UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10‑K10-K

(Mark One)

For the Fiscal Year Ended June 30, 20202021

Or

For the transition period from             to             

Commission File Number: 001-37399

KEARNY FINANCIAL CORP.

(Exact name of Registrant as specified in its Charter)

Registrant’s telephone number, including area code: (973) 244-4500

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  ☒ YESYes    ☐ NONo

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  ☐ YESYes    ☒ NONo

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  ☒ YESYes    ☐ NONo

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  ☒ YESYes    ☐ NONo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.   See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Emerging growth company     ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  ☐ YES    ☒ NO

The aggregate market value of the voting and non-voting common equity held by non‑affiliates of the Registrant on December 31, 20192020 (the last business day of the Registrant’s most recently completed second fiscal quarter) was $1.07 billion.$815.8 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.

As of August 21, 202020, 2021 there were outstanding 89,517,00377,004,871 shares of the Registrant’s Common Stock.

DOCUMENTS INCORPORATED BY REFERENCE

KEARNY FINANCIAL CORP.

ANNUAL REPORT ON FORM 10-K

For the Fiscal Year Ended June 30, 20202021

INDEX

i

PART I

Item 1. Business

Forward-Looking Statements

This Annual Report on Form 10-K contains forward-looking statements, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “plan,” “seek,” “expect” and words of similar meaning. These forward-looking statements include, but are not limited to:

These forward-looking statements are based on current beliefs and expectations of our management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. We are under no duty to and do not take any obligation to update any forward-looking statements after the date of the Annual Report on Form 10-K.

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:

2

Because of these and other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements.

Impact of COVID-19

As the Company’s business is primarily conducted within the states of New Jersey and New York, and those states have been significantly impacted by COVID-19, the operations and operating results of the Company have been similarly impacted.

Employee Matters.  As the COVID-19 pandemic has unfolded, and stay-at-home orders were mandated by government officials, the majority of our non-branch personnel have transitioned to working remotely, and have continued to do so through June 30, 2020. 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, established guidelines to maintain appropriate social distancing and have initiated enhanced cleaning of our facilities 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 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 six of our 46 branches. In the months following, we have outfitted our branches with protective barriers and continued to provide our staff with personal protective equipment. In addition, we have instituted policies requiring our clients to wear face masks and to adhere to social distancing protocols while visiting our branch locations. With these modifications, as of June 30, 2020, all of our branches had re-opened their lobbies and were fully operational.

Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) and 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 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 will guarantee 100% of the PPP loans made to eligible borrowers. As a qualified SBA lender, the Bank is automatically authorized to originate PPP loans. On April 16, 2020, the original authorization of $349 billion in funding for the PPP program was exhausted. On April 23, 2020, the PPP Enhancement Act was signed into law and provided an additional $310 billion in funding for the PPP program. As of June 30, 2020 we had approximately 749 loans with total outstanding balances of $69.0 million under the PPP.

3

Under Section 4013 of the CARES Act, and based upon regulatory guidance promulgated by federal banking regulators, qualifying short-term loan modifications resulting in payment deferrals that are attributable to the adverse impact of COVID-19, are not considered to be troubled debt restructurings (“TDRs”). As such, the applicable loans are reported as current with regard to payment status and continue to accrue interest during the payment deferral period. Additional information regarding loans modified in accordance with this guidance are provided in the tables below.

The CARES Act included multiple provisions which impacted the tax code. One such provision restored net operating loss (“NOL”) carrybacks that were eliminated by the 2017 Tax Cuts and Jobs Act. The new carryback provision allows for a five year carryback of NOLs incurred by corporations in the 2018, 2019 and 2020 tax years. As a result of this provision the Company was able to carry back NOLs, which had been recorded at the current statutory federal rate of 21%, at the prior statutory rate of 34%. The difference between these two rates, multiplied by the amount of the NOL, totaled $1.6 million and was recorded as a credit to income tax expense during the year ended June 30, 2020.

