1,931,887 21,208 1.10 2,032,046 40,684 2.00 Total interest-bearing deposits 4,867,447 15,208 0.31 4,724,871 31,535 0.67 3,905,066 58,852 1.51 FHLB advances 679,388 14,067 2.07 931,148 18,314 1.97 1,236,139 24,582 1.99 Other borrowings 72,841 394 0.54 2,563 2 0.06 56,957 420 0.74 Total borrowings 752,229 14,461 1.92 933,711 18,316 1.96 1,293,096 25,002 1.93 Total interest-bearing liabilities 5,619,676 29,669 0.53 5,658,582 49,851 0.88 5,198,162 83,854 1.61 Non-interest-bearing liabilities (4) 678,143 583,886 394,758 Total liabilities 6,297,819 6,242,468 5,592,920 Stockholders' equity 984,551 1,091,393 1,096,325 Total liabilities and $ 7,282,370 $ 7,333,861 $ 6,689,245 Net interest income $ 196,603 $ 188,234 $ 153,950 Interest rate spread (5) 2.86 % 2.67 % 2.29 % Net interest margin (6) 2.94 % 2.80 % 2.53 % Ratio of interest-earning assets 1.19 X 1.19 X 1.17 X Year Ended June 30, 2022 Year Ended June 30, 2021 Increase (Decrease) Due to Increase (Decrease) Due to Volume Rate Net Volume Rate Net (In Thousands) (In Thousands) Interest and dividend income Loans receivable $ 2,337 $ (14,057 ) $ (11,720 ) $ 12,057 $ (1,416 ) $ 10,641 Taxable investment securities 1,030 478 1,508 7,341 (15,424 ) (8,083 ) Tax-exempt securities (423 ) 44 (379 ) (807 ) 66 (741 ) Other interest-earning assets (2,157 ) 935 (1,222 ) 1,984 (3,520 ) (1,536 ) Total interest-earning assets $ 787 $ (12,600 ) $ (11,813 ) $ 20,575 $ (20,294 ) $ 281 Interest expense: Interest-bearing demand $ 1,216 $ (3,121 ) $ (1,905 ) $ 5,100 $ (9,505 ) $ (4,405 ) Savings 67 (2,176 ) (2,109 ) 1,533 (4,969 ) (3,436 ) Certificates of deposit (2,192 ) (10,121 ) (12,313 ) (1,923 ) (17,553 ) (19,476 ) Borrowings (3,489 ) (366 ) (3,855 ) (7,067 ) 381 (6,686 ) Total interest-bearing liabilities $ (4,398 ) $ (15,784 ) $ (20,182 ) $ (2,357 ) $ (31,646 ) $ (34,003 ) Change in net interest income $ 5,185 $ 3,184 $ 8,369 $ 22,932 $ 11,352 $ 34,284 2023. headcount. two retail branch locations. year ended June 30, 2023. 2021 At or For the Years Ended June 30, 2022 2021 2020 (Dollars in Thousands) Balance at end of year $ 625,000 $ 390,000 $ 865,000 Average balance during year $ 476,142 $ 646,896 $ 904,262 Maximum outstanding at any month end $ 684,000 $ 815,000 $ 1,075,000 Weighted average interest rate at end of year 1.72 % 0.33 % 0.45 % Weighted average interest rate during year 0.58 % 1.08 % 2.14 % At June 30, 2022 Less than One to Over Three Over Five Total (In Thousands) Contractual obligations Operating lease obligations $ 3,614 $ 6,092 $ 5,524 $ 5,956 $ 21,186 Certificates of deposit 1,468,565 356,374 58,929 5,694 1,889,562 Federal Home Loan Bank Advances 520,000 22,500 103,500 6,500 652,500 Total contractual obligations $ 1,992,179 $ 384,966 $ 167,953 $ 18,150 $ 2,563,248 Commitments Undisbursed funds from approved lines of credit (1) $ 75,755 $ 18,548 $ 6,423 $ 58,540 $ 159,266 Construction loans in process (1) 109,047 - - - 109,047 Other commitments to extend credit (1) 242,148 - - - 242,148 Total commitments $ 426,950 $ 18,548 $ 6,423 $ 58,540 $ 510,461 At June 30, 2022 Actual For Capital To Be Well Capitalized Amount Ratio Amount Ratio Amount Ratio (Dollars in Thousands) Total capital (to risk-weighted assets) $ 672,274 13.10 % $ 410,429 8.00 % $ 513,036 10.00 % Tier 1 capital (to risk-weighted assets) 642,336 12.52 % 307,822 6.00 % 410,429 8.00 % Common equity tier 1 capital (to risk-weighted assets) 642,336 12.52 % 230,866 4.50 % 333,473 6.50 % Tier 1 capital (to adjusted total assets) 642,336 8.70 % 295,163 4.00 % 368,954 5.00 % 2023: At June 30, 2022 Actual For Capital Amount Ratio Amount Ratio (Dollars in Thousands) Total capital (to risk-weighted assets) $ 778,253 15.17 % $ 410,515 8.00 % Tier 1 capital (to risk-weighted assets) 748,315 14.58 % 307,886 6.00 % Common equity tier 1 capital (to risk-weighted assets) 748,315 14.58 % 230,914 4.50 % Tier 1 capital (to adjusted total assets) 748,315 10.14 % 295,290 4.00 % 2023: June 30, 2022 1 to 12 Months 13 to 24 Months Change in $ Amount % Change $ Amount % Change $ Amount % Change (Dollars in Thousands) +300 bps 1,089,795 (15.37 ) % 178,865 (13.62 ) % 214,839 (1.68 ) % +200 bps 1,156,219 (10.21 ) % 187,601 (9.40 ) % 215,528 (1.36 ) % +100 bps 1,239,935 (3.71 ) % 198,126 (4.32 ) % 219,594 0.50 % 0 bps 1,287,700 - 207,069 - 218,501 - -100 bps 1,272,203 (1.20 ) % 205,241 (0.88 ) % 204,568 (6.38 ) % June 30, 2021 1 to 12 Months 13 to 24 Months Change in $ Amount % Change $ Amount % Change $ Amount % Change (Dollars in Thousands) +300 bps 1,083,847 (8.82 ) % 175,830 (8.38 ) % 196,307 4.11 % +200 bps 1,132,915 (4.69 ) % 182,089 (5.12 ) % 195,756 3.82 % +100 bps 1,176,890 (0.99 ) % 187,961 (2.06 ) % 194,543 3.17 % 0 bps 1,188,656 - 191,908 - 188,559 - -100 bps 1,071,463 (9.86 ) % 181,645 (5.35 ) % 169,447 (10.14 ) % (A) (B) (C) Number of Securities to be Weighted Average Number of Securities Remaining Equity compensation plans 2005 Stock Compensation 138,040 $ 10.67 - 2016 Equity Incentive Plan 3,251,166 $ 15.17 - 2021 Equity Incentive Plan 251,905 $ - 6,744,285 Equity compensation plans None - $ - - Total 3,641,111 $ 14.98 6,744,285 Financial Instruments (continued) The following presents the carrying amount, fair value, and placement in the fair value hierarchy of the Company’s financial instruments as of June 30, June 30, 2022 Carrying Fair Quoted Significant Significant (In Thousands) Financial assets: Cash and cash equivalents $ 101,615 $ 101,615 $ 101,615 $ - $ - Investment securities available for sale 1,344,093 1,344,093 - 1,344,093 - Investment securities held to maturity 118,291 108,118 - 108,118 - Loans held-for-sale 28,874 28,831 - 28,831 - Net loans receivable 5,370,787 5,215,079 - - 5,215,079 FHLB Stock 47,144 - - - - Interest receivable 20,466 20,466 2 5,210 15,254 Interest rate contracts 41,223 41,223 - 41,223 - Financial liabilities: Deposits 5,862,256 5,839,035 3,972,694 - 1,866,341 Borrowings 901,337 900,505 - - 900,505 Interest payable on deposits 722 722 147 - 575 Interest payable on borrowings 1,611 1,611 - - 1,611 June 30, 2021 Carrying Fair Quoted Significant Significant (In Thousands) Financial assets: Cash and cash equivalents $ 67,855 $ 67,855 $ 67,855 $ - $ - Investment securities available for sale 1,676,864 1,676,864 - 1,676,864 - Investment securities held to maturity 38,138 39,610 - 39,610 - Loans held-for-sale 16,492 16,934 - 16,934 - Net loans receivable 4,793,229 4,830,136 - - 4,830,136 FHLB Stock 36,615 - - - - Interest receivable 19,362 19,362 1 4,238 15,123 Interest rate contracts 1,832 1,832 - 1,832 - Financial liabilities: Deposits 5,485,306 5,490,923 3,607,560 - 1,883,363 Borrowings 685,876 701,419 - - 701,419 Interest payable on deposits 145 145 96 - 49 Interest payable on borrowings 1,335 1,335 - - 1,335 Interest rate contracts 673 673 - 673 - The components of accumulated other comprehensive (loss) income included in stockholders’ equity are as follows: June 30, 2022 2021 (In Thousands) Net unrealized (loss) gain on securities available for sale $ (118,031 ) $ 10,011 Tax effect 34,104 (2,882 ) Net of tax amount (83,927 ) 7,129 Fair value adjustments on derivatives 39,805 (312 ) Tax effect (11,542 ) 94 Net of tax amount 28,263 (218 ) Benefit plan adjustments (89 ) (1,093 ) Tax effect 26 326 Net of tax amount (63 ) (767 ) Total accumulated other comprehensive (loss) income $ (55,727 ) $ 6,144 Years Ended June 30, 2022 2021 2020 (In Thousands) Net unrealized (loss) gain on securities available for sale $ (128,601 ) $ (11,704 ) $ 22,758 Amortization of net unrealized holding loss on securities - - 596 Net realized loss (gain) on securities available for sale (2) 559 (767 ) (2,251 ) Fair value adjustments on derivatives 40,117 19,106 (23,134 ) Benefit plans: Amortization of actuarial loss (3) 80 83 19 Net actuarial gain (loss) 924 236 (348 ) Net change in benefit plan accrued expense 1,004 319 (329 ) Other comprehensive (loss) income before taxes (86,921 ) 6,954 (2,360 ) Tax effect 25,050 (2,067 ) 778 Total other comprehensive (loss) income $ (61,871 ) $ 4,887 $ (1,582 ) Years Ended June 30, 2022 2021 2020 (In Thousands) Non-interest income: Deposit-related fees and charges $ 1,733 $ 1,412 $ 1,626 Loan-related fees and charges (1) 847 485 425 (Loss) gain on sale and call of securities (1) (559 ) 767 2,250 Gain on sale of loans (1) 2,539 5,574 3,186 Gain (loss) on sale and write down of other real estate owned 5 - (28 ) Income from bank owned life insurance (1) 6,167 6,267 6,225 Electronic banking fees and charges (interchange income) 1,626 1,717 1,245 Bargain purchase gain (1) - 3,053 - Miscellaneous (1) 1,576 1,751 194 Total non-interest income $ 13,934 $ 21,026 $ 15,123 Condensed Statements of Financial Condition June 30, 2022 2021 (In Thousands) Assets Cash and amounts due from depository institutions $ 77,750 $ 66,191 Investment securities available for sale - 15,000 Loans receivable 28,201 29,959 Investment in subsidiary 788,021 932,004 Other assets 448 624 Total Assets $ 894,420 $ 1,043,778 Liabilities and Stockholders' Equity Other liabilities 420 834 Stockholders' equity 894,000 1,042,944 Total Liabilities and Stockholders' Equity $ 894,420 $ 1,043,778 Years Ended June 30, 2022 2021 2020 (In Thousands) Dividends from subsidiary $ 156,728 $ 178,918 $ 30,039 Interest income 1,508 1,993 2,108 Equity in undistributed earnings of subsidiaries (88,452 ) (114,969 ) 14,984 Total income 69,784 65,942 47,131 Directors' compensation 530 308 332 Other expenses 1,976 2,660 1,853 Total expense 2,506 2,968 2,185 Income before income taxes 67,278 62,974 44,946 Income tax expense (269 ) (259 ) (19 ) Net income $ 67,547 $ 63,233 $ 44,965 Comprehensive income $ 5,676 $ 68,120 $ 43,383 Condensed Statements of Cash Flows Years Ended June 30, 2022 2021 2020 (In Thousands) Cash Flows from Operating Activities: Net income $ 67,547 $ 63,233 $ 44,965 Adjustment to reconcile net income to net cash provided by operating activities: Equity in undistributed earnings of subsidiaries 88,452 114,969 (14,984 ) Decrease (increase) in other assets 176 484 (583 ) (Decrease) increase in other liabilities (184 ) 160 (50 ) Net Cash Provided by Operating Activities 155,991 178,846 29,348 Cash Flows from Investing Activities: Repayment of loan to ESOP 1,758 1,702 1,645 Proceeds from the maturity of investment securities available for sale 15,000 - - Outlays for business acquisitions - (9,008 ) - Other, net - 118 - Net Cash Provided by (Used in) Investing Activities 16,758 (7,188 ) 1,645 Cash Flows from Financing Activities: Exercise of stock options - 373 - Cash dividends paid (30,693 ) (28,648 ) (24,121 ) Repurchase and cancellation of common stock of Kearny Financial Corp. (129,520 ) (119,021 ) (69,782 ) Cancellation of shares repurchased on vesting to pay taxes (977 ) (803 ) (1,083 ) Net Cash Used In Financing Activities (161,190 ) (148,099 ) (94,986 ) Net Increase (Decrease) in Cash and Cash Equivalents 11,559 23,559 (63,993 ) Cash and Cash Equivalents - Beginning 66,191 42,632 106,625 Cash and Cash Equivalents - Ending $ 77,750 $ 66,191 $ 42,632 Note 22 – Net Income per Common Share (EPS) The following schedule shows the Company’s earnings per share calculations for the periods presented: For the Year Ended June 30, 2022 2021 2020 (In Thousands, Except Per Share Data) Net income $ 67,547 $ 63,233 $ 44,965 Weighted average number of common shares outstanding - basic 70,911 82,387 82,409 Effect of dilutive securities 22 4 21 Weighted average number of common shares outstanding- diluted 70,933 82,391 82,430 Basic earnings per share $ 0.95 $ 0.77 $ 0.55 Diluted earnings per share $ 0.95 $ 0.77 $ 0.55 KEARNY FINANCIAL CORP. /s/ Craig L. Montanaro By: Craig L. Montanaro /s/ Craig L. Montanaro /s/ Keith Suchodolski /s/ Theodore J. Aanensen /s/ Raymond E. Chandonnet /s/ Curtland E. Fields /s/ John N. Hopkins /s/ John J. Mazur, Jr. /s/ John F. McGovern /s/ Christopher Petermann /s/ John F. Regan /s/ Melvina Wong-Zaza Melvina Wong-Zaza☒x2022☐o
Incorporation or Organization)
Identification No.), Fairfield,, New Jersey(973) (973) 244-4500☒ Yesx ☐Yes oNo☐ Yeso ☒Yes xNo☒ Yesx ☐Yes oNo229.405232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yesx ☐Yes oNo☒x☐o☐o☐o☐o☐☒If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. o☐ YES ☒o NOYes 31, 202130, 2022 (the last business day of the Registrant’s most recently completed second fiscal quarter) was $866.9$627.7 million. Solely for purposes of this calculation, shares held by directors, executive officers and greater than 10% stockholders are treated as shares held by affiliates.19, 202218, 2023 there were outstanding 68,226,77565,214,903 shares of the Registrant’s Common Stock.20222023 Annual Meeting of Stockholders. (Part III)2022•the COVID-19 pandemic may continue to adversely impact the local and national economy and our business and results of operations may continue to be adversely affected;2technological changes;•significant increases in our loan losses;•“we”, “us”,“we,” “us,” or “our” refer to the Bank or Company, or both, as the context indicates. in New Jersey and New York and using these deposits, together with other funds, to originate or purchase loans for its portfolio and for sale into the secondary market. Our loan portfolio is primarily comprised of loans collateralized by commercial and residential real estate augmented by secured and unsecured loans to businesses and consumers. We also maintain a portfolio of investment securities, primarily comprised of U.S. agency mortgage-backed securities, obligations of state and political subdivisions, corporate bonds, asset-backed securities and collateralized loan obligations.2022,2023, we had 4543 branch offices. The Company maintains a website at www.kearnybank.com.www.kearnybank.com. We make available through that website, free of charge, copies of our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, amendments to those reports and proxy materials as soon as is reasonably practicable after the Company electronically files those materials with, or furnishes them to, the Securities and Exchange Commission. You may access these materials by following the links under “Investor Relations” under the “Financial Information” tab at the Company’s website. Information on the Company’s website is not and should not be considered a part of this Annual Report on Form 10-K.3AcquisitionTable of MSB Financial Corp. (“MSB”)ContentsOn July 10, 2020, we completed our acquisition of MSB and its subsidiary, Millington Bank. In accordance with the merger agreement, approximately $9.8 million in cash and 5,853,811 shares of Company common stock were distributed to former MSB shareholders in exchange for their shares of MSB common stock. As a result of the merger, we acquired loans with fair values totaling $530.2 million, assumed deposits with fair values totaling $460.2 million and acquired four branch offices located in Somerset and Morris counties. The application of the acquisition method of accounting resulted in the recognition of bargain purchase gain of $3.1 million and a core deposit intangible of $690,000.Impact of COVID-19 PandemicDuring the year ended June 30, 2022, COVID-19 continued to impact the U.S. and global economy in a variety of ways. We continue to monitor developments related to COVID-19, including, but not limited to, its impact on our employees, clients, communities and results of operations.Employee Matters. As the COVID-19 pandemic initially unfolded, and stay-at-home orders were mandated by government officials, many of our non-branch personnel transitioned to working remotely or in a hybrid-remote environment. Through June 30, 2022, many of our non-branch personnel have continued to work in a hybrid-remote fashion. Our information technology infrastructure has afforded us the ability to work remotely with little interruption as we continue to service the needs of our clients. For those essential employees who are unable to work from home, we have provided personal protective equipment and have established procedures and guidelines to ensure a safe working environment.Retail Branches. At the outset of the pandemic we modified our branch hours and access to ensure the safety of our employees and clients. Where possible, branch lobbies were initially