Loan Portfolio.  The government-mandated closure of certain businesses and the curtailment of non-essential travel has created an increased level of risk to certain segments of the loan portfolio. Additional disclosures surrounding portfolio-wide loan-to-value ratios for real estate secured loans, exposures to certain loan sectors and non-TDR loan modifications granted under section 4013 of the CARES Act are provided below.

The following table sets forth the composition of our real estate secured loans indicating the loan-to-value, by loan category, at June 30, 2020:

The following table identifies our exposure to certain loan sectors at June 30, 2020:

4

Through June 30, 2020, the Company had modified a total of 711 non-TDR loans with an aggregate principal balance of $781.3 million, representing 17.2% of total loans. Further details regarding these modifications are provided in the table below. As of June 30, 2020, 351 of the modified loans with an aggregate principal balance of $374.9 million had reached the expiration of their initial three-month deferral period.  Of these loans, 69.5%, or $260.6 million, had returned to their regular payment schedules by August 14, 2020.  Through that same date, 30.3%, or $113.5 million had been granted a second 90-day extension while the remaining 0.2%, or $780,000, had not yet made their July payment.

In addition to the loans reported above, the Company acquired 144 loans with aggregate principal balances of $114.8 million in conjunction with the Company’s acquisition of MSB Financial Corp. (“MSB”) on July 10, 2020 that had been previously modified in accordance with the guidance discussed above.

General

Kearny Financial Corp. (the “Company,” or “Kearny Financial”), is a Maryland corporation that is the holding company for Kearny Bank (the “Bank” or “Kearny Bank”), a nonmember New Jersey stock savings bank. The Bank converted its charter to that of a New Jersey savings bank on June 29, 2017 having previously been a federally chartered stock savings bank.

The Company is a unitary savings and loan holding company, regulated by the Board of Governors of the Federal Reserve Bank (“FRB”) and conducts no significant business or operations of its own. The Bank’s deposits are federally insured by the Deposit Insurance Fund as administered by the Federal Deposit Insurance Corporation (“FDIC”) and the Bank is primarily regulated by the New Jersey Department of Banking and Insurance (“NJDBI”) and, as a nonmember bank, the FDIC. References in this Annual Report on Form 10‑K to the Company or Kearny Financial generally refer to the Company and the Bank, unless the context indicates otherwise. References to “we”, “us”, or “our” refer to the Bank or Company, or both, as the context indicates.  

The Company’s primary business is the ownership and operation of the Bank. The Bank is principally engaged in the business of attracting deposits from the general public in New Jersey and New York and using these deposits, together with other funds, to originate or purchase loans for its portfolio and invest in securities.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, bank-qualified municipal obligations, corporate bonds, asset-backed securities, collateralized loan obligations and subordinated debt.

5

We operate from our administrative headquarters in Fairfield, New Jersey and other administrative locations throughout the state of New Jersey. As of June 30, 2020,2021, we had 4648 branch offices. The Company maintains a website at 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.

Acquisition of Clifton Bancorp Inc.

O3

n April 2, 2018, the Company completed its acquisition of Clifton Bancorp Inc. (“Clifton”), the parent company of Clifton Savings Bank, a federally chartered stock savings bank.  In conjunction with the acquisition, the Company acquired assets with aggregate fair values totaling $1.61 billion including loans and securities with fair values of $1.12 billion and $326.9 million, respectively.  The Company assumed liabilities with aggregate fair values totaling $1.38 billion in conjunction with the Clifton acquisition including deposits and borrowings with fair values of $949.8 million and $414.1 million, respectively.

Merger consideration associated with the acquisition totaled $333.9 million and primarily comprised 25.4 million shares of the Company’s common stock valued at $330.7 million that were issued to Clifton stockholders to reflect an exchange of 1.191 of Company shares for each outstanding share of Clifton common stock at the time of closing.  Merger consideration also included $3.2 million in cash distributed to eligible holders of outstanding options to purchase Clifton stock as well as cash distributed to Clifton stockholders for the settlement of fractional shares.  The amount by which merger consideration exceeded the fair value of net assets acquired resulted in the Company’s recognition of $102.3 million in goodwill associated with the Clifton acquisition.

Acquisition of MSB Financial Corp. (“MSB”)

On July 10, 2020, the Company completed its 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 waswere distributed to former MSB shareholders in exchange for their shares of MSB common stock. As a result of the merger, the Company acquired approximately $500loans with fair values totaling $530.2 million, in loans, assumed approximately $400deposits with fair values totaling $460.2 million in deposits and acquired four branch offices located in Somerset and Morris counties. Given the initial accounting for this business combination is incomplete, management is not yet able to disclose the preliminary fair valueThe application of the assets acquiredacquisition method of accounting resulted in the recognition of bargain purchase gain of $3.1 million and liabilities assumed.a core deposit intangible of $690,000.

COVID-19 Pandemic

As the Company’s business is primarily conducted within the states of New Jersey and New York, which have each been significantly impacted by COVID-19, the operations of the Company have been similarly impacted. 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, 2021 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, 2021, 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 is automatically authorized to originate PPP loans. On April 16, 2020, the original authorization of $349 billion in funding for the PPP was exhausted. On April 23, 2020, the PPP Enhancement Act was signed into law and provided an additional $310 billion in funding for the PPP program. As of June 30, 2021 we had approximately 15 loans with total outstanding balances of $10.2 million 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. Additional information regarding loans modified in accordance with this guidance is provided in the tables below.

2021 Consolidated Appropriations Act. The 2021 Consolidated Appropriations Act was signed into law on December 27, 2020.  The $900 billion relief package includes legislation that extends certain relief provisions of the CARES Act that were set to expire on December 31, 2020. This legislation extends this relief to the earlier of 60 days after the national emergency declared by the President is terminated or January 1, 2022.

Business Strategy

In recent years we have evolved our business model from that of a traditional thrift towardinto that of a full servicefull-service community bank. This evolution has been accomplished by growing our commercial loans and deposits, expanding our product and service offerings, de-novo branching and the acquisition of other financial institutions. During this time, our strategy has been largely focused on profitably deploying capital and enhancing earnings through a variety of balance sheet growth and diversification strategies. While many of our long-term growth strategies remain intact, the uncertainty presented by the COVID-19 pandemic has resulted in a change to our near-term business strategy.  The key components of thisour business strategy are as follows:

As demonstrated by the June 30, 20202021 Tier 1 Leverage ratios of the Company and the Bank of 13.27%11.76% and 11.95%10.23%, respectively, we currently maintain, and plan to continue to maintain, capital levels in excess of regulatory minimums and internal capital adequacy guidelines and peer medians. We plan to continue to maintain robust capital reserves, in part due to the risks and uncertainties associated with the COVID-19 pandemic. For those same reasons, on March 25, 2020, we temporarily suspended our stock repurchase program.guidelines.

In addition to our robust capital levels, we maintain significant sources of both on- and off-balance sheet liquidity and plan to continue to do so.  At June 30, 2020,2021, our liquid assets included $181.0$67.9 million of short-term cash and equivalents supplemented by $1.39$1.68 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 $615.0$651.0 million via unsecured lines of credit and $1.53$2.13 billion and $318.7$233.1 million, without pledging additional collateral, from the Federal Home Loan Bank of New York and Federal Reserve Bank, respectively.

At this time the economic implications of the COVID-19 pandemic, and the resulting impact on our asset quality, remain unclear. Notwithstanding this uncertainty we intend to maintain an allowance for credit losses which, upon adoption of ASU 2016-13, will allow us to absorb all of the expected lifetime losses within our portfolios of assets measured at amortized cost.