transitioned to appointment-only access, with the majority of branch operations being conducted via our drive-up windows. As certain branches did not have drive-up capabilities or suitable alternatives, we temporarily closed certain locations. In the months following, and in accordance with the protocols recommended by the Centers for Disease Control and Prevention (“CDC”), we have outfitted our branches with protective barriers and continued to provide our staff with personal protective equipment. As of June 30, 2022, all of our branches were fully operational.CARES Act, Paycheck Protection Program and Health Care Enhancement Act (“PPP Enhancement Act”). On March 27, 2020, the CARES Act was signed into law. Among the more significant components of the CARES Act, as it pertains to the Company, was the creation of the Paycheck Protection Program (“PPP”), the modification of rules and regulations surrounding troubled debt restructured loans (“TDRs”) and modifications to the tax code to allow for the carryback of net operating losses.The CARES Act authorized the Small Business Administration (“SBA”) to temporarily guarantee loans under a new 7(a) loan program called the Paycheck Protection Program. As part of this program the SBA guarantees 100% of the PPP loans made to eligible borrowers. As a qualified SBA lender, the Bank was automatically authorized to originate PPP loans. As of June 30, 2022 we had four loans with total outstanding balances of $396,000 under the PPP.Based on Section 4013 of the CARES Act, the 2021 Consolidated Appropriations Act and related regulatory guidance promulgated by federal banking regulators, qualifying loan modifications, including short-term payment deferrals, are not considered to be TDRs. At June 30, 2022, we did not have any active COVID-19 payment deferrals that were not considered to be TDRs.2021 Consolidated Appropriations Act. The 2021 Consolidated Appropriations Act was signed into law on December 27, 2020. The $900 billion relief package included legislation that extended certain relief provisions of the CARES Act that were set to expire on December 31, 2020. The relief expired on January 1, 2022.4In recent years we20222023 Tier 1 Leverage ratios of the Company and the Bank of 10.14%9.07% and 8.70%8.15%, respectively, we currently maintain, and plan to continue to maintain, capital levels in excess of regulatory minimums and internal capital adequacy guidelines.2022,2023, our liquid assets included $101.6$70.5 million of short-term cash and equivalents supplemented by $1.34$1.23 billion of investment securities classified as available for sale which can be readily sold or pledged as collateral, if necessary. In addition, we had the capacity to borrow additional funds totaling $975.0$990.0 million via unsecured overnight borrowings from other financial institutions and $2.04$1.55 billion and $303.9$415.0 million from the Federal Home Loan Bank of New York and FRB, respectively, without pledging additional collateral.Grow and Diversify Our Retail Non-Maturity DepositsWe plan to continue to focus on growing and diversifying our retail non-maturity deposit base with an emphasis on growth in core non-maturity deposits and, in particular, non-interest bearing deposits. In addition, we plan to focus on growth in commercial deposits. During fiscal 2022, we successfully grew core non-maturity deposits by $365.1 million, including non-interest-bearing deposit growth of $60.2 million.•Grow and Diversify Our Loan PortfolioWe plan to continue focusing on growing and diversifying our loan portfolio with a particular emphasis on growth in the commercial real estate, commercial business and construction loan segments. Our focus, as it relates to new loan originations, will continue to be on high quality loans with strong sponsors and favorable credit metrics.•Leverage Our Residential Mortgage Banking InfrastructureWe plan to continue to leverage the flexibility of our mortgage banking infrastructure to support the origination of residential mortgage loans for sale into the secondary market or to supplement our loan growth initiatives based on market conditions and loan growth targets. In the long-term, we anticipate that residential mortgage loan origination and sale activity will continue to support our non-interest income, while also serving to help manage our exposure to interest rate risk through the sale of longer-duration, fixed-rate loans into the secondary market.•Optimize Our Branch NetworkAt June 30, 2022, we had a total of 45 branches. We plan to selectively evaluate branch network expansion opportunities while continuing to place strategic emphasis on leveraging the opportunities to increase market share and expand the depth and breadth of client relationships within our existing branches.We also plan to continue to evaluate and optimize the performance of our existing branch network through additional branch consolidations, where appropriate. Such efforts will take into consideration historical branch profitability, market demographic trajectory, geographic proximity of consolidating branches and the expected impact on the Bank’s clients and communities served.•Improve Our Operating EfficiencyIn recent years, our operating efficiency has improved both organically and via economies of scale gained from merger and acquisition activity. Exclusive of potential future acquisitions, we plan to continue to improve operating efficiency through organic means, such as the increased use of technology and the continual evaluation of branch consolidation opportunities.5•In recognition of2023,2024, we plan to accelerate our digital strategy, spearheaded by the adoption of a cloud-based, best-in-breed digital banking platform, and continue to serve our clients’ needs in an omnichannel environment while expanding our products and services into new markets in an efficient and cost-effective manner.2022,2023, our primary market area consisted of the counties in which we currently operate branches, including Bergen, Essex, Hudson, Middlesex, Monmouth, Morris, Ocean, Passaic, Somerset and Union counties in New Jersey and Kings (Brooklyn) and Richmond (Staten Island) counties in New York. Our lending is concentrated in New Jersey and New York and our predominant sources of deposits are the communities in which our offices are located as well as the neighboring communities.primarily from other insured depository institutions located in our primary market area. We also face competition fromarea as well as out-of-market depository institutions operating via online channels and from non-depository institutions including mortgage banks, finance companies, insurance companies, brokerage firms and financial technology companies.At June 30, 2023 2022 Amount Percent Amount Percent (Dollars In Thousands) Commercial loans: Multi-family mortgage $ 2,761,775 47.21 % $ 2,409,090 44.31 % Nonresidential mortgage 968,574 16.56 1,019,838 18.76 Commercial business 146,861 2.51 176,807 3.25 Construction 226,609 3.87 140,131 2.58 One- to four-family residential mortgage 1,700,559 29.07 1,645,816 30.27 Consumer loans: Home equity loans 43,549 0.74 42,028 0.78 Other consumer 2,549 0.04 2,866 0.05 Total loans 5,850,476 100.00 % 5,436,576 100.00 % Less: Allowance for credit losses 48,734 47,058 Unaccreted yield adjustments 21,055 18,731 Total adjustments 69,789 65,789 Total loans, net $ 5,780,687 $ 5,370,787 620222023 and 2021:June 30, 2023 June 30, 2022 Balance LTV Balance LTV (Dollars in Thousands) Commercial mortgage loans: Multi-family mortgage $ 2,761,775 64 % $ 2,409,090 64 % Nonresidential mortgage 968,574 54 % 1,019,838 54 % Construction 226,609 58 % 140,131 61 % Total commercial mortgage loans 3,956,958 61 % 3,569,059 61 % One- to four-family residential mortgage 1,700,559 62 % 1,645,816 62 % Consumer loans: Home equity loans 43,549 49 % 42,028 46 % Total mortgage loans $ 5,701,066 61 % $ 5,256,903 61 % 2022.2023. Demand loans, loans having no stated maturity and overdrafts are shown as due in one year or less. Loans are stated in the following table at contractual maturity and actual maturities could differ due to prepayments.Amounts Due Within
One Year1 to 5
Years5 to 15
YearsOver 15
YearsTotal Due
After One
YearTotal (In Thousands) Multi-family mortgage $ 90,918 $ 871,298 $ 1,691,671 $ 107,888 $ 2,670,857 $ 2,761,775 Nonresidential mortgage 75,890 367,515 432,710 92,459 892,684 968,574 Commercial business 59,165 37,703 45,855 4,138 87,696 146,861 Construction 192,382 31,266 — 2,961 34,227 226,609 One- to four-family residential mortgage 4,602 42,899 215,164 1,437,894 1,695,957 1,700,559 Home equity loans 270 6,074 26,198 11,007 43,279 43,549 Other consumer 987 263 18 1,281 1,562 2,549 Total loans $ 424,214 $ 1,357,018 $ 2,411,616 $ 1,657,628 $ 5,426,262 $ 5,850,476
One Year
Years
Years
Years
After One
Year20222023 due after June 30, 20232024 according to rate type and loan category:7Fixed Rates Floating or Adjustable Rates Total (In Thousands) Multi-family mortgage $ 2,004,363 $ 666,494 $ 2,670,857 Nonresidential mortgage 569,901 322,783 892,684 Commercial business 52,934 34,762 87,696 Construction 1,094 33,133 34,227 One- to four-family residential mortgage 1,570,705 125,252 1,695,957 Home equity loans 24,997 18,282 43,279 Other consumer 508 1,054 1,562 Total loans $ 4,224,502 $ 1,201,760 $ 5,426,262 2022,2023, multi-family mortgage loans totaled $2.41$2.76 billion, or 44.3%47.2% of our loan portfolio, while nonresidential mortgage loans totaled $1.02 billion,$968.6 million, or 18.8%16.6% of our loan portfolio. We originate commercial mortgage loans on a variety of multi-family and nonresidential property types, including loans on mixed-use properties which combine residential and commercial space. We generally offer fixed-rate and adjustable-rate balloon mortgage loans on multi-family and nonresidential properties with final stated maturities ranging from fivethree to fifteen15 years with amortization terms which generally range from 15 to 30 years. Our commercial mortgage loans are primarily secured by properties located in New Jersey, New York and the surrounding states.2022,2023, commercial business loans totaled $176.8$146.9 million, or 3.3%2.5% of our loan portfolio. We originate commercial term loans and lines of credit to a variety of clients in our market area. Included within our business loan products are loans originated through the SBA, in which we participate as a Preferred Lender. Our non-SBA commercial term loans generally have terms of up to 10 years. Our commercial lines of credit have terms of up to one year and are generally floating-rate loans.2022,2023, construction loans totaled $140.1$226.6 million, or 2.6%3.9% of our loan portfolio. Our construction lending includes loans to individuals, builders or developers for the construction of multi-family residential buildings or commercial real estate or for the construction or renovation of one- to four-family residences. Construction borrowers must hold title to the land free and clear of any liens. Financing for construction loans is limited to 80% of the anticipated appraised value of the completed property. Disbursements are made in accordance with inspection reports by our approved appraisal firms. Terms of financing are generally limited to one year with an interest rate tied to the prime rate and may include a premium of one or more points. In some cases, we convert a construction loan to a permanent mortgage loan upon completion of construction. We have no formal limits as to the number of projects a builder has under construction or development and make a case-by-case determination on loans to builders and developers who have multiple projects under development.2022,2023, one- to four-family residential mortgage loans totaled $1.65$1.70 billion, or 30.3%29.1% of our loan portfolio. At June 30, 2022, $1.532023, $1.58 billion, or 92.9%93.1%, of our one- to four-family residential mortgage loans arewere secured by properties located within New Jersey and New York with the remaining $117.1$117.6 million, or 7.1%6.9%, secured by properties in other states. The fixed-rate residential mortgage loans that we originate for portfolio generally meet the secondary mortgage market standards of the Federal Home Loan Mortgage Corporation (“Freddie Mac”). In addition, wewe offer a first-time homebuyer program which provides financial incentives for persons who have not previously owned real estate and are purchasing a one- to four-family property in our primary lending area for use as a primary residence. This program is also available outside these areas, but only to persons who are existing deposit or loan clients of Kearny Bank and/or members of their immediate families.$2.4 million$760,000 in gains associated with the sale of $189.1$103.8 million of mortgage loans held for sale during the year ended June 30, 2022.2023. As of that date, an additional $7.1$9.6 million of loans were held and committed for sale into the secondary market.2022, in addition to our one- to four-family residential mortgage loans held for sale, our commercial mortgage loans held for sale totaled $21.7 million. These loans were non-accrual loans that were expected to be sold subsequent to June 30, 2022.Home Equity Loans. At June 30, 2022,2023, home equity loans totaled $42.0$43.5 million, or 0.8%0.7% of our loan portfolio. Our home equity loans are fixed-rate loans for terms of generally up to 20 years. We also offer fixed-rate and adjustable-rate home equity lines of credit with terms of up to 20 years.2022,2023, other consumer loans totaled $2.9$2.5 million, or 0.1%0.04% of our loan portfolio. Our consumer loan portfolio includes unsecured overdraft lines of credit and personal loans as well as loans secured by savings accounts and certificates of deposit on deposit with the Bank.82022,2023, our legal loans to one borrower limit was approximately $100.8$104.3 million.2022,2023, our largest single borrower had an aggregate outstanding loan exposure of approximately $82.8$98.9 million comprising onesix multi-family mortgage loan, three nonresidential real estate mortgage loans and two commercial business loans. Our second largest single borrower had an aggregate outstanding loan exposure of approximately $76.1 million comprising four multi-family mortgage loans and one nonresidential real estate mortgage loan. At June 30, 2022, these2023, this lending relationships wererelationship was current and performing in accordance with the terms of their loan agreements.For the Years Ended June 30, 2023 2022 2021 (In Thousands) Commercial loans: Multi-family mortgage $ 602,206 $ 911,021 $ 256,223 Nonresidential mortgage 114,184 231,159 96,238 Commercial business 91,803 140,051 104,628 Construction 87,669 86,448 50,382 One- to four-family residential mortgage 197,839 415,602 553,194 Consumer loans: Home equity loans 26,014 18,634 15,804 Other consumer 1,095 1,167 1,227 Total loan originations 1,120,810 1,804,082 1,077,696 Loan purchases: Commercial loans: Multi-family mortgage — 55,847 — Nonresidential mortgage — — 21,351 Commercial business 46 146 251 One- to four-family residential mortgage 656 67,396 60,105 Total loan purchases 702 123,389 81,707 — — 530,693 Commercial business (655) (1,035) (44,450) Total loans sold (655) (1,035) (44,450) Loan repayments (706,860) (1,343,081) (1,311,576) Decrease due to other items (4,097) (5,797) (1,911) Net increase in loan portfolio $ 409,900 $ 577,558 $ 332,159 Directorand other members of Residential Lending, Director of Commercial Real Estate Lending, Director of Commercial & Industrial (C&I) Lending, Senior Credit Officer and Special Assets Manager.senior management. Loans which exceed certain thresholds, as defined within our policies, are submitted to the Bank’s Loan Committee and/or Board of Directors for approval.At June 30, 2023 2022 (Dollars In Thousands) $ 42,627 $ 70,321 Accruing loans 90 days or more past due — — Total nonperforming loans 42,627 70,321 Nonaccrual loans held-for-sale — 21,745 Other real estate owned 12,956 178 Total nonperforming assets $ 55,583 $ 92,244 Total nonaccrual loans to total loans 0.73 % 1.30 % Total nonperforming loans to total loans 0.73 % 