6

We 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. During fiscal 20202021, excluding acquired balances, we successfully grew thesecore non-maturity deposits by $646.7$712.5 million and anticipate that the balance of retail non-maturity deposits will continue to increase in fiscal 2021 and thereafter.2022.

We plan to maintain the balance ofcontinue focusing on growing and diversifying our loan portfolio ofwith a particular emphasis on growth in commercial real estate, commercial business and residential loans, replacing repayments and with newcommercial construction loan originations.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.

For our existing borrowers who have been adversely impacted by COVID-19, we plan to use the resources at our disposal, including loan modifications and payment deferrals, to aid such borrowers in remaining current on their loan payments.

We plan to continue to leverage our mortgage banking infrastructure to support the origination of residential mortgage loans for sale into the secondary market.market and to supplement our loan growth initiatives. We anticipate that residential mortgage loan origination and sale activity will continue to support long-term growth in our non-interest income, while also serving to help manage the Company’s exposure to interest rate risk through the sale of longer-duration, fixed-rate loans into the secondary market.

At June 30, 2020,2021, we had a total of 4648 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 takingthrough additional branch consolidations, where appropriate. Such efforts will take into consideration historical branch profitability, market demographic trajectory, geographic proximity to theof consolidating branchbranches and the expected impact on the Bank’s clients and communities served.

In recent years the Company’s 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 of the ongoing evolution of our business towards onlinedigital channels we have invested significant human resources and capital towards enhancing both our internal and client-facing technology systems. Our ongoing technology transformation will impact nearly every area of the Company including the residential and commercial lending functions, retail deposit gathering, risk management and back office operations.We continually strive to enhance our digital banking services which allow us to serve our clients’ needs in an omnichannel environment.

Market Area. At June 30, 2020,2021, 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 these markets and our predominant sources of deposits are the communities in which our offices are located as well as the neighboring communities. Our acquisition of Millington Bank on July 10, 2020 enabled us to enhance our New Jersey market area by newly expanding into Somerset county while expanding upon our existing presence in Morris county.

Competition. We operate in a highly competitive market area with a large concentration of financial institutions and we face substantial competition in attracting deposits and in originating loans. A number of our competitors are significantly larger institutions with greater financial and technological resources and lending limits. Our ability to compete successfully is a significant factor affecting our growth potential and profitability. Our competition for deposits and loans comes primarily from other insured depository institutions located in our primary market area. We also face competition from out-of-market depository institutions operating via online channels and from non-depository institutions including mortgage banks, finance companies, insurance companies and brokerage firms.

7

Lending Activities

General. Our loan portfolio is comprised of multi-family loans, commercialnonresidential real estate loans, residential mortgage loans, commercial business loans, construction loans, one- to four-family residential mortgage loans, home equity loans and lines of credit and consumer and other loans. In conjunction with our strategic efforts to evolve from a traditional thrift to a full-service community bank,recent years our lending strategies have placed increasing emphasis on the origination of commercial loans. In particular, the outstanding balance of our commercial mortgages, including loans secured by multi‑family, mixed‑use and nonresidential properties, have increased significantly over the past several years.

Loan Portfolio Composition. The following table sets forth the composition of our loan portfolio in dollar amounts and as a percentage of the total portfolio at the dates indicated.

The following table sets forth the composition of our real estate secured loans indicating the loan-to-value (“LTV”), by loan category, at June 30, 2021:

Loan Maturity Schedule. The following table sets forth the maturities of our loan portfolio at June 30, 2020.2021. 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.