1.30 % Total nonperforming loans to total assets 0.53 % 0.91 % Total nonperforming assets to total assets 0.69 % 1.19 % $8.7$10.5 million and $6.2$8.7 million at June 30, 2023 and 2022, and 2021.respectively.increaseddecreased by $12.3$36.7 million to $55.6 million at June 30, 2023 from $92.2 million at June 30, 2022 from $79.9 million at June 30, 2021.2022. For those same comparative periods, the number of nonperforming loans decreased to 6145 loans from 113 loans while there61 loans. There was one property in other real estate owned at June 30, 2023 and 2022, and 2021, respectively. All nonaccrual loans held-for sale at June 30, 2022 were sold during the year ended June 30, 2023.2022, there were three nonaccrual loans held-for-sale.At June 30, 20222023 and 2021,2022, we had loans with aggregate outstanding balances totaling $22.2$17.4 million and $17.8$22.2 million, respectively, reported as TDRs.At June 30, 2023 2022 (In Thousands) Special mention $ 17,674 $ 12,740 Substandard 75,777 81,650 Doubtful 75 165 Total classified loans $ 93,526 $ 94,555 Loans.Loans. On a case-by-case basis, we may conclude that a loan should be evaluated on an individual basis based on its disparate risk characteristics. When we determine that a loan no longer shares similar risk characteristics with other loans in the portfolio, the allowance will be determined on an individual basis using the present value of expected cash flows or, for collateral-dependent loans, the fair value of the collateral as of the reporting date, less estimated selling costs, as applicable. If the fair value of the collateral is less than the amortized cost basis of the loan, we will establish an allowance for the difference between the fair value of the collateral, less costs to sell, at the reporting date and the amortized cost basis of the loan.Instruments”,Instruments,” which replaced the incurred loss methodology with an expected loss methodology, referred to as the “CECL” methodology. See Note 1 to the audited consolidated financial statements for additional information on the adoption of Topic 326. Amounts reported prior to the adoption of ASU 2016-13, continue to be reported in accordance with previously applicable GAAP.Losses”. At June 30, 2023 2022 (Dollars in Thousands) Allowance for credit losses - loans $ 48,734 $ 47,058 Total loans outstanding $ 5,850,476 $ 5,436,576 Total non-performing loans $ 42,627 $ 70,321 Allowance for credit losses as a percent of total loans outstanding 0.83 % 0.87 % Allowance for credit losses to non-performing loans 114.33 % 66.92 % 12
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percent of
average loans
outstanding(Dollars in Thousands) Multi-family mortgage $ 493 $ 2,718,428 0.02 % $ 1,896 $ 2,056,595 0.09 % $ — $ 2,075,450 0.00 % Nonresidential mortgage 39 1,005,943 0.00 % 1,834 1,036,205 0.18 % 80 1,104,052 0.01 % Commercial business 335 188,794 0.18 % 33 190,023 0.02 % 1,429 223,518 0.64 % Construction — 176,185 0.00 % — 105,095 0.00 % — 76,309 0.00 % One- to four-family residential mortgage (2) 1,683,929 — % (147) 1,487,208 (0.01) % 9 1,331,779 0.00 % Home equity loans — 66,479 — % (27) 67,849 (0.04) % 32 88,961 0.04 % Other consumer (55) 2,805 (1.96) % — 2,993 0.00 % 32 4,048 0.79 % Unaccreted yield adjustments — (15,440) 0.00 % — (23,568) 0.00 % — (37,681) 0.00 % Total $ 810 $ 5,827,123 0.01 % $ 3,589 $ 4,922,400 0.07 % $ 1,582 $ 4,866,436 0.03 % 0.07%0.01% for the year ended June 30, 2022, an increase2023, a decrease of foursix basis points from the 0.03%0.07% rate for the year ended June 30, 2021.2022.
to Total Loans
to Total LoansAt June 30, 2023 2022 Amount Percent of Loans
to Total LoansAmount Percent of Loans
to Total Loans(Dollars In Thousands) Multi-family mortgage $ 26,362 47.21 % $ 25,321 44.31 % Nonresidential mortgage 8,953 16.56 10,590 18.76 Commercial business 1,440 2.51 1,792 3.25 Construction 1,336 3.87 1,486 2.58 One- to four-family residential mortgage 10,237 29.07 7,540 30.27 Home equity loans 338 0.74 245 0.78 Other consumer 68 0.04 84 0.05 Total $ 48,734 100.00 % $ 47,058 100.00 % 2022,2023, the ACL totaled $48.7 million, or 0.83% of total loans, reflecting an increase of $1.7 million from $47.1 million, or 0.87% of total loans, reflecting a decrease of $11.1 million from $58.2 million, or 1.19% of total loans, at June 30, 2021. This decrease2022. The increase was largely attributable to a provision for credit losses reversal of $7.5$2.5 million, primarily driven by continued improvement in our economic forecast, a net reduction in reserves on loans individually analyzed for impairment andloan growth, partially offset by a reduction in the expected life of various segments of the loan portfolio. Also contributing to this decreasePartially offsetting the provision for credit losses were net charge-offs of $3.6 million.20222023 is maintained at a level that is management’s best estimate of lifetime expected credit losses inherent in loans at the balance sheet date. The ACL is subject to estimates and assumptions that are susceptible to significant revisions as more information becomes available and as events or conditions effecting individual borrowers and the marketplace as a whole change over time. Additions to the ACL may be necessary if the future economic environment deteriorates from forecasted conditions. In addition, the banking regulators, as an integral part of their examination process, periodically review our loan and foreclosed real estate portfolios, related ACL and valuation allowance for foreclosed real estate. The regulators may require the ACL to be increased based on their review of information available at the time of the examination, which may negatively affect our earnings.20222023 and 20212022 is presented in Note 6 to the audited consolidated financial statements.2022,2023, our investment securities portfolio totaled $1.46$1.37 billion and comprised 18.9%17.0% of our total assets. By comparison, at June 30, 2021,2022, our securities portfolio totaled $1.72$1.46 billion and comprised 23.5%18.9% of our total assets. Additional information about our investment securities at June 30, 20222023 is presented in Note 4 to the audited consolidated financial statements.$252.6$88.2 million which largely reflected repayments sales and callssales that were partially offset by purchases. The decrease in the portfolio included a $128.0$38.1 million decrease in the fair value of the available for sale securities portfolio to an unrealized loss of $156.1 million at June 30, 2023 from an unrealized loss of $118.0 million at June 30, 2022 from an unrealized gain of $10.0 million at June 30, 2021.(“CMC”) that are designated by the Board of Directors as the officers primarily responsible for securities portfolio management and all transactions require the approval of at least two of these designated officers. On a short-term basis, our investment policy authorizes investment in securities purchased under agreements to resell, federal funds, and certificates$785.0$710.0 million at June 30, 20222023 and comprised 53.7%51.7% of total investments and 10.2%8.8% of total assets as of that date. We generally invest in mortgage-backed securities issued by U.S. government agencies or government-sponsored entities. Mortgage-backed securities issued or sponsored by U.S. government agencies and government-sponsored entities are guaranteed as to the payment of principal and interest to investors.$49.6$16.1 million at June 30, 20222023 and comprised 3.4%1.2% of total investments and less than 1.0% of total assets as of that date. Such securities primarily included highly-rated, fixed-rate bank-qualified securities representing general obligations of municipalities located within the U.S. or the obligations of their related entities such as boards of education or school districts. Each of our municipal obligations were consistently rated by Moody’s and S&P well above the thresholds that generally support our investment grade assessment with such ratings equaling or exceeding A- or higher by S&P and/or A2 or higher by Moody’s, where rated by those agencies. In the absence of, or as a complement to, such ratings, we rely upon our own internal analysis of the issuer’s financial condition to validate its investment grade assessment.$166.6$136.2 million at June 30, 20222023 and comprised 11.4%9.9% of total investments and 2.2%1.7% of total assets as of that date. This category of securities is comprised entirely of structured, floating-rate securities representing securitized federal education loans with 97% U.S. government guarantees. Our securities represent the highest credit-quality tranches within the overall structures with each being rated AA+ or higher by S&P/&P or Aa1 or higher by Moody’s, where rated by those agencies.$307.8$377.0 million at June 30, 20222023 and comprised 21.0%27.4% of total investments and 4.0%4.7% of total assets as of that date. This category of securities is comprised entirely of structured, floating-rate securities representing securitized commercial loans to large, U.S. corporations. At June 30, 2022,2023, each of our collateralized loan obligations were consistently rated by Moody’s andand/or S&P well above the thresholds that generally support our investment grade assessment with such ratings equaling AAA by S&P andor Aaa or by Moody’s, where rated by those agencies.$153.4$135.0 million at June 30, 20222023 and comprised 10.5%9.8% of total investments and 2.0%1.7% of total assets as of that date. This category of securities is comprised of two floating-rate corporate debt obligations issued by large financial institutions and subordinated debt representing profitable, well-capitalized, small- to mid-sized community banks located mainly in the mid-Atlantic region of the U.S. At June 30, 2022,2023, corporate bonds issued by large financial institutions were consistently rated by Moody’s and S&P well above the thresholds that generally support our investment grade assessment with such ratings equaling or exceeding BBBBB- or higher by S&P and/or Baa3 or higher by Moody’s, where rated by those agencies.2022,2023, our available for sale securities portfolio had a carrying value of $1.34$1.23 billion or 91.9%89.3% of our total securities with the remaining $118.3$146.5 million or 8.1%10.7% of securities were classified as held to maturity.2022.2023. All of our securities carry market risk insofar as increases in market interest rates have caused, and may continue to cause, a decrease in their market value. We believe that unrealized and unrecognized losses on securities held at June 30, 2022,2023, are a function of changes in market interest rates and credit spreads, not changes in credit quality. Therefore, no allowance for credit losses was recorded at that time.During the year ended June 30, 2020, proceeds from sales of securities available for sale totaled $164.3 million and resulted in gross gains of $2.4 million and gross losses of $145,000. There were no sales of held to maturity securities during the years ended June 30, 2023, 2022 2021 and 2020.2021.At June 30, 2023 2022 (In Thousands) Debt securities available for sale: Obligations of state and political subdivisions $ — $ 28,435 Asset-backed securities 136,170 166,557 Collateralized loan obligations 376,996 307,813 Corporate bonds 135,018 153,397 Total debt securities available for sale 648,184 656,202 Mortgage-backed securities available for sale: Collateralized mortgage obligations — 7,122 Residential pass-through securities 436,151 514,758 Commercial pass-through securities 143,394 166,011 Total mortgage-backed securities available for sale 579,545 687,891 Total securities available for sale 1,227,729 1,344,093 Debt securities held to maturity: Obligations of state and political subdivisions 16,051 21,159 Total debt securities held to maturity 16,051 21,159 Mortgage-backed securities held to maturity: Residential pass-through securities 118,166 84,851 Commercial pass-through securities 12,248 12,281 Total mortgage-backed securities held to maturity 130,414 97,132 Total securities held to maturity 146,465 118,291 Total securities $ 1,374,194 $ 1,462,384 162022.2023. This table shows contractual maturities and does not reflect re-pricing or the effect of prepayments. Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without prepayment penalties. At June 30, 2022,2023, securities with a carrying value of $42.0$40.4 million are callable within one year.At June 30, 2023 One Year or Less One to Five Years Five to Ten Years More Than Ten Years Total Securities Carrying
ValueWeighted
Average
YieldCarrying
ValueWeighted
Average
YieldCarrying
ValueWeighted
Average
YieldCarrying
ValueWeighted
Average
YieldCarrying
ValueWeighted
Average
YieldFair Market
Value(Dollars In Thousands) Debt securities: Obligations of state and political subdivisions $ 3,386 2.18 % $ 12,054 2.26 % $ 611 2.35 % $ — — % $ 16,051 2.25 % $ 15,730 Asset-backed securities — — — — 31,992 6.65 104,178 6.50 136,170 6.53 136,170 Collateralized loan obligations — — — — 201,231 6.73 175,765 7.24 376,996 6.97 376,996 Corporate bonds — — 21,526 7.63 106,367 3.95 7,125 3.72 135,018 4.44 135,018 Mortgage-backed securities: — — — — — — 554,317 2.29 554,317 2.29 541,581 — — — — 12,248 1.79 143,394 3.48 155,642 3.36 153,403 Total securities $ 3,386 2.18 % $ 33,580 5.72 % $ 352,449 5.61 % $ 984,779 3.67 % $ 1,374,194 4.19 % $ 1,358,898
Value
Average
Yield
Value
Average
Yield
Value
Average
Yield
Value
Average
Yield
Value
Average
Yield
Value
subdivisions
obligations (1)
securities (1)
securities (1)Key to our consumer deposit strategy is our “Relationship” suite of products which bundles a variety of banking services and products together for those clients whom have a checking account with direct deposit and electronic statement delivery. Such relationship clients are eligible for a variety of benefits, including a premium on certificates of deposit with a term of at least one year. We also offer High Yield Checking which is primarily designed to attract core deposits in the form of clients’ primary checking accounts through interest rate and fee reimbursement incentives to qualifying clients. The comparatively higher interest expense associated with the High Yield Checking product in relation to our other checking products is partially offset by the transaction fee income associated with the account.20222023 and June 30, 2021,2022, certificates of deposit maturing within one year were $1.47$1.90 billion and $1.51$1.47 billion, respectively. Historically, a significant portion of the certificates of deposit remain with us after they mature.2022, $1.332023, $1.42 billion or 70.2%70.6% of our certificates of deposit were certificates of $100,000 or more compared to $1.19$1.33 billion or 63.3%70.2% at June 30, 2021.2022. Excluding brokered certificates of deposit, $783.7 million or 56.9% of our certificates of deposit were certificates of $100,000 or more at June 30, 2023. The general level of market interest rates and money market conditions significantly influence deposit inflows and outflows. The effects of these factors are particularly pronounced on deposit accounts with larger balances. In particular, certificates of deposit with balances of $100,000 or greater are traditionally viewed as being a more volatile source of funding than comparatively lower balance certificates of deposit or non-maturity transaction accounts. In order to retain certificates of deposit with balances of $100,000 or more, we may have to pay a premium rate, resulting in an increase in our cost of funds. To the extent that such deposits do not remain with us, they may need to be replaced with wholesale funding.$761.9$635.3 million and $11.7$5.2 million, or 13.0%11.3% and 0.2%0.1% of total deposits, respectively, at June 30, 2022.2023. We utilize brokered certificates of deposit and listing service certificates of deposits as alternatives to other forms of wholesale funding, including borrowings, when interest rates and market conditions favor the use of such deposits. For a portion of our short-term brokered certificates of deposit we utilized interest rate contracts to effectively extend their duration and to fix their cost.
Balance
of Total
Deposits
Average
Nominal
Rate
Balance
of Total
Deposits
Average
Nominal
Rate
Balance
of Total
Deposits
Average
Nominal
Rate
depositsFor the Years Ended June 30, 2023 2022 2021 Average
BalancePercent
of Total
DepositsWeighted
Average
Nominal
RateAverage
BalancePercent
of Total
DepositsWeighted
Average
Nominal
RateAverage
BalancePercent
of Total
DepositsWeighted
Average
Nominal
Rate(Dollars In Thousands) Non-interest-bearing deposits $ 644,543 10.79 % — % $ 624,666 11.37 % — % $ 518,149 9.88 % — % Interest-bearing demand 2,349,802 39.33 1.73 2,067,200 37.64 0.25 1,726,190 32.92 0.41 Savings 896,651 15.00 0.37 1,088,971 19.83 0.11 1,066,794 20.35 0.31 Certificates of deposit 2,083,864 34.88 1.64 1,711,276 31.16 0.52 1,931,887 36.85 1.10 . Total average deposits $ 5,974,860 100.00 % 1.31 % $ 5,492,113 100.00 % 0.28 % $ 5,243,020 100.00 % 0.60 % 20222023 and 2021,2022, the aggregate amount of certificates of deposit of $250,000 and over was $897.4 billion$883.7 million and $635.3$897.4 million, respectively. The following table presents the time remaining until maturity of those certificates of deposit as of June 30, 2022:At June 30, 2023 (In Thousands) Maturity Period Within three months $ 555,894 Three through six months 200,167 Six through twelve months 115,125 Over twelve months 12,509 Total certificates of deposit $ 883,695 2022:
One Year
Year to
Two Years
Years to
Three Years
Three
Years to
Four Years
Years to
Five Years
YearsAt June 30, 2023 Within
One YearOver One
Year to
Two YearsOver Two
Years to
Three YearsOver
Three
Years to
Four YearsOver Four
Years to
Five YearsOver Five
YearsTotal (In Thousands) Interest Rate 0.00 - 0.99% $ 180,989 $ 45,910 $ 22,381 $ 13,389 $ 7,497 $ — $ 270,166 1.00 - 1.99% 54,015 11,217 445 234 93 — 66,004 2.00 - 2.99% 615,122 13,885 329 152 — 86 629,574 3.00 - 3.99% 339,860 241 — — — 5,496 345,597 4.00 - 4.99% 503,628 64 — — — — 503,692 5.00 - 5.99% 202,518 — — — — — 202,518 Total certificates of deposit $ 1,896,132 $ 71,317 $ 23,155 $ 13,775 $ 7,590 $ 5,582 $ 2,017,551 19Short‑term FHLB advances generally have original maturities of less than one year. 2022,2023, we had a total$1.28 billion of $375.0 million of short-term FHLB advances outstanding, excluding a net fair value adjustment of $688,000, at a weighted average interest rate of 1.66%4.92%. SuchAt June 30, 2022, we had $652.5 million of FHLB advances represented 90-day or lessoutstanding, excluding a net fair value adjustment of $1.2 million, at a weighted average interest rate of 2.17%.term advances that are generally forecasted to be periodically redrawn at maturity for the same termmature as the original advance. Based on this presumption,follows:At June 30, 2023 2022 (In Thousands) By remaining period to maturity: Less than one year $ 972,500 $ 520,000 One to two years 103,500 22,500 Two to three years 6,500 103,500 Three to four years — 6,500 Four to five years 200,000 — Greater than five years — — Total advances 1,282,500 652,500 Fair value adjustments (688) (1,163) Total advances, net of fair value adjustments $ 1,281,812 $ 651,337 each of theseour FHLB advances at the time they were drawn to effectively fix their cost.Long-term advances generally include term advances with original maturities of greatermaturing in less than one year. At June 30, 2022, our outstanding balance of long-term FHLB advances totaled $277.5 million at a weighted average interest rate of 2.87%. Such advances included $145.0 million of callable advances at a weighted average interest rate of 3.04% and $132.5 million non-callable advances at a weighted average interest rate of 2.68%.Our FHLB advances mature as follows:2022,2023, we are eligible to borrow up to an additional $2.04$1.55 billion of advances from the FHLB as of that date. We are further authorized to post additional collateral in the form of other unencumbered investments securities and eligible mortgage loans that may expand our borrowing capacity with the FHLB up to 30% of our total assets. Additional borrowing capacity up to 50% of our total assets may be authorized with the approval of the FHLB’s Board of Directors or Executive Committee.$975.0$990.0 million via unsecured overnight borrowings from other financial institutions and $303.9$415.0 million from the FRB without pledging additional collateral.20222023 included overnight line of credit borrowings from the FHLB totaling $250.0$125.0 million and unsecured overnight borrowings from other financial institutions totaling $100.0 million.capsfloors to hedge our exposure to interest rate risk in conjunction with our overall asset/liability management process. In accordance with accounting requirements, we formally designate all of our hedging relationships as either fair value hedges or cash flow hedges, and documentsdocument the strategy for undertaking the hedge transactions and its method of assessing ongoing effectiveness.2022,2023, our derivative instruments were comprised of interest rate swaps, caps and capsa floor with a total notional amount of $750.0 million.$2.23 billion. These instruments are intended to manage the interest rate exposure relating to certain wholesale funding positions and assets that were outstanding at June 30, 2022.2022,2023, Kearny Bank was the only wholly-owned operating subsidiary of Kearny Financial Corp. As of that date, Kearny Bank had onetwo wholly-owned subsidiary,subsidiaries, CJB Investment Corp. and 189-245 Berdan Avenue LLC. CJB Investment Corp. is a New Jersey Investment Company and remained active through the three-year period ended June 30, 2022.20serves as a true financial partner to both consumers and businesses by subscribingsubscribes to the belief that people, performance and relationships are what matter most. We serve our clients and shareholders through our deep-rooted principles of ethics and integrity, and by giving back to our communities. We understand that the communities in which we serve.Employee Profile. WeCompany succeeds when our employees and customers succeed and therefore strive to create a diverse and inclusive workforce reflective of our clientsenvironment where employees can thrive and the communities where we live and work.customers want to bank. We respect and recognize the unique contributions each individual brings to our Company, and we are committed to supporting agrowing our culture of diversity, equity and inclusion as a foundation for our values and success.2022,2023, we employed 596556 employees, approximately 63%62% of whom are female. We utilize an online recruitment platform that provides a vehicle to attract a diverse pool of candidates and have established acontinue our partnership with a diversity recruitment solution to broaden and enhance this effort.our overall diversity recruitment efforts.Engagement.Engagement. We invest in the success and the personal and professional development of our employees celebratingby providing employees with career milestones and longevity. Our average length of tenure is eight years as weadvancement opportunities. We look to promote from within to leverage employees’employee talent and knowledge of the organization asorganization. Additionally, we continue to grow. We offer many educational and learning initiatives to enhance our employees’ professional growth, including support for certifications and licenses, as well as offering a robust tuition reimbursement program. To further our efforts in providing employees the opportunity to enrich their careers, weWe offer a Career Mentoring Program, which offers employees an opportunity to interact and collaborate with our senior leaders. In 2018, we established aWe continue to build on the Company’s Diversity and Inclusion Action Plan as well as awhich was established in 2018 and created our Diversity, Equity and Inclusion Committee (collectively the “Diversity Plan”).Committee. The Diversity and Inclusion Action Plan focuses on diversifyingexpanding our recruiting pipeline, obtaining Diversity & Inclusion certifications and training for our recruiting staff and establishing programs to attract and retain diverse talent. As part of this initiative, our Senior Women’s Leadership Group was established to provide a forum for our female employees to exchange ideas and support programs across the Company.Benefits.Benefits. We offer our employees competitive pay andcompensation including incentive programs, together with a comprehensive benefits package designed to enhance the employee experience. Such benefits include medical, dental, vision, long term disability benefits, AD&D and group life insurance, additional supplement plans, Health Advocacy and Employee Assistance programs, generous paid time off and the ability to participate in charitable events during work time. In addition, our employees share in our financial success while preparing for their retirement via participation in our 401(k) Plan, which includes a competitive company match, and our Employee Stock Ownership Plan (“ESOP”), which is 100% funded by the Company.Safety, Health and Wellness. We are committed to providing programs that support the safety and wellness of allneeds of our employees and their families. Wefamilies and provide access to a variety of health and welfarewellness programs, including benefits that support their physical, mental and financial wellbeing. DuringAdditionally, the COVID-19 pandemic, proper protocols were implementedCompany operates in our branches and corporate offices to ensure the continued safety of our employees and customers while maintaining compliance with current state and local regulations and guidelines. We have now successfully transitioned to a hybrid work environment, where applicable, one in which employees are able to maintainpromotes a work-life balance and allows for certain flexibility while maintaining productivity and efficiency while still allowing for certain flexibility. We continue to encourage those who are sick to stay home and take the time needed to recover.efficiency.21“—“—Activity Restrictions on State-Chartered Banks” below.assessments. Any significant increases would have an adverse effect onassessments and adopted a final rule in October 2022 to increase initial base deposit insurance assessment rates by 2 basis points beginning in the operating expenses and resultsfirst quarterly assessment period of operations2023. As a result, effective January 1, 2023, assessment rates for institutions of Kearny Bank. Management cannot predict what assessment rates will be in the future.222022,2023, Kearny Bank has exercised the opt-out election regarding the treatment of Accumulated Other Comprehensive Income.2022,2023, Kearny Bank exceeded all regulatory capital requirements.2022.232022,2023, Kearny Bank was well capitalized.24252022.2023.2022,2023, Kearny Bank met the qualified thrift lender test.continued rising inremained at an elevated level through 2022 at levels not seen for over 40 years. Inflationary pressures are currently expected to remain elevated throughout 2022.and 2023. Small to medium-sized businesses may be impacted more during periods of high inflation as they are not able to leverage economics of scale to mitigate cost pressures compared to larger businesses. Consequently, the ability of our business customers to repay their loans may deteriorate, and in some cases this deterioration may occur quickly, which would adversely impact our results of operations and financial condition. Furthermore, a prolonged period of inflation could cause wages and other costs to the Company to increase, which could adversely affect our results of operations and financial condition.The COVID-19 pandemic could continuepose risks toadequately manage our business,liquidity, deposits, capital levels and interest rate risk, which have come under greater scrutiny in light of recent bank failures, it may have a material adverse effect on our financial condition and results of operationsoperations.future prospectsCalifornia Department of Financial Protection and Innovation (the “DFPI”), on March 12, 2023, Signature Bank, New York, New York, was closed by the New York State Department of Financial Services and on May 1, 2023, First Republic Bank, San Francisco, California, was closed by the DFPI, and in each case the FDIC was appointed receiver for the failed institution. These banks had elevated levels of uninsured deposits, which may be less likely to remain at the bank over time and less stable as a source of funding than insured deposits. These failures led to volatility and declines in the market for bank stocks and questions about depositor confidence in depository institutions.Company.COVID-19 pandemic has adversely impacted the global and national economy and certain industries and geographiesdetails of this portfolio are included in which our clients operate. Given its ongoing and dynamic nature, it is difficult to predict the full impact of the COVID-19 pandemic on the business of the Company, its clients, employees and third-party service providers.The extent of such impact will depend on future developments, which are highly uncertain. Additionally, the responses of various governmental and nongovernmental authorities and consumersNote 4 to the pandemic may have material long-term effects on the Company and its clients which are difficult to quantify in the near-term or long-term.2829In July 2019,Committee’s federal funds rate target was a range of 2.25% – 2.50% and the Committee began lowering the target rate in response to a slowing economy. In March 2020, the Committee quickly loweredsystemically increased the target rate from 1.50% – 1.75% to 0.000.00% – 0.25% in response to the accelerating COVID-19 crisis and the Committee’s objective to inject liquidity into the banking system and stimulate the credit markets. In response to rising inflation in 2022, the Committee increased the target rate to 0.25%5.25% – 0.50% in March 2022, to 0.75% – 1.00% in May 2022, to 1.50% – 1.75% in June 2022 and to 2.25% – 2.50%5.50% in July 2022.2023. In addition, at June 30, 2023, short-term rates were meaningfully lower than long-term rates, which results in an inverted yield curve. Our net interest spread and net interest margin are at risk of being reduced due to potential increases in our cost of funds that may outpace any increases in our yield on interest-earnings assets.0.87%0.83% of total loans at June 30, 20222023 and significant additions to our allowance could materially decrease our net income.2022,2023, our securities portfolio totaled $1.46$1.37 billion, or 18.9%17.0% of our total assets. Investment securities typically have lower yields than loans. For the year ended June 30, 2022,2023, the weighted average yield of our investment securities portfolio was 2.03%3.55%, as compared to 3.87%4.00% for our loan portfolio.2022, $1.342023, $1.23 billion, or 91.9%89.3% of our investment securities, are classified as available for sale and reported at fair value with unrealized gains or losses excluded from earnings and reported in other comprehensive income, which affects our reported equity. Accordingly, given the significant size of the investment securities portfolio classified as available for sale and due to possible mark-to-market adjustments of that portion of the portfolio resulting from market conditions, we may experience greater volatility in the value of reported equity. Moreover, given that we actively manage our investment securities portfolio classified as available for sale, we may sell securities which could result in a realized loss, thereby reducing our net income.30 increased commercial lending exposes us to additional risk.As part of our business strategyintend to increasehave increased our focus on commercial lending. We have increased our commercial lending staff and continue to seek additional commercial lenders to help grow the commercial loan portfolio. Our increased commercial lending, however, exposes us to greater risks than one- to four-family