8

The following table shows the dollar amount of loans as of June 30, 20202021 due after June 30, 20212022 according to rate type and loan category:

Multi-Family and Nonresidential Real Estate Mortgage Loans. At June 30, 2021, multi-family loans totaled $2.04 billion, or 41.8% of our loan portfolio, while nonresidential loans totaled $1.08 billion, or 22.1% of our loan portfolio. We originate commercial mortgage loans on a variety of multi-family and nonresidential properties,property types, including loans on apartment buildings, retail/service properties and other income-producing properties, such as mixed-use properties combiningwhich combine residential and commercial space. We originated approximately $258.5$352.5 million of multi-family and nonresidential real estate mortgages during the year ended June 30, 2020,2021, compared to $437.3$258.5 million during the year ended June 30, 2019.2020. Supplementing our organic originations were loan purchases of whole loans and participations totaling $21.4 million during the year ended June 30, 2021, compared to $55.5 million during the year ended June 30, 2020, compared to $68.6 million during the year ended June 30, 2019.  2020. Additionally, in conjunction with our acquisition of MSB we acquired multi-family and nonresidential real estate mortgage loans with fair values totaling approximately $231.0 million.

We generally offer fixed-rate and adjustable-rate balloon mortgage loans on multi-family and non-residential properties with final stated maturities ranging from five to fifteen 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.

Commercial Business (C&I) Loans. At June 30, 2021, commercial business loans totaled $169.0 million, or 3.5% of our loan portfolio. We originate commercial term loans and lines of credit to a variety of professionals, sole proprietorships and businessesclients in our market area. OurIncluded within our business loan products include our Small Business Express Loan, which offers clients a simplified and expedited application and approval process for term loans and lines of credit up to $250,000, as well asare loans originated through the SBA in which Kearny Bank participates as a Preferred Lender and is authorized to originate PPP loans, as discussed earlier.Lender. We originated approximately $108.5$104.6 million of commercial business loans during the year ended June 30, 2021, of which $4.0 million were originated under the SBA PPP program. By comparison, we originated approximately $108.5 million during the year ended June 30, 2020, of which $69.7 million were originated under the SBA PPP program. By comparison,Additionally, in conjunction with our acquisition of MSB we originatedacquired C&I loans with fair values totaling approximately $21.9 million during the year ended June 30, 2019.  

Supplementing our organic origination of commercial business loans was the funding of wholesale commercial business loan participations totaling $2.7 million for both of the fiscal years ended June 30, 2020 and 2019, respectively.  These participations were comprised of our pro-rata interest in the obligations of nine separate commercial borrowers that were acquired through our membership in BancAlliance, a cooperative network of lending institutions that serves as a conduit for institutional investors to participate in middle-market commercial credits.  During fiscal 2018 we opted to discontinue the purchase of wholesale commercial business loan participations and thus all of the wholesale commercial business loans funded during fiscal 2020 were comprised of advances on previously committed lines of credit.  Our outstanding balance of wholesale commercial business loan participations totaled $20.8 million and $27.2 million at June 30, 2020 and 2019, respectively.  

At June 30, 2020, approximately $48.9 million, or 35.3%, of our commercial business loans represent loans originated through our retail channel while $20.9 million, or 15.0%, comprise loans acquired through the wholesale commercial business loan participation channels and $69.0 million, or 49.7%, were originated under the PPP, as discussed earlier.  Of the retail originated loans, approximately $39.0 million, or 79.7%, are non-SBA loans consisting of secured and unsecured loans totaling $30.6 million and $8.4 million, respectively. Unsecured commercial loans may take the form of overdraft checking authorization and unsecured lines of credit.$103.9 million. 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.

The remaining $9.9During the year ended June 30, 2021, we sold $43.6 million or 20.3% of retailPPP loans. At June 30, 2021, the balance of commercial business loans originated representincluded PPP loans totaling $10.2 million.