residential lending. Unlike single-family, owner-occupied residential mortgage loans, which generally are made on the basis of the borrower’s ability to make repayment from employment and other income sources, and are secured by real property whose value tends to be more easily ascertainable and realizable, the repayment of commercial loans typically is dependent on the successful operation and income stream of the borrower, which can be significantly affected by economic conditions, and are secured, if at all, by collateral that is more difficult to value or sell or by collateral which may depreciate in value. In addition, commercial loans generally carry larger balances to single borrowers or related groups of borrowers than one- to four-family mortgage loans, which increases the financial impact of a borrower’s default.Because we intend to continue to increase ourourexposes us to increased credit risk will increase.Historically werisk.not had a significant portfolio of commercial business loans. We intend to continue to increaseincreased our originations of commercial business loans, including C&I and SBAconstruction loans, which generally have more risk than both one- to four-family residential and commercial mortgage loans. Since repayment of commercial business and construction loans may depend on the successful operation of the borrower’s business or the successful completion of a construction project, repayment of such loans can be affected by adverse conditions in the real estate market or the local economy. BecauseIf we plan to continue to increase our originations of these loans, it may be necessary to increase the level of our allowance for credit losses because of the increased risk characteristics associated with these types of loans. Any such increase to our allowance for credit losses would adversely affect our earnings.514%553% of Bank total risk-based capital at June 30, 2022,2023, however our commercial real estate loan portfolio increased by only 12%31% during the preceding 36 months.2022,2023, gains attributable to the sale of residential mortgage loans totaled $2.4 million,$760,000, or approximately 17.3%27.6% of our non-interest income, a decline of $2.7$1.7 million from $5.1$2.4 million for the year ended June 30, 2021.2022. When interest rates rise, the demand for mortgage loans tends to fall and may reduce the number of loans we can originate for sale. Weak or deteriorating economic conditions also tend to reduce loan demand. If the residential mortgage loan demand decreases or we are unable to sell such loans for an adequate profit, then our non-interest income will likely decline which would adversely affect our earnings.312022,2023, we had investment securities with fair values of approximately $1.45$1.36 billion on which we had approximately $128.5$171.7 million in gross unrealized losses and $304,000$274,000 of gross unrealized gains. The valuation and liquidity of our securities could be adversely impacted by reduced market liquidity, increased normal bid-asked spreads and increased uncertainty of market participants, which could reduce the market value of our securities, including those with no apparent credit exposure. The valuation of our securities requires judgment and as market conditions change security values may also change. Significant negative changes to valuations could result in impairments in the value of our securities portfolio, which could have an adverse effect on our financial condition or results of operations. trust preferred and subordinated debt securities and collateralized loan obligations expose us to additional credit risks.2022,2023, prior enhancements to our investment policies, strategies and infrastructure have enabled us to diversify the composition and allocation of our securities portfolio. Such diversification has included investing in corporate debt, municipal obligations, subordinated debt securities issued by financial institutions and collateralized loan obligations. With the exception of collateralized loan obligations, these securities are generally backed only by the credit of their issuers while investments in collateralized loan obligations generally rely on the structural characteristics of an individual tranche within a larger investment vehicle to protect the investor from credit losses arising from borrowers defaulting on the underlying securitized loans.2022,2023, wholesale funding totaled $1.67$2.15 billion, or approximately 21.7%26.6% of total assets.Generally wholesale funding may not be as stable as funding acquired through traditional retail channels. 3233Changes to LIBOR may adversely impact the value of, and the return on, our loans, investment securities and derivatives which are indexed to LIBOR.ICE Benchmark Administration, the authorized and regulated administrator of LIBOR, ended publication of the one-week and two-month USD LIBOR tenors on December 31, 2021 and the remaining USD LIBOR tenors will end publication in June 2023. Financial services regulators and industry groups have collaborated to develop alternate reference rate indices or reference rates. The transition to a new reference rate requires changes to contracts, risk and pricing models, valuation tools, systems, product design and hedging strategies. Uncertainty as to the nature of such potential changes, alternative reference rates, the elimination or replacement of LIBOR, or other reforms may adversely affect the value of, and the return on our loans, and our investment securities.We hold certain intangible assets, including goodwill, which could become impaired in the future. If these assets are considered to be either partially or fully impaired in the future, our earnings would decrease.At June 30, 2022, we had approximately $213.9 million in intangible assets on our balance sheet comprising $210.9 million of goodwill and $3.0 million of core deposit intangibles. We are required to periodically test our goodwill and identifiable intangible assets for impairment. The impairment testing process considers a variety of factors, including the current market price of our common stock, the estimated net present value of our assets and liabilities, and information concerning the terminal valuation of similarly situated insured depository institutions. If an impairment determination is made in a future reporting period, our earnings and the book value of these intangible assets will be reduced by the amount of the impairment. If an impairment loss is recorded, it will have little or no impact on the tangible book value of our common stock or our regulatory capital levels, but recognition of such an impairment loss could significantly restrict Kearny Bank’s ability to make dividend payments to Kearny Financial and therefore adversely impact our ability to pay dividends to stockholders.34We cannot guarantee that our allocation of capital to various alternatives, including stock repurchase plans, will enhance long-term stockholder value.Our business plan calls for us to execute a variety of strategies to allocate and deploy any excess capital including, but not limited to, continued organic balance sheet growth and diversification, implementation of stock repurchase plans and payment of regular cash dividends. Additionally, we will carefully consider acquisition opportunities to further deploy capital when we expect such opportunities to significantly enhance long-term shareholder value. If we are unable to effectively and timely deploy capital through these strategies, it may constrain growth in earnings and return on equity and thereby diminish potential growth in stockholder value.On August 1, 2022, we announced that our Board authorized a new stock repurchase plan to acquire up to 4,000,000 shares of the Company’s outstanding common stock. Repurchases are made at management’s discretion at prices management considers to be attractive and in the best interests of both the Company and its stockholders, subject to the availability of stock, general market conditions, the trading price of the stock, alternative uses for capital, and the Company’s financial performance.The Inflation Reduction Act of 2022, which was signed into law on August 16, 2022, contains a number of changes to U.S. federal tax laws. One such change is a 1% excise tax on stock repurchases, which will increase the cost of stock repurchases and may impact our future decisions on how to return value to stockholders in the most efficient manner.35Millington and Oakhurst, New Jersey.2022,2023, the Company operated 4543 branch offices located in Bergen, Essex, Hudson, Middlesex, Monmouth, Morris, Ocean, Passaic, Somerset and Union counties, New Jersey and Kings and Richmond counties, New York. At June 30, 2022, 192023, 18 of our branch offices are leased with remaining terms between 7seven months and 10nine years. At June 30, 2022,2023, our net investment in property and equipment totaled $53.3$48.3 million.2022,2023, is presented in Note 8 to the audited consolidated financial statements.2022,2023, there were no lawsuits pending or known to be contemplated against us that would be expected to have a material effect on operations or income.19, 2022,18, 2023, there were 4,3514,207 registered holders of record of the Company’s common stock. Certain shares of the Company are held in “street” name and accordingly, the number of beneficial owners of such shares is not known or included in the foregoing number.2022.2023.
of Shares
Purchased
Paid per Share
of Shares
Purchased as
Part of Publicly
Announced Plans
or Programs
Number of Shares
that May Yet Be
Purchased Under
the Plans or
ProgramsPeriod Total Number
of Shares
PurchasedAverage Price
Paid per ShareTotal Number
of Shares
Purchased as
Part of Publicly
Announced Plans
or ProgramsMaximum
Number of Shares
that May Yet Be
Purchased Under
the Plans or
ProgramsApril 1-30, 2023 596,479 $ 7.91 596,479 1,720,774 May 1-31, 2023 216,027 $ 7.62 216,027 1,504,747 June 1-30, 2023 — $ — — 1,504,747 Total 812,506 $ 7.83 812,506 1,504,747 September 22, 2021,August 1, 2022, the Company announced the authorization of a new stock repurchase plan to repurchase up to 7,602,021 shares, or 10% of the shares then outstanding.4,000,000 shares. This current plan has no expiration date.SNL ThriftS&P U.S. SmallCap Banks Index, in each case assuming an investment of $100 as of June 30, 2017.2018. Total return assumes the reinvestment of all dividends. At June 30, 2018 2019 2020 2021 2022 2023 Kearny Financial Corp. $ 100 $ 102 $ 64 $ 97 $ 93 $ 62 NASDAQ Composite Index 100 108 137 199 152 192 S&P U.S. SmallCap Banks Index 100 92 69 116 107 87 losses.$47.1$48.7 million and $58.2$47.1 million at June 30, 20222023 and 2021,2022, respectively. The $11.1$1.7 million decreaseincrease in our ACL was primarily driven by our collectively evaluated loans. The quantitative component of our ACL, which is largely based on the national unemployment rate forecast, decreased $10.2increased $8.5 million, which largely resulted from continued improvement in our economic forecastloan growth, slower prepayment speeds and a reduction in the expected life of various segments of the loan portfolio.higher forecasted national unemployment rate. The qualitative component of our ACL, which is largely based on management’s judgment of qualitative loss factors, increased $2.1decreased $6.5 million.$47.1$48.7 million at June 30, 20222023 and the amount allocated to our collectively evaluated multi-family and nonresidential mortgage loans was $32.4$32.0 million, of which $28.2$23.3 million was attributable to qualitative loss factors. Changes in managements’ judgement of qualitative loss factors could result in a significant change to the ACL. As described in Note 1, qualitative loss factors are applied to each portfolio segment with the amounts judgmentally determined by the relative risk to the most severe loss periods identified in the historical loan charge-offs of a peer group of similar-sized regional banks. At June 30, 2022,2023, the most severe historical loss rate for multi-family and nonresidential mortgages loans was 1.92%1.72%.2022,2023, if the four-quarter national unemployment rate forecast had been 9% rather than an average of approximately 3.5%4.0%, our ACL as a percent of total loans would have been approximately $11.1 million higher.increased 33 basis points from 0.83% to 1.16%. This sensitivity analysis includes the impact to both the quantitative and qualitative components of our ACL. Changes in quantitative inputs and qualitative loss factors may not occur in the same direction or magnitude across all segments of our loan portfolio and deterioration in some quantitative inputs and qualitative loss factors may offset improvement in others. This sensitivity analysis does not represent a change to our expectations of the economic environment but provides a hypothetical result to assess the sensitivity of the ACL to a change in a key input. This sensitivity analysis does not incorporate changes to management’s judgment of qualitative loss factors.$3.0$315,000 during the year ended June 30, 2023.which resultedat June 30, 2023. Goodwill arises from charge-offs, a loan payoffbusiness combinations and an increase inis generally determined as the excess of the fair value of collateralthe consideration transferred, plus the fair value of any noncontrolling interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. Goodwill is not amortized, but is tested for collateral-dependent loans, partially offsetimpairment at least annually or more frequently if events and circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.new individually analyzed loans.regional bank failures, we performed a quantitative goodwill impairment during the fourth quarter of the year ended June 30, 2023. The quantitative goodwill impairment test compares the estimated fair value of the reporting unit with its carrying amount, including goodwill. If the estimated fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired. However, if the carrying amount of the reporting unit were to exceed its estimated fair value, and impairment loss would be recorded.At June 30, 2023 2022 2021 (In Thousands) Balance Sheet Data: Cash and equivalents $ 70,515 $ 101,615 $ 67,855 Assets 8,064,815 7,719,883 7,283,735 Net loans receivable 5,780,687 5,370,787 4,793,229 Investment securities available for sale 1,227,729 1,344,093 1,676,864 Investment securities held to maturity 146,465 118,291 38,138 Goodwill 210,895 210,895 210,895 Deposits 5,629,183 5,862,256 5,485,306 Borrowings 1,506,812 901,337 685,876 Stockholders' equity 869,284 894,000 1,042,944 For the Years Ended June 30, 2023 2022 2021 (Dollars in Thousands, Except Per Share Amounts) Summary of Operations: Interest income $ 293,724 $ 226,272 $ 238,085 Interest expense 117,859 29,669 49,851 Net interest income 175,865 196,603 188,234 Provision for (reversal of) credit losses 2,486 (7,518) (1,121) Net interest income after provision for (reversal of) credit losses 173,379 204,121 189,355 Non-interest income 2,751 13,934 21,026 Non-interest expenses 123,751 125,708 125,885 Income before taxes 52,379 92,347 84,496 Income tax expense 11,568 24,800 21,263 Net income $ 40,811 $ 67,547 $ 63,233 Per Share Data: Net income per share - Basic and diluted $ 0.63 $ 0.95 $ 0.77 Weighted average number of common shares outstanding (in thousands): Basic 64,804 70,911 82,387 Diluted 64,804 70,933 82,391 Cash dividends per share $ 0.44 $ 0.43 $ 0.35 70.2 % 45.1 % 45.1 % (1) Represents cash dividends declared divided by net income.At or For the Years Ended June 30, 2023 2022 2021 Performance ratios: Return on average assets (ratio of net income to average total assets) 0.51 % 0.93 % 0.86 % Return on average equity (ratio of net income to average total equity) 4.66 % 6.86 % 5.79 % 6.17 % 8.77 % 7.22 % Net interest rate spread 2.09 % 2.86 % 2.61 % Net interest margin 2.34 % 2.94 % 2.75 % Average interest-earning assets to average interest-bearing liabilities 115.66 % 118.93 % 118.63 % 69.28 % 59.71 % 60.16 % Non-interest expense to average assets 1.53 % 1.73 % 1.72 % Asset Quality Ratios: Non-performing loans to total loans 0.73 % 1.30 % 1.64 % Non-performing assets to total assets 0.69 % 1.19 % 1.10 % Net charge-offs to average loans outstanding 0.01 % 0.07 % 0.03 % Allowance for credit losses to total loans 0.83 % 0.87 % 1.19 % Allowance for credit losses to non-performing loans 114.33 % 66.92 % 72.92 % Capital Ratios: Average equity to average assets 10.85 % 13.52 % 14.88 % Equity to assets at period end 10.78 % 11.58 % 14.32 % 8.35 % 9.06 % 11.72 % 40
and non-interest income) average stockholders’ equity reduced by average goodwill and average core deposit intangible assets.4120222023 and June 30, 2021$436.1$344.9 million, or 6.0%4.5%, to $8.06 billion at June 30, 2023 from $7.72 billion at June 30, 2022 from $7.28 billion at June 30, 2021.2022. The increase primarily reflected an increase in net loans receivable, partially offset by a decrease in investment securities.$332.8$116.4 million to $1.23 billion at June 30, 2023 from $1.34 billion at June 30, 2022 from $1.68 billion at June 30, 2021.2022. This decrease was largely the result of principal repayments totaling $330.2of $124.7 million, sales of $100.3$120.4 million and a $128.0$38.1 million decrease in the fair value of the portfolio to a net unrealized loss of $118.0$156.1 million, partially offset by purchases totaling $229.1of $166.5 million.$80.2$28.2 million to $146.5 million at June 30, 2023 from $118.3 million at June 30, 2022 from $38.1 million at June 30, 2021.2022. The increase was largely the result of purchases totaling $86.4of $40.4 million, partially offset by principal repayments totaling $6.1of $12.1 million.20222023 is presented under “Item 1. Business” of this Annual Report on Form 10-K, as well as in Note 4 to the audited consolidated financial statements. as compared to $16.5 million at June 30, 2021 and are reported separately from the balance of net loans receivable. Loans held-for-sale consisted of residential mortgage loans of $9.6 million at June 30, 2022 included2023 as compared to residential mortgage loans and commercial mortgage loans of $7.1 million and $21.7 million, of non-accrual commercial loans.respectively, at June 30, 2022. During the year ended June 30, 2022, $189.12023, we sold $103.8 million of residential mortgage loans, were sold, resulting in a net gainsgain on sale of $2.4$760,000, and $25.3 million of commercial mortgage loans, resulting in a net loss on sale of $2.5 million.$577.6$409.9 million, or 12.0%7.6%, to $5.78 billion at June 30, 2023 from $5.37 billion at June 30, 2022 from $4.79 billion at June 30, 2021.2022. Detail regarding the change in the loan portfolio is presented below:June 30,
2023June 30,
2022Increase/
(Decrease)(In Thousands) Commercial loans: Multi-family mortgage $ 2,761,775 $ 2,409,090 $ 352,685 Nonresidential mortgage 968,574 1,019,838 (51,264) Commercial business 146,861 176,807 (29,946) Construction 226,609 140,131 86,478 Total commercial loans 4,103,819 3,745,866 357,953 One- to four-family residential mortgage 1,700,559 1,645,816 54,743 Consumer loans: Home equity loans 43,549 42,028 1,521 Other consumer 2,549 2,866 (317) Total consumer loans 46,098 44,894 1,204 Total loans 5,850,476 5,436,576 413,900 Unaccreted yield adjustments (21,055) (18,731) (2,324) Allowance for credit losses (48,734) (47,058) (1,676) Net loans receivable $ 5,780,687 $ 5,370,787 $ 409,900 20222023 totaled $1.37 billion, which$895.9 million, comprised $1.14 billionof $716.4 million of commercial mortgage loan originations, $140.1$91.8 million of commercial business loan originations and construction loan disbursements of $86.4$87.7 million. Commercial loan originations for the period were augmented by the purchase of loans totaling $56.0 million.$415.6$197.8 million for the year ended June 30, 20222023 and was augmented by the purchase of loanssupplemented with loan purchases totaling $67.4 million.$656,000. Home equity loan and line of credit origination volume for the same period totaled $18.6$26.0 million.4220222023 is presented under “Item 1. Business” of this Annual Report on Form 10-K, as well as in Note 5 to the audited consolidated financial statements.$9.5$27.7 million to $42.6 million, or 0.73% of total loans, at June 30, 2023 from $70.3 million, or 1.30% of total loans, at June 30, 2022 from $79.8 million, or 1.64% of total loans, at June 30, 2021.2022. The decrease in nonperforming loans was largely attributable to a decrease of $10.7$15.4 million in non-performing one- to four-family residentialnonperforming nonresidential mortgage loans and a decrease of $7.5 million in nonperforming multi-family mortgage loans.2022,2023, we had accruing TDRs totaling $8.7$10.5 million, an increase of $2.5$1.8 million from $6.2$8.7 million at June 30, 2021.2022. At June 30, 2022,2023, we had non-accrual TDRs totaling $13.5$6.9 million, an increasea decrease of $1.9$6.6 million from $11.6$13.5 million at June 30, 2021.Based on Section 4013 of the CARES Act, the 2021 Consolidated Appropriations Act and related regulatory guidance promulgated by federal banking regulators, qualifying loan modifications made in response to the COVID-19 pandemic, including short-term payment deferrals, were not considered to be TDRs. We had no active payment deferrals that were not considered to be TDRs as of June 30, 2022. We had active payment deferrals that were not considered TDRs of $5.6 million at June 30, 2021.20222023 is presented under “Item 1. Business” of this Annual Report on Form 10-K, as well as in Note 5 to the audited consolidated financial statements.Losses (“ACL”). Losses. At June 30, 2022,2023, the ACL totaled $48.7 million, or 0.83% of total loans, reflecting an increase of $1.7 million from $47.1 million, or 0.87% of total loans, reflecting a decrease of $11.1 million from $58.2 million, or 1.19% of total loans, at June 30, 2021.2022. The decreaseincrease was largely attributable to a provision for credit losses reversal of $7.5$2.5 million, primarily driven by continued improvement in our economic forecast,loan growth, partially offset by a reduction in the expected life of various segments of the loan portfolio and a net reduction in reserves on loans individually evaluatedportfolio. Partially offsetting the provision for impairment. Also contributing to this decreasecredit losses were net charge-offs of $3.6 million,$810,000, of which $1.8 million$396,000 had previously been individually reserved for within the ACL.ACL at June 30, 2022.20222023 is presented under “Item 1. Business” of this Annual Report on Form 10-K, as well as in Note 1 and Note 6 to the audited consolidated financial statements.$65.0$73.6 million to $829.8 million at June 30, 2023 from $756.2 million at June 30, 2022 from $691.2 million at June 30, 2021.2022. The increase in other assets primarilylargely reflected a $39.4$24.6 million increase in FHLB stock, a $23.8 million increase in the fair value of our derivatives portfolio and a $20.0$12.8 million increase in net deferred income tax assets during the year ended June 30, 2022.OREO. The increase in OREO was a result of our acquisition of a $13.0 million nonresidential real estate property through foreclosure. The remaining change generally reflected normal operating fluctuations within these line items.increaseddecreased by $377.0$233.1 million, or 6.9%4.0%, to $5.63 billion at June 30, 2023 from $5.86 billion at June 30, 2022 from $5.49 billion2022. Included in total deposits are brokered and listing service time deposits of $640.5 million and $773.5 million at June 30, 2021.2023 and 2022, respectively. The following table sets forth the distribution of, and changes in, deposits, by type, at the dates indicated:June 30,
2023June 30,
2022Increase/
(Decrease)(In Thousands) Non-interest-bearing deposits $ 609,999 $ 653,899 $ (43,900) Interest-bearing deposits: Interest-bearing demand 2,252,912 2,265,597 (12,685) Savings 748,721 1,053,198 (304,477) Certificates of deposit 2,017,551 1,889,562 127,989 Interest-bearing deposits 5,019,184 5,208,357 (189,173) Total deposits $ 5,629,183 $ 5,862,256 $ (233,073) 20222023 is presented under “Item 1. Business” of this Annual Report on Form 10-K, as well as in Note 10 to the audited consolidated financial statements.43$215.5$605.5 million, or 31.4%67.2%, to $1.51 billion at June 30, 2023 from $901.3 million at June 30, 2022 from $685.9 million at June 30, 2021 which included overnight borrowings totaling $250.0$225.0 million and $20.0$250.0 million at June 30, 2023 and 2022, and 2021, respectively. Partially offsetting theThe increase was primarily driven by a net increase in overnight borrowings was the repayment of maturing FHLB advances totaling $15.0 million.advances.20222023 is presented under “Item 1. Business” of this Annual Report on Form 10-K, as well as in Note 11 to the audited consolidated financial statements.$7.3$2.8 million to $59.5 million at June 30, 2023 from $62.3 million at June 30, 2022 from $69.6 million at June 30, 2021.2022. The change in the balance of other liabilities largely reflected the payment of a $12.5 million loan participation liability which was outstanding at June 30, 2021. The remaining change generally reflected normal operating fluctuations within these line items.Additional information about our derivatives portfolio at June 30, 2022 is presented under “Item 1. Business” of this Annual Report on Form 10-K, as well as in Note 12 to the audited consolidated financial statements.$148.9$24.7 million to $869.3 million at June 30, 2023 from $894.0 million at June 30, 2022 from $1.04 billion at June 30, 2021.2022. The decrease in stockholders’ equity during the year ended June 30, 20222023 largely reflected dividends totaling $28.7 million and share repurchases totaling $129.5 million and dividends totaling $30.5$27.4 million. In addition, accumulated other comprehensive (loss) income decreased $61.9loss, net of tax, was $13.7 million, due primarily towhich was driven by a decline in the fair value of our available for sale securities, partially offset by an increase in the fair value of our derivatives portfolio. These decreasesitems were partially offset by net income of $67.5$40.8 million.decreasedincreased by $0.19$0.18 to $13.02$13.20 at June 30, 20222023 while tangible book value per share decreasedincreased by $0.59$0.06 to $9.90$9.96 at June 30, 2022.September 20, 2021,August 1, 2022, we announced that the completionBoard of our seventh stock repurchase plan. On September 22, 2021, we announced the authorization of our eighthDirectors had authorized a new stock repurchase plan to repurchase up to 4,000,000 shares, and the completion of our previous stock repurchase plan, which authorized the repurchase of 7,602,021 or 10% of the shares then outstanding.2022,2023, we repurchased a total of 10,221,5252,820,398 shares of our common stock in conjunction with our seventh and eighth repurchase plans. Such shares were repurchased at a total cost of $129.5$27.4 million, and at an average costor $9.73 per share, including 2,495,253 shares, or 62.4% of $12.67 per share.Including shares repurchased prior to July 1, 2021, the shares repurchasedauthorized for repurchase under our seventh repurchase plan were repurchased at a total cost of $50.5 million and at an average cost of $12.43 per share.Included in the shares repurchased during the year ended June 30, 2022 were 7,276,876 shares that we repurchased pursuant to our eighthcurrent repurchase program, at a cost of $93.2$23.8 million, and at an average cost of $12.80or $9.54 per share which represented 95.7% of the total shares authorized to be repurchased.20222023 and June 30, 2021Income.Income. Net income for the year ended June 30, 20222023 was $40.8 million, or $0.63 per diluted share, a decrease of 39.6% from $67.5 million, or $0.95 per diluted share, an increase of 6.8% from $63.2 million, or $0.77 per diluted share for the year ended June 30, 2021.2022. The increasedecrease in net income reflected an increasea decrease in net interest income, and decreasesan increase in the provision for credit losses and a decrease in non-interest expense,income, partially offset by a decrease in non-interest incomeexpense and an increasea decrease in income tax expense. Net income for the years ended June 30, 2023 and June 30, 2022 was impacted by various non-recurring items, as described in further detail below.Income. Effective July 1, 2021, loan prepayment penalty income was reclassified to interest income on loans. Previously, loan prepayment penalty income was recorded within non-interest income. Interest income and non-interest income for all periods presented reflect this reclassification.Incomeincreaseddecreased by $8.4$20.7 million to $196.6$175.9 million for the year ended June 30, 2022.2023. The increasedecrease between the comparative periods resulted from a decreasean increase of $20.2$88.2 million in interest expense, partially offset by a decreasean increase of $11.8$67.5 million in interest income. Included in net interest income for the years ended June 30, 20222023 and 2021,2022, respectively, was purchase accounting accretion of $9.0$5.3 million and $16.6$9.0 million and loan prepayment penalty income of $895,000 and $5.4 million and $3.7 million.increased 14decreased 60 basis points to 2.34% for the year ended June 30, 2023, from 2.94% for the year ended June 30, 2022, from 2.80% for the year ended June 30, 2021.2022. The increasedecrease reflected decreasesincreases in the cost and average balance of interest-bearing liabilities, partially offset by a decreaseincreases in the yield on and average balance of interest-earning assets. The increased cost of interest-bearing liabilities and yield on interest-earning assets is the result of higher market interest rates that were caused by an increase in the federal funds target rate from 0% - 0.25% in March 2022 to 5.00% - 5.25% in May 2023.For the Years Ended June 30, 2023 2022 2021 Average
BalanceInterest Average
Yield/
CostAverage
BalanceInterest Average
Yield/
CostAverage
BalanceInterest Average
Yield/
Cost(Dollars in Thousands) Interest-earning assets: $ 5,827,123 $ 233,147 4.00 % $ 4,922,400 $ 190,520 3.87 % $ 4,866,436 $ 202,240 4.16 % 1,532,961 54,855 3.58 1,622,475 32,746 2.02 1,571,452 31,238 1.99 30,332 694 2.29 55,981 1,273 2.27 74,604 1,652 2.21 115,390 5,028 4.36 82,802 1,733 2.09 200,435 2,955 1.47 Total interest-earning assets 7,505,806 293,724 3.91 6,683,658 226,272 3.39 6,712,927 238,085 3.55 Non-interest-earning assets 563,131 598,712 620,934 Total assets $ 8,068,937 $ 7,282,370 $ 7,333,861 Interest-bearing liabilities: Interest-bearing demand $ 2,349,802 $ 40,650 1.73 $ 2,067,200 $ 5,123 0.25 $ 1,726,190 $ 7,028 0.41 Savings 896,651 3,351 0.37 1,088,971 1,190 0.11 1,066,794 3,299 0.31 Certificates of deposit 2,083,864 34,162 1.64 1,711,276 8,895 0.52 1,931,887 21,208 1.10 Total interest-bearing deposits 5,330,317 78,163 1.47 4,867,447 15,208 0.31 4,724,871 31,535 0.67 FHLB advances 1,101,658 37,734 3.43 679,388 14,067 2.07 931,148 18,314 1.97 Other borrowings 57,468 1,962 3.41 72,841 394 0.54 2,563 2 0.06 Total borrowings 1,159,126 39,696 3.42 752,229 14,461 1.92 933,711 18,316 1.96 Total interest-bearing liabilities 6,489,443 117,859 1.82 5,619,676 29,669 0.53 5,658,582 49,851 0.88 704,136 678,143 583,886 Total liabilities 7,193,579 6,297,819 6,242,468 Stockholders' equity 875,358 984,551 1,091,393 Total liabilities and stockholders' equity $ 8,068,937 $ 7,282,370 $ 7,333,861 Net interest income $ 175,865 $ 196,603 $ 188,234 2.09 % 2.86 % 2.67 % 2.34 % 2.94 % 2.80 % Ratio of interest-earning assets to interest-bearing liabilities 1.16 1.19 1.19
Balance
Yield/
Cost
Balance
Yield/
Cost
Balance
Yield/
Cost
stockholders' equity
to interest-bearing liabilities$518.1 million and $334.5$518.1 million for the years ended June 30, 2023, 2022 and 2021, and 2020, respectively.
versus
Year Ended June 30, 2021
versus
Year Ended June 30, 2020Year Ended June 30, 2023
versus
Year Ended June 30, 2022Year Ended June 30, 2022
versus
Year Ended June 30, 2021Increase (Decrease) Due to Increase (Decrease) Due to Volume Rate Net Volume Rate Net (In Thousands) (In Thousands) Interest and dividend income Loans receivable $ 36,040 $ 6,587 $ 42,627 $ 2,337 $ (14,057) $ (11,720) Taxable investment securities (1,901) 24,010 22,109 1,030 478 1,508 Tax-exempt securities (590) 11 (579) (423) 44 (379) Other interest-earning assets 876 2,419 3,295 (2,157) 935 (1,222) Total interest-earning assets $ 34,425 $ 33,027 $ 67,452 $ 787 $ (12,600) $ (11,813) Interest expense: Interest-bearing demand $ 802 $ 34,725 $ 35,527 $ 1,216 $ (3,121) $ (1,905) Savings (243) 2,404 2,161 67 (2,176) (2,109) Certificates of deposit 2,320 22,947 25,267 (2,192) (10,121) (12,313) Borrowings 10,324 14,911 25,235 (3,489) (366) (3,855) Total interest-bearing liabilities $ 13,203 $ 74,987 $ 88,190 $ (4,398) $ (15,784) $ (20,182) Change in net interest income $ 21,222 $ (41,960) $ (20,738) $ 5,185 $ 3,184 $ 8,369 Losses.Losses. The provision for credit losses decreasedincreased by $6.4$10.0 million to a provision for credit losses of $2.5 million for the year ended June 30, 2023, compared to a reversal of credit losses of $7.5 million for the year ended June 30, 2022, compared to a2022. The provision for credit losses reversal of $1.1 million for the year ended June 30, 2021. The provision for2023 was largely attributable to loan growth, partially offset by a reduction in the expected life of the loan portfolio. By comparison, the reversal of credit losses reversal for the year ended June 30, 2022 was largely attributable to continuedan improvement in our economic forecast, a reduction in the expected life of various segments of the loan portfolio and a net reduction of $3.0 million in reserves on loans individually evaluated loans. By comparison, the provisionanalyzed for credit losses reversal for the year ended June 30, 2021 was largely attributable to a release of reserves within certain loan segments, reflecting the improving credit risk outlook for those asset classes in the reasonable and supportable forecast, partially offset by an increase of $6.6 million in reserves on individually evaluated loans and $5.1 million of provision expense on non-PCD loans acquired in connection with the acquisition of MSB.impairment.provisionsprovision recognized during the year ended June 30, 20222023 is presented under “Item 1, Business” on this Annual Report on Form 10-K as well as in Note 1 and Note 6 to the audited consolidated financial statements as well as the Comparison of Financial Condition at June 30, 2022.Income.Income. Non-interest income decreased by $7.1$11.2 million to $13.9$2.8 million for the year ended June 30, 2022.2023.Fees and service charges increased by $683,000 to $2.6 million for the year ended June 30, 2022. The increase primarily reflected increases in various loan-related and deposit-related fees and charges.$559,000$15.2 million during the year ended June 30, 20222023 compared to a net gain of $767,000$559,000 recorded during the earlier comparative period.Gain The current year loss was the result of a previously announced wholesale restructuring that involved the sale of $120.4 million of available for sale securities. The proceeds of the sale were reinvested in higher yielding securities.decreased by $3.0 million to $2.5was $1.6 million for the year ended June 30, 2022.2023 compared to a gain on sale of loans of $2.5 million during the earlier comparative period. The current year included a loss of $2.5 million that resulted from the sale of a non-performing commercial mortgage loan held-for-sale. In addition, the decrease in gain on sale of loans reflected a decrease in the volume of loans sold between comparative periods coupled withperiods.lower average gain per loan.Bargain purchasenon-recurring gain of $3.1$2.9 million was recognizedfrom the sale of a former branch location and a $1.8 million increase in income from investment services. These increases were partially offset by $356,000 of non-recurring gains on asset disposals in the earlier comparative period in conjunction with the MSB acquisition. There was no such gain recorded in the current period.46Expense.Expense. Non-interest expense decreased by $177,000$2.0 million to $125.7$123.8 million for the year ended June 30, 2022. Included in non-interest expense for the years ended June 30, 2022 and 2021 were various non-recurring items as described below.2023.increaseddecreased by $7.5 million$675,000 to $76.3$75.6 million for the year ended June 30, 2022.2023. This increasedecrease was largely due to the impact of staff additions, annual merit increases, an increase inlower incentive compensation, lower incentive payments tied to loan origination volume and increases in benefit planlower expense including employee medical, post-retirement plan and ESOP expense.from retirement plans. These increasesdecreases were partially offset by higher salary expense and non-recurring severance expense resulting from a decreasereduction in stock-based compensation expense.increaseddecreased by $1.4$2.1 million to $14.1$12.0 million for the year ended June 30, 2022.2023. This increasedecrease was primarilylargely due to expenses recognized in the prior period including $1.5 million of non-recurring expenses of $1.3 million related to the consolidation of three retail branch locations and an office facility and $250,000 related to facility repairs made in connection with damage incurred during Tropical Storm Ida and $187,000Ida. The current year includes $250,000 of non-recurring occupancy expenses related to the closureconsolidation of a leased office facility acquired in conjunction with the MSB acquisition.increaseddecreased by $1.0$1.3 million to $15.9$14.6 million for the year ended June 30, 2022.2023. This increasedecrease was largely attributable to a prior period non-recurring expense of $800,000 from the early termination of a contract with a service provider.Director compensation decreased by $861,000$2.1$5.1 million for the year ended June 30, 2022.2023. This increase was largely driven by asset growth.Merger-related expenses, associated with our acquisition of MSB, were $4.3 million for the year ended June 30, 2021. There were no such expenses recorded in the current period.Debt extinguishment expenses, resulting from the pre-payment of FHLB advances, totaled $796,000 for the year ended June 30, 2021. There were no such expenses recorded in the current period.Other expense decreased by $4.5 million to $12.8 million for the year ended June 30, 2022. This decrease was primarily attributable to a $1.8 million decrease in the provision for credit losses on unfunded commitments and a $1.5 million decrease in asset impairment charges. For the years ended June 30, 2022 and 2021, non-recurring asset impairment charges related to branch and administrative facility consolidation activity totaled $420,000 and $1.9 million, respectively.Taxes.Taxes. Provision for income taxes increaseddecreased by $3.5$13.2 million to $11.6 million for the year ended June 30, 2023, from $24.8 million for the year ended June 30, 2022, from $21.3 million for the year ended June 30, 2021.2022. The increasedecrease in income tax expense largely reflected a higherlower level of pre-tax net income as compared to the prior period.2021 were 26.9% and 25.2%, respectively. The decrease in the effective tax rate forwas primarily due to lower taxable income, as well as non-taxable payouts on life insurance policies, noted above, during the prior comparative period was impacted by the effects of various non-recurring items recorded in conjunction with our acquisition of MSB, including non-deductible merger related expenses, which were partially offset by a non-taxable bargain purchase gain.20212022 and June 30, 202020212022 and June 30, 20202021 can be found in our Annual Report on Form 10-K for the year ended June 30, 2021,2022, filed with the SEC on August 27, 2021.26, 2022.2022,2023, included $101.6$70.5 million of short-term cash and equivalents supplemented by $1.34and $1.23 billion of investment securities classified as available for sale which can readily be sold or pledged as collateral, if necessary. In addition, we have the capacity to borrow additional funds from the FHLB, Federal Reserve BankFRB or via unsecured overnight borrowings. As of June 30, 2022,2023, we had the capacity to borrow additional funds totaling $2.04$1.55 billion and $303.9$415.0 million from the FHLB of New York and Federal Reserve Bank,FRB, respectively, without pledging additional collateral. We had the ability to pledge additional securities to borrow an additional $477.0 million at June 30, 2023. As of that same date, we also had access to unsecured overnight borrowings with other financial institutions totaling $975.0$990.0 million, of which none$100.0 million was outstanding.increased $377.0decreased $233.1 million to $5.63 billion at June 30, 2023 from $5.86 billion at June 30, 2022 from $5.49 billion at June 30, 2021.2022. The increasedecrease in deposit balances reflected a $316.8$189.2 million increasedecrease in interest-bearing deposits coupled with a $60.2$43.9 million increasedecrease in non-interest-bearing deposits. Borrowings from the FHLB of New York and other sources are generally available to supplement the Bank’sour liquidity position or to replace maturing deposits. As of June 30, 2022, the Bank’s2023, our outstanding balance of FHLB advances, excluding fair value adjustments, totaled $652.5 million.$1.28 billion. As of the same date, we had $250.0$125.0 million outstanding via the Bank’sour overnight line of credit with the FHLB.At or For the Years Ended June 30, 2023 2022 2021 (Dollars in Thousands) Balance at end of year $ 1,175,000 $ 625,000 $ 390,000 Average balance during year $ 900,997 $ 476,142 $ 646,896 Maximum outstanding at any month end $ 1,280,000 $ 684,000 $ 815,000 Weighted average interest rate at end of year 5.42 % 1.72 % 0.33 % Weighted average interest rate during year 4.49 % 0.58 % 1.08 % 2022:2023:June 30, 2023 Less than
One YearOne to
Three YearsOver Three
Years to
Five YearsOver Five
YearsTotal (In Thousands) Contractual obligations Operating lease obligations $ 3,445 $ 6,254 $ 4,904 $ 4,305 $ 18,908 Certificates of deposit 1,896,132 94,472 21,365 5,582 2,017,551 Federal Home Loan Bank Advances 972,500 110,000 200,000 — 1,282,500 Total contractual obligations $ 2,872,077 $ 210,726 $ 226,269 $ 9,887 $ 3,318,959 Commitments $ 87,467 $ 20,942 $ 4,123 $ 56,961 $ 169,493 58,485 — — — 58,485 23,261 — — — 23,261 Total commitments $ 169,213 $ 20,942 $ 4,123 $ 56,961 $ 251,239
One Year
Three Years
Years to
Five Years
Years$20.3$11.7 million of in process loans whose terms included interest rate locks to borrowers that were paired with a best-efforts commitment to sell the loan to a buyer at a fixed price and within a predetermined timeframe after the sale commitment is established.48$130,000$115,000 at June 30, 20222023 through which we guarantee certain specific business obligations of our commercial customers.2022,2023, outstanding loan commitments relating to loans held in portfolio totaled $510.5$251.2 million compared to $512.2$510.5 million at June 30, 2021.2022. Since some of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. For additional information regarding our outstanding lending commitments at June 30, 2022,2023, see Note 17 to the audited consolidated financial statements.2022,2023, Kearny Financial and Kearny Bank exceeded all capital requirements of the federal banking regulators and were considered well capitalized.2022:
Adequacy Purposes
Under Prompt
Corrective Action
ProvisionsJune 30, 2023 Actual For Capital
Adequacy PurposesTo Be Well Capitalized
Under Prompt
Corrective Action
ProvisionsAmount Ratio Amount Ratio Amount Ratio (Dollars in Thousands) Total capital (to risk-weighted assets) $ 695,417 13.31 % $ 417,853 8.00 % $ 522,316 10.00 % Tier 1 capital (to risk-weighted assets) 659,783 12.63 % 313,389 6.00 % 417,853 8.00 % Common equity tier 1 capital (to risk-weighted assets) 659,783 12.63 % 235,042 4.50 % 339,505 6.50 % Tier 1 capital (to adjusted total assets) 659,783 8.15 % 323,922 4.00 % 404,902 5.00 % 2022:
Adequacy PurposesJune 30, 2023 Actual For Capital
Adequacy PurposesAmount Ratio Amount Ratio (Dollars in Thousands) Total capital (to risk-weighted assets) $ 770,621 14.75 % $ 418,015 8.00 % Tier 1 capital (to risk-weighted assets) 734,987 14.07 % 313,511 6.00 % Common equity tier 1 capital (to risk-weighted assets) 734,987 14.07 % 235,133 4.50 % Tier 1 capital (to adjusted total assets) 734,987 9.07 % 324,170 4.00 % 2022,2023, see Note 15 to the audited consolidated financial statements.49and June 30, 2021 precluded the modeling of certain falling rate scenarios.and 2021, respectively:
Interest Rates
of EVE
in EVE
of NII
in NII
of NII
in NII
Interest Rates
of EVE
in EVE
of NII
in NII
of NII
in NIIJune 30, 2023 1 to 12 Months 13 to 24 Months Change in
Interest Rates$ Amount
of EVE% Change
in EVE$ Amount
of NII% Change
in NII$ Amount
of NII% Change
in NII(Dollars in Thousands) +300 bps 507,998 (32.36) % 154,552 (5.26) % 168,366 (3.87) % +200 bps 571,129 (23.95) % 156,274 (4.20) % 167,683 (4.26) % +100 bps 673,314 (10.35) % 160,344 (1.71) % 173,170 (1.13) % 0 bps 751,040 — 163,132 — 175,143 — -100 bps 799,675 6.48 % 163,455 0.20 % 173,319 (1.04) % -200 bps 814,293 8.42 % 161,284 (1.13) % 166,473 (4.95) % -300 bps 849,208 13.07 % 158,526 (2.82) % 156,507 (10.64) % June 30, 2022 1 to 12 Months 13 to 24 Months Change in
Interest Rates$ Amount
of EVE% Change
in EVE$ Amount
of NII% Change
in NII$ Amount
of NII% Change
in NII(Dollars in Thousands) +300 bps 1,089,795 (15.37) % 178,865 (13.62) % 214,839 (1.68) % +200 bps 1,156,219 (10.21) % 187,601 (9.40) % 215,528 (1.36) % +100 bps 1,239,935 (3.71) % 198,126 (4.32) % 219,594 0.50 % 0 bps 1,287,700 — 207,069 — 218,501 — -100 bps 1,272,203 (1.20) % 205,241 (0.88) % 204,568 (6.38) % Subsequent to June 30, 2022, we executed a series of derivative transactions designed to reduce our net interest income exposure to interest rate shocks in a rising rate environment. These transactions were structured to minimize any adverse impact on current period net interest income.51None.20222023 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days of the Registrant’s fiscal year end (the “Proxy Statement”) is incorporated herein by reference.Compensation”,Compensation,” “Director Compensation” and “Compensation Discussion and Analysis” in the Proxy Statement is incorporated herein by reference.20222023 with respect to compensation plans under which equity securities of the Registrant are authorized for issuance.(B)
Weighted Average
Exercise Price of
Outstanding Options,
Warrants and RightsEquity compensation plans approved by stockholders: 2005 Stock Compensation and Incentive Plan 103,530 $ 10.65 — 2016 Equity Incentive Plan 2,958,826 $ 15.15 — 2021 Equity Incentive Plan 497,664 $ — 5,825,421 Equity compensation plans not approved by stockholders: None — $ — — Total 3,560,020 $ 14.99 5,825,421
Issued Upon Exercise of
Outstanding Options,
Warrants and Rights(1)
Exercise Price of
Outstanding Options,
Warrants and Rights
Available for Future Issuance Under
Equity Compensation Plans - Excluding
Securities Reflected in Column (A)(2)
approved by stockholders:
and Incentive Plan
not approved by stockholders:3,133,0402,923,530 vested options and 120,00060,000 non-vested options outstanding as of June 30, 2022.2023. In addition to these options, 136,16678,826 restricted stock awards and 251,905497,664 restricted stock units were also non-vested as of June 30, 2022.2023. The non-vested options and restricted stock awards are earned at thea rate of 20% one year after the date of the grant and 20% annually thereafter.annually. The non-vested restricted stock units are earned at thea rate of 33% seven months after the date of the grant and 33% annually thereafter.2022,2023, there were 6,744,2855,825,421 options (or 2,248,0951,941,807 restricted stock units or restricted stock awards) remaining available for award under the approved equity compensation plans.F-71KEARNY FINANCIAL CORP. AND SUBSIDIARIESNotes to Consolidated Financial StatementsNote 18 – Fair ValueFinancial Instruments (continued)At$3.3 million reflecting an aggregate fair value of $17.7 million. By comparison, at June 30, 2022, collateral dependent loans valued using Level 3 inputs comprised loans with principal balance totaling $24.6$24.6 million and valuation allowanceallowances of $3.6$3.6 million reflecting an aggregate fair value of $21.0$21.0 million. million. By comparison, at June 30, 2021, collateral dependent loans valued using Level 3 inputs comprised loans with principal balance totaling $25.2 million and valuation allowancesTable of $Contents6.5 million reflecting an aggregate fair value$18.7 million.20222023 and 2021,2022, the Company held other real estate owned totaling $178,000,$13.0 million and $178,000, respectively, whose carrying value was written down utilizing Level 3 inputs.20222023 and 2021:2022:June 30, 2023 Carrying
AmountFair
ValueQuoted
Prices
in Active
Markets for
Identical
Assets
(Level 1)Significant
Other
Observable
Inputs
(Level 2)Significant
Unobservable
Inputs
(Level 3)(In Thousands) Financial assets: Cash and cash equivalents $ 70,515 $ 70,515 $ 70,515 $ — $ — Investment securities available for sale 1,227,729 1,227,729 — 1,227,729 — Investment securities held to maturity 146,465 131,169 — 131,169 — Loans held-for-sale 9,591 9,442 — 9,442 — Net loans receivable 5,780,687 5,261,808 — — 5,261,808 FHLB Stock 71,734 — — — — Interest receivable 28,133 28,133 14 8,924 19,195 Interest rate contracts 71,624 71,624 — 71,624 — Financial liabilities: Deposits 3,611,632 3,611,632 3,611,632 — — Certificates of deposits 2,017,551 1,989,434 — — 1,989,434 Borrowings 1,506,812 1,498,920 — — 1,498,920 Interest payable on deposits 6,826 6,826 1,933 — 4,893 Interest payable on borrowings 5,282 5,282 — — 5,282
Amount
Value
Prices
in Active
Markets for
Identical
Assets
(Level 1)
Other
Observable
Inputs
(Level 2)
Unobservable
Inputs
(Level 3)F-72
Amount
Value
Prices
in Active
Markets for
Identical
Assets
(Level 1)
Other
Observable
Inputs
(Level 2)
Unobservable
Inputs
(Level 3)June 30, 2022 Carrying
AmountFair
ValueQuoted
Prices
in Active
Markets for
Identical
Assets
(Level 1)Significant
Other
Observable
Inputs
(Level 2)Significant
Unobservable
Inputs
(Level 3)(In Thousands) Financial assets: Cash and cash equivalents $ 101,615 $ 101,615 $ 101,615 $ — $ — Investment securities available for sale 1,344,093 1,344,093 — 1,344,093 — Investment securities held to maturity 118,291 108,118 — 108,118 — Loans held-for-sale 28,874 28,831 — 28,831 — Net loans receivable 5,370,787 5,215,079 — — 5,215,079 FHLB Stock 47,144 — — — — Interest receivable 20,466 20,466 2 5,210 15,254 Interest rate contracts 41,223 41,223 — 41,223 — Financial liabilities: Deposits 3,972,694 3,972,694 3,972,694 — — Certificates of deposits 1,889,562 1,866,341 — — 1,866,341 Borrowings 901,337 900,505 — — 900,505 Interest payable on deposits 722 722 147 — 575 Interest payable on borrowings 1,611 1,611 — — 1,611 F-73June 30, 2023 2022 (In Thousands) Net unrealized loss on securities available for sale $ (156,138) $ (118,031) Tax effect 45,018 34,104 Net of tax amount (111,120) (83,927) Fair value adjustments on derivatives 58,414 39,805 Tax effect (16,940) (11,542) Net of tax amount 41,474 28,263 Benefit plan adjustments 268 (89) Tax effect (78) 26 Net of tax amount 190 (63) Total accumulated other comprehensive loss $ (69,456) $ (55,727) Years Ended June 30, 2023 2022 2021 (In Thousands) Net unrealized loss on securities available for sale $ (53,334) $ (128,601) $ (11,704) 15,227 559 (767) Fair value adjustments on derivatives 18,609 40,117 19,106 Benefit plans: (24) 80 83 Net actuarial gain 381 924 236 Net change in benefit plan accrued expense 357 1,004 319 Other comprehensive (loss) income before taxes (19,141) (86,921) 6,954 Tax effect 5,412 25,050 (2,067) Total other comprehensive (loss) income $ (13,729) $ (61,871) $ 4,887
available for sale transferred to held to maturity (1)Represents amounts reclassified out of accumulated other comprehensive (loss) income and included in interest income on taxable securities.(2)(3)(2)2021 and 2020.2021. Sources of revenue outside the scope of ASC 606 are noted as such.Years Ended June 30, 2023 2022 2021 (In Thousands) Non-interest income: Deposit-related fees and charges $ 1,881 $ 1,733 $ 1,412 1,225 847 485 (15,227) (559) 767 (1,645) 2,539 5,574 (Loss) gain on sale of other real estate owned (139) 5 — 8,645 6,167 6,267 Electronic banking fees and charges (interchange income) 1,759 1,626 1,717 — — 3,053 6,252 1,576 1,751 Total non-interest income $ 2,751 $ 13,934 $ 21,026 F-75subsidiarysubsidiaries CJB Investment Corp. and 189-245 Berdan Avenue LLC. The consolidated earnings of the subsidiaries are recognized by the Company using the equity method of accounting. Accordingly, the consolidated earnings of the subsidiaries are recorded as increases in the Company’s investment in the subsidiaries. The following are the condensed financial statements for Kearny Financial Corp. (Parent Company only) as of June 30, 20222023 and 2021,2022, and for each of the years in the three-year period ended June 30, 2022.2023.June 30, 2023 2022 (In Thousands) Assets Cash and amounts due from depository institutions $ 48,839 $ 77,750 Loans receivable 26,384 28,201 Investment in subsidiary 794,080 788,021 Other assets 827 448 Total Assets $ 870,130 $ 894,420 Liabilities and Stockholders' Equity Other liabilities 846 420 Stockholders' equity 869,284 894,000 Total Liabilities and Stockholders' Equity $ 870,130 $ 894,420 Years Ended June 30, 2023 2022 2021 (In Thousands) Dividends from subsidiary $ 26,282 $ 156,728 $ 178,918 Interest income 1,749 1,508 1,993 Equity in undistributed earnings of subsidiaries 14,912 (88,452) (114,969) Total income 42,943 69,784 65,942 Directors' compensation 532 530 308 Other expenses 1,715 1,976 2,660 Total expense 2,247 2,506 2,968 Income before income taxes 40,696 67,278 62,974 Income tax expense (115) (269) (259) Net income $ 40,811 $ 67,547 $ 63,233 Comprehensive income $ 27,082 $ 5,676 $ 68,120 F-76Years Ended June 30, 2023 2022 2021 (In Thousands) Cash Flows from Operating Activities: Net income $ 40,811 $ 67,547 $ 63,233 Adjustment to reconcile net income to net cash provided by operating activities: Equity in undistributed earnings of subsidiaries (14,912) 88,452 114,969 (Increase) decrease in other assets (379) 176 484 Increase (decrease) in other liabilities 271 (184) 160 Net Cash Provided by Operating Activities 25,791 155,991 178,846 Cash Flows from Investing Activities: Repayment of loan to ESOP 1,817 1,758 1,702 Proceeds from the maturity of investment securities available for sale — 15,000 — Outlays for business acquisitions — — (9,008) Other, net — — 118 Net Cash Provided by (Used in) Investing Activities 1,817 16,758 (7,188) Cash Flows from Financing Activities: Exercise of stock options — — 373 Cash dividends paid (28,499) (30,693) (28,648) Repurchase and cancellation of common stock of Kearny Financial Corp. (27,558) (129,520) (119,021) Cancellation of shares repurchased on vesting to pay taxes (462) (977) (803) Net Cash Used In Financing Activities (56,519) (161,190) (148,099) Net (Decrease) Increase in Cash and Cash Equivalents (28,911) 11,559 23,559 Cash and Cash Equivalents - Beginning 77,750 66,191 42,632 Cash and Cash Equivalents - Ending $ 48,839 $ 77,750 $ 66,191 For the Year Ended June 30, 2023 2022 2021 (In Thousands, Except Per Share Data) Net income $ 40,811 $ 67,547 $ 63,233 Weighted average number of common shares outstanding - basic 64,804 70,911 82,387 Effect of dilutive securities — 22 4 Weighted average number of common shares outstanding- diluted 64,804 70,933 82,391 Basic earnings per share $ 0.63 $ 0.95 $ 0.77 Diluted earnings per share $ 0.63 $ 0.95 $ 0.77 , 3,246,138 and 3,115,0003,246,138 shares of common stock were not considered in computing diluted earnings per share at June 30, 2023, 2022 2021 and 2020,2021, respectively, because they were considered anti-dilutive. In addition, 497,664 and 251,905 RSUs were not considered in computing diluted earnings per share at June 30, 2023 and 2022, respectively, because the RSUsthey were considered anti-dilutive.Dated: August 26, 202225, 2023
President and Chief Executive Officer26, 202225, 2023 on behalf of the Registrant and in the capacities indicated.Curtland E. Fields
Director/s/ Catherine A. Lawton John N. HopkinsDirectorCatherine A. LawtonDirector/s/ Joseph P. Mazza John J. Mazur, Jr.DirectorJoseph P. MazzaDirector/s/ Leopold W. Montanaro John F. McGovernDirectorLeopold W. MontanaroDirector/s/ Charles J. Pivirotto Christopher PetermannDirectorCharles J. PivirottoDirector
Director