Supplementing our organic origination of commercial business loans was the retained portionfunding of SBAwholesale commercial business loan originations,participations totaling $251,000 and $2.7 million for the years ended June 30, 2021 and 2020, respectively. During fiscal 2018 we opted to discontinue the purchase of which approximately $437,000 is guaranteed by the SBA.  Such loans are generally secured by various forms of collateral, including real estate,wholesale commercial business equipmentloan participations and other forms of collateral.  We may choose to sell the guaranteed portion of eligible SBA loans originated, which ranges from 50% to 90%thus all of the loan’swholesale commercial business loans funded during fiscal 2021 and 2020 were comprised of advances on previously committed lines of credit. Our outstanding balance while retaining the nonguaranteed portion of such loans in portfolio.wholesale commercial business loan participations totaled $11.9 million and $20.8 million at June 30, 2021 and 2020, respectively.

9

Construction Lending. At June 30, 2021, construction loans totaled $93.8 million, or 1.9% of our loan portfolio. Our construction lending includes loans to individuals, builders or developers for the construction or renovation of one- to four-family residences or for major renovations or improvements to an existing dwelling.  Ourthe construction lending also includes loans to builders and developers forof commercial real estate or multi-family residential buildings. At June 30, 2020,In conjunction with our acquisition of MSB we acquired construction loans totaled $21.0with fair values totaling approximately $48.2 million.

During the year ended June 30, 2020,2021, construction loan disbursements were $7.2$50.4 million compared to $8.5$7.2 million during the year ended June 30, 2019.2020. Construction loan repaymentsdisbursements, including construction loans acquired from MSB, outpaced disbursementsrepayments during fiscal 20192021 resulting in the reported net decreaseincrease in the outstanding balance of this segment of the loan portfolio.

8

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 published in the Wall Street Journal 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.

One- to Four-Family First Mortgage Loans Held in Portfolio. At June 30, 2021, one- to four-family mortgage loans totaled $1.45 billion, or 29.7% of our loan portfolio. Our portfolio lending activities include the origination of one- to four-family first mortgage loans, of which approximately $1.17$1.35 billion, or 92.0%93.1%, are secured by properties located within New Jersey and New York as of June 30, 20202021 with the remaining $102.0$99.5 million, or 8.0%6.9%, secured by properties in other states.

During the year ended June 30, 2020,2021, we originated $197.8$553.2 million of one- to four-family first mortgage portfolio loans compared to $106.9$197.8 million in the year ended June 30, 2019.2020. To supplement portfolio loan originations, we also purchased one- to four-family first mortgages totaling $60.1 million during the year ended June 30, 2021 compared to $15.0 million during the year ended June 30, 2020 compared to $95.5 million during the year ended June 30, 2019.

We will originate a2020. Additionally, in conjunction with our acquisition of MSB, we acquired one- to four-family first mortgage loans on an owner-occupied property with a principal amount of up to 95%fair values totaling approximately $132.5 million.

The fixed-rate residential mortgage loans that we originate for portfolio generally meet the secondary mortgage market standards of the lesser of the appraised value or the purchase price of the property, with private mortgage insurance required if the loan-to-value ratio exceeds 80%Federal Home Loan Mortgage Corporation (“Freddie Mac”). At June 30, 2020, our one- to four-family mortgage loan portfolio was primarily comprised of loans secured by owner-occupied properties.  Our loan-to-value limit on a non-owner-occupied property is 75%.

WeIn addition, we 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 customersclients of Kearny Bank and/or members of their immediate families.  The financial incentive under this program are a one quarter of one percentage point rate reduction on all first mortgage loan types and the refund of the commitment fee at closing.

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”).

Substantially all of our residential mortgages include due on sale clauses, which give us the right to declare a loan immediately payable if the borrower sells or otherwise transfers an interest in the property to a third party.  Property appraisals on real estate securing our one- to four-family first mortgage loans are made by state certified or licensed independent appraisers approved by our Board of Directors. Appraisals are performed in accordance with applicable regulations and policies.  We require title insurance policies on all first mortgage real estate loans originated.  Homeowners, liability and fire insurance and, if applicable, flood insurance, are also required.

One- to Four-Family Mortgage Loans Held for Sale. As a complement to our residential one- to four-family portfolio lending activities, we operate a mortgage banking platform which supports the origination of one- to four-family mortgage loans for sale into the secondary market. The loans we originate for sale generally meet the secondary mortgage market standards of the Federal Home Loan Mortgage Corporation. Such loans are generally originated by, and sourced from, the same resources and markets as those loans originated and held in our portfolio.

Our mortgage banking business strategy resulted in the recognition of $3.2$5.1 million in gains associated with the sale of $285.4 million of mortgage loans held for sale during the year ended June 30, 2020.2021. As of that date, an additional $20.8$16.5 million of loans were held and committed for sale into the secondary market.

10

Home Equity Loans and Lines of Credit. At June 30, 2021, home equity loans and lines of credit totaled $47.9 million, or 1.0% 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. During the year ended June 30, 2020,2021, we originated $16.4$15.8 million of home equity loans and home equity lines of credit compared to $33.8$16.4 million in the year ended June 30, 2019.2020. However, repayments of home equity loans and lines of credit generally outpaced origination volume and acquired loans during fiscal 2020,2021, resulting in a net decrease in the outstanding balance of this segment of the loan portfolio.

Collateral value is determined through a property value analysis report, or full appraisal where appropriate, provided by a state certified or licensed independent appraiser.  Home Additionally, in conjunction with our acquisition of MSB we acquired home equity loans and lines of credit do not require title insurance but do require homeowner, liability and fire insurance and, if applicable, flood insurance.

Home equity loans and fixed-rate home equity lines of credit are generally originated in our market area and are generally made in amounts of up to 80% of value on term loans and of up to 75% of value on home equity adjustable-rate lines of credit.  We originate home equity loans secured by either a first lien or a second lien on the property.with fair values totaling approximately $14.1 million.

Other Consumer Loans. 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. The balance of consumer loans at June 30, 20202021 primarily include $3.4$3.0 million of loans fully secured by savings accounts or certificates of deposit held by the Bank and $607,000$262,000 of other unsecured consumer loans. We will generally lend up to 90% of the account balance on a loan secured by a savings account or certificate of deposit.

Our underwriting standards for internally originated consumer loans include a determination of the applicant’s credit history and an assessment of the applicant’s ability to meet existing obligations and payments on the proposed loan.  The stability of the applicant’s monthly income may be determined by verification of gross monthly income from primary employment and any additional verifiable secondary income.

Loans to One Borrower. New Jersey law generally limits the amount that a savings bank may lend to a single borrower and related entities to 15% of the institution’s capital funds. Accordingly, as of June 30, 2020,2021, our legal loans-to-one-borrowerloans to one borrower limit was approximately $122.5$114.3 million.

Notwithstanding regulatory limitations regarding loans to one borrower, the Bank has established a more conservative set of internal thresholds that further limit our lending exposure to any single borrower or set of borrowers affiliated by common ownership.  In that regard, the Bank’s internal limits are $35.0 million for a single loan transaction and $85.0 million to a common ownership or an affiliated group of borrowers/guarantors. These limits apply irrespective of whether the obligations are on a personally guaranteed/recourse basis or non-personally guaranteed/non-recourse basis.  Exceptions to these internal limits may be considered on a case-by-case basis, subject to the review and approval of each exception by the Bank’s Board of Directors.

9

At June 30, 2020,2021, our largest single borrower had an aggregate outstanding loan balance of approximately $54.0$48.5 million comprising one commercial mortgage loan and four multi-family mortgage loans. Our second largest single borrower had an aggregate outstanding loan balance of approximately $49.6$48.2 million comprising six multi-family mortgage loans. At June 30, 2020,2021, these lending relationships were current and performing in accordance with the terms of their loan agreements.

11

Loan Originations, Purchases, Sales, Solicitation and Processing. The following table shows the principal balances of portfolio loans originated, purchased, acquired and repaid during the periods indicated: