UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM ~~10‑K~~10-K

(Mark One)


☒ x			ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended June 30, ~~2020~~

2023


☐ o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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:

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

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. ☒x ~~YES~~ ☐ Yes NO

o No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐o ~~YES~~ ☒ Yes NO

x No

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. ☒x ~~YES~~ ☐ Yes NO

o No

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~~232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒x ~~YES~~ ☐ Yes NO

o No

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.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

~~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. ☐o

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. ☒x

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

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). o

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

x No

The aggregate market value of the voting and non-voting common equity held by non‑affiliates of the Registrant on December ~~31, 2019~~30, 2022 (the last business day of the Registrant’s most recently completed second fiscal quarter) was ~~$1.07 billion.~~$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.

As of August ~~21, 2020~~18, 2023 there were outstanding ~~89,517,003~~65,214,903 shares of the Registrant’s Common Stock.

DOCUMENTS INCORPORATED BY REFERENCE

1.Portions of the definitive Proxy Statement for the Registrant’s 2023 Annual Meeting of Stockholders. (Part III)

1.	~~Portions of the definitive Proxy Statement for the Registrant’s 2020 Annual Meeting of Stockholders. (Part III)~~

Table of Contents

KEARNY FINANCIAL CORP.

ANNUAL REPORT ON FORM 10-K

For the Fiscal Year Ended June 30, ~~2020~~

2023

INDEX

	~~PART I~~
		PART I		~~Page~~
~~Item 1.~~			~~Business~~Page	2
Item ~~1A.~~ 1.		Business	~~Risk Factors~~2	33
Item 1A.		Risk Factors	28
Item 1B.			Unresolved Staff Comments	40 36
Item 2.		Properties	~~Properties~~36	41
Item 3.			Legal Proceedings	41 36
Item 4.			Mine Safety Disclosures	41 36

			PART II

Item 5.			Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	42 37
Item 6.		[Reserved]	~~Selected Financial Data~~38	44
Item 7.			Management’s Discussion and Analysis of Financial Condition and Results of Operations	46 39
Item 7A.			Quantitative and Qualitative Disclosures About Market Risk	59 51
Item 8.			Financial Statements and Supplementary Data	61 52
Item 9.			Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	61 53
Item 9A.			Controls and Procedures	62 53
Item 9B.			Other Information	62 53
Item 9C.		Disclosure Regarding Foreign Jurisdictions that Prevent Inspections		53
			~~PART III~~
		PART III

Item 10.			Directors, Executive Officers and Corporate Governance	63 54
Item 11.			Executive Compensation	63 54
Item 12.			Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	63 54
Item 13.			Certain Relationships and Related Transactions, and Director Independence	64 55
Item 14.			Principal Accounting Fees and Services	64 55

			PART IV

Item 15.			Exhibits, Financial Statement Schedules	65 56
Item 16.			Form 10-K Summary	67 58

SIGNATURES

Table of Contents

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:

•

~~statements of our goals, intentions and expectations;~~

•statements of our goals, intentions and expectations;

~~statements regarding our business plans, prospects, growth and operating strategies;~~

•statements regarding our business plans, prospects, growth and operating strategies;

~~statements regarding the quality of our loan and investment portfolios; and~~

•statements regarding the quality of our loan and investment portfolios; and

~~estimates of our risks and future costs and benefits.~~

•estimates of our risks and future costs and benefits.

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:

•

~~the recent global coronavirus outbreak has and will continue to pose risks and could harm our business and results of operations;~~

•

general economic conditions, either nationally or in our market areas, that are worse than expected;

•

changes in the level and direction of ~~loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for~~ loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for credit losses;

•

our ability to access cost-effective funding;

•

fluctuations in real estate values and both residential and commercial real estate market conditions;

•

demand for loans and deposits in our market area;

•

our ability to implement changes in our business strategies;

•

competition among depository and other financial institutions;

•

inflation and changes in the interest rate environment that reduce our margins and yields, or reduce the fair value of financial instruments or reduce the origination levels in our lending business, or increase the level of defaults, losses and prepayments on loans we have made and make whether held in portfolio or sold in the secondary markets;

•

adverse changes in the securities markets;

•

changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements;

•

changes in monetary or fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board;

•

our ability to manage market risk, credit risk and operational risk in the current economic conditions;

•significant increases in our loan losses;

~~our ability to enter new markets successfully and capitalize on growth opportunities;~~

•our ability to enter new markets successfully and capitalize on growth opportunities;

our ability to successfully integrate any assets, liabilities, customers, systems and management personnel we have acquired or may acquire into our operations and our ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto;

•our ability to successfully integrate any assets, liabilities, clients, systems and management personnel we have acquired or may acquire into our operations and our ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto;

~~changes in consumer demand, borrowing and savings habits;~~

•changes in consumer demand, borrowing and savings habits;

•changes in accounting policies and practices, as may be adopted by bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission or the Public Company Accounting Oversight Board;

•our ability to retain key employees;

•technological changes;

•

changes in accounting policies and practices, as may be adopted by bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission or the Public Company Accounting Oversight Board;

Table of Contents

•cyber-attacks, computer viruses and other technological risks that may breach the security of our websites or other systems to obtain unauthorized access to confidential information and destroy data or disable our systems;

~~our ability to retain key employees;~~

•technological changes that may be more difficult or expensive than expected;

~~technological changes;~~

•the ability of third-party providers to perform their obligations to us;

~~significant increases in our loan losses;~~

•the ability of the U.S. Government to manage federal debt limits;

cyber-attacks, computer viruses and other technological risks that may breach the security of our websites or other systems to obtain unauthorized access to confidential information and destroy data or disable our systems;

•changes in the financial condition, results of operations or future prospects of issuers of securities that we own; and

~~technological changes that may be more difficult or expensive than expected;~~

•other economic, competitive, governmental, regulatory and operational factors affecting our operations, pricing products and services described elsewhere in this Annual Report on Form 10-K.

~~the ability of third-party providers to perform their obligations to us;~~

•

~~the ability of the U.S. Government to manage federal debt limits;~~

•

~~changes in the financial condition, results of operations or future prospects of issuers of securities that we own; and~~

•

~~other economic, competitive, governmental, regulatory and operational factors affecting our operations, pricing products and services described elsewhere in this Annual Report on Form 10-K.~~

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.

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:~~

June 30, 2020

Balance

LTV

(In Thousands)

Commercial mortgage loans:

Multi-family commercial mortgage loans
$
2,059,568

63%

Nonresidential commercial mortgage loans

960,853

54%

Total commercial mortgage loans

3,020,421

60%

One- to four-family residential mortgage

1,273,022

59%

Consumer loans:

Home equity loans and lines of credit

82,920

41%

Total mortgage loans
$
4,376,363

59%

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

June 30, 2020

Real-Estate Secured

Non-Real Estate Secured

Total

# of Loans

Balance

LTV

# of Loans

Balance

# of Loans

Balance

(Dollars In Thousands)

Hotel

4

$
4,421

52
%

7

$
1,566

11

$
5,987

Restaurant

15

9,529

52
%

35

3,172

50

12,701

Retail shopping center

114

297,773

54
%

2

58

116

297,831

Entertainment & recreation

4

5,211

44
%

14

784

18

5,995

Wholesale commercial business

-

-

N/A

15

20,841

15

20,841

Wholesale consumer unsecured

-

-

N/A

133

449

133

449

Total

137

$
316,934

54
%

206

$
26,870

343

$
343,804

General

~~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.

June 30, 2020

# of Loans

Balance

(In Thousands)

Commercial loans:

Multi-family mortgage loans

136

$
387,744

Nonresidential mortgage

131

237,384

Commercial business

54

10,450

Construction

1

796

Total commercial loans

322

636,374

Residential mortgage

345

141,890

Consumer loans:

Home equity loans

44

3,014

Total loans

711

$
781,278

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~~Jersey-chartered 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”,~~“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 of state and political subdivisions, corporate bonds, asset-backed securities and collateralized loan ~~obligations and subordinated debt.~~

obligations.

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,~~2023, we had 4643 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.

~~Acquisition~~

Table of ~~Clifton Bancorp Inc.~~

On 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.Contents

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.~~

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 was distributed to former MSB shareholders in exchange for their shares of MSB common stock. As a result of the merger, the Company acquired approximately $500 million in loans, assumed approximately $400 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 value of the assets acquired and liabilities assumed.

Business Strategy

~~In recent years we~~

We have evolved our business model from that of a traditional thrift ~~toward~~into that of a ~~full service~~full-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 ~~this~~our business strategy are as follows:

•

Maintain Robust Capital and Liquidity Levels

As demonstrated by the June 30, ~~2020~~2023 Tier 1 Leverage ratios of the Company and the Bank of ~~13.27%~~9.07% and ~~11.95%~~8.15%, 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,~~2023, our liquid assets included ~~$181.0~~$70.5 million of short-term cash and equivalents supplemented by ~~$1.39~~$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 ~~$615.0~~$990.0 million via unsecured ~~lines of credit~~overnight borrowings from other financial institutions and ~~$1.53~~$1.55 billion and ~~$318.7~~$415.0 million ~~without pledging additional collateral,~~ from the Federal Home Loan Bank of New York and ~~Federal Reserve Bank, respectively.~~

FRB, respectively, without pledging additional collateral.

•Continue Our Technology Transformation

~~Ensure the Adequacy of Our Allowance for Credit Losses~~

~~At this time~~

Given the ~~economic implications~~ongoing evolution of our business towards digital 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 ~~COVID-19 pandemic,~~Company including the residential and commercial lending functions, retail deposit gathering, risk management and back office operations. In fiscal 2024, we plan to accelerate our digital strategy, spearheaded by the ~~resulting impact~~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.

•Focus on Relationship Banking and Core Deposits

We focus on the acquisition and retention of core non-maturity deposit accounts and expanding customer relationships. Our philosophy is to provide superior, personalized service to our ~~asset quality, remain unclear. Notwithstanding this uncertainty~~clients. In addition, 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.~~

•

~~Grow and Diversify Our Retail Non-Maturity Deposits~~

~~We plan to continue to focus on growing and diversifying our retail~~increase core non-maturity deposit ~~base with an emphasis on growth in core~~accounts by growing business banking relationships through expanded product lines tailored to meet our target business customers’ needs. Core non-maturity ~~deposits. During fiscal 2020 we successfully grew these deposits by $646.7 million and anticipate that the balance of retail non-maturity deposits will increase in fiscal 2021 and thereafter.~~

•

~~Maintain the Balance of Our Loan Portfolio while Aiding Borrowers Impacted by COVID-19~~

We plan to maintain the balance of our portfolio of commercial and residential loans, replacing repayments and with new loan originations. Our focus, as it relates to new originations, will 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~~deposit accounts totaled $3.61 billion at ~~our disposal, including loan modifications and payment deferrals, to aid such borrowers in remaining current on their loan payments.~~

•

~~Leverage Our Residential Mortgage Banking Infrastructure~~

We plan to continue to leverage our mortgage banking infrastructure to support the origination of residential mortgage loans for sale into the secondary market. 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.

•

~~Optimize Our Branch Network~~

At June 30, ~~2020, we had a~~2023, representing 64.2% of total of 46 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, taking into consideration historical branch profitability, market demographic trajectory, geographic proximity to the consolidating branch and the expected impact on the Bank’s clients and communities served.

deposits.

•

Improve Our Operating Efficiency

In recent years, ~~the Company’s~~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 our branch ~~consolidation opportunities.~~

•

~~Continue Our Technology Transformation~~

~~In recognition of~~network. We plan to continue to evaluate and optimize the ~~ongoing evolution~~performance of our ~~business towards online channels~~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.

During the year ended June 2023, we ~~have invested significant human resources~~announced the adoption of a company-wide operating efficiency initiative that included the optimization and ~~capital towards enhancing both~~reduction of vendor spend, the automation or outsourcing of routine activities, and the realignment of our ~~internal and client-facing technology systems. Our ongoing technology transformation will impact nearly every area of~~workforce. The result was an improvement in our non-interest expense to average assets ratio to 1.53% during the ~~Company including~~year ended June 30, 2023 from 1.73% during the ~~residential and commercial lending functions, retail deposit gathering, risk management and back office operations.~~

year ended June 30, 2022.

Market Area. At June 30, ~~2020,~~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 ~~these markets~~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. ~~Our acquisition~~

Table 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.~~Contents

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~~area 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 ~~brokerage firms.~~financial technology companies.

Lending Activities

General.

~~General.~~ Our loan portfolio is comprised of multi-family mortgage loans, ~~commercial real estate loans, residential~~nonresidential mortgage loans, commercial business loans, construction loans, ~~and consumer~~one- to four-family residential mortgage loans, home equity loans and other consumer 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.


	At June 30,																												At June 30,
	2020					2019					2018					2017						2016							2023				2022
	Amount		Percent			Amount		Percent			Amount		Percent			Amount			Percent			Amount			Percent				Amount		Percent		Amount		Percent
	(Dollars In Thousands)																												(Dollars In Thousands)
Commercial loans:																												Commercial loans:
Multi-family	$	2,059,568		45.36	%	$	1,946,391		41.14	%	$	1,758,584		38.50	%	$	1,412,575			43.57	%	$	1,040,293			38.94	%
Nonresidential		960,853		21.16			1,258,869		26.61			1,302,961		28.52			1,085,064			33.46			820,673			30.72
Multi-family mortgage																												Multi-family mortgage	$	2,761,775	47.21	%	$	2,409,090	44.31	%
Nonresidential mortgage																												Nonresidential mortgage	968,574		16.56		1,019,838		18.76
Commercial business		138,788		3.06			65,763		1.39			85,825		1.88			74,471			2.30			88,207			3.30		Commercial business	146,861		2.51		176,807		3.25
Construction		20,961		0.46			13,907		0.29			23,271		0.51			3,815			0.12			2,038			0.08		Construction	226,609		3.87		140,131		2.58
One- to four-family residential mortgage loans		1,273,022		28.04			1,344,044		28.41			1,297,453		28.40			567,323			17.50			605,203			22.66
One- to four-family residential mortgage																												One- to four-family residential mortgage	1,700,559		29.07		1,645,816		30.27
Consumer loans:																							-					Consumer loans:
Home equity loans and lines of credit		82,920		1.83			96,165		2.03			90,761		1.99			82,822			2.55			89,566			3.35
Other consumer loans		3,991		0.09			5,814		0.13			9,060		0.20			16,383			0.50			25,401			0.95
Home equity loans																												Home equity loans	43,549		0.74		42,028		0.78
Other consumer																												Other consumer	2,549		0.04		2,866		0.05
Total loans		4,540,103		100.00	%		4,730,953		100.00	%		4,567,915		100.00	%		3,242,453			100.00	%		2,671,381			100.00	%	Total loans	5,850,476		100.00	%	5,436,576		100.00	%
Less:																												Less:
Allowance for loan losses		37,327					33,274					30,865					29,286						24,229
Unaccreted (unamortized) yield adjustments		41,706					52,025					66,567					(2,808	)					(2,606	)
Allowance for credit losses																												Allowance for credit losses	48,734				47,058
Unaccreted yield adjustments																												Unaccreted yield adjustments	21,055				18,731
Total adjustments		79,033					85,299					97,432					26,478						21,623					Total adjustments	69,789				65,789

Total loans, net	$	4,461,070				$	4,645,654				$	4,470,483				$	3,215,975					$	2,649,758					Total loans, net	$	5,780,687			$	5,370,787

Table of Contents

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, 2023 and 2022:


	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	%

Loan Maturity Schedule. The following table sets forth the maturities of our loan portfolio at June 30, ~~2020.~~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.

Multi-Family Mortgage

Non-
Residential
Mortgage

Commercial
Business

Construction

Residential
Mortgage

Home Equity Loans

Other
Consumer

Total

(In Thousands)

Amounts due:

Within one year
$
56,868

$
14,925

$
13,091

$
17,297

$
1,422

$
691

$
1,690

$
105,984

After one year:

1 to 3 years

116,562

170,326

82,916

3,664

10,796

3,084

393

387,741

3 to 5 years

248,034

117,551

15,060

-

17,649

3,959

57

402,310

5 to 10 years

1,410,898

421,046

20,475

-

116,108

25,002

45

1,993,574

10 to 15 years

79,691

83,553

2,644

-

111,845

29,913

26

307,672

Over 15 years

147,515

153,452

4,602

-

1,015,202

20,271

1,780

1,342,822

Total due after one year

2,002,700

945,928

125,697

3,664

1,271,600

82,229

2,301

4,434,119

Total amount due
$
2,059,568

$
960,853

$
138,788

$
20,961

$
1,273,022

$
82,920

$
3,991

$
4,540,103


	Amounts Due
	Within One Year		1 to 5 Years		5 to 15 Years		Over 15 Years		Total Due After One Year		Total
	(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

Table of Contents

The following table shows the ~~dollar amount of~~ loans as of June 30, ~~2020~~2023 due after June 30, ~~2021~~2024 according to rate type and loan category:

Fixed Rates

Floating or Adjustable Rates

Total

(In Thousands)

Commercial loans:

Multi-family
$
645,929

$
1,356,771

$
2,002,700

Nonresidential

374,550

571,378

945,928

Commercial business

94,139

31,558

125,697

Construction

-

3,664

3,664

One- to four-family residential mortgage loans

985,454

286,146

1,271,600

Consumer loans:

Home equity loans and lines of credit

66,480

15,749

82,229

Other consumer loans

772

1,529

2,301

Total loans
$
2,167,324

$
2,266,795

$
4,434,119


	Fixed 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

Multi-Family and Nonresidential Real Estate Mortgage Loans. At June 30, 2023, multi-family mortgage loans totaled $2.76 billion, or 47.2% of our loan portfolio, while nonresidential mortgage loans totaled $968.6 million, or 16.6% 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 ~~combining~~which combine residential and commercial space. We originated approximately $258.5 million of multi-family and nonresidential real estate mortgages during the year ended June 30, 2020, compared to $437.3 million during the year ended June 30, 2019. Supplementing our organic originations were purchases of whole loans and participations totaling $55.5 million during the year ended June 30, 2020, compared to $68.6 million during the year ended June 30, 2019.

We generally offer fixed-rate and adjustable-rate balloon mortgage loans on multi-family and ~~non-residential~~nonresidential properties with final stated maturities ranging from ~~five~~three to ~~fifteen~~15 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, 2023, commercial business loans totaled $146.9 million, or 2.5% of our loan portfolio. We originate commercial term loans and lines of credit to a variety of ~~professionals, sole proprietorships and businesses~~clients in our market area. 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 as loans originated through the SBA in which Kearny Bank participates as a Preferred Lender and is authorized to originate PPP loans, as discussed earlier. We originated approximately $108.5 million of commercial business loans during the year ended June 30, 2020, of which $69.7 million were originated under the SBA PPP program. By comparison, we originated 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. 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 $9.9 million or 20.3% of retail commercial business loans originated represent the retained portion of SBA loan originations, of which approximately $437,000 is guaranteed by the SBA. Such loans are generally secured by various forms of collateral, including real estate, business equipment and other forms of collateral. We may choose to sell the guaranteed portion of eligible SBA loans originated, which ranges from 50% to 90% of the loan’s outstanding balance, while retaining the nonguaranteed portion of such loans in portfolio.

Construction Lending. At June 30, 2023, construction loans totaled $226.6 million, or 3.9% of our loan portfolio. Our construction lending includes loans to individuals, builders or developers for the construction of ~~one- to four-family residences~~multi-family residential buildings or ~~for major renovations or improvements to an existing dwelling. Our construction lending also includes loans to builders and developers for~~ commercial real estate or ~~multi-family residential buildings. At June 30, 2020,~~for the construction ~~loans totaled $21.0 million.~~

~~During the year ended June 30, 2020, construction loan disbursements were $7.2 million compared~~or renovation of one- to $8.5 million during the year ended June 30, 2019. Construction loan repayments outpaced disbursements during fiscal 2019 resulting in the reported net decrease in the outstanding balance of this segment of the loan portfolio.

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 ~~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~~Residential Mortgage Loans Held in Portfolio. ~~Our portfolio lending activities include the origination of~~At June 30, 2023, one- to four-family ~~first~~residential mortgage loans ~~of which approximately $1.17~~totaled $1.70 billion, or ~~92.0%~~29.1% of our loan portfolio. At June 30, 2023, $1.58 billion, or 93.1%, ~~are~~of our one- to four-family residential mortgage loans were secured by properties located within New Jersey and New York ~~as of June 30, 2020~~ with the remaining ~~$102.0~~$117.6 million, or ~~8.0%~~6.9%, secured by properties in other states.

During the year ended June 30, 2020, we originated $197.8 million of one- to four-family first mortgage portfolio loans compared to $106.9 million in the year ended June 30, 2019. To supplement portfolio loan originations, we also purchased one- to four-family first mortgages totaling $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 a one- to four-family~~ The fixed-rate residential mortgage loans ~~on an owner-occupied property with a principal amount of up to 95%~~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 customers 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 Residential 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.~~Freddie Mac. 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 million~~$760,000 in gains associated with the sale of ~~$285.4~~$103.8 million of mortgage loans held for sale during the year ended June 30, ~~2020.~~2023. As of that date, an additional ~~$20.8~~$9.6 million of loans were held and committed for sale into the secondary market.

Home Equity ~~Loans and Lines~~Loans. At June 30, 2023, home equity loans totaled $43.5 million, or 0.7% of ~~Credit.~~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~~

Table of Contents

Other Consumer Loans. At June 30, ~~2020, we originated $16.4~~2023, other consumer loans totaled $2.5 million, or 0.04% of home equity loans and home equity lines of credit compared to $33.8 million in the year ended June 30, 2019. However, repayments of home equity loans and lines of credit generally outpaced origination volume during fiscal 2020, resulting in a net decrease in the outstanding balance of this segment of theour 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 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.

~~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, 2020 primarily include $3.4 million of loans fully secured by savings accounts or certificates of deposit held by the Bank and $607,000 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,~~2023, our legal ~~loans-to-one-borrower limit was approximately $122.5 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.

was approximately $104.3 million.

At June 30, ~~2020,~~2023, our largest single borrower had an aggregate outstanding loan ~~balance~~exposure of approximately ~~$54.0 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~~$98.9 million comprising six multi-family mortgage loans. At June 30, ~~2020, these~~2023, this lending ~~relationships were~~relationship was current and performing in accordance with the terms of their loan agreements.

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


	For the Years Ended June 30,
	2023		2022		2021
	(In Thousands)
Loan originations: (1)
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
Loans acquired from MSB (2)	—		—		530,693
Loan sales:(1)
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

For the Years Ended June 30,

2020

2019

2018

(In Thousands)

Loan originations:⁽¹⁾

Commercial loans:

Multi-family
$
193,158

$
352,208

$
358,521

Nonresidential

65,357

85,077

100,249

Commercial business

108,546

21,856

25,896

Construction

7,192

8,478

25,213

One- to four-family residential mortgage loans

197,825

106,883

52,974

Consumer loans:

Home equity loans and lines of credit

16,396

33,757

20,234

Other consumer loans

1,312

2,274

1,368

Total loan originations

589,786

610,533

584,455

Loan purchases:

Commercial loans:

Multi-family

2,500

35,000

-

Nonresidential

53,043

33,625

-

Commercial business

2,671

2,732

28,292

One- to four-family residential mortgage loans

15,048

95,454

26,298

Total loan purchases

73,262

166,811

54,590

Loans acquired from Clifton ⁽²⁾

-

-

1,116,821

Loan sales:⁽¹⁾

Multi-family

(470
)

-

-

Commercial business

-

(867
)

(2,802
)
Total loans sold

(470
)

(867
)

(2,802
)

Loan repayments

(849,249
)

(612,622
)

(497,306
)
Increase (decrease) due to other items

2,087

11,316

(1,250
)

Net increase in loan portfolio
$
(184,584
)

$
175,171

$
1,254,508

(1)~~(1)~~

Excludes origination and sales ~~of one- to four-family mortgage loans held for sale.~~

~~(2)~~

~~For information on loans acquired in the Clifton acquisition, see Note 3 to the audited consolidated financial statements.~~

Our customary sources of loan applications include loans originated by our loan officers, repeat clients, referrals from realtors and other professionals and walk-in clients. These sources are supported in varying degrees by our advertising and marketing strategies. We have also entered into purchase agreements with a number of bank and non-bank originators to supplement our loan production pipeline. These agreements call for our purchase of one- to four-family ~~first~~ mortgage loans held for sale.

(2)For information on ~~either a servicing released or servicing retained basis from~~loans acquired in the ~~seller. In addition~~MSB acquisition, see Note 3 to ~~purchasing one- to four-family loans, we have also purchased commercial mortgage and commercial business loans and participations originated by other banks and non-bank originators.~~

the audited consolidated financial statements.

Additional information about ~~the Company’s~~our loans is presented in Note 75 to the audited consolidated financial statements.

Loan Approval Procedures and Authority. Senior management recommends, and the Board of Directors approves, our lending policies and loan approval limits. The Bank’s Loan Committee consists of the Chief Executive Officer, Chief Lending Officer, Chief Credit Officer, Chief Risk Officer ~~Director~~and other members of ~~Residential Lending and Special Assets Manager. Our Chief Lending Officer may approve residential loans up~~senior management. Loans which exceed certain thresholds, as defined within our policies, are submitted to ~~$1.0 million. Our loan department personnel serving in~~ the following positions may approve loans as follows: residential mortgage loan managers, mortgage/consumer loans up to $500,000; and residential mortgage loan underwriters, mortgage loans up to $350,000. In addition to these principal amount limits, there are established limits for different levels of approval authority as to minimum credit scores and maximum loan-to-value ratios and debt-to-income ratios or debt service coverage. Our Chief Executive Officer, Chief Lending Officer, or Chief Credit Officer have authorization to approve loans for amounts up to a limit of $1.0 million. Non-conforming residential mortgage loans and loans over $1.0 million up to $2.0 million require the approval of theBank’s Loan ~~Committee.~~

~~The~~ Committee ~~may approve individual commercial loans~~ and/or ~~an aggregate commercial lending relationship up to $5.0 million. Commercial loans or aggregate relationships in excess of $5.0 million require approval by the~~ Board of Directors ~~while such approval is also required~~ for ~~residential mortgage loans in excess~~approval.

Table of ~~$2.0 million and commercial business loans in excess of $1.0 million.~~Contents

Asset Quality

Collection Procedures on Delinquent Loans. We regularly monitor the payment status of all loans within our portfolio and promptly initiate collection efforts on past due loans in accordance with applicable policies and procedures. Delinquent borrowers are notified when a loan is 30 days past due. If the delinquency continues, subsequent efforts are made to contact the delinquent borrower and additional collection notices are sent. All reasonable attempts are made to collect from borrowers prior to referral to an attorney for collection. However, when a residential loan is 120 days delinquent and a commercial loan is 90 days delinquent, it is our general practice to refer it to an attorney for repossession, foreclosure or other form of collection action, as appropriate. In certain instances, we may modify the loan or grant a limited moratorium on loan payments to enable the borrower to reorganize their financial affairs as we attempt to work with the borrower to establish a repayment schedule to cure the delinquency.

As to mortgage loans, if a foreclosure action is taken and the loan is not reinstated, paid in full or refinanced, the property is sold at judicial sale at which we may be the buyer if there are no adequate offers to satisfy the debt. Any property acquired as the result of foreclosure or by deed in lieu of foreclosure is classified as other real estate owned until it is sold or otherwise disposed of. When other real estate owned is acquired, it is recorded at its fair market value less estimated selling costs. The initial write-down of the property, if necessary, is charged to the allowance for ~~loan~~credit losses. Adjustments to the carrying value of the properties that result from subsequent declines in value are charged to operations in the period in which the declines are identified.

Past Due Loans. A loan’s past due status is generally determined based upon its principal and interest ~~payment~~ (“P&I”) payment delinquency status in conjunction with its past maturity status, where applicable. A loan’s P&I payment delinquency status is based upon the number of calendar days between the date of the earliest P&I payment due and the as of measurement date. A loan’s past maturity status, where applicable, is based upon the number of calendar days between a loan’s contractual maturity date and the as of measurement date. Based upon the larger of these criteria, loans are categorized into the following past due tiers for financial statement reporting and disclosure purposes: Current (including 1-29 days past due), 30-59 days past due, 60-89 days past due and 90 or more days past due.

Additional information about our past due loans is presented in Note 5 to the audited consolidated financial statements.

Nonaccrual Loans. Loans are generally placed on nonaccrual status when contractual payments become 90 or more days past due or when ~~the Company does~~we do not expect to receive all P&I payments owed substantially in accordance with the terms of the loan agreement, regardless of past due status. Loans that become 90 days past due but are well secured and in the process of collection, may remain on accrual status. Nonaccrual loans are generally returned to accrual status when all payments due are brought current and we expect to receive all remaining P&I payments owed substantially in accordance with the terms of the loan agreement. Payments received in cash on nonaccrual loans, including both the principal and interest portions of those payments, are generally applied to reduce the carrying value of the loan.

Purchased Credit Deteriorated Loans (“PCD”).PCD loans are acquired loans that, as of the acquisition date, have experienced a more-than-insignificant deterioration in credit quality since origination. Non-PCD loans are acquired loans that have experienced no or insignificant deterioration in credit quality since origination. To distinguish between the two types of acquired loans, we evaluate risk characteristics that have been determined to be indicators of deteriorated credit quality. The determining criteria may involve loan specific characteristics such as payment status, debt service coverage or other changes in creditworthiness since the loan was originated, while others are relevant to recent economic conditions, such as borrowers in industries impacted by the pandemic.As part of our acquisition of MSB, we acquired PCD loans with a par value of $69.4 million and an allowance for credit losses of $3.9 million. Additional information about our PCD loans is presented in Note 5 to the audited consolidated financial statements.

Table of Contents

Nonperforming Assets. The following table provides information regarding our nonperforming assets which are comprised of nonaccrual loans, accruing loans 90 days or more past due, nonaccrual loans held-for-sale and other real estate owned:


	At June 30,
	2023			2022
	(Dollars In Thousands)
Nonaccrual loans (1)	$	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		%

At June 30,

2020

2019

2018

2017

2016

(Dollars In Thousands)

Nonaccrual loans:

Commercial loans:

Multi-family
$
2,962

$
70

$
116

$
158

$
205

Nonresidential

23,936

8,900

5,340

5,720

6,588

Commercial business

592

469

1,238

2,634

1,965

Construction

-

-

-

255

357

One- to four-family residential mortgage loans

8,359

9,943

9,192

8,790

10,732

Consumer loans:

Home equity loans and lines of credit

842

866

913

1,241

1,170

Other consumer loans

-

-

-

-

-

Total nonaccrual loans⁽¹⁾

36,691

20,248

16,799

18,798

21,017

Accruing loans 90 days or more past due:

Commercial loans:

Multi-family

-

-

-

-

-

Nonresidential

-

-

-

-

-

Commercial business

-

-

-

-

-

Consumer loans:

Other consumer loans

5

22

60

74

38

Total accruing loans 90 days or more past due

5

22

60

74

38

Total nonperforming loans
$
36,696

$
20,270

$
16,859

$
18,872

$
21,055

Other real estate owned
$
178

$
-

$
725

$
1,632

$
826

Total nonperforming assets
$
36,874

$
20,270

$
17,584

$
20,504

$
21,881

Total nonperforming loans to total loans

0.82
%

0.43
%

0.37
%

0.58
%

0.79
%
Total nonperforming loans to total assets

0.54
%

0.31
%

0.26
%

0.39
%

0.47
%
Total nonperforming assets to total assets

0.55
%

0.31
%

0.27
%

0.43
%

0.49
%

~~(1)~~

~~TDRs on accrual status not included above totaled $8.4 million, $4.3 million, $3.5 million, $2.5 million and $2.9 million at June 30, 2020, 2019, 2018, 2017 and 2016, respectively.~~

~~Total nonperforming assets increased by $16.6~~(1)TDRs on accrual status not included above totaled $10.5 million ~~to $36.9~~and $8.7 million at June 30, ~~2020 from $20.3~~2023 and 2022, respectively.

Total nonperforming assets decreased by $36.7 million to $55.6 million at June 30, ~~2019. The increase was due to a net increase in nonperforming loans of $16.4~~2023 from $92.2 million ~~coupled with an increase in other real estate owned of $178,000.~~at June 30, 2022. For those same comparative periods, the number of nonperforming loans decreased to 7045 loans from ~~77 loans while there~~61 loans. There was one property in other real estate owned at June 30, ~~2020 compared to no properties~~2023 and 2022, respectively. All nonaccrual loans held-for sale at June 30, ~~2019.~~

~~As noted above, the $16.4 million increase in nonperforming loans for~~2022 were sold during the year ended June 30, 2020 was primarily attributable to a single, $14.3 million, owner-occupied commercial real estate loan which was placed on non-accrual status during the quarter ended March 31, 2020. This loan is secured by a grocery-anchored retail shopping center located in northern New Jersey and has a current loan-to-value of approximately 69%.

2023.

At June 30, ~~2020, 2019,~~2023 and ~~2018, Kearny Bank~~2022, we had loans with aggregate outstanding balances totaling ~~$21.5 million, $15.1~~$17.4 million and ~~$10.2~~$22.2 million, respectively, reported as ~~troubled debt restructurings.~~

TDRs.

Loan Review System. We maintain a loan review system consisting of several related functions including, but not limited to, classification of assets, calculation of the allowance for ~~loan~~credit losses, independent credit file review as well as internal audit and lending compliance reviews. We utilize both internal and external resources, where appropriate, to perform the various loan review ~~functions. For example, we have engaged the services~~functions, all of ~~a third party firm specializing in loan review and analysis to perform several loan review functions. The firm reviews the loan portfolio~~which operate in accordance with ~~the~~a scope and frequency determined by senior management and the Audit and Compliance Committee of the Board of Directors.

~~The third party~~

As one component of our loan review system we engage a third-party firm which specializes in loan review and analysis functions. As part of their review process, our third-party review firm compares their review results with their client base to evaluate our risk assessment among our peers. This firm assists senior management and the Board of Directors in identifying potential credit weaknesses; in reviewing and confirming risk ratings or adverse classifications internally ascribed to loans by management; in identifying relevant trends that affect the collectability of the portfolio and identifying segments of the portfolio that are potential problem areas; in verifying the appropriateness of the allowance for ~~loan~~credit losses; in evaluating the activities of lending personnel including compliance with lending policies and the quality of their loan approval, monitoring and risk assessment; and by providing an objective assessment of the overall quality of the loan portfolio. Currently, ~~independent~~third-party loan reviews are being conducted quarterly and include non-performing loans as well as samples of performing loans of varying types within our portfolio.

~~Our~~

In addition, our loan review system ~~also~~ includes ~~the~~functions performed by internal audit and compliance ~~functions, which operate in accordance with a scope determined by the Audit and Compliance Committee of the Board of Directors.~~personnel. Internal audit resources ~~assess~~perform credit review functions utilizing guidance from regulatory and Institute of Internal Auditors standards in addition to assessing the adequacy of, and adherence to, internal credit policies and loan administration ~~procedures. Similarly, our~~procedures and adherence to regulatory guidance. Our compliance resources monitor adherence to relevant lending-related and consumer protection-related laws and regulations. ~~As noted, the loan review system also comprises our policies and procedures relating to the regulatory classification~~

Table of ~~assets and the allowance for loan loss functions each of which are described in greater detail below.~~

Contents

Classification of Assets. In compliance with the regulatory guidelines, our loan review system includes an evaluation process through which certain loans exhibiting adverse credit quality characteristics are classified as Substandard, Doubtful or Loss. An asset is classified as Substandard if it is inadequately protected by the paying capacity and net worth of the obligor or the collateral pledged, if any. Substandard assets include those characterized by the distinct possibility that the insured institution will sustain some loss if the deficiencies are not corrected. Assets classified as Doubtful have all of the weaknesses inherent in those classified as Substandard, with the added characteristic that the weaknesses present make collection or liquidation in full highly questionable and improbable, on the basis of currently existing facts, conditions and values. Assets, or portions thereof, classified as Loss are considered uncollectible or of so little value that their continuance as assets is not warranted. Assets which do not currently expose us to a sufficient degree of risk to warrant an adverse classification but have some credit deficiencies or other potential weaknesses are designated as Special Mention by management. Adversely classified assets, together with those rated as Special Mention are generally referred to as Classified Assets. Non-classified assets are internally rated within one of four Pass categories or as Watch with the latter denoting a potential deficiency or concern that warrants increased oversight or tracking by management until remediated.

Additional information about our classification of assets is presented in Note 85 to the audited consolidated financial statements.

The following table discloses our designation of certain loans as special mention or adversely classified during each of the ~~five~~two years presented:


	At June 30,											At June 30,
	2020		2019		2018		2017		2016			2023		2022
	(In Thousands)											(In Thousands)
Special mention	$	9,187	$	5,681	$	592	$	2,594	$	2,528	Special mention	$	17,674	$	12,740
Substandard		46,069		27,822		28,752		29,428		33,052	Substandard	75,777		81,650
Doubtful		1		1		1		3		2	Doubtful	75		165
Total classified loans	$	55,257	$	33,504	$	29,345	$	32,025	$	35,582	Total classified loans	$	93,526	$	94,555

~~At June 30, 2020, 17~~

Individually Evaluated 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 ~~were classified~~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 ~~Special Mention~~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 ~~139 loans were classified as Substandard. As~~the amortized cost basis of ~~that same date, five loans were classified as Doubtful.~~

the loan.

Allowance for ~~Loan~~Credit Losses - Loans

On July 1, 2020, we adopted ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial 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.

A description of our methodology in establishing our allowance for credit losses is set forth in the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies - Allowance for Credit Losses.”

Additional information about our allowance for credit losses is also presented in Note 6 to the audited consolidated financial statements.

Our allowance for ~~loan~~credit losses is maintained at a level necessary to ~~absorb loan~~cover lifetime expected credit losses ~~that are both probable and reasonably estimable. The allowance for loan losses as of June 30, 2020, is maintained~~in financial assets at ~~a level that represents management’s best estimate of losses inherent in~~ the loan portfolio. Although we believe that our allowance for loans losses is established in accordance with management’s best estimate, actual losses are dependent upon future events and, as such, further additions to the level of loan loss allowances may be necessary.

~~Additional information about our allowance for loan losses is presented in Note 1 and Note 8 to the audited consolidated financial statements.~~

balance sheet date. The following table ~~sets forth information with respect to activity in the~~presents allowance for ~~loan~~credit losses ratios, along with the components of their calculation, for the periods indicated:

For the Years Ended June 30,

2020

2019

2018

2017

2016

(Dollars in Thousands)

Allowance balance (at beginning of period)
$
33,274

$
30,865

$
29,286

$
24,229

$
15,606

Provision for loan losses

4,197

3,556

2,706

5,381

10,690

Charge offs:

Multi-family

-

-

-

-

(133
)
Nonresidential

-

(54
)

(45
)

(149
)

-

Commercial business

(50
)

(861
)

(145
)

(221
)

(1,464
)
One- to four-family residential mortgage loans

-

(83
)

(521
)

(76
)

(1,213
)
Home equity loans and lines of credit

-

-

(18
)

(96
)

(93
)
Other consumer loans

(139
)

(285
)

(829
)

(849
)

(55
)
Total charge offs:

(189
)

(1,283
)

(1,558
)

(1,391
)

(2,958
)
Recoveries:

Nonresidential

10

6

-

-

-

Commercial business

2

47

90

727

760

One- to four-family residential mortgage loans

-

-

172

256

88

Home equity loans and lines of credit

-

-

65

16

41

Other consumer loans

33

83

104

68

2

Total recoveries:

45

136

431

1,067

891

Net charge offs:

(144
)

(1,147
)

(1,127
)

(324
)

(2,067
)
Allowance balance (at end of period)
$
37,327

$
33,274

$
30,865

$
29,286

$
24,229

Total loans outstanding
$
4,540,103

$
4,730,953

$
4,567,915

$
3,242,453

$
2,671,381

Average loans outstanding
$
4,568,816

$
4,669,436

$
3,577,598

$
2,955,686

$
2,512,231

Allowance for loan losses as a percent of
  total loans outstanding

0.82
%

0.70
%

0.68
%

0.90
%

0.91
%
Net loan charge-offs as a percent of
  average loans outstanding

0.00
%

0.02
%

0.03
%

0.01
%

0.08
%
Allowance for loan losses to
  non-performing loans

101.72
%

164.15
%

183.08
%

155.18
%

115.07
%


	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		%

~~Allocation~~

Table of ~~Allowance for Loan Losses.~~Contents

The following table ~~sets forth~~presents the ~~allocation~~ratio of ~~the total allowance for loan losses~~net charge-offs (recoveries) to average loans outstanding by loan category, ~~and segment and~~along with the ~~percent of loans in each category’s segment to total net loans receivable at the dates indicated. The portion~~components of the ~~loan loss allowance allocated to each loan segment does not represent~~calculation, for the ~~total available for future losses which may occur within a particular loan segment since the total loan loss allowance is a valuation reserve applicable to the entire loan portfolio.~~

periods indicated:

At June 30,

2020

2019

2018

2017

2016

Amount

Percent
of Loans
to Total
Loans

Amount

Percent
of Loans
to Total
Loans

Amount

Percent
of Loans
to Total
Loans

Amount

Percent
of Loans
to Total
Loans

Amount

Percent
of Loans
to Total
Loans

(Dollars In Thousands)

At end of period allocated to:

Commercial loans:

Multi-family
$
20,916

56.03

%

$
16,959

50.96

%

$
14,946

48.42

%

$
13,941

43.57

%

$
9,995

38.94

%
Nonresidential

8,763

23.48

9,672

29.07

9,787

31.71

9,939

33.46

7,846

30.72

Commercial business

1,926

5.16

2,467

7.41

2,552

8.27

1,709

2.30

2,784

3.30

Construction

236

0.63

136

0.41

258

0.84

35

0.12

24

0.08

One- to four-family residential
mortgage loans

4,860

13.02

3,377

10.15

2,479

8.03

2,384

17.50

2,370

22.66

Consumer loans:

Home equity loans and lines of
credit

568

1.52

491

1.48

430

1.39

501

2.55

432

3.35

Other consumer loans

58

0.16

172

0.52

413

1.34

777

0.50

778

0.95

Total
$
37,327

100.00

%

$
33,274

100.00

%

$
30,865

100.00

%

$
29,286

100.00

%

$
24,229

100.00

%


	For the Years Ended June 30,
	2023						2022						2021
	Net charge-offs (recoveries)		Average loans outstanding		Net charge- offs as a percent of average loans outstanding		Net charge-offs (recoveries)		Average loans outstanding		Net charge- offs as a percent of average loans outstanding		Net charge-offs		Average loans outstanding		Net charge- offs as a 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	%

The following table sets forth the allocation of the allowance for loan losses by loan category and segment within each valuation allowance category at the dates indicated. The valuation allowance categories presented reflect the allowance for loan loss calculation methodology in effect at the time.

At June 30,

2020

2019

2018

2017

2016

(In Thousands)

Valuation allowance for loans individually
evaluated for impairment

Commercial loans:

Nonresidential
$
41

$
-

$
-

$
39

$
53

Commercial business

47

-

227

6

400

One- to four-family residential mortgage loans

1

31

79

154

77

Consumer loans:

Home equity loans and lines of credit

-

-

-

-

78

Total valuation allowance

89

31

306

199

608

Valuation allowance for loans collectively
evaluated for impairment:

Historical loss factors

1,184

2,108

2,074

2,131

3,439

Environmental loss factors:

Commercial loans:

Multi-family

20,916

16,959

14,946

13,941

9,985

Nonresidential

8,699

9,627

9,686

9,701

7,269

Commercial business

758

653

750

731

810

Construction

236

136

258

35

24

One- to four-family residential mortgage loans

4,852

3,243

2,368

1,988

1,621

Consumer loans:

Home equity loans and lines of credit

568

482

410

401

306

Other

25

35

67

159

167

Total environmental factors

36,054

31,135

28,485

26,956

20,182

Total allowance for loan losses
$
37,327

$
33,274

$
30,865

$
29,286

$
24,229

During the year ended June 30, 2020, the balance of the allowance for loan losses (“ALLL”) increased by $4.1 million to $37.3 million at June 30, 2020 from $33.3 million, at June 30, 2019, resulting in an ALLL to total loans ratio of 0.82% and 0.70% as of those dates, respectively. The increase resulted from a loan loss provision of $4.2 million during the year ended June 30, 2020 coupled with charge-offs and net of recoveries totaling $144,000 during that same period.

The portion of the allowance for loan losses attributable to loans individually evaluated for impairment increased by $58,000 to $89,000 at June 30, 2020 from $31,000 at June 30, 2019. This balance reflected an allowance for impairment on $1.8 million of impaired loans while an additional $43.3 million of impaired loans had no allowance. By comparison, the balance at June 30, 2019 reflected an allowance for impairment on $363,000 of impaired loans while an additional $24.2 million of impaired loans had no allowance for impairment.

The portion of the allowance for loan losses attributable to loans collectively evaluated for impairment increased by $4.0 million to $37.2 million at June 30, 2020 from $33.2 million at June 30, 2019. This increase was attributable to changes in a combination of historical and environmental loss factors. With regard to historical loss factors, ourOur loan portfolio experienced an annualized net charge-off rate of ~~0.00%~~0.01% for the year ended June 30, ~~2020,~~2023, a decrease of ~~two~~six basis points from the ~~0.02%~~0.07% rate for the year ended June 30, ~~2019.~~2022.

Table of Contents

Allocation of Allowance for Credit Losses on Loans. The ~~annual average net charge off rate~~following table sets forth the allowance for ~~June 30, 2019 had previously decreased~~credit losses (“ACL”) allocated by ~~one basis point from 0.03% for~~loan category and the ~~prior year ended June 30, 2018.~~percent of loans in each category to total loans receivable at the dates indicated. The ~~effect~~ACL allocated to each category is the estimated amount considered necessary to cover lifetime expected credit losses inherent in any particular category as of the ~~net change in historical loss factors resulted in a decrease in~~balance sheet date and does not restrict the ~~applicable portion~~use of the allowance ~~attributable~~ to ~~these factors~~absorb losses in other categories.


	At June 30,
	2023				2022
	Amount		Percent of Loans to Total Loans		Amount		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	%

At June 30, 2023, the ACL totaled $48.7 million, or 0.83% of ~~approximately $924,000 to $1.2~~total loans, reflecting an increase of $1.7 million from $47.1 million, or 0.87% of total loans, at June 30, ~~2020 from $2.1~~2022. The increase was largely attributable to a provision for credit losses of $2.5 million, ~~at June 30, 2019.~~

With regard to environmental loss factors, the Company made adjustments to various factors during the year ended June 30, 2020. Most notably, the environmental factors associated with national and regional economic conditions were increased substantially in response to the economic impact of COVID-19. The net effect of these adjustments,primarily driven by loan growth, partially offset by a ~~decrease~~reduction in the ~~balance of the unimpaired portion~~expected life of the loan ~~portfolio, resulted in a $4.9 million increase in~~portfolio. Partially offsetting the ~~portion~~provision for credit losses were net charge-offs of ~~the allowance for loan losses attributable to environmental loss factors to $36.1 million~~$810,000.

The ACL at June 30, ~~2020 from $31.1 million~~2023 is maintained at ~~June 30, 2019.~~

~~An overview~~a level that is management’s best estimate of lifetime expected credit losses inherent in loans at the balances and activity within the ALLL during the prior fiscal year ended June 30, 2019 can be found in our Annual Report on Form 10-K for the year ended June 30, 2019, filed with the SEC on August 28, 2019.

balance sheet date. The ~~calculation of probable losses within a loan portfolio and the resulting ALLL~~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. ~~Future additions~~Additions to the ~~allowance for loan losses~~ACL may be necessary if ~~economic and market conditions deteriorate in~~ the future economic environment deteriorates from ~~those currently prevalent in the marketplace.~~forecasted conditions. In addition, the ~~federal~~ banking regulators, as an integral part of their examination process, periodically review our loan and foreclosed real estate portfolios, ~~and the~~ related ~~allowance for loan losses~~ACL and valuation allowance for foreclosed real estate. The regulators may require the ~~allowance for loan losses~~ACL to be increased based on their review of information available at the time of the examination, which may negatively affect our earnings. ~~Finally, changes in accounting standards promulgated by~~

Additional information about the ~~Financial Accounting Standards Board, such as those discussed~~ACL at June 30, 2023 and 2022 is presented in Note 26 to the audited consolidated financial statements regarding the use of a current expected credit loss (“CECL”) model to calculate credit losses, may require increases in the allowance for loan losses upon adoption of the applicable accounting standard. As the Company operates on a non-calendar fiscal year, as of June 30, 2020, it had not yet adopted the CECL model to calculate credit losses.

~~Additional information about the ALLL at June 30, 2020 and June 30, 2019 is presented in Note 8 to the audited consolidated financial~~ statements.

Investment Securities ~~Portfolio~~

At June 30, ~~2020,~~2023, our investment securities portfolio totaled ~~$1.42~~$1.37 billion and comprised ~~21.0%~~17.0% of our total assets. By comparison, at June 30, ~~2019,~~2022, our securities portfolio totaled ~~$1.29~~$1.46 billion and comprised ~~19.5%~~18.9% of our total assets. Additional information about ~~the Company’s~~our investment securities at ~~Jun~~June 30, ~~2020~~2023 is presented in Note 4 ~~Note 5 and Note 6~~ to the audited consolidated financial statements.

The year-over-year net ~~increase~~decrease in the securities portfolio totaled ~~approximately $127.3~~$88.2 million which largely reflected ~~security purchases during the year~~repayments and sales that were partially offset by ~~repayments, sales and calls.~~purchases. The ~~increase~~decrease in the portfolio included a ~~$20.5~~$38.1 million ~~increase~~decrease in the fair value of the available for sale securities portfolio to an unrealized ~~gain~~loss of ~~$22.5~~$156.1 million at June 30, ~~2020~~2023 from an unrealized ~~gain~~loss of ~~$2.0~~$118.0 million at June 30, ~~2019.~~

2022.

Our investment policy, which is approved by the Board of Directors, is designed to foster earnings and manage cash flows within prudent interest rate risk and credit risk ~~guidelines. Generally, our investment policy is to invest funds in various categories of securities and maturities based upon~~guidelines, taking into consideration our liquidity needs, asset/liability management ~~policies, investment quality, and marketability~~goals, and performance objectives. Our Chief Executive ~~Officer, Chief Operating~~ Officer, Chief Financial Officer, Chief Risk Officer and Treasurer/Chief Investment Officer are the senior management members of our Capital Markets Committee ~~(“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. ~~The Board of Directors is responsible for the oversight of the securities portfolio and the CMC’s activities relating thereto.~~

The investments authorized for purchase under the investment policy approved by our Board of Directors include U.S. government and agency mortgage-backed securities, U.S. government agency debentures, municipal obligations, corporate bonds, asset-backed securities, collateralized loan obligations and subordinated debt. ~~We also hold small balances~~

Table of single-issuer trust preferred securities that were acquired through bank acquisitions, but generally do not purchase such securities for the portfolio. On a short-term basis, our investment policy authorizes investment in securities purchased under agreements to resell, federal funds, and certificates of deposits of insured financial institutions.

Contents

The carrying value of our mortgage-backed securities totaled ~~$819.1~~$710.0 million at June 30, ~~2020~~2023 and comprised ~~57.8%~~51.7% of total investments and ~~12.1%~~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. Mortgage-backed securities generally yield less than the mortgage loans underlying such securities because of the costs of servicing and of their payment guarantees or credit enhancements which minimize the level of credit risk to the security holder.

The carrying value of our securities representing obligations of state and political subdivisions totaled ~~$86.6~~$16.1 million at June 30, ~~2020~~2023 and comprised ~~6.1%~~1.2% of total investments and ~~1.3%~~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.

The carrying value of our asset-backed securities totaled ~~$172.4~~$136.2 million at June 30, ~~2020~~2023 and comprised ~~12.2%~~9.9% of total investments and ~~2.6%~~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, at June 30, 2020.~~

agencies.

The outstanding balance of our collateralized loan obligations totaled ~~$193.8~~$377.0 million at June 30, ~~2020~~2023 and comprised ~~13.7%~~27.4% of total investments and ~~2.9%~~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, ~~2020,~~2023, each of our collateralized loan obligations were consistently rated by Moody’s ~~and~~and/or S&P well above the thresholds that generally support our investment grade assessment with such ratings equaling AAA by S&P ~~and~~or Aaa or by Moody’s, where rated by those agencies.

The carrying value of our corporate bonds totaled ~~$143.6~~$135.0 million at June 30, ~~2020~~2023 and comprised ~~10.1%~~9.8% of total investments and ~~2.1%~~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. ~~We generally limit our investment in the unsecured corporate debt of any single issuer to $25.0 million.~~ At June 30, ~~2020,~~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 BBB+~~BBB- or higher by S&P ~~and/~~or A3Baa3 or higher by Moody’s, where rated by those agencies.

The typical structure of the subordinated debt is a 10-year final maturity, with a fixed rate coupon for the first five years of the term, and then at a variable rate that will reset quarterly to a level equal to the then current 3-month LIBOR plus a spread over the remainder of the term. The notes are redeemable after five years subject to satisfaction of certain conditions. The securities are rated BBB- or higher by Kroll Bond Rating Agency (“Kroll”) and/or BBB- by Fitch Ratings Inc., where rated by those agencies. Of the securities rated by Kroll, two of the securities are rated BBB- or higher by S&P and Baa3 by Moody’s, where rated by those agencies. One subordinated debt security is non-rated. In each case, the indebtedness evidenced by the subordinated notes, including principal and interest, is unsecured and subordinate and junior to the issuer’s general and secured creditors and depositors.

The carrying value of our trust preferred securities totaled $2.6 million at June 30, 2020 and comprised less than one percent of total investments and total assets as of that date. This category of securities is comprised of two single-issuer trust preferred securities that were acquired as a result of merger activity. At June 30, 2020, the securities were rated by Moody’s and S&P above the thresholds that generally support our investment grade assessment, with such ratings equaling BBB- by S&P and Baa1 by Moody’s.

Current accounting standards require that debt securities be categorized as held to maturity ~~trading securities~~ or available for sale, based on management’s intent as to the ultimate disposition of each security. These standards allow debt securities to be classified as held to maturity and reported in financial statements at amortized cost only if the reporting entity has the positive intent and ability to hold these securities to maturity. Securities that might be sold in response to changes in market interest rates, changes in the security’s prepayment risk, increases in loan demand, or other similar factors cannot be classified as held to maturity.

We do not currently use or maintain a trading account. Securities not classified as held to maturity are classified as available for sale. These securities are reported at fair value and unrealized gains and losses on the securities are excluded from earnings and reported, net of deferred taxes, as adjustments to accumulated other comprehensive income (loss), a separate component of equity. ~~In April 2019, the FASB issued~~ ~~ASU 2019-04 Codification Improvements to Topic 326, Financial Instruments Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments.~~ The Company adopted ASU 2019-04 on July 1, 2019 and as part of the adoption, reclassified $537.7 million of investment securities held to maturity to investment securities available for sale. The Company did not reclassify investment securities from held to maturity to available for sale upon the original adoption of the amendments in ASU 2017-12. As of June 30, ~~2020,~~2023, our available for sale securities portfolio had a carrying value of ~~$1.39~~$1.23 billion or ~~97.7%~~89.3% of our total securities with the remaining ~~$32.6~~$146.5 million or ~~2.3%~~10.7% of securities were classified as held to maturity.

Other than securities issued or guaranteed by the U.S. government or its agencies, we did not hold securities of any one issuer having an aggregate book value in excess of 10% of our equity at June 30, ~~2020.~~2023. All of our securities carry market risk insofar as increases in market interest rates ~~of interest~~have caused, and may continue to cause, a decrease in their market value. We ~~have determined~~believe that ~~none of our~~unrealized and unrecognized losses on securities ~~with unrealized losses~~held at June 30, ~~2020~~2023, are ~~other than temporarily impaired as~~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 ~~date.~~

time.

During the year ended June 30, ~~2020,~~2023, proceeds from sales of securities available for sale totaled ~~$164.3~~$105.2 million and resulted in no gross gains ~~of $2.4 million~~ and gross losses of ~~$145,000.~~$15.2 million. During the year ended June 30, ~~2019,~~2022, proceeds from sales of securities available for sale totaled ~~$75.4~~$100.3 million and resulted in no gross gains ~~of $190,000~~ and gross losses of ~~$513,000.~~$565,000. During the year ended June 30, ~~2018,~~2021, proceeds from sales of securities available for sale totaled ~~$254.6~~$98.1 million and resulted in gross gains of $1.2 million and gross losses of ~~$31,000.~~

$470,000. There were no sales of held to maturity securities during the ~~year~~years ended June 30, ~~2020~~2023, 2022 and ~~2019. During the year ended June, 30, 2018, proceeds from sales~~2021.

Table of securities held to maturity totaled $211,000 which resulted in gross losses of $8,000. The securities sold were limited to those securities where there was evidence of a deterioration of creditworthiness.

Contents

The following table sets forth the carrying value of our securities portfolio at the dates indicated:


	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

Table of Contents

At June 30,

2020

2019

2018

2017

2016

(In Thousands)

Debt securities available for sale:

U.S. agency securities
$
-

$
3,678

$
4,411

$
5,316

$
6,440

Obligations of state and political subdivisions

54,054

26,951

26,088

27,740

28,398

Asset-backed securities

172,447

179,313

182,620

162,429

82,625

Collateralized loan obligations

193,788

208,611

226,066

98,154

127,374

Corporate bonds

143,639

122,024

147,594

142,318

137,404

Trust preferred securities

2,627

3,756

3,783

8,540

7,669

Total debt securities available for sale

566,555

544,333

590,562

444,497

389,910

Mortgage-backed securities available for sale:

Collateralized mortgage obligations

30,903

21,390

24,292

30,536

60,577

Residential pass-through securities

561,954

44,303

102,359

130,550

214,526

Commercial pass-through securities

226,291

104,237

7,872

8,177

8,524

Total mortgage-backed securities available for sale

819,148

169,930

134,523

169,263

283,627

Total securities available for sale

1,385,703

714,263

725,085

613,760

673,537

Debt securities held to maturity:

U.S. agency securities

-

-

-

35,000

84,992

Obligations of state and political subdivisions

32,556

104,086

109,483

94,713

82,179

Subordinated debt

-

63,086

46,294

15,000

-

Total debt securities held to maturity

32,556

167,172

155,777

144,713

167,171

Mortgage-backed securities held to maturity:

Collateralized mortgage obligations

-

46,381

56,886

17,854

23,081

Residential pass-through securities

-

166,283

200,622

178,813

223,632

Commercial pass-through securities

-

196,816

176,445

151,941

163,402

Total mortgage-backed securities held to maturity

-

409,480

433,953

348,608

410,115

Total securities held to maturity

32,556

576,652

589,730

493,321

577,286

Total securities
$
1,418,259

$
1,290,915

$
1,314,815

$
1,107,081

$
1,250,823

The following table sets forth certain information regarding the carrying values, weighted average yields and maturities of our securities portfolio at June 30, ~~2020.~~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, ~~2020,~~2023, securities with a carrying value of ~~$28.9~~$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 Value		Weighted Average Yield		Carrying Value		Weighted Average Yield		Carrying Value		Weighted Average Yield		Carrying Value		Weighted Average Yield		Carrying Value		Weighted Average Yield		Fair 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:

Residential pass-through securities (1)	—		—		—		—		—		—		554,317		2.29		554,317		2.29		541,581
Commercial pass-through securities (1)	—		—		—		—		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

At June 30, 2020

One Year or Less

One to Five Years

Five to Ten Years

More Than Ten Years

Total Securities

Carrying
Value

Weighted
Average
Yield

Carrying
Value

Weighted
Average
Yield

Carrying
Value

Weighted
Average
Yield

Carrying
Value

Weighted
Average
Yield

Carrying
Value

Weighted
Average
Yield

Fair Market
Value

(Dollars In Thousands)

Debt securities:

Obligations of state and political subdivisions
$
7,038

1.51

%

$
33,535

2.05

%

$
46,037

2.40

%

$
-

-

%

$
86,610

2.19

%

$
88,123

Asset-backed securities

-

-

-

-

-

-

172,447

1.28

172,447

1.28

172,447

Collateralized loan obligations

-

-

-

-

87,033

1.70

106,755

1.62

193,788

1.66

193,788

Corporate bonds

5,009

2.53

69,670

1.27

68,960

5.11

-

-

143,639

3.16

143,639

Trust preferred securities

-

-

-

-

2,627

1.40

-

-

2,627

1.40

2,627

Mortgage-backed securities:

Collateralized mortgage obligations ⁽¹⁾

-

-

2,431

1.57

-

-

28,472

2.49

30,903

2.42

30,903

Residential pass-through securities ⁽¹⁾

3

4.53

16,337

1.66

14,837

1.91

530,777

2.70

561,954

2.65

561,954

Commercial pass-through securities ⁽¹⁾

-

-

79,167

2.33

2,337

3.19

144,787

3.29

226,291

2.95

226,291

Total securities
$
12,050

1.93

%

$
201,140

1.85

%

$
221,831

2.93

%

$
983,238

2.41

%

$
1,418,259

2.41

%

$
1,419,772

(1)Government-sponsored enterprises.

Table of Contents

Sources of Funds

General.

~~General.~~ Retail deposits are our primary source of funds for lending and other investment purposes. In addition, we derive funds from principal repayments of loan and investment securities. Loan and securities payments are a relatively stable source of funds, while deposit inflows are significantly influenced by general interest rates and money market conditions. Wholesale funding sources including, but not limited to, borrowings from the ~~FHLB~~Federal Home Loan Bank of New York (“FHLB”), wholesale deposits and other ~~short term-borrowings~~short-term borrowings are also used to supplement the funding for loans and investments.

Deposits. Our current deposit products include interest-bearing and non-interest-bearing checking accounts, money market deposit accounts, savings accounts and certificates of deposit accounts ranging in terms from 30 days to five years. Certificates of deposit with terms ranging from six months to five years are available for individual retirement account plans. Deposit account terms, such as interest rate earned, applicability of certain fees and service charges and funds accessibility, will vary based upon several factors including, but not limited to, minimum balance, term to maturity, and transaction frequency and form requirements.

Deposits are obtained primarily from within New Jersey and New York through the Bank’s network of retail branches, business relationship officers, treasury management officers and digital banking channels. We maintain a robust suite of commercial deposit products designed to appeal to small and mid-size businesses, non-profit organizations and ~~non-profit organizations.~~government entities. Our team of experienced and dedicated business relationship officers serve as the primary points of contact for these commercial clients and act as both new business originators and relationship managers.

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.

The determination of interest rates on retail deposits is based upon a number of factors, including: (1) our need for funds based on loan demand, current maturities of deposits and other cash flow needs; (2) a current survey of a selected group of competitors’ rates for similar products; (3) our current cost of funds, yield on assets and asset/liability position; and (4) the alternate cost of funds on a wholesale basis. Interest rates are reviewed by senior management on a regular basis, with deposit product and pricing updated, as appropriate, during recurring and ad-hoc senior management meetings.

~~A portion of our deposits are in certificates of deposit whose balances declined to 41.5% of total deposits at June 30, 2020 from 53.2% of total deposits at June 30, 2019.~~

Our liquidity could be reduced if a significant amount of certificates of deposit maturing within a short period were not renewed. At June 30, ~~2020~~2023 and ~~June 30, 2019,~~2022, certificates of deposit maturing within one year were ~~$1.52~~$1.90 billion and ~~$1.49~~$1.47 billion, respectively. Historically, a significant portion of the certificates of deposit remain with us after they mature.

At June 30, ~~2020, $1.01~~2023, $1.42 billion or ~~55.2%~~70.6% of our certificates of deposit were certificates of $100,000 or more compared to ~~$1.32~~$1.33 billion or ~~59.8%~~70.2% at June 30, ~~2019.~~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.

Our sources of wholesale funding included brokered certificates of deposit and listing service certificates of deposit whose balances totaled approximately $635.3 million and $5.2 million, or 11.3% and 0.1% of total deposits, respectively, at June 30, 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.

Table of Contents

The following table sets forth the distribution of average deposits for the periods indicated and the weighted average nominal interest rates for each period on each category of deposits presented:


	For the Years Ended June 30,																									For the Years Ended June 30,
	2020								2019								2018									2023						2022						2021
	Average Balance		Percent of Total Deposits			Weighted Average Nominal Rate			Average Balance		Percent of Total Deposits			Weighted Average Nominal Rate			Average Balance		Percent of Total Deposits			Weighted Average Nominal Rate				Average Balance		Percent of Total Deposits		Weighted Average Nominal Rate		Average Balance		Percent of Total Deposits		Weighted Average Nominal Rate		Average Balance		Percent of Total Deposits		Weighted Average Nominal Rate
	(Dollars In Thousands)																									(Dollars In Thousands)
Non-interest-bearing deposits	$	334,522		7.89	%		-	%	$	312,169		7.68	%		-	%	$	281,262		8.67	%		-	%	Non-interest-bearing deposits	$	644,543	10.79	%	—	%	$	624,666	11.37	%	—	%	$	518,149	9.88	%	—	%
Interest-bearing demand		1,041,188		24.56			1.10			796,815		19.60			1.02			896,695		27.64			0.82		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		831,832		19.62			0.81			761,203		18.73			0.55			569,777		17.56			0.17		Savings	896,651		15.00		0.37		1,088,971		19.83		0.11		1,066,794		20.35		0.31
Certificates of deposit		2,032,046		47.93			2.00			2,194,513		53.99			1.83			1,496,743		46.13			1.42		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 deposits	$	4,239,588		100.00	%		1.39	%	$	4,064,700		100.00	%		1.29	%	$	3,244,477		100.00	%		0.91	%
Total average deposits																									Total average deposits	$	5,974,860	100.00	%	1.31	%	$	5,492,113	100.00	%	0.28	%	$	5,243,020	100.00	%	0.60	%

~~The following table sets forth certificates~~

As of ~~deposit classified by interest rate as of~~June 30, 2023 and 2022, the ~~dates indicated:~~

At June 30,

2020

2019

2018

(In Thousands)

Interest Rate

0.00 - 0.99%
$
326,413

$
66,109

$
185,765

1.00 - 1.99%

822,846

604,162

1,272,580

2.00 - 2.99%

663,182

1,506,221

552,459

3.00 - 3.99%

27,955

27,965

5,834

Total certificates of deposit
$
1,840,396

$
2,204,457

$
2,016,638

~~The following table shows the~~aggregate amount of certificates of deposit of ~~$100,000 or more by~~$250,000 and over was $883.7 million and $897.4 million, respectively. The following table presents the time remaining until maturity of those certificates of deposit as of ~~the dates indicated:~~

June 30, 2023:

CDs over 100,000:
At June 30,

2020

2019

2018

(In Thousands)

Maturity Period

Within three months
$
278,157

$
300,464

$
134,479

Three through six months

262,561

363,801

115,748

Six through twelve months

307,769

243,061

370,853

Over twelve months

166,508

410,220

528,709

Total certificates of deposit
$
1,014,995

$
1,317,546

$
1,149,789


	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

The following table sets forth the amount and maturities of certificates of deposit at June 30, ~~2020:~~

2023:


	At June 30, 2020															At June 30, 2023
	Within One Year		Over One Year to Two Years		Over Two Years to Three Years		Over Three Years to Four Years		Over Four Years to Five Years		Over Five Years		Total			Within One Year		Over One Year to Two Years		Over Two Years to Three Years		Over Three Years to Four Years		Over Four Years to Five Years		Over Five Years		Total
	(In Thousands)															(In Thousands)
Interest Rate															Interest Rate
0.00 - 0.99%	$	290,497	$	28,520	$	4,818	$	1	$	2,507	$	70	$	326,413	0.00 - 0.99%	$	180,989	$	45,910	$	22,381	$	13,389	$	7,497	$	—	$	270,166
1.00 - 1.99%		668,233		108,073		17,734		10,661		17,912		233		822,846	1.00 - 1.99%	54,015		11,217		445		234		93		—		66,004
2.00 - 2.99%		534,043		34,321		62,251		15,857		16,710		-		663,182	2.00 - 2.99%	615,122		13,885		329		152		—		86		629,574
3.00 - 3.99%		22,269		-		-		-		-		5,686		27,955	3.00 - 3.99%	339,860		241		—		—		—		5,496		345,597
4.00 - 4.99%															4.00 - 4.99%	503,628		64		—		—		—		—		503,692
5.00 - 5.99%															5.00 - 5.99%	202,518		—		—		—		—		—		202,518

Total certificates of deposit	$	1,515,042	$	170,914	$	84,803	$	26,519	$	37,129	$	5,989	$	1,840,396	Total certificates of deposit	$	1,896,132	$	71,317	$	23,155	$	13,775	$	7,590	$	5,582	$	2,017,551

Additional information about ~~the Company’s~~our deposits is presented in Note 1210 to the audited consolidated financial statements.

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Borrowings. The sources of wholesale funding we utilize include borrowings in the form of advances from the FHLB as well as other forms of borrowings. We generally use wholesale funding to manage our exposure to interest rate risk and liquidity risk in conjunction with our overall asset/liability management process.

Advances from the FHLB are typically secured by our FHLB capital stock and certain investment securities as well as residential and ~~multi-family~~commercial mortgage loans that we choose to utilize as collateral for such borrowings. Additional information about ~~the Company’s~~our FHLB advances is included under Note 1311 to the audited consolidated financial statements.

~~Short‑term FHLB advances generally have original maturities of less than one year and may also include overnight borrowings.~~

At June 30, ~~2020,~~2023, we had ~~a total $865.0 million~~$1.28 billion of ~~short-term~~ FHLB advances outstanding, excluding a net fair value adjustment of $688,000, at a weighted average interest rate of ~~0.45%~~4.92%. Such advances represented 90-day FHLB term advances that are generally forecasted to be periodically redrawn at maturity for the same term as the original advance. Based on this presumption, we utilized interest rate swaps to effectively extend the duration of each of these advances at the time they were drawn to effectively fix their cost for periods of up to seven years.

~~Long-term advances generally include term advances with original maturities of greater than one year.~~ At June 30, ~~2020, our outstanding balance~~2022, we had $652.5 million of ~~long-term~~ FHLB advances ~~totaled $304.5~~outstanding, excluding a net fair value adjustment of $1.2 million, at a weighted average interest rate of ~~2.87%~~2.17%. ~~Such advances included $145.0 million of callable advances at a weighted average interest rate of 3.04% and $159.5 million non-callable, term advances at a weighted average interest rate of 2.71%.~~

Our FHLB advances mature as follows:


	At June 30,										At June 30,
	2020			2019			2018				2023		2022
	(In Thousands)										(In Thousands)
By remaining period to maturity:										By remaining period to maturity:
Less than one year	$	865,000		$	873,400		$	741,000		Less than one year	$	972,500	$	520,000
One to two years		27,000			64,046			48,400		One to two years	103,500		22,500
Two to three years		145,000			62,700			64,160		Two to three years	6,500		103,500
Three to four years		22,500			155,000			35,700		Three to four years	—		6,500
Four to five years		103,500			22,500			155,000		Four to five years	200,000		—
Greater than five years		6,500			110,000			132,500		Greater than five years	—		—
Total advances		1,169,500			1,287,646			1,176,760		Total advances	1,282,500		652,500
Fair value adjustments		(2,071	)		(4,435	)		(6,616	)	Fair value adjustments	(688)		(1,163)
Total advances, net of fair value adjustments	$	1,167,429		$	1,283,211		$	1,170,144		Total advances, net of fair value adjustments	$	1,281,812	$	651,337

At June 30, 2023, we utilized interest rate contracts to effectively extend the duration and fix the cost of our FHLB advances maturing in less than one year.

Based upon the market value of investment securities and mortgage loans that are posted as collateral for FHLB advances at June 30, ~~2020,~~2023, we are eligible to borrow up to an additional ~~$1.53~~$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.

In addition, ~~the Company~~we had the capacity to borrow additional funds totaling ~~$615.0~~$990.0 million via unsecured ~~lines of credit~~overnight borrowings from other financial institutions and ~~$318.7~~$415.0 million from the ~~Federal Reserve Bank~~FRB without pledging additional collateral.

The balance of borrowings at June 30, ~~2020 also~~2023 included overnight line of credit borrowings infrom the ~~form of depositor sweep accounts~~FHLB totaling ~~$5.7~~$125.0 million and unsecured overnight borrowings from other financial institutions totaling $100.0 million.

Interest Rate Derivatives and Hedging

We utilize derivative instruments in the form of interest rate swaps, caps and ~~caps~~floors 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 ~~documents~~document the strategy for undertaking the hedge transactions and its method of assessing ongoing effectiveness.

At June 30, ~~2020,~~2023, our derivative instruments were comprised of interest rate swaps, caps and ~~caps~~a floor with a total notional amount of ~~$1.32~~$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, ~~2020.~~

2023.

Additional information regarding our use of interest rate derivatives and our hedging activities is presented in Note 1 and Note 1412 to the audited consolidated financial statements.

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Subsidiary Activity

At June 30, ~~2020,~~2023, Kearny Bank was the only wholly-owned operating subsidiary of Kearny Financial Corp. As of that date, Kearny Bank had two wholly-owned ~~subsidiaries:~~subsidiaries, CJB Investment Corp. and ~~KFS Insurance Services, Inc.~~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, ~~2020. KFS Insurance Services, Inc.~~2023. 189-245 Berdan Avenue LLC was ~~created for~~formed during the ~~primary purpose of acquiring insurance agencies and was considered inactive through the three-year period~~year ended June 30, ~~2020.~~

~~Personnel~~

2023 for the purpose of ownership and operation of commercial real estate.

Human Capital Resources

Kearny Bank subscribes 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 Company succeeds when our employees and customers succeed and therefore strive to create a diverse and inclusive environment where employees can thrive and where customers want to bank. We recognize the unique contributions each individual brings to our Company, and we are committed to growing our culture of diversity, equity and inclusion as a foundation for our values and success.

To further establish our commitment to diversity, in the fourth quarter of fiscal year 2023 we appointed an individual to the role of Senior Vice President, Director of Diversity, Equity and Inclusion. Beginning in fiscal year 2024, the Director of Diversity, Equity and Inclusion will work as the intermediary between the business lines and management to promote diversity in various aspects of the Company’s business. Additionally, this year we launched the Kearny Bank ChangeMakers program to provide networking and workshop opportunities focusing on women-owned businesses in our communities.

Employee Profile.As of June 30, ~~2020,~~2023, we ~~had 494 full‑time~~employed 556 employees, approximately 62% of whom are female. We continue our partnership with a diversity recruitment solution to broaden and ~~58 part‑time employees equating to a total of 523 full-time equivalent employees. As of June 30, 2019, we had 524 full‑time employees~~enhance our overall diversity recruitment efforts.

Talent Development and ~~41 part‑time employees equating to a total of 545 full-time equivalent employees. None~~Employee Engagement. We invest in the success and the personal and professional development of our employees ~~are covered~~ by providing employees with career advancement opportunities. We look to promote from within to leverage employee talent and knowledge of the organization. Additionally, we offer many educational and learning initiatives to enhance our employees’ professional growth, including support for certifications and licenses, as well as offering a ~~collective bargaining agreement~~robust tuition reimbursement program. We offer a Career Mentoring Program, which offers employees an opportunity to interact and ~~we consider our relationship~~collaborate with our senior leaders. We continue to build on the Company’s Diversity and Inclusion Action Plan which was established in 2018 and created our Diversity, Equity and Inclusion Committee. The Diversity and Inclusion Action Plan focuses on expanding 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 ~~be good. As~~exchange ideas and support programs across the Company.

Employee Benefits. We offer our employees competitive compensation 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.

Health and Wellness. We are committed to providing programs that support the needs of ~~July 31, 2020 and in conjunction with~~ our ~~acquisition of MSB, we retained an additional 22 full-time~~ employees and ~~six part-time employees thereby increasing our number~~their families and provide access to a variety of ~~full-time equivalent employees by 21 as~~health and wellness programs, including benefits that support their physical, mental and financial wellbeing. Additionally, the Company operates in a hybrid work environment, where applicable, one which promotes a work-life balance and allows for certain flexibility while maintaining productivity and efficiency.

Table of ~~that date.~~

~~REGULATION~~

~~General~~

Contents

Supervision and Regulation

Kearny Bank and Kearny Financial operate in a highly regulated industry. This regulation establishes a comprehensive framework of activities in which a savings and loan holding company and New Jersey savings bank may engage and is intended primarily for the protection of the deposit insurance fund and depositors. Set forth below is a brief description of certain laws that relate to the regulation of Kearny Bank and Kearny Financial. The description does not purport to be complete and is qualified in its entirety by reference to applicable laws and regulations.

Regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the imposition of restrictions on the operation of an institution and its holding company, the classification of assets by the institution and the adequacy of an institution’s allowance for ~~loan~~credit losses. Any change in such regulation and oversight, whether in the form of regulatory policy, regulations, or legislation, including changes in the regulations governing savings and loan holding companies, could have a material adverse impact on Kearny Financial, Kearny Bank and their operations. The adoption of regulations or the enactment of laws that restrict the operations of Kearny Bank and/or Kearny Financial or impose burdensome requirements upon one or both of them could reduce their profitability and could impair the value of Kearny Bank’s franchise, resulting in negative effects on the trading price of our common stock.

Regulation of Kearny Bank

~~Kearny Bank was formerly a federal savings bank. On June 29, 2017, it converted its charter to that of a nonmember New Jersey savings bank regulated by the NJDBI and the FDIC.~~

General. As a nonmember New Jersey savings bank with ~~deposits~~federally insured ~~by the FDIC,~~deposits, Kearny Bank is subject to extensive ~~regulation.~~regulation by the NJDBI and the FDIC. The regulatory structure gives the regulatory agencies ~~authority’s~~ widespread discretion in connection with their supervisory and enforcement activities and examination policies, including policies regarding the classification of assets and the level of the allowance for ~~loan~~credit losses. The activities of New Jersey savings banks are subject to extensive regulation including restrictions or requirements with respect to loans to one borrower, dividends, permissible investments and lending activities, liquidity, transactions with affiliates and community reinvestment. ~~New Jersey savings banks are also subject to reserve requirements imposed by the Federal Reserve Board.~~ Both state and federal law regulate a savings bank’s relationship with its depositors and borrowers, especially in such matters as the ownership of savings accounts and the form and content of Kearny Bank’s mortgage documents.

Kearny Bank must file reports with the NJDBI and FDIC concerning its activities and financial condition and obtain regulatory approvals prior to entering into certain transactions such as establishing new branches and mergers with or acquisitions of other ~~financial~~depository institutions. The NJDBI and FDIC regularly examine Kearny Bank and prepare reports to Kearny Bank’s Board of Directors on any deficiencies ~~if any,~~ found in its operations. The agencies have substantial discretion to take enforcement action with respect to an institution that fails to comply with applicable regulatory requirements or engages in violations of law or unsafe and unsound practices. Such actions can include, among others, the issuance of a cease and desist order, assessment of civil money penalties, removal of officers and directors and the appointment of a receiver or conservator.

Activities and Powers. Kearny Bank derives its lending, investment and other powers primarily from the applicable provisions of the New Jersey Banking Act and the related regulations. Under these laws and regulations, New Jersey savings banks, including Kearny Bank, generally may invest in real estate mortgages; consumer and commercial loans; specific types of debt securities, including certain corporate debt securities and obligations of federal, state and local governments and agencies; certain types of corporate equity securities and ~~certain~~ other specified assets.

A savings bank may also invest pursuant to a leeway power that permits investments not otherwise permitted by the New Jersey Banking Act. Leeway investments must comply with a number of limitations on ~~the~~ individual and aggregate amounts of ~~leeway~~ investments. New Jersey savings banks may also exercise those powers, rights, benefits or privileges authorized for national banks, federal savings banks or federal savings associations, or ~~their subsidiaries.~~either directly or through a subsidiary. New Jersey savings banks may exercise powers, rights, benefits and privileges of out-of-state banks, savings banks and savings associations, or ~~their subsidiaries,~~either directly or through a subsidiary, provided that prior approval by the NJDBI is required before exercising any such power, right, benefit or privilege. The exercise of these lending, investment and activity powers is further limited by federal law and the related regulations. See “—Activity Restrictions on State-Chartered Banks” below.

Activity Restrictions on State-Chartered Banks. Federal law and FDIC regulations generally limit the activities as principal and equity investments of state-chartered FDIC insured banks and their subsidiaries to those permissible for national banks and their subsidiaries, ~~unless~~except such activities and investments that are specifically exempted by law or regulation, or approved by the FDIC.

Table of Contents

Before engaging as principal in a new activity that is not permissible for a national bank, or otherwise permissible under federal law or FDIC regulations, an insured bank must seek approval from the FDIC, subject to certain specified exceptions. The FDIC will not approve the activity unless the bank meets its minimum capital requirements and the FDIC determines that the activity does not present a significant risk to the FDIC’s Deposit Insurance Fund. Certain activities of subsidiaries that are engaged in activities permitted for national banks only through a financial subsidiary are subject to additional ~~restrictions. Equity investments by state banks are generally limited to those permissible for national banks subject to certain exceptions.~~

requirements.

Federal Deposit Insurance. Kearny Bank’s deposits are insured to applicable limits by the FDIC. The general maximum deposit insurance amount is $250,000 per depositor.

The FDIC assesses insured depository institutions to maintain the Deposit Insurance ~~Fund.~~Fund (“DIF”). Under the FDIC’s risk-based assessment system, institutions deemed less risky pay lower assessments. Assessments for institutions of less than $10 billion of assets, such as Kearny Bank, are ~~now~~ based on financial measures and supervisory ratings derived from statistical modeling estimating the probability of ~~failure of~~ an institution’s failure within three years. ~~That system, effective July 1, 2016, replaced the previous system under which institutions were placed into risk categories.~~

~~Federal legislation required the FDIC to revise its procedures to base assessments upon each insured institution’s total assets less tangible equity instead of deposits.~~ The ~~FDIC finalized a rule, effective April 1, 2011, that set the~~ assessment range ~~at 2.5 to 45 basis points of total assets less tangible equity. In conjunction with the Deposit Insurance Fund’s reserve ratio achieving 1.15%, the assessment range was reduced~~ for insured institutions of less than $10 billion of total assets is 1.5 to ~~1.5~~30 basis points of total assets less tangible equity.

Assessment rates for institutions of Kearny Bank’s size ranged from 1.5 to 30 basis points effective ~~July 1, 2016.~~

Federal legislation increased the minimum target Deposit Insurance Fund ratio from 1.15% of estimated insured deposits to 1.35% of estimated insured deposits. The FDIC was required to achieve the 1.35% ratio by September 30, 2020. The law requires insured institutions with assets of $10 billion or more to fund the increase from 1.15% to 1.35% and, effective July 1, 2016, such institutions were subjected to a surcharge to achieve that goal. The 1.35% ratio was reached effective September 30, 2018. As a result, the surcharges ceased and institutions with less than $10 billion of assets received credits for assessment payments made that contributed to achieving the 1.35% ratio. The legislation eliminated the 1.5% maximum fund ratio, instead leaving it to the discretion of the FDIC, and the FDIC has exercised that discretion by establishing a long-range fund ratio of 2.0%.

In addition to the FDIC assessments, the Financing Corporation (“FICO”) was authorized to impose and collect assessments for anticipated payments, issuance costs and custodial fees on bonds issued by the FICO in the 1980s to recapitalize the former Federal Savings and Loan Insurance Corporation. The final FICO bonds matured in 2019 and the FICO assessments have ended.

through December 31, 2022. The FDIC has authority to increase insurance ~~assessments. Any significant increases would have an adverse effect on~~assessments 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 results~~first quarterly assessment period of ~~operations~~2023. 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.~~

Bank’s size ranged from 2.5 to 32 basis points.

Insurance of deposits may be terminated by the FDIC upon a finding that an institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC. We do not currently know of any practice, condition or violation that may lead to termination of our deposit insurance.

Regulatory Capital Requirements. FDIC regulations require nonmember banks to meet several minimum capital standards: a common equity Tier 1 capital to risk-based assets ratio of 4.5%, a Tier 1 capital to risk-based assets ratio of 6.0%, a total capital to risk-based assets of 8%, and a 4% Tier 1 capital to total assets leverage ratio. The ~~present capital requirements were effective January 1, 2015 and represent increased standards over the previous requirements. The~~ current requirements implement recommendations of the Basel Committee on Banking Supervision and certain requirements of federal law.

~~The~~

For purposes of the regulatory capital standards, ~~require the maintenance of~~ common ~~equity Tier 1 capital, Tier 1 capital and total capital to risk-weighted assets of at least 4.5%, 6% and 8%, respectively, and a leverage ratio of at least 4% Tier 1 capital. Common~~ equity Tier 1 capital is generally defined as common stockholders’ equity and retained earnings. Tier 1 capital is generally defined as common equity Tier 1 and additional Tier 1 capital. Additional Tier 1 capital includes certain noncumulative perpetual preferred stock and related surplus and minority interests in equity accounts of consolidated subsidiaries. Total capital includes Tier 1 capital (common equity Tier 1 capital plus additional Tier 1 capital) and Tier 2 capital. Tier 2 capital is comprised of capital instruments and related surplus, meeting specified requirements, and may include cumulative preferred stock and long-term perpetual preferred stock, mandatory convertible securities, intermediate preferred stock and subordinated debt.

Also included in Tier 2 capital is the allowance for ~~loan and lease~~credit losses limited to a maximum of 1.25% of risk-weighted assets and, for institutions that have exercised an opt-out election regarding the treatment of Accumulated Other Comprehensive Income, up to 45% of net unrealized gains on available-for-sale equity securities with readily determinable fair market values. Calculation of all types of regulatory capital is subject to deductions and adjustments specified in the regulations.

At June 30, 2023, Kearny Bank has exercised the opt-out election regarding the treatment of Accumulated Other Comprehensive Income.

In determining the amount of risk-weighted assets for purposes of calculating risk-based capital ratios, all assets, including certain off-balance sheet assets, are multiplied by a risk weight factor assigned by the regulations based on the risks believed inherent in the type of asset. Higher levels of capital are required for asset categories believed to present greater risk. For example, a risk weight of 0% is assigned to cash and U.S. government securities, a risk weight of 50% is generally assigned to prudently underwritten first lien one- to four-family residential mortgages, a risk weight of 100% is assigned to commercial and consumer loans, a risk weight of 150% is assigned to certain past due loans and a risk weight of between 0% to 600% is assigned to equity interests depending on certain specified factors.

In addition to establishing the minimum regulatory capital requirements, the regulations limit capital distributions and certain discretionary bonus payments to management if the institution does not hold a capital conservation buffer consisting of 2.5% of common equity Tier 1 capital to risk-weighted assets above the amount necessary to meet its minimum risk-based capital requirements. ~~The~~At June 30, 2023, Kearny Bank exceeded all regulatory capital ~~conservation buffer requirement was phased in beginning January 1, 2016 at 0.625%~~requirements.

Table of ~~risk-weighted assets and increasing each year until fully implemented at 2.5% on January 1, 2019.~~

Contents

In assessing an institution’s capital adequacy, the FDIC takes into consideration, not only these numeric factors, but also qualitative ~~factors as well, and~~factors. The FDIC has the authority to establish higher capital requirements for individual institutions where deemed necessary. ~~The Economic Growth, Regulatory Relief,~~

Depository institutions and ~~Consumer Protection Act enacted in May 2018 requires the federal banking agencies, including the FDIC, to establish for banks with assets of~~depository institution holding companies that have less than $10 billion ofin total consolidated assets aand meet other qualifying criteria may elect to use the optional community bank leverage ratio ~~(the~~framework, which requires maintaining a leverage ratio of ~~a bank’s tangible equity capital~~greater than 9%, to ~~average total consolidated assets) of 8 to 10%. A qualifying community bank with capital meeting~~satisfy the specified requirements (including off balance sheet exposures of 25% or less of total assets and trading assets and liabilities of 5% or less of total assets) and electing to follow the alternative framework is considered to meet all applicable regulatory capital requirements, including the risk-based requirements. ~~The community bank leverage ratio was established at 9% Tier 1 capital to total average assets, effective January 1, 2020.~~ A qualifying ~~bank~~institution may opt in and out of the community bank leverage ratio framework on its quarterly call report. ~~A bank that ceases to meet any qualifying criteria is provided with a two-quarter grace period to comply with~~Kearny Bank did not opt into the community bank leverage ratio ~~requirements or the general capital regulations~~framework as of June 30, 2023.

Regulations issued by the ~~federal regulators.~~

Section 4012 of the Coronavirus Aid, Relief and Economic Security Act of 2020 required that the community bank leverage ratio be temporarily lowered to 8%. The federal regulators issued a rule making the lower ratio effective April 23, 2020. The rules also established a two-quarter grace periodNJDBI establish generally similar regulatory capital standards for ~~a qualifying community bank whose leverage ratio falls below the 8% community bank leverage ratio requirement so long~~New Jersey-chartered savings banks such as the bank maintains a leverage ratio of 7% or greater. Another rule was issued to transition back to the 9% community bank leverage ratio, increasing the ratio to 8.5% for calendar year 2021 and to 9% thereafter.

Kearny Bank.

Prompt Corrective Regulatory Action. Federal law requires that federal bank regulatory authorities take prompt corrective action with respect to institutions that do not meet minimum capital requirements. For these purposes, the law establishes five capital categories: ~~well~~“well capitalized, ~~adequately~~” “adequately capitalized, ~~undercapitalized, significantly undercapitalized~~” “undercapitalized,” “significantly undercapitalized” and ~~critically~~“critically undercapitalized.”

The FDIC has adopted regulations to implement the prompt corrective action legislation. ~~The regulations were amended to incorporate the previously mentioned increased regulatory capital standards that were effective January 1, 2015.~~ An institution is deemed to be well capitalized if it has a total risk-based capital ratio of 10.0% or greater, a Tier 1 risk-based capital ratio of 8.0% or greater, a leverage ratio of 5.0% or greater and a common equity Tier 1 ratio of 6.5% or greater. An institution is adequately capitalized if it has a total risk-based capital ratio of 8.0% or greater, a Tier 1 risk-based capital ratio of 6.0% or greater, a leverage ratio of 4.0% or greater and a common equity Tier 1 ratio of 4.5% or greater.

An institution is undercapitalized if it has a total risk-based capital ratio of less than 8.0%, a Tier 1 risk-based capital ratio of less than 6.0%, a leverage ratio of less than 4.0% or a common equity Tier 1 ratio of less than 4.5%.

An institution is ~~deemed to be~~categorized as significantly undercapitalized if it has a total risk-based capital ratio of less than 6.0%, a Tier 1 risk-based capital ratio of less than 4.0%, a leverage ratio of less than 3.0% or a common equity Tier 1 ratio of less than 3.0%. AnCritically undercapitalized status is triggered if an institution ~~is considered to be critically undercapitalized if it~~ has a ratio of tangible equity (as defined in the regulations) to total assets that is equal to or less than 2.0%. ~~The previously referenced 2018 legislation provides that qualifying~~Qualifying banks that elect and comply with the community bank leverage ratio (as established by the regulatory agencies) isare considered well-capitalized under the prompt corrective action regulations.

Undercapitalized banks must adhere to growth, capital distribution (including dividend) and other limitations and are required to submit a capital restoration plan. A bank’s compliance with such a plan must be guaranteed by any company that controls the undercapitalized institution in an amount equal to the lesser of 5% of the institution’s total assets when deemed undercapitalized or the amount necessary to achieve the status of adequately ~~capitalized.~~capitalized status. If an undercapitalized bank fails to submit an acceptable plan, it is treated as if it is significantly undercapitalized. Significantly undercapitalized banks must comply with one or more of a number of additional measures including, but not limited to, a required sale of sufficient voting stock to become adequately capitalized, a requirement to reduce total assets, cessation of taking deposits from correspondent banks, the dismissal of directors or officers and restrictions on interest rates paid on deposits, compensation of executive officers and capital distributions by the parent holding company. Critically undercapitalized institutions are subject to additional measures including, subject to a narrow exception, the appointment of a receiver or conservator within 270 days after ~~it obtains~~ such ~~status.~~status is triggered. These actions are in addition to other discretionary supervisory or enforcement actions that the FDIC may take.

As of June 30, 2023, Kearny Bank was well capitalized.

Dividend Limitations. Federal regulations impose various restrictions or requirements on Kearny Bank to pay dividends to Kearny Financial. An institution that is a subsidiary of a savings and loan holding company, such as Kearny Bank, must file notice with the Federal Reserve Board at least thirty days before paying a dividend. The Federal Reserve Board may disapprove a notice if: (i) the savings institution would be undercapitalized following the capital distribution; (ii) the proposed capital distribution raises safety and soundness concerns; or (iii) the capital distribution would violate a prohibition contained in any statute, regulation, enforcement action or agreement or condition imposed in connection with an application.

New Jersey law specifies that no dividend may be paid if the dividend would impair the capital stock of the savings bank. In addition, no dividend may be paid unless the savings bank would, after payment of the dividend, have a surplus of at least 50% of its capital stock (or if the payment of dividend would not reduce surplus).

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Transactions with Related Parties. Transactions between a ~~savings~~depository institution (and, generally, its subsidiaries) and its related parties or affiliates are limited by Sections 23A and 23B of the Federal Reserve Act. An affiliate of an institution is any company or entity that controls, is controlled by or is under common control with the institution. In a holding company context, the parent holding company and any companies ~~which~~that are controlled by such parent holding company are affiliates of the institution. Generally, Section 23A of the Federal Reserve Act limits the extent to which the institution or its subsidiaries may engage in covered transactions with any one affiliate to 10% of such institution’s capital stock and surplus and contain an aggregate limit on all such transactions with all affiliates to an amount equal to 20% of such institution’s capital stock and surplus. The term ~~covered transaction~~“covered transaction” includes an extension of credit, purchase of assets, issuance of a guarantee or letter of credit and similar transactions. In addition, loans or other extensions of credit by the institution to the affiliate are required to be collateralized in accordance with specified requirements.

The law also requires that affiliate transactions generally be on terms and conditions that are substantially the same as, or at least as favorable to the institution as, those provided to non-affiliates.

Kearny Bank’s authority to extend credit to its directors, executive officers and 10% stockholders, as well as to entities controlled by such persons, is ~~currently~~ governed by the requirements of Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O of the Federal Reserve Board. Among other things, ~~and~~ subject to certain exceptions, these provisions generally require that extensions of credit to insiders:

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be made on terms that are substantially the same as, and follow credit underwriting procedures that are not less stringent than, those prevailing for comparable transactions with unaffiliated persons and that do not involve more than the normal risk of repayment or present other unfavorable features; and

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not to exceed certain limitations on the amount of credit extended to such persons, individually and in the aggregate, which limits are based, in part, on the amount of Kearny Bank’s regulatory capital.

In addition, extensions of credit in excess of certain limits must be approved by Kearny Bank’s Board of Directors. Extensions of credit to executive officers are subject to additional limits based on the type of extension involved.

Community Reinvestment Act. Under the Community Reinvestment Act (the “CRA”), every insured depository institution, including Kearny Bank, has a continuing and affirmative obligation consistent with its safe and sound operation to help meet the credit needs of its entire community, including low and moderate income neighborhoods. The CRA does not establish specific lending requirements or programs for financial institutions nor does it limit an institution’s discretion to develop the types of products and services that it believes are best suited to its particular community. The CRA requires the FDIC to assess the depository institution’s record of meeting the credit needs of its community and to consider ~~such~~that record in its ~~evaluation~~consideration of certain applications by ~~such~~the institution, such as for a merger or the establishment of a branch ~~office by Kearny Bank.~~office. The FDIC may use an unsatisfactory CRA examination rating as the basis for ~~the denial of~~denying such an application. Kearny Bank received a satisfactory CRA rating from ~~its primary federal regulator,~~ the FDIC in its most recent CRA ~~examination.~~evaluation.

On May 5, 2022, the FDIC, the Federal Reserve Board and the Office of the Comptroller of the Currency released a notice of proposed rulemaking to “strengthen and modernize” the CRA regulations and the related regulatory framework.

Commercial Real Estate Lending Concentrations. 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:

•Total reported loans for construction, land development and other land represent 100% or more of the bank’s capital; or

•Total commercial real estate loans (as defined in the guidance) represent 300% or more of the bank’s total capital or the outstanding balance of the bank’s commercial real estate loan portfolio has increased 50% or more during the prior 36 months.

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The guidance provides that the strength of an institution’s lending and risk management practices with respect to such concentrations will be taken into account in supervisory guidance on evaluation of capital adequacy.

Federal Home Loan Bank System. Kearny Bank is a member of the FHLB of New York, which is one of eleven regional Federal Home Loan Banks. Each FHLB serves as a reserve or central bank for its members within its assigned region. It is funded primarily from funds deposited by financial institutions and proceeds derived from the sale of consolidated obligations of the FHLB System. It makes loans to members pursuant to policies and procedures established by the Board of Directors of the FHLB.

As a member, Kearny Bank is required to purchase and maintain stock in the FHLB of New York in specified amounts. The FHLB imposes various limitations on advances such as limiting the amount of certain types of real estate related collateral and limiting total advances to a member.

The FHLB of New York may pay periodic dividends to members. These dividends are affected by factors such as the FHLB’s operating results and statutory responsibilities that may be imposed such as providing certain funding for affordable housing and interest subsidies on advances targeted for low- and moderate-income housing projects. The payment ~~of such~~ dividends, or any particular amount of dividend, cannot be assumed.

Other Laws and Regulations

Interest and other charges collected or contracted for by Kearny Bank are subject to state usury laws and federal laws concerning interest rates. Kearny Bank’s operations are also subject to federal laws (and their implementing regulations) applicable to credit transactions, such as the:

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~~Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers;~~

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Real Estate Settlement Procedures Act, requiring that borrowers for mortgage loans for one- to four-family residential real estate receive various disclosures, including good faith estimates of settlement costs, lender servicing and escrow account practices, and prohibiting certain practices that increase the cost of settlement services;

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Home Mortgage Disclosure Act, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves;

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~~Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit;~~

•Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers;

~~Fair Credit Reporting Act, governing the use and provision of information to credit reporting agencies;~~

•Real Estate Settlement Procedures Act, requiring that borrowers for mortgage loans for one- to four-family residential real estate receive various disclosures, including good faith estimates of settlement costs, lender servicing and escrow account practices, and prohibiting certain practices that increase the cost of settlement services;

~~Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies; and~~

•Home Mortgage Disclosure Act, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves;

~~Truth in Savings Act, prescribing disclosure and advertising requirements with respect to deposit accounts.~~

•Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit;

•Fair Credit Reporting Act, governing the use and provision of information to credit reporting agencies;

•Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies; and

•Truth in Savings Act, prescribing disclosure and advertising requirements with respect to deposit accounts.

The operations of Kearny Bank also are subject to the:

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Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records;

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Electronic Funds Transfer Act, and Regulation E promulgated thereunder, governing automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services;

•Check Clearing for the 21st•

~~Check Clearing for the 21~~^st Century Act (also known as “Check 21”), which gives substitute checks, such as digital check images and copies made from that image, the same legal standing as the original paper check;

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USA PATRIOT Act, which requires institutions operating to, among other things, establish broadened anti-money laundering compliance programs, due diligence policies and controls to ensure the detection and reporting of money laundering. Such required compliance programs are intended to supplement existing compliance requirements, also applicable to financial institutions, under the Bank Secrecy Act and the Office of Foreign Assets Control regulations; and

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Gramm-Leach-Bliley Act, which places limitations on the sharing of consumer financial information by financial institutions with unaffiliated third parties. Specifically, the Gramm-Leach-Bliley Act requires all financial institutions offering financial products or services to retail customers to provide such customers with the financial institution’s privacy policy and provide such customers the opportunity to opt out of the sharing of certain personal financial information with unaffiliated third parties.

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•Gramm-Leach-Bliley Act, which places limitations on the sharing of consumer financial information by financial institutions with unaffiliated third parties. Specifically, the Gramm-Leach-Bliley Act requires all financial institutions offering financial products or services to retail customers to provide such customers with the financial institution’s privacy policy and provide such customers the opportunity to opt out of the sharing of certain personal financial information with unaffiliated third parties.

•Banking organizations are required to notify their primary federal regulator as soon as possible and no later than 36 hours of determining that a “computer-security incident” that arises to the level of a “notification incident” has occurred. A notification incident is a “computer-security incident” that has materially disrupted or degraded, or is reasonably likely to materially disrupt or degrade, the banking organization’s ability to deliver services to a material portion of its customer base, jeopardize the viability of key operations of the banking organization, or impact the stability of the financial sector. Bank service providers are also required to notify any affected bank to or on behalf of which the service provider provides services “as soon as possible” after determining that it has experienced an incident that materially disrupts or degrades, or is reasonably likely to materially disrupt or degrade, covered services provided to such bank for four or more hours.

Regulation of Kearny Financial

General. Kearny Financial is a savings and loan holding company within the meaning of federal law. Kearny Financial maintained its savings and loan holding company status (rather than becoming a bank holding company), notwithstanding the June 2017 conversion of Kearny Bank to a New Jersey savings bank charter, bythrough Kearny Bank exercising an election available to it under federal law. Kearny ~~Bank~~Financial is required to file reports with, and is subject to regulation and examination by, the Federal Reserve Board. Kearny Financial must also obtain regulatory approval from the Federal Reserve Board before engaging in certain transactions, such as mergers with or acquisitions of other ~~financial~~depository institutions.

In addition, the Federal Reserve Board has enforcement authority over Kearny Financial and any non-depository subsidiaries. ~~This~~That permits the Federal Reserve Board to restrict or prohibit activities that are determined to pose a serious risk to Kearny Bank. This ~~regulation~~regulatory structure is intended primarily for ~~the~~ protection of ~~the~~Kearny Bank’s depositors and not for the benefit of stockholders of Kearny Financial.

The Federal Reserve Board has indicated that, to the greatest extent possible taking into account any unique characteristics of savings and loan holding companies and the requirements of federal law, its approach is to apply to savings and loan holding companies ~~its~~the supervisory ~~approach~~principles applicable to the supervision of bank holding companies. The stated objective of the Federal Reserve Board is to ensure the savings and loan holding company and its non-depository subsidiaries are effectively supervised, can serve as a source of strength for and do not threaten the safety and soundness of, the subsidiary depository ~~institutions.~~

institution.

Nonbanking Activities. As a savings and loan holding company, Kearny Financial ~~Corp.~~ is permitted to engage in those activities permissible under federal law for financial holding companies (if certain criteria are met and an election is submitted) and for multiple savings and loan holding companies. A financial holding company may engage in activities that are financial in nature, including underwriting equity securities and insurance, as well as activities that are incidental to financial activities or complementary to a financial activity. A multiple savings and loan holding company is generally limited to activities permissible for bank holding companies under Section 4(c)(8) of the Bank Holding Company Act and certain additional activities authorized by federal regulations, subject to the approval of the Federal Reserve Board.

Mergers and Acquisitions. Kearny Financial must generally obtain approval from the Federal Reserve Board before acquiring, directly or indirectly, more than 5% of the voting stock of another savings institution or savings and loan holding company or acquiring such an institution or holding company by merger, consolidation, or purchase of its assets. Federal law also prohibits a savings and loan holding company from acquiring more than 5% of a company engaged in activities other than those authorized for savings and loan holding companies by federal law or acquiring or retaining control of a depository institution that is not insured by the FDIC. In evaluating an application for Kearny Financial to acquire control of a savings institution, the Federal Reserve Board considers factors such as the financial and managerial resources and future prospects of Kearny Financial and the target institution, the effect of the acquisition on the risk to the deposit insurance fund, the convenience and the needs of the community served and competitive factors. A merger of another depository institution into Kearny Bank requires the prior approval of the NJDBI and FDIC, based on similar considerations.

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Consolidated Capital Requirements. Savings and loan holding companies had historically not been subjected to consolidated regulatory capital requirements. Federal legislation, however, required the Federal Reserve Board to promulgate consolidated capital requirements for bank and savings and loan holding companies that are no less stringent, both quantitatively and in terms of components of capital, than those applicable to their subsidiary depository institutions. Instruments such as cumulative preferred stock and trust-preferred securities, which were previously includable as Tier 1 capital (within limit) by bank holding companies, were no longer includable as Tier 1 capital, subject to certain grandfathering. The previously discussed final rule regarding regulatory capital requirements implemented the legislative directives as to holding company capital requirements. Currently, consolidatedConsolidated regulatory capital requirements identical to those applicable to the subsidiary depository institutions (including the community bank leverage ratio alternative) apply to savings and loan holding companies with $3 billion or more of consolidated assets, including Kearny Financial. Kearny Financial was in compliance with the holding company capital requirements and the capital conservation buffer as of June 30, 2023.

Source of Strength Doctrine; Dividends. Federal law extended the source of strength doctrine, which has long applied to bank holding companies, to savings and loan holding companies. The Federal Reserve Board has promulgated regulations implementing the source of strength policy, which requires holding companies to act as a source of strength to their subsidiary depository institutions by providing capital, liquidity and other support in times of financial distress. Further, the Federal Reserve Board has issued a policy statement regarding the payment of dividends by bank holding companies that it has also applied to savings and loan holding companies. In general, the policy provides that dividends should be paid only out of current earnings and only if the prospective rate of earnings retention by the holding company appears consistent with the organization’s capital needs, asset quality and overall financial condition. Regulatory guidance provides for prior consultation with Federal Reserve supervisory staff as to dividends in certain circumstances, such as ~~where~~when the dividend is not covered by earnings for the period for which it is being paid, when net income for the past four quarters, net of dividends previously paid over that period, is insufficient to fully fund the dividend or when the ~~overall~~prospective rate of earnings retention by the holding company is inconsistent with its capital needs and overall financial condition. The ability of a holding company to pay dividends may be restricted if a subsidiary depository institution becomes undercapitalized. In addition, a subsidiary institution of a savings and loan holding company must file prior notice with the Federal Reserve Board, and receive its non-objection, before paying ~~dividends~~a dividend to the parent savings and loan holding company. Federal Reserve Board guidance also provides for regulatory review of certain stock redemption and repurchase proposals by holding companies. These regulatory policies could affect the ability of Kearny Financial to pay dividends, engage in stock redemptions or repurchases or otherwise engage in capital distributions.

Qualified Thrift Lender Test. In order for Kearny Financial to be regulated by the Federal Reserve Board as a savings and loan holding company (rather than as a bank holding company), Kearny Bank must remain a qualified thrift lender under applicable law or satisfy the domestic building and loan association test under the Internal Revenue Code. Under the qualified thrift lender test, an institution is generally required to maintain at least 65% of its portfolio assets (total assets less: (i) specified liquid assets up to 20% of total assets; (ii) intangible assets, including goodwill; and (iii) the value of property used to conduct business) in certain qualified thrift investments (primarily residential mortgages and related investments, including certain mortgage-backed and related securities) in at least nine months out of each 12 month period. As of June 30, 2023, Kearny Bank met the qualified thrift lender test.

Acquisition of Control. Under the federal Change in Bank Control Act, a notice must be submitted to the Federal Reserve Board if any person (including a company), or group acting in concert, seeks to acquire control of a savings and loan holding company. An acquisition of control can occur upon the acquisition of 10% or more of a class of voting stock of a savings and loan holding company or as otherwise defined by the Federal Reserve Board. Under the Change in Bank Control Act, the Federal Reserve Board has 60 days from the filing of a complete notice to act, taking into consideration certain factors, including the financial ~~and managerial resources~~condition of the acquirer, and future prospects of the ~~anti‑trust~~proposed acquirer, the competence and integrity of the proposed acquirer and the effects of the ~~acquisition.~~acquisition on competition. Any company that ~~so acquires control is~~seeks to acquire “control” of Kearny Financial or Kearny Bank, within the meaning of the Savings and Loan Holding Company Act, must file an application, and receive the Federal Reserve Board’s prior approval under that statute. The Company would then be subject to regulation as a savings and loan holding company.

The prior approval of the NJDBI would also be necessary for the acquisition of 25% of a class of the Company’s voting stock, or ~~control~~“control” as otherwise defined under New Jersey law.

Incentive Compensation

. 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.

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Item 1A. Risk Factors

An investment in our securities is subject to risks inherent in our business and the industry in which we operate. Before making an investment decision, you should carefully consider the risks and uncertainties described below and all other information included in this Annual Report on Form 10-K. The risks described below may adversely affect our business, financial condition and operating results. In addition to these risks and any other risks or uncertainties described in “Item 1. Business—Forward-Looking Statements” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” there may be additional risks and uncertainties that are not currently known to us or that we currently deem to be immaterial that could materially and adversely affect our business, financial condition or operating results. The value or market price of our securities could decline due to any of these identified or other risks. Past financial performance may not be a reliable indicator of future performance, and historical trends should not be used to anticipate results or trends in future periods.

~~The COVID-19 pandemic has,~~

Economic and ~~will continue to, pose risks to~~Market Area

Changes in economic conditions, in particular an economic slowdown in the markets we operate in, could materially and negatively affect our business.

Our business is directly impacted by factors such as economic, political and market conditions, broad trends in industry and finance, legislative and regulatory changes, changes in government monetary and fiscal policies and inflation, all of which are beyond our control. Any deterioration in economic conditions, whether caused by national or local concerns, in particular any further economic slowdown in the markets we operate in, could result in the following consequences, any of which could hurt our business materially: loan delinquencies may increase; problem assets and foreclosures may increase; demand for our products and services may decrease; low cost or non-interest bearing deposits may decrease; and collateral for loans made by us, especially real estate, may decline in value, in turn reducing customers’ borrowing power, and reducing the value of assets and collateral associated with our existing loans.

Our success significantly depends upon the growth in population, income levels, deposits, and housing starts in our markets. If the communities in which we operate do not grow or if prevailing economic conditions locally or nationally are unfavorable, our business may not succeed. An economic downturn or prolonged recession may result in the deterioration of the quality of our loan portfolio and reduce our level of deposits, which in turn would hurt its business. If we experience an economic downturn or a prolonged economic recession occurs in the economy as a whole, borrowers will be less likely to repay their loans as scheduled. Unlike many larger institutions, we are not able to spread the risks of unfavorable local economic conditions across a large number of diversified economies. An economic downturn could, therefore, result in losses that materially and adversely affect our business.

Inflationary pressures and rising prices may affect our results of operations and financial condition.

Inflation rose sharply at the ~~future prospects~~end of 2021 and has remained at an elevated level through 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 ~~Company.~~

~~The COVID-19 pandemic is having an~~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.

Our stock price may be negatively impacted by unrelated bank failures and negative depositor confidence in depository institutions. Further, if we were unable to adequately manage our 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 ~~impact~~effect on our financial condition and results of operations.

On March 9, 2023, Silvergate Bank, La Jolla, California, announced its decision to voluntarily liquidate its assets and wind down operations. On March 10, 2023, Silicon Valley Bank, Santa Clara, California, was closed by the California 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.

These events have led to a greater focus by institutions, investors and regulators on the ~~Company,~~on-balance sheet liquidity of and funding sources for financial institutions, the composition of its ~~customers~~deposits, including the amount of uninsured deposits, the amount of accumulated other comprehensive loss, capital levels and ~~the communities~~interest rate risk management.

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If we are unable to adequately manage our liquidity, deposits, capital levels and interest rate risk, it ~~serves. Given its ongoing~~may have a material adverse effect on our financial condition and ~~dynamic nature, it is difficult~~results of operations. We must maintain sufficient funds to ~~predict the full impact of the COVID-19 outbreak on the business of the Company, its customers, employees and third-party service providers.~~The extent of such impact will depend on future developments, which are highly uncertain, including when the coronavirus can be controlled and abated and when and how the economy may be reopened in an efficient manner. Additionally, the responses of various governmental and nongovernmental authorities to curtail business and consumer activities in an effort to mitigate the pandemic will have material long-term effects on the Company and its customers which are difficult to quantify in the near-term or long-term.

~~As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, the Company is subject~~respond to the ~~following risks,~~needs of depositors and borrowers. Deposits have traditionally been our primary source of funds for use in lending and investment activities. We also receive funds from loan repayments, investment maturities and income on other interest-earning assets. While we emphasize the generation of low-cost core deposits as a source of funding, there is strong competition for such deposits in our market area. Additionally, deposit balances can decrease if customers perceive alternative investments as providing a better risk/return tradeoff. Accordingly, as a part of our liquidity management, we must use a number of funding sources in addition to deposits and repayments and maturities of loans and investments, which may include Federal Home Loan Bank of New York advances, federal funds purchased and brokered certificates of deposit. Adverse operating results or changes in industry conditions could lead to difficulty or an inability to access these additional funding sources.

Any decline in available funding could adversely impact our ability to originate loans, invest in securities, pay our expenses, or fulfill obligations such as repaying our borrowings or meeting deposit withdrawal demands, any of which could have a material adverse ~~effect~~impact on ~~the~~our liquidity, business, financial condition ~~liquidity,~~ and results of ~~operations~~operations.

A lack of liquidity could also attract increased regulatory scrutiny and potential restraints imposed on us by regulators. Depending on the capitalization status and regulatory treatment of depository institutions, including whether an institution is subject to a supervisory prompt corrective action directive, certain additional regulatory restrictions and prohibitions may apply, including restrictions on growth, restrictions on interest rates paid on deposits, restrictions or prohibitions on payment of dividends and restrictions on the acceptance of brokered deposits.

Our financial flexibility would be severely constrained if we were unable to maintain our access to funding or if adequate financing were not available at acceptable interest rates. Further, if we were required to rely more heavily on more expensive funding sources to support liquidity, our revenues may not increase proportionately to cover our increased costs. In this case, our operating margins and profitability would be adversely affected. If alternative funding sources were no longer available to us, we may need to sell a portion of our investment and/or loan portfolio to raise funds, which, depending upon market conditions, could result in us realizing a loss on the sale of such assets. As of June 30, 2023, we had a net unrealized loss of $156.1 million on our available-for-sale investment securities portfolio as a result of the ~~Company~~:

rising interest rate environment. Our investment securities totaled $1.37 billion, or 17.0% of total assets, at June 30, 2023. The details of this portfolio are included in Note 4 to the consolidated financial statements.

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~~risks to the capital markets that may impact~~Severe weather could harm our business.

Weather-related events, including those that may result from climate change, can disrupt our operations, result in damage to our properties, reduce or destroy the value ~~or performance of the Company’s investment securities portfolio, as well as limit our access to the capital markets and wholesale funding sources;~~

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~~effects on key employees, including operational or management personnel and those charged withpreparing, monitoring and evaluating the companies’ financial reporting and internal controls;~~

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declines in demand for loans and other banking services and products, as well as a decline in the credit quality of our loan portfolio, owing to the effects of COVID-19 in the markets served by the Company;

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~~collateral for loans, especially real estate, may continue to decline in value, which could cause loan losses to increase;~~

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~~the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments;~~

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~~the allowance for credit losses may increase if borrowers experience financial difficulties, which will adversely affect net income;~~

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if the economy is unable to substantially reopen or reopen in an efficient manner, and high levels of unemployment continue for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased loan losses and reduced interest income;

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in certain states in which we do business temporary bans on evictions and foreclosures have been enacted through executive orders, and may continue indefinitely, resulting in our inability to take timely possession of real estate assets collateralizing loans, which may increase our loan losses;

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as the result of the decline in the Federal Reserve Board’s target federal funds rate to near 0%, the yield on assets may decline to a greater extent than the decline in cost of interest-bearing liabilities, reducing net interest margin and spread and reducing net income;

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~~cyber security risks are increased as the result of an increase in the number of employees working remotely and an increase in the number of our clients banking electronically;~~

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~~declines in demand resulting from adverse impacts of the disease on businesses deemed to be “non-essential”~~ by ~~governments in the markets served by the Company;and~~

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~~increasing or protracted volatility in the price of the Company’s commonstock, which may also impair our goodwill or other intangible assets.~~

As a participating lender in the SBA Paycheck Protection Program (“PPP”), we are subject to additional risks of litigation from our customers or other parties regarding our processing of loans for the PPP which could have a significant adverse impact on our business, financial position, results of operations, and prospects.

~~The COVID-19 pandemic and its impact on the economy have led to actions including the enactment~~ of the ~~Coronavirus Aid, Relief~~collateral for our loans and ~~Economic Security Act, including~~negatively affect the establishment of the PPP administered by the Small Business Administration (“SBA”). Under the PPP, small businesses and other entities and individuals can apply for loans from existing SBA lenders and other approved regulated lenders that enrolllocal economies in the program, subject to numerous limitations and eligibility criteria. We are participating as a lender in the PPP. Since the initiation of the PPP, several banks have been subject to litigation or threatened litigation regarding the process and procedures that such banks used in processing applications for the PPP. We may be exposed to the risk of litigation, from both clients and non-clients that approached us regarding PPP loans. If any such litigation is filed or threatened against us and is not resolved in a manner favorable to us, it may result in significant cost or adversely affect our reputation. Any financial liability, litigation costs or reputational damage caused by PPP-related litigationwhich we operate, which could have a material adverse ~~impact~~effect on our ~~business, financial position,~~ results of operations and ~~prospects.~~

financial condition. The occurrence of a natural disaster could result in one or more of the following: (i) an increase in loan delinquencies; (ii) an increase in problem assets and foreclosures; (iii) a decrease in the demand for our products and services; or (iv) a decrease in the value of the collateral for loans, especially real estate, in turn reducing clients’ borrowing power, the value of assets associated with problem loans and collateral coverage. Weather-related events may cause significant flooding and other storm-related damage and these outcomes may become more common in the future.

Acts of terrorism, public health issues, and geopolitical and other external events could impact our ability to conduct business.

Financial institutions have been, and continue to be, targets of terrorist threats aimed at compromising operating and communication systems. Additionally, the metropolitan New York area and northern New Jersey remain central targets for potential acts of terrorism. Such events could cause significant damage, impact the stability of our facilities and result in additional expenses, impair the ability of our borrowers to repay their loans, reduce the value of collateral securing repayment of our loans, and result in the loss of revenue. While we have established and regularly test disaster recovery procedures, the occurrence of any such event could have a material adverse effect on our business, operations and financial condition.

Additionally, global markets may be adversely affected by the emergence of widespread health emergencies or pandemics, cyber attacks or campaigns, military conflicts, terrorism or other geopolitical events, including the military conflict between Russia and Ukraine. The impact of global market fluctuations may affect our business liquidity. Also, any sudden or prolonged market downturn in the U.S. or abroad as a result of the above factors or otherwise could result in a decline in revenues and adversely affect our results of operations and financial condition, including capital and liquidity levels.

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Our inability to achieve profitability on new branches may negatively affect our earnings.

We have expanded our presence throughout our market area and we intend to pursue further expansion through de novo branching or the purchase of branches from other financial institutions. The profitability of our expansion strategy will depend on whether the income that we generate from the new branches will offset the increased expenses resulting from operating these branches. We expect that it may take a period of time before these branches can become profitable, especially in areas in which we do not have an established presence. During this period, the expense of operating these branches may negatively affect our net income.

We face intense competition from other financial services and financial services technology companies, and competitive pressures could adversely affect our business or financial performance.

We face intense competition in all of its markets and geographic regions. We expect competitive pressures to intensify in the future, especially in light of legislative and regulatory initiatives arising out of the recent global economic crisis, technological innovations that alter the barriers to entry, current economic and market conditions, and government monetary and fiscal policies. Competition with financial services technology companies, or technology companies partnering with financial services companies, may be particularly intense, due to, among other things, differing regulatory environments. Competitive pressures may drive us to take actions that we might otherwise eschew, such as lowering the interest rates or fees on loans or raising the interest rates on deposits in order to keep or attract high-quality clients. These pressures also may accelerate actions that we might otherwise elect to defer, such as substantial investments in technology or infrastructure. The actions that we take in response to competition may adversely affect its results of operations and financial condition. These consequences could be exacerbated if we are not successful in introducing new products and other services, achieving market acceptance of its products and other services, developing and maintaining a strong client base, or prudently managing expenses.

Asset Quality and Interest Rate

Changes in interest rates or the shape of the yield curve may adversely affect our profitability and financial condition.

We derive our income mainly from the difference or spread between the interest earned on loans, securities and other interest-earning assets and interest paid on deposits, borrowings and other interest-bearing liabilities. In general, the larger the spread, the more we earn. When market rates of interest change, the interest we receive on our assets and the interest we pay on our liabilities will fluctuate. This can cause decreases in our spread and can adversely affect our income. ~~From an interest rate risk perspective, we have generally been liability sensitive, which indicates that liabilities re-price faster than assets.~~

~~From December 2015~~

Beginning in March 2022, in response to ~~December 2018,~~rising inflation, the Federal Reserve Board’s Federal Open Market Committee systemically increased ~~its federal funds rate target from a range of 0.00% - 0.25% to a range of 2.25% - 2.50%. However, beginning July 2019, the Committee began lowering~~ the target rate ~~in response to a slowing economy and in March 2020 quickly lowered the target rate back to 0.00~~from 0.00% – 0.25% to 5.25% – 5.50% 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. Such actions had the immediate effect of steepening the yield curve and then to flatten it asJuly 2023. In addition, at June 30, 2023, short-term rates were meaningfully lower than long-term rates, fell shortly thereafter. The Company’s cost of deposits and short-term borrowings have dropped while long-term rates on loans and investments have also dropped, but not at the same pace. As a result of the flattening of thewhich results in an inverted yield ~~curve our~~curve. Our net interest spread and net interest margin are at risk of being reduced due to potential ~~decreases~~increases in our cost of funds that may outpace any increases in our yield on ~~interest-earning assets which may outpace the decreases in our cost of funds.~~

interest-earnings assets.

Interest rates also affect how much money we lend. For example, when interest rates rise, the cost of borrowing increases and loan originations tend to decrease. In addition, changes in interest rates can affect the average life of loans and securities. For example, ~~a reduction~~an increase in interest rates generally results in ~~increased~~decreased prepayments of loans and mortgage-backed securities, as borrowers are less likely to refinance their debt in order to reduce their borrowing cost. This causes reinvestment risk, because we generally are not able to reinvest prepayments at rates that are comparable to the rates we earned on the prepaid loans or securities in a declining rate environment.

debt. Changes in market interest rates also impact the value of our interest-earning assets and interest-bearing liabilities as well as the value of our derivatives portfolios. In particular, the unrealized gains and losses on securities available for sale and changes in the fair value of interest rate derivatives serving as cash flows hedges are reported, net of tax, in accumulated other comprehensive income which is a component of stockholders’ equity. Consequently, declines in the fair value of these instruments resulting from changes in market interest rates have, and may continue to, adversely affect stockholders’ equity.

If our allowance for ~~loan~~credit losses is not sufficient to cover actual loan losses, our earnings will decrease.

We make various assumptions and judgments about the collectability of our loan portfolio, including the creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for the repayment of many of our loans. In determining the required amount of the allowance for ~~loan~~credit losses, we evaluate ~~certain~~ loans individually and establish ~~loan~~credit loss allowances for specifically identified impairments. For ~~all non-impaired~~ loans ~~including those~~ not individually ~~reviewed,~~analyzed, we estimate losses and establish ~~loan loss allowances~~reserves based ~~upon historical~~on reasonable and ~~environmental loss~~supportable forecasts and adjustments for qualitative factors. If the assumptions used in our calculation methodology are incorrect, our allowance for ~~loan~~credit losses may not be sufficient to cover losses inherent in our loan portfolio, resulting in further additions to our allowance. Our allowance for ~~loan~~credit losses on loans was ~~0.82%~~0.83% of total loans at June 30, ~~2020~~2023 and significant additions to our allowance could materially decrease our net income.

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In addition, bank regulators periodically review our allowance for ~~loan~~credit losses and may require us to increase our provision for ~~loan~~credit losses or recognize further loan charge-offs. Any increase in our allowance for ~~loan~~credit losses or loan charge-offs as required by these regulatory authorities might have a material adverse effect on our financial condition and results of operations.

Our acquisitions, including our recent acquisition of MSB, and the integration of acquired businesses, subject us to various risks and may not result in all of the cost savings and benefits anticipated, which could adversely affect our financial condition or results of operations.

We have in the past, and may in the future, seek to grow our business by acquiring other businesses. In July 2020, we completed our acquisition of MSB, and its wholly owned subsidiary, Millington Bank. There is risk that our acquisitions may not have the anticipated positive results, including results relating to: correctly assessing the asset quality of the assets being acquired; the total cost and time required to complete the integration successfully; being able to profitably deploy funds acquired in an acquisition; or the overall performance of the combined entity.

Acquisitions may also result in business disruptions that could cause customers to remove their accounts from us and move their business to competing financial institutions. It is possible that the integration process related to acquisitions could result in the disruption of our ongoing businesses or inconsistencies in standards, controls, procedures and policies that could adversely affect our ability to maintain relationships with clients, customers, and employees. The loss of key employees in connection with an acquisition could adversely affect our ability to successfully conduct our business. Acquisition and integration efforts could divert management attention and resources, which could have an adverse effect on our financial condition and results of operations. Additionally, the operation of the acquired branches may adversely affect our existing profitability, and we may not be able to achieve results in the future similar to those achieved by the existing banking business or manage growth resulting from the acquisition effectively.

~~A new accounting standard may require us to increase our allowance for loan losses and may have a material adverse effect on our financial condition and results of operations.~~

The Financial Accounting Standards Board has adopted a new accounting standard which became effective for us on July 1, 2020. This standard, referred to as Current Expected Credit Loss, or CECL, will require financial institutions to determine periodic estimates of lifetime expected credit losses on loans, and recognize the expected credit losses as allowances for loan losses. This will change the current method of providing allowances for loan losses that are probable, which may require us to increase our allowance for loan losses, and to greatly increase the types of data we would need to collect and review to determine the appropriate level of the allowance for loan losses. Any increase in our allowance for loan losses or expenses incurred to determine the appropriate level of the allowance for loan losses may have a material adverse effect on our financial condition and results of operations.

A significant portion of our assets consists of investment securities, which generally have lower yields than loans, and we classify a significant portion of our investment securities as available for sale, which creates potential volatility in our equity and may have an adverse impact on our net income.

As of June 30, ~~2020,~~2023, our securities portfolio totaled ~~$1.42~~$1.37 billion, or ~~21.0%~~17.0% of our total assets. Investment securities typically have lower yields than loans. For the year ended June 30, ~~2020,~~2023, the weighted average yield of our investment securities portfolio was ~~2.97%~~3.55%, as compared to ~~4.09%~~4.00% for our loan portfolio.

Accordingly, our net interest margin is lower than it would have been if a higher proportion of our interest-earning assets consisted of loans. Additionally, at June 30, ~~2020, $1.39~~2023, $1.23 billion, or ~~97.7%~~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.

Our ~~loan portfolio contains a significant portion of loans that are unseasoned. It is difficult to evaluate the future performance of unseasoned loans.~~

Our loan portfolio has grown to $4.50 billion at June 30, 2020, from $2.67 billion at June 30, 2016. This increase reflects the acquisition of Clifton coupled with increases in commercial loans resulting from internal loan originations, as well as purchases and participations in loans originated by other financial institutions. It is difficult to assess the future performance of these loans recently added to our portfolio because our relatively limited experience with such loans does not provide us with a significant payment history from which to evaluate future collectability. These loans may experience higher delinquency or charge-off levels than our historical loan portfolio experience, which could adversely affect our future performance.

~~Our increased~~ commercial lending exposes us to additional risk.

~~We intend to increase commercial lending as part of our ongoing transition from a traditional thrift to a full-service community bank. We~~

Over the past several years, we have increased our focus on commercial ~~lending staff and continue to seek additional commercial lenders to help grow the commercial loan portfolio.~~lending. 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 ~~his or her~~ 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.

The risk exposure from our increased commercial lending is also a function of the markets in which we operate. Our commercial lending activity is generally focused on borrowers domiciled, and real estate located, within the states of New Jersey and New York. Regional risk factors and changes to local laws and regulations, including changes to rent regulations or foreclosure laws, may present greater risk than a more geographically diversified portfolio.

~~Because we intend to continue to increase our~~

Our increased commercial business and construction loan originations ~~our~~exposes us to increased credit ~~risk will increase.~~

~~Historically we~~risk.

We have ~~not had a significant portfolio of commercial business loans. We intend to increase~~increased our originations of commercial business ~~loans, including C&I~~ and ~~SBA~~construction 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. ~~Because~~If we ~~plan to~~ continue to increase our originations of these loans, it may be necessary to increase the level of our allowance for ~~loan~~credit losses because of the increased risk characteristics associated with these types of loans. Any such increase to our allowance for ~~loan~~credit losses would adversely affect our earnings.

We have a significant concentration in commercial real estate loans. If our regulators were to curtail our commercial real estate lending activities, our earnings, dividend paying capacity and/or ability to repurchase shares could be adversely affected.

In 2006, the FDIC, the Office of the Comptroller of the Currency and the Board of Governors of the Federal Reserve System issued joint guidance entitled “Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices” (the “Guidance”). The Guidance provides that a bank’s commercial real estate lending exposure may receive increased supervisory scrutiny when total non-owner occupied commercial real estate loans, including loans secured by multi-family property, non-owner occupied commercial real estate and construction ~~and land~~ loans, represent 300% or more of an institution’s total risk-based capital and the outstanding balance of the commercial real estate loan portfolio has increased by 50% or more during the preceding 36 months. Our level of non-owner occupied commercial real estate equaled ~~360%~~553% of Bank total risk-based capital at June 30, ~~2020 and~~2023, however our commercial real estate loan portfolio increased by ~~21%~~only 31% during the preceding 36 months.

~~Changes to LIBOR may adversely impact the value~~Table of ~~and the return on, our loans, investment securities and derivatives which are indexed to LIBOR.~~Contents

On July 27, 2017, the U.K. Financial Conduct Authority, which regulates LIBOR, announced that it will no longer persuade or compel banks to submit rates for the calculation of LIBOR to the LIBOR administrator after 2021. The announcement also indicates that the continuation of LIBOR on the current basis cannot and will not be guaranteed after 2021. Consequently, at this time, it is not possible to predict whether and to what extent banks will continue to provide LIBOR submissions to the LIBOR administrator or whether any additional reforms to LIBOR may be enacted in the United Kingdom or elsewhere. Similarly, it is not possible to predict whether LIBOR will continue to be viewed as an acceptable benchmark for certain loans and liabilities including our subordinated notes, what rate or rates may become accepted alternatives to LIBOR or the effect of any such changes in views or alternatives on the values of the loans and liabilities, whose interest rates are tied to LIBOR.

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.

Income from secondary mortgage market operations is volatile, and we may incur losses with respect to our secondary mortgage market operations that could negatively affect our earnings.

A component of our business strategy is to sell a portion of residential mortgage loans originated into the secondary market, earning non-interest income in the form of gains on sale. For the year ended June 30, ~~2020, sale~~2023, gains attributable to the sale of residential mortgage loans totaled ~~$3.2 million~~$760,000, or approximately ~~16.0%~~27.6% of our non-interest ~~income.~~income, a decline of $1.7 million from $2.4 million for the year ended June 30, 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.

~~Our reliance on wholesale funding could adversely affect our liquidity and operating results.~~

Among other sources of funds, we rely on wholesale funding, including short- and long-term borrowings, brokered deposits and non-brokered deposits acquired through listing services, to provide funds with which to make loans, purchase investment securities and provide for other liquidity needs. On June 30, 2020, wholesale funding totaled $1.23 billion, or approximately 18.3% of total assets.

Generally wholesale funding may not be as stable as funding acquired through traditional retail channels. In the future, this funding may not be readily replaced as it matures, or we may have to pay a higher rate of interest to maintain it. Not being able to maintain or replace those funds as they mature would adversely affect our liquidity. Paying higher interest rates to maintain or replace funding would adversely affect our net interest margin and operating results.

We may be required to record impairment charges with respect to our investment securities portfolio.

We review our securities portfolio at the end of each quarter to determine whether the fair value is below the current carrying value. When the fair value of any of our investment securities has declined below its carrying value, we are required to assess whether we intend to sell, or it is more than likely than not that we will be required to sell the ~~impairment is other than temporary, such assessment is completed internally, on a quarterly~~security before recovery of its amortized cost basis. If this assessment indicates that a credit loss exists, we ~~conclude that the impairment is other than temporary, we are~~would be required to ~~write down~~record an impairment charge.

We elected the practical expedient of zero loss estimates for securities issued by U.S. government entities and agencies. A possible future downgrade of the sovereign credit ratings of the U.S. government and a decline in the perceived creditworthiness of U.S. government-related obligations could adversely impact the value of ~~that security. The credit-related portion~~our investment securities portfolio. We cannot predict if, when or how any changes to the credit ratings or perceived creditworthiness of these organizations will affect economic conditions. A downgrade of the ~~impairment is recognized through earnings whereas the noncredit-related portion is generally recognized through other comprehensive income in the circumstances where the future sale~~sovereign credit ratings of the ~~security is unlikely.~~

U.S. government or the credit ratings of related institutions, agencies or instruments would significantly exacerbate the other risks to which we are subject and any related adverse effects on the business, financial condition and results of operations.

At June 30, ~~2020,~~2023, we had investment securities with fair values of approximately ~~$1.42~~$1.36 billion on which we had approximately ~~$10.7~~$171.7 million in gross unrealized losses and ~~$34.7 million~~$274,000 of gross unrealized gains. ~~All unrealized losses on investment~~The valuation and liquidity of our securities ~~at June 30, 2020 represented temporary~~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 ~~of value. However, if changes~~ in the ~~expected cash flows~~value of ~~these~~our securities ~~and/~~portfolio, which could have an adverse effect on our financial condition or ~~prolonged price declines result in our concluding in future periods that the impairment~~results of ~~these securities is other than temporary, we will be required to record an impairment charge against income equal to the credit-related impairment.~~

operations.

Our investments in corporate and municipal debt securities, ~~trust preferred and~~ subordinated debt securities and collateralized loan obligations expose us to additional credit risks.

The composition and allocation of our investment portfolio has historically emphasized U.S. agency mortgage-backed securities and U.S. agency debentures. While such assets remain a significant component of our investment portfolio at June 30, ~~2020,~~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, ~~and~~ municipal obligations, ~~trust preferred and~~ 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.

While we have invested primarily in investment grade securities, these securities are not backed by the federal government and expose us to a greater degree of credit risk than U.S. agency securities. Any decline in the credit quality of these securities exposes us to the risk that the market value of the securities could decrease which may require us to write down their value and could lead to a possible default in payment.

Source of Funds

Our reliance on wholesale funding could adversely affect our liquidity and operating results.

Among other sources of funds, we rely on wholesale funding, including short- and long-term borrowings, brokered deposits and non-brokered deposits acquired through listing services, to provide funds with which to make loans, purchase investment securities and provide for other liquidity needs. On June 30, 2023, wholesale funding totaled $2.15 billion, or approximately 26.6% of total assets.

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In the future, this funding may not be readily replaced as it matures, or we may have to pay a higher rate of interest to maintain it. Not being able to maintain or replace those funds as they mature would adversely affect our liquidity. Paying higher interest rates to maintain or replace funding would adversely affect our net interest margin and operating results.

Public funds deposits are a notable source of funds for us and a reduced level of those deposits may hurt our profits and liquidity position.

Public funds deposits are a notable source of funds for our lending and investment activities. At June 30, 2023, $672.0 million, or 11.9% of our total deposits, consisted of public funds deposits from local government entities in the state of New Jersey, such as townships, counties and school districts. These deposits are collateralized by letters of credit from the FHLB or through the pledge of eligible investment securities. Given our reliance on these typically high-average balance public funds deposits as a source of funds, our inability to retain such funds could adversely affect our liquidity. Further, our public funds deposits are primarily floating rate interest-bearing demand deposit accounts and therefore their pricing is more sensitive to changes in interest rates. If we are forced to pay higher rates on our public funds accounts to retain those funds, or if we are unable to retain such funds and we are forced to rely on other sources of funds for our lending and investment activities, such as borrowings from the FHLB, the interest expense associated with these other funding sources may be higher than the rates we are currently paying on our public funds deposits, which would adversely affect our net interest income.

Information Security

Risks associated with system failures, service interruptions or other performance exceptions could negatively affect our earnings.

Information technology systems are critical to our business. We use various technology systems to manage our client relationships, general ledger, securities investments, deposits, and loans. We have established policies and procedures to prevent or limit the effect of system failures, service interruptions or other performance exceptions, but such events may still occur or may not be adequately addressed if they do occur. In addition, performance failures or other exceptions of our client-facing technologies could deter clients from using our products and services.

In addition, we outsource a majority of our data processing to certain third-party service providers. If these service providers encounter difficulties, or if we have difficulty communicating with them, our ability to timely and accurately process and account for transactions could be adversely affected.

The occurrence of any system failures, service interruptions or other performance exceptions could damage our reputation and result in a loss of clients and business thereby subjecting us to additional regulatory scrutiny, or 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.

Risks associated with cyber-security could negatively affect our earnings.

The financial services industry has experienced an increase in both the number and severity of reported cyber-attacks aimed at gaining unauthorized access to bank systems as a way to misappropriate assets and sensitive information, corrupt and destroy data, or cause operational disruptions. 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.

Our clients are also the target of cyber-attacks and identity theft. Large scale identity theft could result in clients' accounts being compromised and fraudulent activities being performed in their name. We have implemented certain safeguards against these types of activities but they may not fully protect us from fraudulent financial losses. 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.

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While our Board of Directors takes an active role in cybersecurity risk tolerance, we rely to a large degree on management and outside consultants in overseeing cybersecurity risk management.

Our Board of Directors takes an active role in the cybersecurity risk tolerance of the Company and all members receive cybersecurity training annually. The Board reviews the annual risk assessments and approves information technology policies, which include cybersecurity. Furthermore, our Audit Committee is responsible for reviewing all audit findings related to information technology general controls, internal and external vulnerability, and penetration testing. The Board receives an annual information security report and the Enterprise Risk Management Committee receives an annual presentation from our Information Security Officer as it relates to cybersecurity and related issues. We also engage outside consultants to support our cybersecurity efforts. However, our directors do not have significant experience in cybersecurity risk management outside of the Company and therefore, its ability to fulfill its oversight function remains dependent on the input it receives from management and outside consultants.

Regulatory Matters

We operate in a highly regulated environment and may be adversely affected by changes in federal and state laws and regulations.

The financial services industry is extensively regulated. Federal and state banking regulations are designed primarily to protect the deposit insurance funds and consumers, not to benefit a company’s shareholders. These regulations may sometimes impose significant limitations on operations. The significant federal and state banking regulations that affect us are described under the heading “Item 1. Business—Regulation.” These regulations, along with the currently existing tax, accounting, securities, insurance, and monetary laws, regulations, rules, standards, policies, and interpretations control the methods by which financial institutions conduct business, implement strategic initiatives and tax compliance, and govern financial reporting and disclosures. New proposals for legislation continue to be introduced in the U.S. Congress that could further alter the regulation of the bank and non-bank financial services industries and the manner in which companies within the industry conduct business.

In addition, federal and state regulatory agencies also frequently adopt changes to their regulations or change the manner in which existing regulations are applied. Future changes in federal policy and at regulatory agencies may occur over time through policy and personnel changes, which could lead to changes involving the level of oversight and focus on the financial services industry. These changes may require us to invest significant management attention and resources to make any necessary changes to operations to comply and could have an adverse effect on our business, financial condition and results of operations.

Changes to tax laws and regulations could adversely affect our financial condition or results of operations.

Changes in tax laws and/or regulatory requirements could be enacted. These changes in the law may be retroactive to previous periods and as a result could negatively affect our current and future financial performance. An increase in our corporate tax rate could have an unfavorable impact on our earnings and capital generation abilities. Similarly, the Bank’s clients could experience varying effects from changes in tax laws and such effects, whether positive or negative, may have a corresponding impact on our business and the economy as a whole. In addition, changes to regulatory requirements could increase our costs of regulatory compliance and may significantly affect the markets in which we do business, the markets for and value of our loans and investments, and our ongoing operations, costs and profitability.

Business Issues

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, ~~2020,~~2023, we had approximately ~~$214.9~~$213.4 million in intangible assets on our balance sheet comprising $210.9 million of goodwill and ~~$4.0~~$2.5 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.

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We ~~operate~~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 ~~highly regulated environment~~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 increased the cost of stock repurchases and may ~~be adversely affected by changes in federal and state laws and regulations.~~

~~The financial services industry is extensively regulated. Federal and state banking regulations are designed primarily~~impact our future decisions on how to ~~protect the deposit insurance funds and consumers, not~~return value to benefit a company’s shareholders. These regulations may sometimes impose significant limitations on operations. The significant federal and state banking regulations that affect us are described under the heading “Item 1. Business—Regulation.” These regulations, along with the currently existing tax, accounting, securities, insurance, and monetary laws, regulations, rules, standards, policies, and interpretations control the methods by which financial institutions conduct business, implement strategic initiatives and tax compliance, and govern financial reporting and disclosures. New proposals for legislation continue to be introducedstockholders in the ~~U.S. Congress~~most efficient manner.

Our acquisitions and the integration of acquired businesses, subject us to various risks and may not result in all of the cost savings and benefits anticipated, which could adversely affect our financial condition or results of operations.

We have in the past, and may in the future, seek to grow our business by acquiring other businesses. There is risk that our acquisitions may not have the anticipated positive results, including results relating to: correctly assessing the asset quality of the assets being acquired; the total cost and time required to complete the integration successfully; being able to profitably deploy funds acquired in an acquisition; or the overall performance of the combined entity.

Acquisitions may also result in business disruptions that could ~~further alter~~cause clients to remove their accounts from us and move their business to competing financial institutions. It is possible that the ~~regulation~~integration process related to acquisitions could result in the disruption of ~~the bank~~our ongoing businesses or inconsistencies in standards, controls, procedures and ~~non-bank financial services industries~~policies that could adversely affect our ability to maintain relationships with clients and ~~the manner~~employees. The loss of key employees in ~~which companies within the industry~~connection with an acquisition could adversely affect our ability to successfully conduct our business.

~~In addition, federal~~ Acquisition and state regulatory agencies also frequently adopt changes to their regulations or change the manner in which existing regulations are applied. Future changes in federal policy and at regulatory agencies may occur over time through policy and personnel changes, whichintegration efforts could ~~lead to changes involving the level of oversight and focus on the financial services industry. These changes may require us to invest significant~~divert management attention and resources, ~~to make any necessary changes to operations to comply and~~which could have an adverse effect on our ~~business,~~ financial condition and results of operations.

~~A natural disaster could harm our business.~~

~~Natural disasters can disrupt our operations, result in damage to our properties, reduce or destroy~~ Additionally, the ~~value~~operation of the ~~collateral for~~acquired branches may adversely affect our ~~loans~~existing profitability, and ~~negatively affect the local economies in which~~ we ~~operate, which could have a material adverse effect on our~~may not be able to achieve results of operations and financial condition. The occurrence of a natural disaster could result in one or more of the following: (i) an increase in loan delinquencies; (ii) an increase in problem assets and foreclosures; (iii) a decrease in the ~~demand for our products and services;~~future similar to those achieved by the existing banking business or ~~(iv) a decrease in~~manage growth resulting from the ~~value of the collateral for loans, especially real estate, in turn reducing customers’ borrowing power, the value of assets associated with problem loans and collateral coverage.~~

acquisition effectively.

~~Acts of terrorism and other external events could impact our ability to conduct business.~~

Because the nature of the financial services business involves a high volume of transactions, we face significant operational risks.

We operate in diverse markets and rely on the ability of our employees and systems to process a high number of transactions. Operational risk is the risk of loss resulting from our operations, including but not limited to, the risk of fraud by employees or persons outside the Company, the execution of unauthorized transactions by employees, errors relating to transaction processing and technology, breaches of the internal control system and compliance requirements, and business continuation and disaster recovery. Insurance coverage may not be available for such losses, or where available, such losses may exceed insurance limits. This risk of loss also includes the potential legal actions that could arise as a result of an operational deficiency or as a result of noncompliance with applicable regulatory standards, adverse business decisions or their implementation, and ~~customer~~client attrition due to potential negative publicity. In the event of a breakdown in the internal control system, improper operation of systems or improper employee actions, we could suffer financial loss, face regulatory action, and suffer damage to our reputation.

Our risk management framework may not be effective in mitigating risk and reducing the potential for significant losses.

Our risk management framework is designed to effectively manage and mitigate risk while minimizing exposure to potential losses. We seek to identify, measure, monitor, report and control our exposure to risk, including strategic, market, liquidity, compliance and operational risks. While we use a broad and diversified set of risk monitoring and mitigation techniques, these techniques are inherently limited because they cannot anticipate the existence or future development of currently unanticipated or unknown risks. Recent economic conditions and heightened legislative and regulatory scrutiny of the financial services industry, among other developments, have increased our level of risk. Accordingly, we could suffer losses as a result of our failure to properly anticipate and manage these risks.

Table of Contents

We could be adversely affected by failure in our internal controls.

A failure in our internal controls could have a significant negative impact not only on our earnings, but also on the perception that ~~customers,~~clients, regulators and investors may have of us. We continue to devote a significant amount of effort, time and resources to continually strengthening our controls and ensuring compliance with complex accounting standards and banking regulations.

The inability to attract and retain key personnel could adversely affect our business.

The successful execution of our business strategy is partially dependent on our ability to attract and retain experienced and qualified personnel. Failure to do so could adversely affect our strategy, ~~customer~~client relationships and internal operations.

~~Risks associated with system failures, service interruptions or other performance exceptions could negatively affect our earnings.~~

Information technology systems are critical to our business. We use various technology systems to manage our customer relationships, general ledger, securities investments, deposits, and loans. We have established policies and procedures to prevent or limit the effect of system failures, service interruptions or other performance exceptions, but such events may still occur or may not be adequately addressed if they do occur. In addition, performance failures or other exceptions of our customer-facing technologies could deter customers from using our products and services.

The occurrence of any system failures, service interruptions or other performance exceptions could damage our reputation and result in a loss of customers and business thereby subjecting us to additional regulatory scrutiny, or 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.

~~Risks associated with cyber-security could negatively affect our earnings.~~

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 customers' transaction data may put us at risk for possible losses due to fraud or operational disruption.

Our customers are also the target of cyber-attacks and identity theft. Large scale identity theft could result in customers' accounts being compromised and fraudulent activities being performed in their name. We have implemented certain safeguards against these types of activities but they may not fully protect us from fraudulent financial losses.

The occurrence of a breach of security involving our customers' information, regardless of its origin, could damage our reputation and result in a loss of customers 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.

~~Our inability to achieve profitability on new branches may negatively affect our earnings.~~

~~We face intense competition from other financial services and financial services technology companies, and competitive pressures could adversely affect our business or financial performance.~~

The Company faces intense competition in all of its markets and geographic regions. The Company expects competitive pressures to intensify in the future, especially in light of legislative and regulatory initiatives arising out of the recent global economic crisis, technological innovations that alter the barriers to entry, current economic and market conditions, and government monetary and fiscal policies. Competition with financial services technology companies, or technology companies partnering with financial services companies, may be particularly intense, due to, among other things, differing regulatory environments. Competitive pressures may drive the Company to take actions that the Company might otherwise eschew, such as lowering the interest rates or fees on loans or raising the interest rates on deposits in order to keep or attract high-quality customers. These pressures also may accelerate actions that the Company might otherwise elect to defer, such as substantial investments in technology or infrastructure. The actions that the Company takes in response to competition may adversely affect its results of operations and financial condition. These consequences could be exacerbated if the Company is not successful in introducing new products and other services, achieving market acceptance of its products and other services, developing and maintaining a strong customer base, or prudently managing expenses.

Item 1B. Unresolved Staff Comments

Not applicable.

Item 2. Properties

The Company and the Bank conduct business from their ~~administrative~~corporate headquarters at 120 Passaic Avenue in Fairfield, New Jersey and ~~leases office suites~~from administrative offices located in Fairfield, Clifton and Oakhurst, New Jersey.

At June 30, ~~2020,~~2023, the Company operated 4643 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. ~~Nineteen~~At June 30, 2023, 18 of our branch offices are leased with remaining terms between 11seven months and 12nine years. At June 30, ~~2020,~~2023, our net investment in property and equipment totaled ~~$57.4~~$48.3 million.

In conjunction with the Company’s acquisition of MSB on July 10, 2020, the Company acquired a loan production office in Millington, NJ and four branch offices located in Somerset and Morris counties. The loan production office and two branch offices are leased with remaining terms between 14 months and 4.3 years.

Additional information regarding our properties as of June 30, ~~2020,~~2023, is presented in Note 108 to the audited consolidated financial statements.

Item 3. Legal Proceedings

We are, from time to time, party to routine litigation, which arises in the normal course of business, such as claims to enforce liens, condemnation proceedings on properties in which we hold security interests, claims involving the making and servicing of real property loans and other issues incident to our business. At June 30, ~~2020,~~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.

Item 4. Mine Safety Disclosures

Not applicable.

Table of Contents

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

(a) Market ~~Information~~Information.. The Company’s common stock trades on The NASDAQ Global Select Market under the symbol “KRNY.”

Declarations of dividends by the Board of Directors depend on a number of factors, including investment opportunities, growth objectives, financial condition, profitability, tax considerations, minimum capital requirements, regulatory limitations, stock market characteristics and general economic conditions. The timing, frequency and amount of dividends are determined by the Board of Directors.

The Company’s ability to pay dividends may also depend on the receipt of dividends from the Bank, which is subject to a variety of limitations under federal banking regulations regarding the payment of dividends. For discussion of corporate and regulatory limitations applicable to the payment of dividends, see “Item 1. Business-Regulation.”

As of August ~~21, 2020,~~18, 2023, there were ~~4,652~~4,207 registered holders of record of the Company’s common ~~stock, plus approximately 7,176~~stock. Certain shares of the Company are held in “street” name and accordingly, the number of beneficial ~~(street name) owners.~~

owners of such shares is not known or included in the foregoing number.

(b) Use of Proceeds. Not applicable.

(c) Issuer Purchases of Equity Securities. Set forth below is information regarding the Company’s stock repurchases during the fourth quarter of the fiscal year ended June 30, 2023.


Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
April 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

On ~~March 13, 2019,~~August 1, 2022, the Company announced the authorization of a ~~fourth~~new stock repurchase plan ~~for~~to repurchase up to ~~9,218,324 shares or 10% of shares then outstanding.~~4,000,000 shares. This current plan has no expiration date. On March 25, 2020 the Company temporarily suspended its stock repurchase program due to the risks and uncertainties associated with the COVID-19 pandemic. Through June 30, 2020, the Company repurchased 8,457,294 shares, or 91.7%

Table of ~~the shares authorized for repurchase under the current repurchase program, at a cost of $111.1 million, or an average of $13.14 per share.~~ Contents

Stock Performance Graph. The following graph compares the cumulative total shareholder return on the Company’s common stock with the cumulative total return on the NASDAQ Composite Index and a peer group of the ~~SNL Thrift~~S&P U.S. SmallCap Banks Index, in each case assuming an investment of $100 as of June 30, ~~2015.~~2018. Total return assumes the reinvestment of all dividends. This year the stock performance graph reflects a change made by the Company in the peer group comparison indices from the SNL Thrift $5 Billion - $10 Billion Index and the SNL Thrift MHC Index to the SNL Thrift Index. Management believes that the SNL Thrift Index provides a better peer group comparison of financial institutions more comparable to the Company. In accordance with Item 201 (e) of the Regulation S-K of the Securities and Exchange Commission, which requires the inclusion of all new indices and all indices used the immediately preceding year, this year the performance graph also includes a comparison of the cumulative return for the SNL Thrift $5 Billion - $10 Billion Index and the SNL Thrift MHC Index.

At June 30,

2015

2016

2017

2018

2019

2020

Kearny Financial Corp.
$
100

$
113

$
135

$
124

$
126

$
80

NASDAQ Composite

100

98

126

156

168

213

SNL Thrift Index

100

101

119

130

117

95

SNL Thrift $5B - $10B Index

100

105

128

160

147

111

SNL Thrift MHC Index

100

106

107

112

120

101

2026


	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

The NASDAQ Composite Index measures all NASDAQ domestic and international based common type stocks listed on The NASDAQ Stock Market. The ~~SNL indices were prepared by~~ S&P ~~Global Market Intelligence. The SNL Thrift~~U.S. SmallCap Banks Index includes all major exchange (NYSE, NYSE American and NASDAQ) traded ~~thrifts~~banks under $15 billion in ~~SNL’s~~market capitalization in S&P’s coverage universe. The SNL Thrift $5 Billion - $10 Billion Index includes all thrift institutions with total assets between $5.0 billion and $10.0 billion. The SNL Thrift MHC Index includes all publicly traded mutual holding companies. There can be no assurance that the Company’s future stock performance will be the same or similar to the historical stock performance shown in the graph above. The Company neither makes nor endorses any predictions as to stock performance.

Item 6. ~~Selected Financial Data~~[Reserved]

Table of Contents

~~The following financial information and other data in this section are derived from the Company’s audited consolidated financial statements and should be read together therewith:~~

At June 30,

2020

2019

2018

2017

2016

(In Thousands)

Balance Sheet Data:

Assets
$
6,758,175

$
6,634,829

$
6,579,874

$
4,818,127

$
4,500,059

Net loans receivable

4,461,070

4,645,654

4,470,483

3,215,975

2,649,758

Investment securities available for sale

1,385,703

714,263

725,085

613,760

673,537

Investment securities held to maturity

32,556

576,652

589,730

493,321

577,286

Cash and equivalents

180,967

38,935

128,864

78,237

199,200

Goodwill

210,895

210,895

210,895

108,591

108,591

Deposits

4,430,282

4,147,610

4,073,604

2,929,745

2,694,687

Borrowings

1,173,165

1,321,982

1,198,646

806,228

614,423

Stockholders’ equity

1,084,177

1,127,159

1,268,748

1,057,181

1,147,629

For the Years Ended June 30,

2020

2019

2018

2017

2016

(In Thousands, Except Percentage and Per Share Amounts)

Summary of Operations:

Interest income
$
233,208

$
237,333

$
171,431

$
139,093

$
126,888

Interest expense

83,854

82,020

50,138

36,519

31,903

Net interest income

149,354

155,313

121,293

102,574

94,985

Provision for loan losses

4,197

3,556

2,706

5,381

10,690

Net interest income after loan loss provision

145,157

151,757

118,587

97,193

84,295

Non-interest income, excluding asset
  gains, losses and write-downs

14,311

13,309

12,270

9,920

10,426

Non-interest income from asset
  gains, losses and write-downs

5,408

246

993

1,428

301

Other non-interest expenses

107,624

109,243

97,850

81,118

72,417

Income before taxes

57,252

56,069

34,000

27,423

22,605

Income tax expense

12,287

13,927

14,404

8,820

6,783

Net income
$
44,965

$
42,142

$
19,596

$
18,603

$
15,822

Per Share Data:

Net income per share – Basic and diluted
$
0.55

$
0.46

$
0.24

$
0.22

$
0.18

Weighted average number of common shares
  outstanding (in thousands):

         Basic

82,409

91,054

82,587

84,590

89,591

         Diluted

82,430

91,100

82,643

84,661

89,625

Cash dividends per share
$
0.29

$
0.37

$
0.25

$
0.10

$
0.08

Dividend payout ratio⁽¹⁾

52.78

%

80.75

102.87

%

44.99

%

45.28

%

~~(1)Represents cash dividends declared divided by net income.~~

At or For the Years Ended June 30,

2020

2019

2018

2017

2016

Performance ratios:

Return on average assets (net income divided
  by average total assets)

0.67

%

0.63

%

0.37

%

0.40

%

0.36

%
Return on average equity (net income divided
  by average total equity)

4.10

3.52

1.81

1.68

1.36

Net interest rate spread

2.22

2.31

2.25

2.14

2.06

Net interest margin

2.45

2.56

2.50

2.41

2.35

Average interest-earning assets to
  average interest-earning liabilities

117.24

118.88

125.12

132.14

136.23

Efficiency ratio (non-interest expenses divided
  by sum of net interest income and non-interest income)

63.66

64.69

72.72

71.20

68.50

Non-interest expense to average assets

1.61

1.64

1.86

1.76

1.64

Asset Quality Ratios:

Non-performing loans to total loans

0.82

0.43

0.37

0.58

0.79

Non-performing assets to total assets

0.55

0.31

0.27

0.43

0.49

Net charge-offs to average loans outstanding
0.00

0.02

0.03

0.01

0.08

Allowance for loan losses to total loans

0.82

0.70

0.68

0.90

0.91

Allowance for loan losses to non-performing loans

101.72

164.15

183.08

155.18

115.07

Capital Ratios:

Average equity to average assets

16.39

17.97

20.54

24.02

26.47

Equity to assets at period end

16.04

16.99

19.28

21.94

25.50

Tangible equity to tangible assets at period end⁽¹⁾

13.29

14.19

16.53

20.14

23.65

~~(1)Tangible equity equals total stockholders’ equity reduced by goodwill and core deposit intangible assets.~~

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

General

This discussion and analysis reflects Kearny Financial Corp.’s consolidated financial statements and other relevant statistical data, and is intended to enhance your understanding of our financial condition and results of operations. You should read the information in this section in conjunction with the business and financial information regarding Kearny Financial Corp. and the audited consolidated financial statements and notes thereto contained in this Annual Report on Form 10-K.

Critical Accounting Policies

and Estimates

Our accounting policies are integral to understanding the results reported. We describe them in detail in Note 1 to our audited consolidated financial ~~statements included as an exhibit to this document.~~statements. In preparing the audited consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the dates of the ~~consolidated statements~~Consolidated Statements of ~~financial condition~~Financial Condition and revenues and expenses for the periods then ended. Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significant changes relate to the determination of the allowance for ~~loan losses.~~

credit losses and goodwill.

Allowance for ~~Loan~~Credit Losses. The allowance for loan losses is a valuation account that reflects our estimation of the losses in its loan portfolio to the extent they are both probable and reasonable to estimate. The balance of the allowance is generally maintained through provisions for loan losses that are charged to income in the period that estimated losses on loans are identified. We charge confirmed losses on loans against the allowance as such losses are identified. Recoveries on loans previously charged-off are added back to the allowance.

Our allowance for loan loss calculation methodology utilizes a two-tier loss measurement process that is performed quarterly. We first identify the loans that must be reviewed individually for impairment. Factors considered in identifying individual loans to be reviewed include, but may not be limited to, loan type, classification status, contractual payment status, performance/accrual status and impaired status. Loans considered to be eligible for individual impairment review include commercial mortgage loans, construction loans, commercial business loans, one- to four-family mortgage loans, home equity loans and home equity lines of credit. A loan is deemed to be impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement. Once a loan is determined to be impaired, management performs an analysis to determine the amount of impairment associated with that loan.

The second tier of the loss measurement process involves estimating the probable and estimable losses on loans not otherwise individually reviewed for impairment. Such loans generally comprise large groups of smaller-balance homogeneous loans as well as the remaining non-impaired loans of those types noted above that are otherwise eligible for individual impairment evaluation.

Valuation allowances established through the second tier of the loss measurement process utilize historical and environmental loss factors to collectively estimate the level of probable losses within defined segments of our loan portfolio. To calculate the historical loss factors, our allowance for loan loss methodology generally utilizes a two-year moving average of annualized net charge-off rates (charge-offs net of recoveries) by loan segment, where available, to calculate the actual, historical loss experience. The outstanding principal balance of each loan segment is multiplied by the applicable historical loss factor to estimate the level of probable losses based upon our historical loss experience.

Environmental loss factors are based upon specific quantitative and qualitative criteria representing key sources of risk within the loan portfolio. Such sources of risk include those relating to the level of and trends in nonperforming loans; the level of and trends in credit risk management effectiveness, the levels and trends in lending resource capability; levels and trends in economic and market conditions; levels and trends in loan concentrations; levels and trends in loan composition and terms, levels and trends in independent loan review effectiveness, levels and trends in collateral values and the effects of other external factors. The outstanding principal balance of each applicable loan segment is multiplied by the applicable environmental loss factors to estimate the level of probable losses based upon their supporting quantitative and qualitative criteria.

The sum of the probable and estimable loan losses calculated in accordance with loss measurement processes, as described above, represents the total targeted balance for our allowance for loan losses at the end of a fiscal period. A more detailed discussiondetermination of our allowance for ~~loan~~credit losses on loans (“ACL”) is considered a critical accounting estimate by management because of the high degree of judgment involved in determining qualitative loss ~~calculation methodology is presented~~factors, the subjectivity of the assumptions used, and the potential for changes in the forecasted economic environment that could result in changes to the amount of the recorded ACL. See Note 1 to our audited consolidated financial ~~statements.~~

statements for a detailed discussion of our accounting policies and methodologies for establishing the ACL.

Management believes the following information may enable investors to better understand the changes in our ACL. Our ACL totaled $48.7 million and $47.1 million at June 30, 2023 and 2022, respectively. The $1.7 million increase 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, increased $8.5 million, which largely resulted from loan growth, slower prepayment speeds and a higher forecasted national unemployment rate. The qualitative component of our ACL, which is largely based on management’s judgment of qualitative loss factors, decreased $6.5 million.

Our ACL totaled $48.7 million at June 30, 2023 and the amount allocated to our collectively evaluated multi-family and nonresidential mortgage loans was $32.0 million, of which $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, 2023, the most severe historical loss rate for multi-family and nonresidential mortgages loans was 1.72%.

Management performed a hypothetical sensitivity analysis to understand the impact of a change in a key input on our ACL. At June 30, 2023, if the four-quarter national unemployment rate forecast had been 9% rather than an average of approximately 4.0%, our ACL as a percent of total loans would have 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.

Our ACL on individually analyzed loans is determined on an individual basis using the present value of expected cash flows discounted using the loan’s effective interest rate or, for collateral-dependent loans, the fair value of the collateral, less estimated selling costs, as applicable. Our ACL on individually analyzed loans decreased $315,000 during the year ended June 30, 2023.

~~Business Combinations.~~ Table of Contents

Goodwill.We ~~account for~~have goodwill of $210.9 million at June 30, 2023. Goodwill arises from business combinations ~~under~~and is generally determined as the ~~purchase method of accounting. The application of this method of accounting requires the use of significant estimates and assumptions in the determination~~excess of the fair value of the 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 ~~in order to properly allocate purchase price consideration between assets that are amortized, accreted or depreciated from those that are recorded~~ as ~~goodwill. Our estimates~~ of the fair values of assets acquired and liabilities assumed are based upon assumptions that we believe to be reasonable, and whenever necessary, include assistance from independent third-party appraisal and valuation firms.

~~Goodwill. Goodwill represents the excess of the purchase price over the net fair value of the acquired businesses.~~acquisition date. Goodwill is not amortized, but is tested for impairment at ~~the reporting unit level at~~ least annually or more frequently ~~whenever~~if events orand circumstances ~~occur~~change that ~~indicate that it is more-likely-than-not that an impairment loss has occurred.~~ would more likely than not reduce the fair value of a reporting unit below its carrying amount.

In assessing impairment, we have the option to perform a qualitative analysis to determine whether the existence of events or circumstances leads to a determination that it is more-likely-than-not that the fair value of the reporting unit is less than its carrying amount. ~~If, after assessing the totality of such events or circumstances,~~Due to a significant decline in bank stock prices, triggered by regional bank failures, we ~~determine it is not more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, then we would not be required to perform~~performed a quantitative goodwill impairment ~~test.~~

during the fourth quarter of the year ended June 30, 2023. The quantitative goodwill impairment test is performed in two steps. The first step requires a comparison of a reporting unit’s fair value to its carrying value. If the fair value exceeds the carrying value no impairment is present; however, if the carrying value exceeds the fair value, an additional impairment evaluation must be performed. That additional evaluation compares the ~~implied~~estimated fair value of the reporting ~~unit’s~~unit with its carrying amount, including goodwill. If the estimated fair value of the reporting unit exceeds its carrying amount, goodwill ~~with~~of the reporting unit is considered not impaired. However, if the carrying amount of ~~that goodwill. An~~the reporting unit were to exceed its estimated fair value, and impairment loss is recorded to the extent that the carrying amount of goodwill exceeds its implied fair value. Significant judgment is applied when goodwill is assessed for impairment. This judgment includes, but may notwould be ~~limited to, the selection of appropriate discount rates, the identification of relevant market comparables and the development of cash flow projections.~~ recorded.

The ~~selection and weighting of the various fair value techniques may result in a higher or lower fair value. Judgment is applied in determining the weightings that are most representative of fair value.~~

~~The annual~~ quantitative assessment of goodwill for our single reporting unit was performed utilizing a discounted cash flow analysis (“income approach”) and estimates of selected market information (“market ~~approach”~~approaches”). The income approach measures the fair value of an interest in a business by discounting expected future cash flows to present value. The market approach takes into consideration fair values of comparable companies operating in similar lines of business that are potentially subject to similar economic and environmental factors and could be considered reasonable investment alternatives. The resultsresult of the income approach ~~were~~was weighted at ~~75% while~~50% and the results of the market ~~approach were weighted at 25%. The results of~~approaches comprised the ~~annual quantitative impairment analysis indicated that~~remaining 50% in determining the fair value ~~exceeded the carrying value for~~of our single reporting unit.

The ~~assumptions used in~~fair value of our single reporting unit exceeded its carrying value and no impairment charges were recorded for the ~~impairment test~~year ended June 30, 2023. Determining fair value of ~~goodwill are susceptible~~our single reporting unit is subject to ~~change based~~uncertainty as it is reliant on projected future cash flows, discount rate assumption, and market estimates. In the future, changes in ~~economic conditions~~projected future cash flows, discount rate assumption, or market estimates could result in material goodwill impairment. To quantify the impact of a potential goodwill impairment charge at June 30, 2023, the impact of a five percent impairment charge on goodwill would result in a reduction in pre-tax income of approximately $10.5 million.

Table of Contents

Financial Overview

The following financial information and other ~~factors. Any change~~data in this section are derived from our audited consolidated financial statements and should be read together therewith:


	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
Dividend payout ratio(1)	70.2		%	45.1		%	45.1		%

(1)Represents cash dividends declared divided by net income.

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	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	%
Return on average tangible equity (ratio of net income to average tangible equity)(1)	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	%
Efficiency ratio(2)	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	%
Tangible equity to tangible assets at period end(3)	8.35	%	9.06	%	11.72	%

(1)Average tangible equity equals average total stockholders’ equity reduced by average goodwill and average core deposit intangible assets.

(2)Efficiency ratio equals non-interest expense divided by the ~~assumptions which we utilize to determine the carrying value~~sum of net interest income and non-interest income.

(3)Tangible equity equals total stockholders’ equity reduced by goodwill ~~could adversely impact our results of operations.~~

and core deposit intangible assets.

Comparison of Financial Condition at June 30, ~~2020~~2023 and June 30, ~~2019~~

2022

Executive Summary. Total assets increased ~~$123.3~~by $344.9 million, or 4.5%, to ~~$6.76~~$8.06 billion at June 30, ~~2020~~2023 from ~~$6.63~~$7.72 billion at June 30, ~~2019.~~2022. The ~~net~~increase primarily reflected an increase in ~~total assets primarily reflected increases in the balances of cash and equivalents, investment securities,~~net loans ~~held-for-sale and other assets,~~receivable, partially offset by a decrease in ~~net loans receivable.~~

~~Wholesale Restructuring Transaction.~~ ~~During the year ended June 30, 2020 the Company executed a wholesale restructuring transaction designed to enhance net interest income and reduce credit risk within the~~ investment portfolio. During the first phase of the transaction, $158.4 million of investment securities with a weighted average yield of 2.63% were sold and a portion of the proceeds utilized to extinguish $121.5 million of Federal Home Loan Bank (“FHLB”) advances with a weighted average cost of 2.84%. Gains on sale of investment securities and debt extinguishment losses each totaled $2.2 million, resulting in a negligible impact on pre-tax net income. During the second phase of the transaction, $248.7 million of U.S. agency-backed mortgage-backed securities were purchased at a weighted average yield of 2.77% and were funded with a combination of FHLB advances, brokered time deposits and overnight borrowings that, at execution of the transaction, carried a weighted average cost of 1.65%.securities.

Investment Securities. Investment securities ~~classified as~~ available for sale ~~increased~~decreased by ~~$671.4~~$116.4 million to ~~$1.39~~$1.23 billion at June 30, ~~2020~~2023 from ~~$714.3 million~~$1.34 billion at June 30, ~~2019. The net increase in~~2022. This decrease was largely the ~~portfolio partially reflected the adoption~~result of ~~ASU 2019-04 on July 1, 2019, upon which the Company reclassified $537.7~~principal repayments of $124.7 million, sales of ~~investment securities from held to maturity to available for sale. In addition, the net increase in the portfolio during the year ended June 30, 2020 reflected security purchases totaling $487.9~~$120.4 million and a ~~$20.5~~$38.1 million ~~increase~~decrease in the fair value of the portfolio to a net unrealized ~~gain~~loss of ~~$22.5 million. The net increase in the portfolio was~~$156.1 million, partially offset by ~~security sales totaling $162.1 million and $212.6 million in principal repayment, net~~purchases of ~~premium amortization and discount accretion.~~$166.5 million.

Investment securities ~~classified as~~ held to maturity ~~decreased~~increased by ~~$544.1~~$28.2 million to ~~$32.6~~$146.5 million at June 30, ~~2020~~2023 from ~~$576.7~~$118.3 million at June 30, ~~2019.~~2022. The ~~decrease in held to maturity securities~~increase was largely ~~reflected~~ the ~~adoption~~result of ~~ASU 2019-04, as noted above. The decrease in the portfolio for the year ended June 30, 2020 also reflected~~purchases of $40.4 million, partially offset by principal ~~repayment, net~~repayments of ~~discount accretion and premium amortization, totaling $6.4~~$12.1 million.

~~Based on its evaluation, management has concluded that no other-than-temporary impairment was present within the investment portfolio as of June 30, 2020.~~

Additional information regarding investment securities at June 30, ~~2020~~2023 is presented under “Item 1. Business” of this Annual Report on Form 10-K, as well as in Note 4 ~~Note 5 and Note 6~~ to the audited consolidated financial statements.

Loans Held-for-Sale. Loans held-for-sale totaled ~~$20.8~~$9.6 million at June 30, ~~2020~~2023 as compared to ~~$12.3~~$28.9 million at June 30, ~~2019~~2022 and are reported separately from the balance of net loans ~~receivable~~receivable. Loans held-for-sale consisted of residential mortgage loans of $9.6 million at June 30, 2023 as compared to residential mortgage loans and commercial mortgage loans of ~~those dates.~~$7.1 million and $21.7 million, respectively, at June 30, 2022. During the year ended June 30, ~~2020, $282.3~~2023, we sold $103.8 million of residential mortgage loans, ~~were sold,~~ resulting in a net ~~gains~~gain on sale of ~~$3.2~~$760,000, and $25.3 million of commercial mortgage loans, resulting in a net loss on sale of $2.5 million.

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Net Loans Receivable. ~~Loans~~Net loans receivable ~~net of unamortized premiums, deferred costs and the allowance for loan losses, decreased~~increased by ~~$184.6~~$409.9 million, or 7.6%, to ~~$4.46~~$5.78 billion at June 30, ~~2020~~2023 from ~~$4.65~~$5.37 billion at June 30, ~~2019. The decrease~~2022. Detail regarding the change in ~~net loans receivable was primarily attributable to elevated levels of loan prepayment activity outpacing new loan origination and purchase volume during~~ the ~~year ended June 30, 2020. The detail of the changes in~~ loan portfolio is presented below:

	June 30,			June 30,			Increase/
	2020			2019			(Decrease)				June 30, 2023		June 30, 2022		Increase/ (Decrease)
	(In Thousands)										(In Thousands)
Commercial loans:										Commercial loans:
Multi-family		2,059,568		$	1,946,391		$	113,177
Nonresidential		960,853			1,258,869			(298,016	)
Multi-family mortgage										Multi-family mortgage	$	2,761,775	$	2,409,090	$	352,685
Nonresidential mortgage										Nonresidential mortgage	968,574		1,019,838		(51,264)
Commercial business		138,788			65,763			73,025		Commercial business	146,861		176,807		(29,946)
Construction		20,961			13,907			7,054		Construction	226,609		140,131		86,478
Total commercial loans		3,180,170			3,284,930			(104,760	)	Total commercial loans	4,103,819		3,745,866		357,953

One- to four-family residential mortgage loans		1,273,022			1,344,044			(71,022	)
One- to four-family residential mortgage										One- to four-family residential mortgage	1,700,559		1,645,816		54,743

Consumer loans:										Consumer loans:
Home equity loans and lines of credit		82,920			96,165			(13,245	)
Other consumer loans		3,991			5,814			(1,823	)
Total consumer		86,911			101,979			(15,068	)
Home equity loans										Home equity loans	43,549		42,028		1,521
Other consumer										Other consumer	2,549		2,866		(317)
Total consumer loans										Total consumer loans	46,098		44,894		1,204

Total loans		4,540,103			4,730,953			(190,850	)	Total loans	5,850,476		5,436,576		413,900

Unaccreted yield adjustments		(41,706	)		(52,025	)		10,319		Unaccreted yield adjustments	(21,055)		(18,731)		(2,324)
Allowance for loan losses		(37,327	)		(33,274	)		(4,053	)
Allowance for credit losses										Allowance for credit losses	(48,734)		(47,058)		(1,676)

Net loans receivable	$	4,461,070		$	4,645,654		$	(184,584	)	Net loans receivable	$	5,780,687	$	5,370,787	$	409,900

Commercial loan origination volume for the year ended June 30, ~~2020~~2023 totaled ~~$374.3~~$895.9 million, ~~which~~ comprised ~~$258.5~~of $716.4 million of commercial mortgage loan originations, ~~augmented by $108.5~~$91.8 million of commercial business loan originations and construction loan disbursements ~~totaling $7.2~~of $87.7 million. For the year ended June 30, 2020, within the commercial business loan category, we originated $69.0 million under the PPP, as noted above. Commercial loan originations were augmented with the funding of purchased loans totaling $58.2 million during the year ended June 30, 2020.

One- to four-family residential mortgage loan origination volume, excluding loans held-for-sale, totaled $197.8 million for the year ended June 30, ~~2020, excluding loans held-for-sale, totaled $197.8 million. Originations of one- to four-family residential loans were augmented~~2023 and was supplemented with loan purchases totaling ~~$15.0 million.~~$656,000. Home equity ~~loans~~loan and line of credit origination volume for the ~~year ended June 30, 2020~~same period totaled ~~$16.4~~$26.0 million.

Additional information about ~~the Company’s~~our loans at June 30, ~~2020~~2023 is presented under “Item 1. Business” of this Annual Report on Form 10-K, as well as in Note 75 to the audited consolidated financial statements.

Nonperforming ~~Loans.~~ Loans and TDRs. Nonperforming loans ~~increased~~decreased by ~~$16.4~~$27.7 million to ~~$36.7~~$42.6 million, or ~~0.82%~~0.73% of total loans, at June 30, ~~2020,~~2023 from ~~$20.3~~$70.3 million, or ~~0.43%~~1.30% of total loans, at June 30, ~~2019.~~2022. The ~~increase~~decrease in ~~non-performing~~nonperforming loans was ~~primarily~~largely attributable to a ~~single, $14.3~~decrease of $15.4 million ~~owner-occupied commercial real estate~~in nonperforming nonresidential mortgage loans and a decrease of $7.5 million in nonperforming multi-family mortgage loans.

TDRs are loans where we have modified the contractual terms of the loan ~~which was~~as a result of the financial condition of the borrower. Subsequent to their modification, TDRs are placed on non-accrual ~~status during~~until such time as satisfactory payment performance has been demonstrated, at which time the ~~quarter ended March 31, 2020. This~~ loan ~~is secured by a grocery-anchored retail shopping center located in northern New Jersey and has a current loan-to-value~~may be returned to accrual status. At June 30, 2023, we had accruing TDRs totaling $10.5 million, an increase of ~~approximately 69%.~~

~~Nonperforming loans generally include those loans reported as 90 or more days past due while still accruing and loans reported as nonaccrual, with such balances totaling $5,000 and $36.7~~$1.8 million ~~respectively,~~from $8.7 million at June 30, ~~2020.~~

2022. At June 30, 2023, we had non-accrual TDRs totaling $6.9 million, a decrease of $6.6 million from $13.5 million at June 30, 2022.

Additional information about nonperforming loans and TDRs at June 30, ~~2020~~2023 is presented under “Item 1. Business” of this Annual Report on Form 10-K, as well as in Note 85 to the audited consolidated financial statements.

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Allowance for ~~Loan~~Credit Losses. ~~During the year ended~~At June 30, ~~2020,~~2023, the ~~balance of the allowance for loan losses increased by $4.1 million to $37.3~~ACL totaled $48.7 million, or ~~0.82%~~0.83% of total loans, reflecting an increase of $1.7 million from $47.1 million, or 0.87% of total loans, at June 30, ~~2020, from $33.3~~2022. The increase was largely attributable to a provision for credit losses of $2.5 million, ~~or 0.70%~~primarily driven by loan growth, partially offset by a reduction in the expected life of ~~total loans~~the loan portfolio. Partially offsetting the provision for credit losses were net charge-offs of $810,000, of which $396,000 had been individually reserved for within the ACL at June 30, 2019. The increase resulted from provisions of $4.2 million during the year ended June 30, 2020 that were partially offset by charge-offs, net of recoveries, totaling $144,000 during that same period. Excluding the balance of acquired loans, which generally do not carry an ALLL, the ALLL as a percentage of non-acquired loans at June 30, 2020 and June 30, 2019 totaled 1.03% and .91%, respectively. As of June 30, 2020, the balance of acquired loans totaled $923.9 million, had remaining purchase accounting discounts of $43.1 million, or 4.67% of the applicable outstanding balance, with no associated ALLL.2022.

Additional information about the allowance for ~~loan~~credit losses at June 30, ~~2020~~2023 is presented under “Item 1. Business” of this Annual Report on Form 10-K, as well as in Note 1 and Note 86 to the audited consolidated financial statements.

Other Assets. The aggregate balance of other assets, including premises and equipment, FHLB stock, interest receivable, goodwill, core deposit intangibles, bank owned life insurance, deferred income taxes, ~~other real estate owned~~OREO and other assets, increased by ~~$30.0~~$73.6 million to ~~$677.1~~$829.8 million at June 30, ~~2020~~2023 from ~~$647.1~~$756.2 million at June 30, ~~2019.~~

2022. The increase in other assets ~~primarily~~largely reflected a $24.6 million increase in FHLB stock, a $23.8 million increase in the ~~adoption~~fair value of our derivatives portfolio and a $12.8 million increase in OREO. The increase in OREO was a result of our acquisition of a new accounting standard that requires leases to be recognized on our Consolidated Statements of Condition as a right of use asset and lease liability and a payment deferral receivable related to modified loans in accordance with the CARES Act provisions. Our operating lease right of use asset and payment deferral receivable totaled approximately $16.5$13.0 million ~~and $12.4 million, respectively, as of June 30, 2020.~~nonresidential real estate property through foreclosure. The remaining ~~increases and decreases in other assets for the year ended June 30, 2020~~change generally reflected normal operating fluctuations ~~in their respective balances.~~

~~Additional information about the Company’s operating lease right of use asset at June 30, 2020 is presented in Note 9 to the audited consolidated financial statements.~~

within these line items.

Deposits. Total deposits ~~increased~~decreased by ~~$282.7~~$233.1 million, or 4.0%, to ~~$4.43~~$5.63 billion at June 30, ~~2020~~2023 from ~~$4.15~~$5.86 billion at June 30, ~~2019. The following table sets forth the changes, by account type,~~2022. Included in ~~deposits.~~

June 30,

June 30,

Increase/

2020

2019

(Decrease)

(In Thousands)

Deposits:

Non-interest-bearing deposits
$
419,138

$
309,063

$
110,075

Interest-bearing demand

1,264,151

843,432

420,719

Savings

906,597

790,658

115,939

Certificates of deposit

1,840,396

2,204,457

(364,061
)
Interest-bearing deposits

4,011,144

3,838,547

172,597

Total deposits
$
4,430,282

$
4,147,610

$
282,672

~~The net increase in deposit balances for the year ended~~total deposits are brokered and listing service time deposits of $640.5 million and $773.5 million at June 30, 2020 was comprised of changes in the balances of retail deposits as well as non-retail deposits acquired through various wholesale channels. The reallocation of deposits for the year ended June 30, 2020 reflected the Company’s continued success in realigning its funding mix in favor of core deposits.2023 and 2022, respectively. The following table sets forth the distribution of, ~~total deposit accounts,~~and changes in, deposits, by ~~retail and wholesale deposits,~~type, at the dates indicated:

June 30,

June 30,

Increase/

2020

2019

(Decrease)

(In Thousands)

Retail deposits:

Non-interest-bearing demand
$
419,138

$
309,063

$
110,075

Interest-bearing demand

1,264,151

843,432

420,719

Savings

906,597

790,658

115,939

Certificates of deposits

1,773,257

1,902,542

(129,285
)
Total retail deposits

4,363,143

3,845,695

517,448

Wholesale deposits:

Certificates of deposits - listing service

35,760

66,110

(30,350
)
Certificates of deposits - brokered

31,379

235,805

(204,426
)
Total wholesale deposits

67,139

301,915

(234,776
)

Total deposits
$
4,430,282

$
4,147,610

$
282,672


	June 30, 2023		June 30, 2022		Increase/ (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)

Uninsured deposits totaled $1.77 billion as of June 30, 2023 compared to $1.53 billion as of June 30, 2022. Excluding collateralized deposits of state and local governments, and deposits of the Bank’s wholly-owned subsidiary and holding company, uninsured deposits totaled $710.4 million, or 12.6% of total deposits, at June 30, 2023 compared to $792.1 million, or 13.5% of total deposits, at June 30, 2022.

Additional information about our deposits at June 30, ~~2020~~2023 is presented under “Item 1. Business” of this Annual Report on Form 10-K, as well as in Note 1210 to the audited consolidated financial statements.

Borrowings. The balance of borrowings ~~decreased~~increased by ~~$148.8~~$605.5 million, or 67.2%, to ~~$1.17~~$1.51 billion ~~or 17.4% of total assets,~~ at June 30, ~~2020~~2023 from ~~$1.32 billion, or 19.9% of total assets,~~$901.3 million at June 30, ~~2019. The decrease in borrowings primarily reflected the extinguishment and maturity of $121.5 million and $35.0 million of FHLB advances, respectively. The decrease in borrowings also~~2022 which included ~~a decrease in~~ overnight borrowings totaling ~~$30.0 million.~~$225.0 million and $250.0 million at June 30, 2023 and 2022, respectively. The ~~decrease in borrowings~~increase was ~~partially offset~~primarily driven by a net increase in ~~short-term~~ FHLB ~~advances totaling $40.0 million.~~advances.

Additional information about our borrowings at June 30, ~~2020~~2023 is presented under “Item 1. Business” of this Annual Report on Form 10-K, as well as in Note 1311 to the audited consolidated financial statements.

Other Liabilities. The balance of other liabilities, ~~increased~~including advance payments by ~~$32.5~~borrowers for taxes and other miscellaneous liabilities, decreased by $2.8 million to ~~$70.6~~$59.5 million at June 30, ~~2020~~2023 from ~~$38.1~~$62.3 million at June 30, ~~2019.~~2022. The ~~increase~~change in the balance of other liabilities ~~primarily~~generally reflected normal operating fluctuations within these line items.

Stockholders’ Equity. Stockholders’ equity decreased by $24.7 million to $869.3 million at June 30, 2023 from $894.0 million at June 30, 2022. The decrease in stockholders’ equity during the ~~adoption~~year ended June 30, 2023 largely reflected dividends totaling $28.7 million and share repurchases totaling $27.4 million. In addition, other comprehensive loss, net of tax, was $13.7 million, which was driven by a ~~new accounting standard related to leases and a decrease~~decline in the fair value of our interest rate derivatives. The new accounting standard requires leases to be recognized on our Consolidated Statements of Condition as a right of use asset and lease liability, as noted above. Our operating lease liability totaled approximately $17.1 million as of June 30, 2020 and the decreaseavailable for sale securities, partially offset by an increase in the fair value of our ~~interest rate~~ derivatives ~~portfolio in a liability position was approximately $18.0 million~~portfolio. These items were partially offset by net income of $40.8 million.

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Book value per share increased by $0.18 to $13.20 at June 30, ~~2020. The remaining variance generally represented normal operating fluctuations in the balances of other liabilities.~~

~~Additional information about the Company’s operating lease liability~~2023 while tangible book value per share increased by $0.06 to $9.96 at June 30, ~~2020 is presented in Note 9~~2023.

On August 1, 2022, we announced that the Board of Directors had authorized a new stock repurchase plan to repurchase up to 4,000,000 shares, and the audited consolidated financial statements. Additional information about the Company’s derivatives portfolio at June 30, 2020 is presented under “Item 1. Business” of this Annual Report on Form 10-K, as well as in Note 14 to the audited consolidated financial statements.

~~Stockholders’ Equity.~~ ~~Stockholders’ equity decreased by $43.0 million to $1.08 billion at June 30, 2020 from $1.13 billion at June 30, 2019 largely reflecting the impact~~completion of our ~~share repurchases and dividends declared during fiscal 2020. In March 2019 we announced our fourth share~~previous stock repurchase ~~program through~~plan, which we authorized the repurchase of ~~9,218,324 shares, or 10%, of our outstanding shares as of that date.~~

7,602,021 shares. During the year ended June 30, ~~2020, the Company~~2023, we repurchased ~~5,375,551~~2,820,398 shares of common stock at a ~~total~~ cost of ~~$69.8~~$27.4 million, ~~and an average cost of $12.98~~or $9.73 per share. The shares of common stock repurchased during the period represented 58.3% of the total shares authorized to be repurchased under the current repurchase program. Cumulatively, the Company has repurchased a total of 8,457,294share, including 2,495,253 shares, or ~~91.7%~~62.4% of the shares ~~to be repurchased~~authorized for repurchase under ~~its~~the current repurchase program, at a ~~total~~ cost of $111.1 million and at an average cost of $13.14 per share. On March 25, 2020 the Company temporarily suspended its stock repurchase program due to the risks and uncertainties associated with the COVID-19 pandemic.

~~The net decrease in stockholders’ equity was partially offset by net income of $45.0~~$23.8 million, or ~~$0.55~~$9.54 per ~~share, for the year ended June 30, 2020 from which we declared and paid cash dividends totaling $0.29 per~~ share. ~~Cash dividends declared and paid during the year ended June 30, 2020 reduced stockholders’ equity by $23.7 million.~~

~~The change in stockholders’ equity also reflected a $1.6 million decrease in accumulated other comprehensive income during the year ended June 30, 2020.~~

Comparison of Operating Results for the Years Ended June 30, ~~2020,~~2023 and June 30, ~~2019~~

2022

Net Income. Net income for the year ended June 30, ~~2020~~2023 was ~~$45.0~~$40.8 million, or ~~$0.55~~$0.63 per ~~basic and~~ diluted share, ~~compared to $42.1~~a decrease of 39.6% from $67.5 million, or ~~$0.46~~$0.95 per ~~basic and~~ diluted share for the year ended June 30, ~~2019.~~2022. The ~~increase~~decrease in net income reflected a decrease in net interest income, an increase in the provision for credit losses and a decrease in non-interest income, partially offset by a decrease in non-interest expense and a decrease in income tax ~~expense that was partially offset by a decrease in net interest income, as detailed above, and an increase to the provision for loan losses.~~

expense. Net income for the ~~year~~years ended June 30, ~~2020~~2023 and June 30, 2022 was impacted by avarious non-recurring ~~increase of $720,000~~items, as described in non-interest expense and a non-recurring decrease of $342,000 in non-interest income which were recognized in conjunction with the Company’s previously completed branch consolidations. In addition, net income reflected the Company’s recognition of certain merger-related expenses totaling $951,000 related to its acquisition of MSB, as noted above.

further detail below.

Net Interest Income. Net interest income decreased by ~~$6.0~~$20.7 million to ~~$149.4~~$175.9 million for the year ended June 30, ~~2020.~~2023. The decrease between the comparative periods resulted from ~~a decrease~~an increase of ~~$4.1~~$88.2 million in interest ~~income and an increase of $1.8 million in interest expense.~~

~~The decrease in interest income of $4.1 million partly reflected an eight basis points decrease in the yield on interest-earning assets to 3.83%~~expense, partially offset by an increase of $67.5 million in interest income. Included in net interest income for the years ended June 30, 2023 and 2022, respectively, was purchase accounting accretion of $5.3 million and $9.0 million and loan prepayment penalty income of $895,000 and $5.4 million.

Net interest margin decreased 60 basis points to ~~their average balance of $17.2 million to $6.09 billion. Interest income on loans decreased by $5.4 million to $187.0 million~~2.34% for the year ended June 30, ~~2020. The decrease in interest income on loans was primarily attributable to a $100.6 million decrease in the average balance of loans to $4.57 billion during the year ended June 30, 2020.~~ ~~The average yield on loans decreased three basis points to 4.09%.~~ The decrease in interest income on interest-earning assets, excluding loans, was due to decreases in interest income on tax-exempt securities and other interest-earning assets partially offset by an increase in interest income on taxable investment securities.

~~The increase in interest expense partly reflected an $86.3 million increase in the average balance of interest-bearing liabilities to $5.20 billion~~2023, from 2.94% for the year ended June 30, ~~2020, while also reflecting a one basis point increase~~2022. The decrease reflected increases in the cost and average balance of interest-bearing liabilities, partially offset by increases in the yield on and average balance of interest-earning assets. The increased cost of interest-bearing liabilities ~~to 1.61%. Interest expense on deposits increased $6.3 million to $58.9 million for the year ended June 30, 2020~~ and ~~was attributable to an increase of $152.5 million in the average balance of interest-bearing deposits coupled with an 11 basis point increase in their cost.~~ Interest expense on borrowings decreased by $4.5 million to $25.0 million for the year ended June 30, 2020 and was attributable to a decrease of $66.2 million in the average balance of borrowings coupled with a 24 basis point decrease in their cost.

For the year ended June 30, 2020, net interest spread declined by nine basis points to 2.22% while net interest margin declined 11 basis points to 2.45%. The decrease in the net interest rate spread reflected a decrease in the average yield on interest-earning assets ~~and~~is the result of higher market interest rates that were caused by an increase in the ~~average cost~~federal funds target rate from 0% - 0.25% in March 2022 to 5.00% - 5.25% in May 2023.

Table of ~~interest-bearing liabilities.~~

Contents

~~Additional details~~Details surrounding the composition of, and changes to, net interest income are presented in the ~~tables below.~~

~~The following~~ table below which reflects the components of the average balance sheet and of net interest income for the periods indicated. We derived the average yields and costs by dividing income or expense by the average balance of assets or liabilities, respectively, for the periods presented with daily balances used to derive average balances. No tax equivalent adjustments have been made to yield or costs. Non-accrual loans were included in the calculation of average balances, however interest receivable on these loans has been fully reserved for and therefore not included in interest income. The yields and costs set forth below include the effect of deferred fees, discounts and premiums that are amortized or accreted to interest income or expense and exclude the impact of prepayment penalties, which are recorded to non-interest income.


	For the Years Ended June 30,
	2023						2022						2021
	Average Balance		Interest		Average Yield/ Cost		Average Balance		Interest		Average Yield/ Cost		Average Balance		Interest		Average Yield/ Cost
	(Dollars in Thousands)
Interest-earning assets:
Loans receivable (1)	$	5,827,123	$	233,147	4.00	%	$	4,922,400	$	190,520	3.87	%	$	4,866,436	$	202,240	4.16	%
Taxable investment securities(2)	1,532,961		54,855		3.58		1,622,475		32,746		2.02		1,571,452		31,238		1.99
Tax-exempt securities (2)	30,332		694		2.29		55,981		1,273		2.27		74,604		1,652		2.21
Other interest-earning assets(3)	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
Non-interest-bearing liabilities(4)	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
Interest rate spread(5)					2.09	%					2.86	%					2.67	%
Net interest margin(6)					2.34	%					2.94	%					2.80	%
Ratio of interest-earning assets to interest-bearing liabilities	1.16						1.19						1.19

For the Years Ended June 30,

2020

2019

2018

Average
Balance

Interest

Average
Yield/
Cost

Average
Balance

Interest

Average
Yield/
Cost

Average
Balance

Interest

Average
Yield/
Cost

(Dollars in Thousands)
Interest-earning assets:

Loans receivable ⁽¹⁾
$
4,568,816

$
187,003

4.09

%

$
4,669,436

$
192,386

4.12

%

$
3,577,598

$
138,426

3.87

%
Taxable investment securities⁽²⁾

1,291,516

39,321

3.04

1,171,335

37,213

3.18

1,048,163

27,053

2.58

Tax-exempt securities ⁽²⁾

111,477

2,393

2.15

134,489

2,839

2.11

127,779

2,616

2.05

Other interest-earning assets⁽³⁾

122,278

4,491

3.67

101,595

4,895

4.82

93,209

3,336

3.58

Total interest-earning assets

6,094,087

233,208

3.83

6,076,855

237,333

3.91

4,846,749

171,431

3.54

Non-interest-earning assets

595,158

582,838

420,219

Total assets
$
6,689,245

$
6,659,693

$
5,266,968

Interest-bearing liabilities:

Interest-bearing demand
$
1,041,188

$
11,433

1.10

$
796,815

$
8,125

1.02

$
896,695

$
7,390

0.82

Savings

831,832

6,735

0.81

761,203

4,186

0.55

569,777

993

0.17

Certificates of deposit

2,032,046

40,684

2.00

2,194,513

40,200

1.83

1,496,743

21,266

1.42

Total interest-bearing deposits

3,905,066

58,852

1.51

3,752,531

52,511

1.40

2,963,215

29,649

1.00

Borrowings

1,293,096

25,002

1.93

1,359,323

29,509

2.17

910,527

20,489

2.25

Total interest-bearing liabilities

5,198,162

83,854

1.61

5,111,854

82,020

1.60

3,873,742

50,138

1.29

Non-interest-bearing liabilities⁽⁴⁾

394,758

351,217

311,560

Total liabilities

5,592,920

5,463,071

4,185,302

Stockholders’ equity

1,096,325

1,196,622

1,081,666

Total liabilities and stockholders’
equity
$
6,689,245

$
6,659,693

$
5,266,968

Net interest income

$
149,354

$
155,313

$
121,293

Interest rate spread⁽⁵⁾

2.22

%

2.31

%

2.25

%
Net interest margin⁽⁶⁾

2.45

%

2.56

%

2.50

%
Ratio of interest-earning assets
to interest-bearing liabilities

1.17

X

1.19

X

1.25

X

(1)Loans held-for-sale and non-accruing loans have been included in loans receivable and the effect of such inclusion was not material. Allowance for credit losses has been included in non-interest-earning assets.

Loans held-for-sale and non-accruing loans have been included in loans receivable and the effect of such inclusion was not material. Allowance for loan losses has been included in non-interest-earning assets.

(2)Fair value adjustments have been excluded in the balances of interest-earning assets.

~~Fair value adjustments have been excluded in the balances of interest-earning assets.~~

(3)Includes interest-bearing deposits at other banks and FHLB of New York capital stock.

~~Includes interest-bearing deposits at other banks and FHLB of New York capital stock.~~

(4)Includes average balances of non-interest-bearing deposits of $644.5 million, $624.7 million and $518.1 million for the years ended June 30, 2023, 2022 and 2021, respectively.

~~Includes average balances of non-interest-bearing deposits of $334,522,000, $312,169,000 and $281,262,000, for the years ended June 30, 2020, 2019 and 2018, respectively.~~

(5)Interest rate spread represents the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities.

~~Interest rate spread represents the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities.~~

(6)Net interest margin represents net interest income as a percentage of average interest-earning assets.

~~Net interest margin represents net interest income as a percentage of average interest-earning assets.~~

Table of Contents

The following table reflects the dollar amount of changes in interest income and interest expense to changes in volume and in prevailing interest rates during the periods indicated. Each category reflects the: (1) changes in volume (changes in volume multiplied by old rate); (2) changes in rate (changes in rate multiplied by old volume); and (3) net change. The net change attributable to the combined impact of volume and rate has been allocated proportionally to the absolute dollar amounts of change in each.


	Year Ended June 30, 2020 versus Year Ended June 30, 2019									Year Ended June 30, 2019 versus Year Ended June 30, 2018									Year Ended June 30, 2023 versus Year Ended June 30, 2022						Year Ended June 30, 2022 versus Year Ended June 30, 2021
	Increase (Decrease) Due to									Increase (Decrease) Due to									Increase (Decrease) Due to						Increase (Decrease) Due to
	Volume			Rate			Net			Volume			Rate			Net			Volume		Rate		Net		Volume		Rate		Net
	(In Thousands)									(In Thousands)									(In Thousands)						(In Thousands)
Interest and dividend income																		Interest and dividend income
Loans receivable	$	(4,023	)	$	(1,360	)	$	(5,383	)	$	44,534		$	9,426		$	53,960	Loans receivable	$	36,040	$	6,587	$	42,627	$	2,337	$	(14,057)	$	(11,720)
Taxable investment securities		3,770			(1,662	)		2,108			3,411			6,749			10,160	Taxable investment securities	(1,901)		24,010		22,109		1,030		478		1,508
Tax-exempt securities		(498	)		52			(446	)		143			80			223	Tax-exempt securities	(590)		11		(579)		(423)		44		(379)
Other interest-earning assets		890			(1,294	)		(404	)		321			1,238			1,559	Other interest-earning assets	876		2,419		3,295		(2,157)		935		(1,222)
Total interest-earning assets	$	139		$	(4,264	)	$	(4,125	)	$	48,409		$	17,493		$	65,902	Total interest-earning assets	$	34,425	$	33,027	$	67,452	$	787	$	(12,600)	$	(11,813)

Interest expense:																		Interest expense:
Interest-bearing demand	$	2,634		$	674		$	3,308		$	(894	)	$	1,629		$	735	Interest-bearing demand	$	802	$	34,725	$	35,527	$	1,216	$	(3,121)	$	(1,905)
Savings and club		418			2,131			2,549			417			2,776			3,193
Savings																		Savings	(243)		2,404		2,161		67		(2,176)		(2,109)
Certificates of deposit		(3,094	)		3,578			484			11,692			7,242			18,934	Certificates of deposit	2,320		22,947		25,267		(2,192)		(10,121)		(12,313)
Borrowings		(1,378	)		(3,129	)		(4,507	)		9,772			(752	)		9,020	Borrowings	10,324		14,911		25,235		(3,489)		(366)		(3,855)
Total interest-bearing liabilities		(1,420	)		3,254			1,834			20,987			10,895			31,882	Total interest-bearing liabilities	$	13,203	$	74,987	$	88,190	$	(4,398)	$	(15,784)	$	(20,182)

Change in net interest income	$	1,559		$	(7,518	)	$	(5,959	)	$	27,422		$	6,598		$	34,020	Change in net interest income	$	21,222	$	(41,960)	$	(20,738)	$	5,185	$	3,184	$	8,369

Provision for ~~Loan~~Credit Losses. The provision for ~~loan~~credit losses increased by ~~$641,000~~$10.0 million to ~~$4.2~~a provision for credit losses of $2.5 million for the year ended June 30, ~~2020~~2023, compared to ~~$3.6~~a reversal of credit losses of $7.5 million for the year ended June 30, ~~2019.~~2022. The ~~increase largely reflected increases to environmental loss factors associated with the adverse impact of COVID-19 that was partially offset by the effects of lower growth during~~provision for credit losses for the year ended June 30, ~~2020~~2023 was largely attributable to loan growth, partially offset by a reduction in the ~~balance~~expected life of the ~~portion~~loan portfolio. By comparison, the reversal of credit losses for the year ended June 30, 2022 was largely attributable to an improvement in our economic forecast, a reduction in the expected life of various segments of the loan portfolio ~~that was collectively evaluated~~and a net reduction in reserves on loans individually analyzed for ~~impairment compared to that of the prior year ended June 30, 2019.~~impairment.

Additional information regarding the allowance for ~~loan~~credit losses and the associated ~~provisions~~provision recognized during the year ended June 30, ~~2020~~2023 is presented under “Item 1, Business” on this Annual Report on Form 10-K as well as in Note 1 and Note 86 to the audited consolidated financial statements as well as the Comparison of Financial Condition at June 30, ~~2020.~~

2023.

Non-Interest Income. Non-interest income ~~increased~~decreased by ~~$6.2~~$11.2 million to ~~$19.7~~$2.8 million for the year ended June 30, ~~2020, reflecting~~2023.

Loss on sale and call of securities was $15.2 million during the ~~effects~~year ended June 30, 2023 compared to $559,000 recorded during the earlier comparative period. The current year loss was the result of ~~several offsetting factors.~~

~~Fees and service charges increased by $1.2~~a previously announced wholesale restructuring that involved the sale of $120.4 million ~~to $6.6~~of available for sale securities. The proceeds of the sale were reinvested in higher yielding securities.

Loss on sale of loans was $1.6 million for the year ended June 30, ~~2020.~~2023 compared to a gain on sale of loans of $2.5 million during the earlier comparative period. The ~~increase was largely attributable~~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.

Income from bank owned life insurance increased $2.5 million to ~~an increase of $1.1 million in loan pre-payment penalty income to $4.6~~$8.6 million for the year ended June 30, ~~2020.~~

~~Gains on sales and calls of securities during the year ended June 30, 2020 totaled $2.3 million, compared to a net loss of $323,000 during the earlier comparative period.~~2023. The increase ~~was primarily attributable to~~is the ~~execution~~result of ~~a wholesale restructuring transaction, as noted above.~~

~~Gain~~payouts on ~~sale~~life insurances policies.

Table of ~~loans~~Contents

Other non-interest income increased ~~by $2.6~~$4.7 million to ~~$3.2~~$6.3 million for the year ended June 30, ~~2020.~~2023. The increase was primarily attributable to a non-recurring gain of $2.9 million from the sale of a former branch location and a $1.8 million increase in ~~loan sale gains reflected an increase~~income from investment services. These increases were partially offset by $356,000 of ~~$2.6 million in~~non-recurring gains on ~~sale of residential mortgage loans. The increase~~asset disposals in ~~residential mortgage gains on sale primarily reflected changes in the volume of loans originated and sold between comparative periods.~~

~~The Company incurred a net loss of $28,000 related to the write down and sale of OREO during the year ended June 30, 2020 compared to a net loss of $11,000 during~~ the earlier comparative period.

Miscellaneous non-interest income decreased by $281,000 to $194,000 for the year ended June 30, 2020. The decrease primarily reflected $342,000 of non-recurring asset disposal losses recognized in conjunction with the Company’s previously completed branch consolidations.

The remaining changes in the other components of non-interest income between comparative periods generally reflected normal operating fluctuations within those line items.

Non-Interest ~~Expenses~~Expense. ~~Total non-interest~~Non-interest expense decreased by ~~$1.6~~$2.0 million to ~~$107.6~~$123.8 million for the year ended June 30, ~~2020.~~2023.

Salaries and employee benefits expense decreased by ~~$1.0 million~~$675,000 to ~~$62.0~~$75.6 million for the year ended June 30, ~~2020. The net~~2023. This decrease ~~in salaries~~was largely due to lower incentive compensation, lower incentive payments tied to loan origination volume and ~~employee benefits~~lower expense ~~reflected decreases in employee severance, defined benefit plan expense, ESOP expense and employee stock-based compensation expense.~~from retirement plans. These decreases were partially offset by ~~increases~~higher salary expense and non-recurring severance expense resulting from a reduction in ~~wages and salaries, medical benefits and payroll taxes.~~

headcount.

Net occupancy expense of premises ~~increased~~decreased by ~~$204,000~~$2.1 million to ~~$11.4~~$12.0 million for the year ended June 30, ~~2020.~~2023. This ~~increase~~decrease was largely ~~attributable~~due to ~~$517,000~~expenses recognized in the prior period including $1.5 million of non-recurring ~~lease termination costs recognized in conjunction with~~expenses related to the ~~previously noted~~consolidation of three retail branch ~~consolidations coupled with~~locations and an ~~increase in~~office facility ~~lease expenses arising from costs associated with forthcoming branch additions~~ and ~~relocations. Partially offsetting these increases were decreases in ongoing~~$250,000 related to facility repairs ~~and maintenance expenses.~~

made in connection with damage incurred during Tropical Storm Ida. The current year includes $250,000 of non-recurring occupancy expenses related to the consolidation of two retail branch locations.

Equipment and systems expense decreased by ~~$518,000~~$1.3 million to ~~$11.8~~$14.6 million for the year ended June 30, ~~2020.~~2023. This decrease ~~in expense~~ was largely attributable to a decrease of $1.1 million in core processing expense and $319,000 in telecommunication delivery channel expense, partially offset by increases in other technology infrastructure costs. The reduction in core processing expense was primarily attributable toprior period non-recurring expense ~~reductions~~ of ~~$907,000, recognized in~~$800,000 from the ~~current period, attributable~~early termination of a contract with a service provider.

FDIC insurance premiums increased $2.7 million to the re-negotiation of the Company’s core processing contract. The remaining reduction in core processing expense and the reduction in telecommunication channel expense was largely the result of expenses recognized by the Company, in the earlier comparative period, related to an acquired institution.

~~Advertising and marketing expense decreased by $263,000 to $2.8~~$5.1 million for the year ended June 30, ~~2020.~~2023. This ~~decrease~~increase was largely ~~reflected an overall reduction in marketing and advertising expenditures coupled with a shift in marketing focus from more traditional advertising mediums to digital marketing channels.~~

~~FDIC insurance premiums~~driven by asset growth.

Director compensation decreased by ~~$1.5 million~~$768,000 to $286,000 for the year ended June 30, 2020. This decrease was attributable to no expense being recorded during first nine months of fiscal 2020 as a result of the FDIC’s Small Bank Assessment Credit program.

~~Directors’ compensation expense increased by $35,000 to $3.1~~$1.4 million for the year ended June 30, ~~2020 and~~2023. This decrease primarily reflected ~~an increase~~a decline in director-related ~~stock based compensation.~~

~~Merger-related expenses increased by $951,000 and were related to~~stock-based compensation expense.

The remaining changes in the ~~Company’s acquisition~~other components of ~~MSB, as noted above,~~non-interest expense between comparative periods generally reflected normal operating fluctuations within those line items.

Provision for ~~which no such expenses were recorded during the earlier comparative period.~~

~~Debt extinguishment expenses increased by $2.2 million and were related to the Company’s execution of a wholesale restructuring transaction, as noted above,~~Income Taxes. Provision for ~~which no such expenses were recorded during the earlier comparative period.~~

~~Miscellaneous expense~~income taxes decreased by ~~$1.7~~$13.2 million to ~~$13.2~~$11.6 million for the year ended June 30, 2020. This decrease was largely attributable to the recovery an of asset write-down, recognized in conjunction with branch consolidations, of $288,000 compared to an asset write-down of $1.0 million in the prior comparative period. The decrease in miscellaneous expense also reflected decreases in professional and consulting expense, audit and accounting fees, OREO expense and office supplies that were partially offset by increases in legal expense, loan expense, insurance expense and deposit account losses.

~~Provision for Income Taxes. The provision for income taxes decreased by $1.6 million to $12.2~~2023, from $24.8 million for the year ended June 30, ~~2020.~~2022. The decrease in income tax expense reflected a $1.6 million reduction in income tax expense attributable to the carryback of net operating losses into prior periods at a higher statutory federal tax rate than is currently in effect for the Company. This carryback was permitted by tax law changes enacted by the CARES Act, which was signed into law on March 27, 2020. In addition, the Company reversed valuation allowances totaling $591,000 which were associated with capital loss carryforwards and were determined to be realizable due to the sale of investment securities at the Bank’s New Jersey investment company subsidiary. Finally, a lower level of pre-tax ~~net~~ income as compared to the prior ~~period, resulted~~period.

Effective tax rates for the years ended June 30, 2023 and 2022 were 22.1% and 26.9%, respectively. The decrease in ~~a lower provision for income tax expense.~~

~~Our~~the effective tax ~~rates for~~rate was primarily due to lower taxable income, as well as non-taxable payouts on life insurance policies, noted above, during the year ended June 30, 2020 and June 30, 2019 were 21.5% and 24.8% which, in relation to statutory income tax rates, reflected the effects of recurring sources of tax-favored income included in pre-tax income. However, the effective tax rate for the year ended June 30, 2020 further reflected the effects of the CARES Act and the reversal of valuation allowances recognized during the period, as discussed above.

2023.

Comparison of Operating Results for the Years Ended June 30, ~~2019,~~2022 and June 30, ~~2018~~

2021

A comparison of our operating results for the years ended June 30, ~~2019~~2022 and June 30, ~~2018~~2021 can be found in our Annual Report on Form 10-K for the year ended June 30, ~~2019,~~2022, filed with the SEC on August ~~28, 2019.~~

26, 2022.

Table of Contents

Liquidity and Commitments

Liquidity, represented by cash and cash equivalents, is a product of operating, investing and financing activities. ~~The Company’s~~Our primary sources of funds are deposits, borrowings, cash flows from investment securities and loans receivable and funds provided from operations. While scheduled payments from the amortization and maturity of loans and investment securities are relatively predictable sources of funds, general interest rates, economic conditions and competition greatly influence deposit flows and prepayments on loans and securities.

Liquidity, at June 30, ~~2020,~~2023, included ~~$181.0~~$70.5 million of short-term cash and equivalents ~~supplemented by $1.39~~and $1.23 billion of investment securities ~~classified as~~ available for sale which can readily be sold or pledged as collateral, if necessary. In addition, ~~the Company has~~we have the capacity to borrow additional funds from the FHLB, ~~Federal Reserve Bank~~FRB or via unsecured ~~lines of credit.~~overnight borrowings. As of June 30, ~~2020, the Company~~2023, we had the capacity to borrow additional funds totaling ~~$1.53~~$1.55 billion and ~~$318.7~~$415.0 million from the FHLB and FRB, respectively, without pledging additional ~~collateral, from~~collateral. We had the ~~FHLB~~ability to pledge additional securities to borrow an additional $477.0 million at June 30, 2023. As of ~~New York and FRB, respectively. The Company~~that same date, we also had ~~the capacity~~access to ~~borrow additional funds, on an~~ unsecured ~~basis, via lines of credit established~~overnight borrowings with other financial ~~institutions. As~~institutions totaling $990.0 million, of ~~June 30, 2020, the available borrowing capacity under those lines of credit totaled $615.0 million.~~

which $100.0 million was outstanding.

Deposits ~~increased $282.7~~decreased $233.1 million to ~~$4.43~~$5.63 billion at June 30, ~~2020~~2023 from ~~$4.15~~$5.86 billion at June 30, ~~2019.~~2022. The ~~increase~~decrease in deposit balances reflected a ~~$172.6~~$189.2 million ~~increase~~decrease in interest-bearing deposits coupled with a ~~$110.1~~$43.9 million ~~increase~~decrease in non-interest-bearing deposits. Borrowings from the FHLB ~~of New York~~ and other sources are generally available to supplement ~~the Bank’s~~our liquidity position or to replace maturing deposits. As of June 30, ~~2020, the Bank’s~~2023, our outstanding balance of FHLB advances, excluding fair value adjustments, totaled ~~$1.17~~$1.28 billion. ~~In addition to FHLB advances~~As of the same date, we ~~have other borrowings totaling $5.7~~had $125.0 million ~~which represent collateralized~~outstanding via our overnight ~~sweep account balances linked to customer demand deposits.~~

line of credit with the FHLB.

The following table sets forth information concerning balances and interest rates on our short-term borrowings at and for the periods shown:


	At or For the Years Ended June 30,										At or For the Years Ended June 30,
	2020			2019			2018				2023			2022			2021
	(Dollars in Thousands)										(Dollars in Thousands)
Balance at end of year	$	865,000		$	825,000		$	625,000		Balance at end of year	$	1,175,000		$	625,000		$	390,000
Average balance during year	$	904,262		$	854,554		$	629,008		Average balance during year	$	900,997		$	476,142		$	646,896
Maximum outstanding at any month end	$	1,075,000		$	975,000		$	667,000		Maximum outstanding at any month end	$	1,280,000		$	684,000		$	815,000
Weighted average interest rate at end of year		0.45	%		2.54	%		2.22	%	Weighted average interest rate at end of year	5.42		%	1.72		%	0.33		%
Weighted average interest rate during year		2.14	%		2.48	%		1.64	%	Weighted average interest rate during year	4.49		%	0.58		%	1.08		%

The following table discloses our contractual obligations and commitments as of June 30, ~~2020:~~

2023:


	June 30, 2023
	Less than One Year		One to Three Years		Over Three Years to Five Years		Over Five Years		Total
	(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
Undisbursed funds from approved lines of credit(1)	$	87,467	$	20,942	$	4,123	$	56,961	$	169,493
Construction loans in process(1)	58,485		—		—		—		58,485
Other commitments to extend credit(1)	23,261		—		—		—		23,261

Total commitments	$	169,213	$	20,942	$	4,123	$	56,961	$	251,239

At June 30, 2020

Less than
One Year

One to
Three Years

Over Three
Years to
Five Years

Over Five
Years

Total

(In Thousands)

Contractual obligations

Operating lease obligations
$
3,212

$
5,409

$
3,248

$
7,373

$
19,242

Certificates of deposit

1,515,042

255,717

63,648

5,989

1,840,396

Federal Home Loan Bank Advances

865,000

172,000

126,000

6,500

1,169,500

Total contractual obligations
$
2,383,254

$
433,126

$
192,896

$
19,862

$
3,029,138

Commitments

Undisbursed funds from approved lines of credit⁽¹⁾
$
26,097

$
6,959

$
3,890

$
45,556

$
82,502

Construction loans in process⁽¹⁾

16,973

-

-

-

16,973

Other commitments to extend credit⁽¹⁾

45,598

-

-

-

45,598

Total commitments
$
88,668

$
6,959

$
3,890

$
45,556

$
145,073

(1)Represents amounts committed to customers.

~~(1)~~

~~Represents amounts committed to customers.~~

Table of Contents

In addition to the loan commitments noted above, the pipeline of loans held for sale included ~~$127.2~~$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.

~~Off-Balance Sheet Arrangements~~

We are a party to financial instruments with off-balance-sheet risk in the normal course of our business of investing in loans and securities as well as in the normal course of maintaining and improving our facilities. These financial instruments include significant purchase commitments, such as commitments related to capital expenditure plans and commitments to extend credit to meet the financing needs of our customers. We had no significant off-balance sheet commitments for capital expenditures as of June 30, 2020.

In addition to the commitments noted above, we are party to standby letters of credit totaling approximately ~~$217,000~~$115,000 at June 30, ~~2020~~2023 through which we guarantee certain specific business obligations of our commercial customers.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee by the customer. Our exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual notional amount of those instruments. We use the same credit policies in making commitments and conditional obligations as we do for on-balance-sheet instruments. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

At June 30, ~~2020,~~2023, outstanding loan commitments relating to loans held in portfolio totaled ~~$145.1~~$251.2 million compared to ~~$110.1~~$510.5 million at June 30, ~~2019.~~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, ~~2020,~~2023, see Note 1817 to the audited consolidated financial statements.

Capital

Consistent with our goals to operate as a sound and profitable financial organization, Kearny Financial and Kearny Bank actively seek to maintain our well capitalized status in accordance with regulatory standards. As of June 30, ~~2020,~~2023, Kearny Financial and Kearny Bank exceeded all capital requirements of the federal banking regulators and were considered well capitalized.

The following table presents information regarding the Bank’s regulatory capital levels at June 30, ~~2020:~~

2023:


	At June 30, 2020																June 30, 2023
	Actual					For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions						Actual				For Capital Adequacy Purposes				To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio				Amount		Ratio		Amount		Ratio		Amount		Ratio
	(Dollars in Thousands)																(Dollars in Thousands)
Total capital (to risk-weighted assets)	$	816,577		21.38	%	$	305,562		8.00	%	$	381,953		10.00	%	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)		779,250		20.40	%		229,172		6.00	%		305,562		8.00	%	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)		779,250		20.40	%		171,879		4.50	%		248,269		6.50	%	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)		779,250		11.95	%		260,893		4.00	%		326,116		5.00	%	Tier 1 capital (to adjusted total assets)	659,783		8.15	%	323,922		4.00	%	404,902		5.00	%

The following table presents information regarding the consolidated Company’s regulatory capital levels at June 30, ~~2020:~~

2023:


	At June 30, 2020											June 30, 2023
	Actual					For Capital Adequacy Purposes						Actual				For Capital Adequacy Purposes
	Amount		Ratio			Amount		Ratio				Amount		Ratio		Amount		Ratio
	(Dollars in Thousands)											(Dollars in Thousands)
Total capital (to risk-weighted assets)	$	906,058		23.61	%	$	306,958		8.00	%	Total capital (to risk-weighted assets)	$	770,621	14.75	%	$	418,015	8.00	%
Tier 1 capital (to risk-weighted assets)		868,731		22.64	%		230,219		6.00	%	Tier 1 capital (to risk-weighted assets)	734,987		14.07	%	313,511		6.00	%
Common equity tier 1 capital (to risk-weighted assets)		868,731		22.64	%		172,664		4.50	%	Common equity tier 1 capital (to risk-weighted assets)	734,987		14.07	%	235,133		4.50	%
Tier 1 capital (to adjusted total assets)		868,731		13.27	%		261,783		4.00	%	Tier 1 capital (to adjusted total assets)	734,987		9.07	%	324,170		4.00	%

For additional information regarding regulatory capital at June 30, ~~20120,~~2023, see Note 1615 to the audited consolidated financial statements.

Table of Contents

Impact of Inflation

The financial statements included in this document have been prepared in accordance with accounting principles generally accepted in the United States of America. These principles require the measurement of financial position and operating results in terms of historical dollars, without considering changes in the relative purchasing power of money over time due to inflation.

Our primary assets and liabilities are monetary in nature. As a result, interest rates have a more significant impact on our performance than the effects of general levels of inflation. Interest rates, however, do not necessarily move in the same direction or with the same magnitude as the price of goods and services, since such prices are affected by inflation. In a period of rapidly rising interest rates, the liquidity and maturities of our assets and liabilities are critical to the maintenance of acceptable performance levels.

The principal effect of inflation on earnings, as distinct from levels of interest rates, is in the area of non-interest expense. Expense items such as employee compensation, employee benefits and occupancy and equipment costs may be subject to increases as a result of inflation. An additional effect of inflation is the possible increase in the dollar value of the collateral securing loans that we have made. We are unable to determine the extent, if any, to which properties securing our loans have appreciated in dollar value due to inflation.

Recent Accounting Pronouncements

For a discussion of the expected impact of recently issued accounting pronouncements that have yet to be adopted by us, please refer to Note 2 to the audited consolidated financial statements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Management of Interest Rate Risk and Market Risk

The majority of our assets and liabilities are sensitive to changes in interest ~~rates. Consequently,~~rates and as such, interest rate risk is a significant form of ~~business~~market risk that we must manage. Interest rate risk is generally defined in regulatory nomenclature as the risk to earnings or capital arising from the movement of interest rates and arises from several risk factors including re-pricing risk, basis risk, yield curve risk and option risk.

We maintain an Asset/Liability Management (“ALM”) program in order to manage our interest rate risk. The program is overseen by the Board of Directors through its Interest Rate Risk Management ~~Committee. The Board of Directors~~Committee, which has assigned the responsibility for the operational aspects of the ALM program to our Asset/Liability Management Committee (“ALCO”)~~. The ALCO~~, which is a management committee comprising the Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, Chief Lending Officer, Chief Credit Officer, Chief Banking Officer, Chief Risk Officer and Treasurer/Chief Investment Officer. Additionalcomprised of various members of ~~our~~the senior and executive management ~~team may be asked to participate on the ALCO, as appropriate.~~

team.

The quantitative analysis that we conduct measures interest rate risk from both a capital and earnings perspective. With regard to earnings, movements in interest rates and the shape of the yield curve significantly influence the amount of net interest income (“NII”) that we recognize. Movements in market interest rates, and the effect of such movements on the risk factors noted above, significantly influence the spread between the interest earned on our interest-earning assets and the interest paid on our interest-bearing liabilities. Our internal interest rate risk analysis calculates the sensitivity of our projected NII over a one year period utilizing a static balance sheet assumption through which incoming and outgoing asset and liability cash flows are reinvested into similar instruments. Product pricing and earning asset prepayment speeds are appropriately adjusted for each rate scenario.

With regard to capital, our internal interest rate risk analysis calculates the sensitivity of our Economic Value of Equity (“EVE”) ~~ratio~~ to movements in interest rates. EVE represents the present value of the expected cash flows from our assets less the present value of the expected cash flows arising from our liabilities adjusted for the value of off-balance sheet instruments. EVE attempts to quantify our economic value using a discounted cash flow ~~methodology while the EVE ratio reflects that value as a form of capital ratio.~~methodology. The degree to which ~~the~~our EVE ~~ratio~~ changes for any hypothetical interest rate scenario from its base case measurement is a reflection of an institution’s sensitivity to interest rate risk.

For both earnings and capital at risk our interest rate risk analysis calculates a base case scenario that assumes no change in interest rates. The model then measures changes throughout a series of interest rate scenarios representing immediate and permanent, parallel shifts in the yield curve up and down 100, 200 and 300 basis points with additional scenarios modeled where appropriate. The model requires that interest rates remain positive for all points along the yield curve for each rate scenario which may preclude the modeling of certain falling rate scenarios during periods of lower market interest rates. The relatively low level of interest rates prevalent at June 30, ~~2020 and June 30, 2019~~2022 precluded the modeling of certain falling rate scenarios.

Table of Contents

The following tables present the results of our internal EVE ~~analysis~~and NII analyses as of June 30, ~~2020~~2023 and ~~June 30, 2019,~~2022, respectively:


	June 30, 2020																	June 30, 2023
	Economic Value of Equity (“EVE”)									EVE as a % of Present Value of Assets											1 to 12 Months			13 to 24 Months
Change in Interest Rates	$ Amount of EVE		$ Change in EVE			% Change in EVE				EVE Ratio			Change in EVE Ratio				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)																	(Dollars in Thousands)
+300 bps		961,579		11,882			1		%		15.57	%		113		bps	+300 bps	507,998	(32.36)	%	154,552	(5.26)	%	168,366	(3.87)	%
+200 bps		988,278		38,581			4		%		15.61	%		117		bps	+200 bps	571,129	(23.95)	%	156,274	(4.20)	%	167,683	(4.26)	%
+100 bps		988,410		38,713			4		%		15.28	%		84		bps	+100 bps	673,314	(10.35)	%	160,344	(1.71)	%	173,170	(1.13)	%
0 bps		949,697	-			-					14.44	%	-				0 bps	751,040	—		163,132	—		175,143	—
-100 bps		829,775		(119,922	)		(13	)	%		12.60	%		(184	)	bps	-100 bps	799,675	6.48	%	163,455	0.20	%	173,319	(1.04)	%

-200 bps																	-200 bps	814,293	8.42	%	161,284	(1.13)	%	166,473	(4.95)	%
-300 bps																	-300 bps	849,208	13.07	%	158,526	(2.82)	%	156,507	(10.64)	%


	June 30, 2019																	June 30, 2022
	Economic Value of Equity (“EVE”)									EVE as a % of Present Value of Assets											1 to 12 Months			13 to 24 Months
Change in Interest Rates	$ Amount of EVE		$ Change in EVE			% Change in EVE				EVE Ratio			Change in EVE Ratio				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)																	(Dollars in Thousands)
+300 bps		733,887		(172,135	)		(19	)	%		12.44	%		(168	)	bps	+300 bps	1,089,795	(15.37)	%	178,865	(13.62)	%	214,839	(1.68)	%
+200 bps		795,855		(110,167	)		(12	)	%		13.12	%		(100	)	bps	+200 bps	1,156,219	(10.21)	%	187,601	(9.40)	%	215,528	(1.36)	%
+100 bps		859,686		(46,336	)		(5	)	%		13.77	%		(35	)	bps	+100 bps	1,239,935	(3.71)	%	198,126	(4.32)	%	219,594	0.50	%
0 bps		906,022	-			-					14.12	%	-				0 bps	1,287,700	—		207,069	—		218,501	—
-100 bps		892,775		(13,247	)		(1	)	%		13.63	%		(49	)	bps	-100 bps	1,272,203	(1.20)	%	205,241	(0.88)	%	204,568	(6.38)	%
-200 bps		800,049		(105,973	)		(12	)	%		12.11	%		(201	)	bps

There are numerous internal and external factors that may contribute to changes in our EVE ~~ratio~~ and its sensitivity. Changes in the composition and allocation of our balance sheet, or utilization of ~~off balance~~off-balance sheet instruments such as derivatives, can significantly alter the exposure to interest rate risk as quantified by the changes in the EVE sensitivity measures. Changes to certain external factors, most notably changes in the level of market interest rates and overall shape of the yield curve, can also alter the projected cash flows of our interest-earning assets and interest-costing liabilities and the associated present values thereof.

~~The following tables present the results of our internal NII analysis as of June 30, 2020 and June 30, 2019, respectively:~~

June 30, 2020

Net Interest
Income (“NII”)
Change in
Interest Rates

Balance Sheet
Composition

Measurement
Period

$ Amount
of NII

$ Change
in NII

% Change
in NII

(Dollars In Thousands)

+300 bps

Static

One Year

$
146,062

$
(9,010
)

(5.81
)
%
+200 bps

Static

One Year

150,502

(4,570
)

(2.95
)

+100 bps

Static

One Year

154,612

(460
)

(0.30
)

0 bps

Static

One Year

155,072

-

-

-100 bps

Static

One Year

162,070

6,998

4.51

June 30, 2019

Net Interest
Income (“NII”)
Change in
Interest Rates

Balance Sheet
Composition

Measurement
Period

$ Amount
of NII

$ Change
in NII

% Change
in NII

(Dollars In Thousands)

+300 bps

Static

One Year

$
131,190

$
(16,118
)

(10.94
)
%
+200 bps

Static

One Year

136,883

(10,425
)

(7.08
)

+100 bps

Static

One Year

143,007

(4,301
)

(2.92
)

0 bps

Static

One Year

147,308

-

-

-100 bps

Static

One Year

148,011

703

0.48

-200 bps

Static

One Year

146,927

(381
)

(0.26
)

Notwithstanding the rate change scenarios presented in the EVE and NII-based analyses above, future interest rates and their effect on net interest income are not predictable. Computations of prospective effects of hypothetical interest rate changes are based on numerous assumptions, including relative levels of market interest rates, prepayments and deposit run-offs and should not be relied upon as indicative of actual results. Certain shortcomings are inherent in this type of computation. Although certain assets and liabilities may have similar maturities or periods of re-pricing, they may react at different times and in different degrees to changes in market interest rates. The interest rate on certain types of assets and liabilities, such as demand deposits and savings accounts, may fluctuate in advance of changes in market interest rates, while rates on other types of assets and liabilities may lag behind changes in market interest rates. Certain assets, such as adjustable-rate mortgages, generally have features which restrict changes in interest rates on a short-term basis and over the life of the asset. In the event of a change in interest rates, prepayments and early withdrawal levels could deviate significantly from those assumed in the analyses set forth above. Additionally, an increase in credit risk may result as the ability of borrowers to service their debt may decrease in the event of an interest rate increase.

Item 8. Financial Statements and Supplementary Data

The Company’s consolidated financial statements are contained in this Annual Report on Form 10-K immediately following Item 16.

Table of Contents

Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

Item 9A. Controls and Procedures

(a)

Disclosure Controls and Procedures

~~(a)~~

~~Disclosure Controls and Procedures~~

Based on their evaluation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)), the Company’s principal executive officer and principal financial officer have concluded that as of the end of the period covered by this Annual Report on Form 10-K such disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and is accumulated and communicated to the Company’s management, including the principal executive and principal financial officer, as appropriate to allow timely decisions regarding required disclosures.

~~(b)~~

~~Internal Control over Financial Reporting~~

1.(b)Internal Control over Financial Reporting

~~Management’s Annual Report on Internal Control Over Financial Reporting.~~

1.Management’s Annual Report on Internal Control Over Financial Reporting.

Management’s report on the Company’s internal control over financial reporting appears in the Company’s consolidated financial statements that are contained in this Annual Report on Form 10-K immediately following Item 16. Such report is incorporated herein by reference.

2.Report of Independent Registered Public Accounting Firm.

~~Report of Independent Registered Public Accounting Firm.~~

The report of Crowe LLP, an independent registered public accounting firm, on the Company’s internal control over financial reporting appears in the Company’s consolidated financial statements that are contained in this Annual Report on Form 10-K immediately following Item 16. Such report is incorporated herein by reference.

3.Changes in Internal Control Over Financial Reporting.

~~Changes in Internal Control Over Financial Reporting.~~

During the last quarter of the year under report, there was no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item 9B. Other Information

Rule 10b5-1 Trading Plans

During the fiscal quarter ended June 30, 2023, none of the Company’s directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement.”

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

Table of Contents

~~None.~~

PART III

Item 10. Directors, Executive Officers and Corporate Governance

The information that appears under the headings included under “Proposal I – Election of Directors” and “Corporate Governance Matters” in the Registrant’s definitive proxy statement for the Registrant’s ~~2020~~2023 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.

The Company has adopted a code of ethics that applies to its principal executive officer and principal financial and accounting officer. A copy of the code of ethics (referred to as Conflicts of Interest & Code of Conduct) is available on our website at www.kearnybank.com under the “Investors Relations” link, then within the “Corporate Overview” drop down and under the link “Governance Documents” or without charge upon request to the Corporate Secretary, Kearny Financial Corp., 120 Passaic Avenue, Fairfield, New Jersey 07004.

Item 11. Executive Compensation

The information that appears under the headings “Executive ~~Compensation”,~~Compensation,” “Director Compensation” and “Compensation Discussion and Analysis” in the Proxy Statement is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

(a)Security Ownership of Certain Beneficial Owners. Information required by this item is incorporated herein by reference to the section captioned “Security Ownership of Certain Beneficial Owners and Management” in the Proxy Statement.

(b)Security Ownership of Management. Information required by this item is incorporated herein by reference to the section captioned “Proposal I – Election of Directors” in the Proxy Statement.

(c)Changes in Control. Management of the Company knows of no arrangements, including any pledge by any person of securities of the Company, the operation of which may at a subsequent date result in a change in control of the registrant.

(d)Securities Authorized for Issuance Under Equity Compensation Plans. Set forth below is information as of June 30, 2023 with respect to compensation plans under which equity securities of the Registrant are authorized for issuance.


	(A) Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights(1)	(B) Weighted Average Exercise Price of Outstanding Options, Warrants and Rights		(C) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans - Excluding Securities Reflected in Column (A)(2)
Equity 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

~~(a)~~(1)The number of securities includes 2,923,530 vested options and 60,000 non-vested options outstanding as of June 30, 2023. In addition to these options, 78,826 restricted stock awards and 497,664 restricted stock units were also non-vested as of June 30, 2023. The non-vested options and restricted stock awards are earned at a rate of 20% annually. The non-vested restricted stock units are earned at a rate of 33% annually.

~~Security Ownership of Certain Beneficial Owners.~~ ~~Information required by this item is incorporated herein by reference to the section captioned “Security Ownership of Certain Beneficial Owners and Management” in the Proxy Statement.~~

~~(b)~~(2)As of June 30, 2023, there were 5,825,421 options (or 1,941,807 restricted stock units or restricted stock awards) remaining available for award under the approved equity compensation plans.

~~Security Ownership of Management.~~ ~~Information required by this item is incorporated herein by reference to the section captioned “Proposal I – Election of Directors” in the Proxy Statement.~~

~~(c)~~

~~Changes in Control.~~ Management of the Company knows of no arrangements, including any pledge by any person of securities of the Company, the operation of which may at a subsequent date result in a change in control of the registrant.

~~(d)~~

~~Securities Authorized for Issuance Under Equity Compensation Plans.~~ ~~Set forth below is information as of June 30, 2020 with respect to compensation plans under which equity securities of the Registrant are authorized for issuance.~~

(A)

(B)

(C)

Number of Securities
to be Issued
Upon Exercise of
Outstanding Options,
Warrants and Rights

Weighted Average
Exercise Price of
Outstanding Options,
Warrants and Rights

Number of Securities
Remaining Available
for Future Issuance
Under Equity
Compensation Plans -
Excluding Securities
Reflected in Column (A)

Equity compensation plans
  approved by stockholders ⁽¹⁾:

2005 Stock Compensation
  and Incentive Plan

179,452

$
10.28

-

2016 Equity Incentive Plan

3,761,750

$
15.17

626,334

Equity compensation plans
  not approved by stockholders:

None.

-

$
-

-

Total

3,941,202

$
14.95

626,334

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~~(1)~~

The number of securities reported in column (A) includes 1,928,452 vested options and 1,366,000 non-vested options outstanding as of June 30, 2020. In addition to these options, restricted stock awards of 646,750 shares were also non-vested as of June 30, 2020. The non-vested options and restricted stock awards are earned at the rate of 20% one year after the date of the grant and 20% annually thereafter. As of June 30, 2020, there were 53,706 restricted shares and 572,628 options remaining available for award under the approved equity compensation plans and are reported under column (C) as securities remaining available for future issuance under such plans.

Item 13. Certain Relationships and Related Transactions and Director Independence

The information that appears under the sections captioned “Corporate Governance Matters – Transactions with Certain Related Persons” and “– Board Independence” in the Proxy Statement is incorporated herein by reference.

Item 14. Principal Accounting Fees and Services

Our independent registered public accounting firm is Crowe LLP, Livingston, NJ, Auditor Firm ID: 173

The information relating to this item is incorporated herein by reference to the information contained under the section captioned “Proposal II – Ratification of Appointment of Independent Auditor” in the Proxy Statement.

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PART IV

Item 15. Exhibits, Financial Statement Schedules

(1)

~~(1)~~ The following financial statements and the independent auditors’ report appear in this Annual Report on Form 10-K immediately after Item 16:

(2)All schedules are omitted because they are not required or applicable, or the required information is shown in the consolidated financial statements or the notes thereto.

(3)The following exhibits are filed as part of this Annual Report on Form 10-K:

~~3.1~~
3.1		Articles of Incorporation of Kearny Financial Corp. (Incorporated by reference to ~~the Registrant’s~~Kearny Financial Corp.’s Registration Statement on Form S-1 (File No. 333-198602), originally filed on September 5, 2014)

3.2			Amended and Restated Bylaws of Kearny Financial Corp. (Incorporated by reference to ~~the Registrant’s~~Kearny Financial Corp.’s Current Report on Form 8-K (File No. 001-37399), originally filed on August 16, 2023)

4.1		Form of Common Stock Certificate of Kearny Financial Corp. (Incorporated by reference to Kearny Financial Corp.’s Registration Statement on Form S-1 (File No. 333-198602), originally filed on September 5, 2014)

~~4.1~~ 4.2			~~Form~~Description of ~~Common~~Capital Stock ~~Certificate~~ of Kearny Financial Corp. (Incorporated by reference to ~~the Registrant’s Registration Statement~~Exhibit 4.2 to Kearny Financial Corp.’s Annual Report on Form ~~S-1~~10-K (File No. ~~333-198602)~~001-37399), originally filed on ~~September 5, 2014)~~August 28, 2020)

~~4.2~~ 10.1			~~Description of Capital Stock of Kearny Financial Corp.~~

~~10.1~~	Amended and Restated Employment Agreement between Kearny Bank and Craig Montanaro dated May 18, 2015 (Incorporated by reference to Exhibit 10.1 to Kearny Financial Corp.’s Annual Report on Form 10-K (File No. 001-37399), originally filed on September 14, 2015)†

10.2			Amended and Restated Employment Agreement between Kearny Financial Corp. and Craig Montanaro dated May 18, 2015 (Incorporated by reference to Exhibit 10.2 to Kearny Financial Corp.’s Annual Report on Form 10-K (File No. 001-37399), originally filed on September 14, 2015)†

10.3			Employment Agreement between Kearny Bank and Patrick M. Joyce dated May 18, 2015 (Incorporated by reference to Exhibit 10.4 to Kearny Financial Corp.’s Annual Report on Form 10-K (File No. 001-37399), originally filed on September 14, 2015)†

10.4			Amended and Restated Employment Agreement between Kearny Bank and Eric B. Heyer dated July 1, 2018 (Incorporated by reference to exhibit 10.5 to Kearny Financial Corp.’s Annual Report on Form 10-K (File No. 001-37399, originally filed on August 28, 2018)†

~~10.5~~	Employment Agreement between Kearny Bank and Erika K. Parisi dated May 18, 2015 (Incorporated by reference to Exhibit 10.6 to Kearny Financial Corp.’s Annual Report on Form 10-K (File No. 001-37399), originally filed on September 14, 2015)†

~~10.6~~ 10.5			~~Amended and Restated Change in Control~~Employment Agreement between Kearny Bank and Keith Suchodolski dated ~~July 1, 2018~~June 15, 2022 (Incorporated by reference to ~~exhibit 10.7~~Exhibit 10.1 to Kearny Financial Corp.’s ~~Annual~~Current Report on Form ~~10-K~~8-K (File No. 001-37399, originally filed on ~~August 28, 2018)~~June 16, 2022)†

~~10.7~~ 10.6			Employment Agreement between Kearny Bank and Thomas D. DeMedici dated June 21, 2017 (Incorporated by reference to Exhibit 10.8 to Kearny Financial Corp.’s Annual Report on Form 10-K (File No. 001-37399), originally filed on August 28, 2019)†

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~~10.8~~ 10.7			Change ofin Control Agreement between Kearny Bank and Anthony V. Bilotta, Jr. dated July 1, 2018 (Incorporated by reference to Exhibit 10.9 to Kearny Financial Corp.’s Annual Report on Form 10-K (File No. 001-37399), originally filed on August 28, 2019)†

~~10.9~~ 10.8			Form of Two Year Change in Control Agreement between Kearny Bank and Certain Officers (Incorporated by reference to Exhibit 10.7 to Kearny Financial Corp.’s Annual Report on Form 10-K (File No. 001-37399), originally filed on September 14, 2015)†

~~10.10~~ 10.9			Form of Two Year Change of Control Agreement between Kearny Bank and John V. Dunne and Timothy A. Swansson. Dated July 1, 2019 (Incorporated by reference to Exhibit 10.11 to Kearny Financial Corp.’s Annual Report on Form 10-K (File No. 001-37399), originally filed on August 28, 2019)†

~~10.11~~	Directors Consultation and Retirement Plan as Amended and Restated (Incorporated by reference to Exhibit 10.8 to Kearny Financial Corp.’s Annual Report on Form 10-K (File No. 001-37399), originally filed on September 14, 2015)†

~~10.12~~ 10.10			Amended and Restated Benefit Equalization Plan for Pension Plan (Incorporated by reference to Exhibit 10.9 to Kearny Financial Corp.’s Annual Report on Form 10-K (File No. 001-37399), originally filed on September 14, 2015)†

~~10.13~~ 10.11			Amended and Restated Benefits Equalization Plan Related to the Employee Stock Ownership Plan (Incorporated by reference to Exhibit 10.10 to Kearny Financial Corp.’s Annual Report on Form 10-K (File No. 001-37399), originally filed on September 14, 2015)†

~~10.14~~ 10.12			Kearny Bank Director Life Insurance Agreement (Incorporated by reference to Exhibit 10.1 to Kearny Financial Corp.’s Current Report on Form 8-K (File No. 000-51093), originally filed on August 18, 2005)†

~~10.15~~ 10.13			Form of Amendment to Kearny Bank Director Life Insurance Agreement (Incorporated by reference to Exhibit 10.14 to Kearny Financial Corp.’s Annual Report on Form 10-K (File No. 001-37399), originally filed on September 14, 2015)†

~~10.16~~ 10.14		Kearny Bank Amended and Restated Executive Life Insurance Agreement with Craig Montanaro (Incorporated by reference to Exhibit 10.2 to Kearny Financial Corp.’s Current Report on Form 8-K (File No. 001-37399), originally filed on June 16, 2022)†

10.15		Form of Kearny Bank Executive Life Insurance Agreement with Keith Suchodolski, Patrick M. Joyce and Thomas D. DeMedici (Incorporated by reference to Exhibit 10.2 to Kearny Financial Corp.’s Current Report on Form 8-K (File No. 000-51093), originally filed on August 18, 2005)†

~~10.17~~ 10.16			Form of Amendment to Kearny Bank Executive Life Insurance Agreement with Keith Suchodolski, Patrick M. Joyce and Thomas D. DeMedici (Incorporated by reference to Exhibit 10.16 to Kearny Financial Corp.’s Annual Report on Form 10-K (File No. 001-37399), originally filed on September 14, 2015)†

~~10.18~~ 10.17			Kearny Bank Amended and Restated ~~Officer~~ Change in Control Severance Pay Plan (Incorporated by reference to Exhibit ~~10.19~~10.1 to Kearny Financial Corp.’s ~~Annual~~Quarterly Report on Form ~~10-K~~10-Q (File No. 001-37399), originally filed on ~~August 28, 2019)~~May 6, 2022)†

~~10.19~~ 10.18			Kearny Bank Executive Management Incentive Compensation Plan (Incorporated by reference to Exhibit 10.20 to Kearny Financial Corp.’s Annual Report on Form 10-K (File No. 001-37399), originally filed on August 28, 2019) †

~~10.20~~ 10.19			Amendment to Freeze Benefit Accruals Under the Kearny Financial Corp. Directors Consultation and Retirement Plan (Incorporated by reference to Exhibit 10.1 to Kearny Financial Corp.’s Current Report on Form 8-K (File No. 001-37399), originally filed on December 23, 2015)†

~~10.21~~ 10.20			Kearny Financial Corp. 2016 Equity Incentive Plan (Incorporated by reference to Appendix A to Kearny Financial Corp’s Proxy Statement (File No. 001-37399), originally filed on September 14, 2016)†

21 10.21		Supplemental Executive Retirement Plan by and between Kearny Bank and Craig L. Montanaro effective as of July 1, 2021 (Incorporated by reference to Exhibit 10.1 to Kearny Financial Corp.’s Current Report on Form 8-K (File No. 001-37399), originally filed on June 21, 2021)†

10.22		Amendment to Freeze the Benefit Under the Supplemental Executive Retirement Plan by and between Kearny Bank and Craig L. Montanaro effective as of December 21, 2022 (Incorporated by reference to Exhibit 10.1 to Kearny Financial Corp.’s Current Report on Form 8-K (File No. 001-37399), originally filed on December 22, 2022)†

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10.23	Kearny Financial Corp. 2021 Equity Incentive Plan (Incorporated by reference to Appendix A to Kearny Financial Corp’s Proxy Statement (File No. 001-37399), originally filed on September 17, 2021)†

21	Subsidiaries of Registrant

23.1		Consent of Crowe LLP

31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certification of Chief Executive Officer ~~and~~pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101						The following materials from the Company’s Annual Report to Stockholders on Form 10-K for the year ended June 30, ~~2020,~~2023, formatted in Inline XBRL (Extensible Business Reporting Language): (i) the Consolidated Statements of Financial Condition, (ii) the Consolidated Statements of Operations; (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Changes in Stockholder’s Equity, (v) the Consolidated Statements of Cash Flows and (vi) the Notes to Consolidated Financial Statements.

101.INS						Inline XBRL Instance Document (The instance document does not appear in the Interactive Data File because its XBRL tags are embedded with the Inline XBRL document)

101.SCH						Inline XBRL Taxonomy Extension Schema Document

101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB						Inline XBRL Taxonomy Extension Labels Linkbase Document

101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document

104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

†	† Management contract or compensatory plan or arrangement required to be filed as an exhibit.

Item 16. Form 10-K Summary

Not applicable.



	~~120 Passaic Avenue~~ ● ~~Fairfield, NJ 07004-3510~~ ● ~~973-244-4500~~

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August ~~28, 2020~~

25, 2023

Management Report on Internal Control over Financial Reporting

The management of Kearny Financial Corp. and Subsidiaries (collectively the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control system is a process designed to provide reasonable assurance to the management and board of directors regarding the preparation and fair presentation of published consolidated financial statements.

The Company’s internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; provide reasonable assurances that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with U.S. generally accepted accounting principles and that receipts and expenditures are being made only in accordance with authorizations of management and the directors of the Company; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on our consolidated financial statements.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to consolidated financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The Company’s management assessed the effectiveness of internal control over financial reporting as of June 30, ~~2020.~~2023. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013). Based on its assessment, management believes that, as of June 30, ~~2020,~~2023, the Company’s internal control over financial reporting is effective based on those criteria.

The Company’s independent registered public accounting firm that audited the consolidated financial statements has issued an audit report on the effective operation of the Company’s internal control over financial reporting as of June 30, ~~2020,~~2023, a copy of which is included in this annual report.


/s/ Craig L. Montanaro						/s/ Keith Suchodolski
Craig L. Montanaro						Keith Suchodolski
President and Chief Executive Officer						Senior Executive Vice President and Chief Financial Officer

F-1

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Report of Independent Registered Public Accounting Firm

~~The~~

Stockholders and the Board of Directors ~~and Shareholders~~ of

Kearny Financial Corp. and Subsidiaries

Fairfield, New Jersey

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated statements of financial condition of Kearny Financial Corp. and Subsidiaries (the ~~"Company"~~“Company”) as of June 30, ~~2020~~2023 and ~~2019,~~2022, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended June 30, ~~2020,~~2023, and the related notes (collectively referred to as the ~~"financial statements"~~“financial statements”). We also have audited the Company’s internal control over financial reporting as of June 30, ~~2020,~~2023, based on criteria established in Internal Control – Integrated Framework: (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of June 30, ~~2020~~2023 and ~~2019,~~2022, and the results of its operations and its cash flows for each of the years in the three-year period ended June 30, ~~2020~~2023 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, ~~2020,~~2023, based on criteria established in Internal Control – Integrated Framework: (2013) issued by COSO.

Explanatory Paragraph – Change in Accounting Principle

As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for credit losses effective July 1, 2020 due to the adoption of ASC 326.

Basis for Opinions

The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ~~("PCAOB"~~(“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

F-2

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Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the ~~company~~Company are being made only in accordance with authorizations of management and directors of the ~~company;~~Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) ~~involved~~involve our especially challenging, subjective, or complex judgments. The communication of the critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate ~~opinions~~opinion on the critical audit matters or on the accounts or disclosures to which they relate.

Allowance for ~~Loan~~Credit Losses – ~~Environmental Loss~~Qualitative Factors

- As described in ~~Notes~~Note 1 ~~and 8~~ to the consolidated financial statements, the ~~Company’s allowance~~Company accounts for ~~loan~~credit losses ~~is a valuation account that reflects~~under ASC 326, Financial Instruments – Credit Losses. ASC 326 requires the ~~Company’s estimation~~measurement of ~~incurred~~expected lifetime credit losses ~~in its loan portfolio to~~for financial assets measured at amortized cost at the ~~extent they are both probable and reasonable to estimate. The allowance for loan losses was $37,327,000 at~~reporting date. As of June 30, ~~2020, which consists of two components:~~2023, the valuation allowance for loans individually evaluated for impairment (“specific reserves”), representing $89,000, and the valuation allowance for loans collectively evaluated for impairment (“general reserves”), representing $37,238,000. The general reserves are further broken down as reserves based on historical loss factors ($1,184,000) and environmental loss factors ($36,054,000). The calculationbalance of the allowance for ~~loan~~credit losses on loans was $48.7 million.

Management employs a process and methodology to estimate the allowance for credit losses (“ACL”) on loans that evaluates both quantitative and qualitative factors. The methodology for evaluating quantitative factors involves ~~significant estimates and subjective assumptions which require a high degree of judgment relating to 1) the external operating environment, 2) the composition, terms and performance of Company’s~~pooling loans into portfolio segments for loans that share similar risk characteristics. Pooled loan portfolio segments include multi-family, nonresidential mortgage, commercial business, construction, one-to-four family residential mortgage, home equity and 3)consumer loans.

For pooled loans, the ~~Company’s ability~~Company primarily utilizes a discounted cash flow (“DCF”) methodology to ~~monitor and manage~~estimate credit losses over the expected life of the loan. The DCF methodology combines the probability of default, the loss given default, remaining life of the loan and prepayment and curtailment speed assumptions to estimate a reserve for each loan. The loss rates are adjusted by current and forecasted macroeconomic assumptions and return to the mean after the forecasted periods. These quantitative factors are supplemented by qualitative factors reflecting management’s view of how losses may vary from those represented by quantitative loss rates. Qualitative factors are applied to each portfolio ~~and how those assumptions impact probable incurred losses within~~segment with the ~~loan portfolio.~~amounts determined by correlation of credit stress to the maximum loss factors of a peer group’s historical charge-offs. Changes in these assumptions could have a material effect on the Company’s financial results.

~~Environmental loss factors are based on specific quantitative and~~

We identified auditing the qualitative criteria representing key sources of risk within the loan portfolio. Such sources of risk include those relating to the level of and trends in nonperforming loans, credit risk management effectiveness, lending resource capability, economic and market conditions, loan concentrations, loan composition and terms, independent loan review effectiveness, and collateral values, as well as the effects of other external factors. The outstanding principal balance of each applicable loan segment is multiplied by the applicable environmental loss factors to estimate the level of probable incurred losses based upon their supporting quantitative and qualitative criteria. Thus, the evaluation of these sources of risk results in environmental loss factors which contribute significantly to the general reserve component of the ~~estimate of the allowance for loan losses. Management’s allocation relies~~ACL on a qualitative assessment of risks to determine the quantitative impact the issues have on the allowance. Management’s identification and analysis of these issues requires significant judgment. We identified the estimate of the individual and aggregate environmental loss factors of the allowance for loan losses with respect topooled loans in the multi-family, nonresidential mortgage, and ~~non-residential~~one-to-four family residential mortgage loan segments as a critical audit matter ~~as it~~because the methodology to determine the estimate of credit losses uses subjective judgments by management and is subject to material variability. Performing audit procedures to evaluate the qualitative factors on the multi-family, nonresidential mortgage, and one-to-four family residential mortgage loan segments involved ~~especially subjective~~a high degree of auditor ~~judgment.~~

judgment and required significant effort, including the need to involve more experienced audit personnel including the use of internal specialists.

The primary procedures we performed to address this critical audit matter included:

•

~~Testing the effectiveness of controls over the evaluation of the sources of risk used to estimate the environmental loss factors, including controls addressing:~~

o•Testing the effectiveness of controls over the evaluation of the ACL on pooled loans, including controls addressing:

~~Management’s review of the accuracy of data inputs used as the basis for the adjustments relating to environmental loss factors.~~

o◦Methodology and accounting policies.

~~Management’s determination of loans excluded from the environmental loss factors calculation due to their status as acquired or impaired loans.~~

o◦Data inputs, judgments and calculations used to determine the qualitative factors.

~~Management’s review of the qualitative and quantitative conclusions related to the environmental loss factors and the resulting allocation to the allowance.~~

•◦Information technology general controls and application controls.

~~Substantively testing management’s process, including evaluating their judgments and assumptions, for developing the environmental loss factors which included:~~

~~Evaluation of the completeness and accuracy of data inputs used as a basis for the adjustments relating to environmental loss~~◦Management’s review of the qualitative factors.

~~Evaluation of loans excluded from the environmental loss factors calculation for propriety of classification as acquired or impaired loans.~~

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o•Substantively testing management’s process, including evaluating their judgments and assumptions, for developing the ACL on loans collectively evaluated for impairment, which included:

Evaluation of the reasonableness of management’s judgments related to the qualitative and quantitative assessment of the data used in the determination of environmental loss factors and the resulting allocation to the allowance. Among other procedures, our evaluation considered, the weight of confirming and disconfirming evidence from internal and external sources, loan portfolio performance and third-party data, and whether such assumptions were applied consistently period over period, and gave appropriate consideration to current economic factors.

◦Evaluation of the appropriateness of the Company’s methodology and accounting policies involved in the application of ASC 326.

◦Testing the mathematical accuracy of the calculation.

◦Testing the completeness and accuracy of data used in the calculation including utilizing internal specialists to assist in testing the accuracy of the underlying peer data used to develop the maximum loss factors.

◦Evaluation of the reasonableness of management’s judgments related to qualitative factors to determine if they are calculated to conform with management’s policies and were consistently applied period over period. Our evaluation considered evidence from internal and external sources and loan portfolio composition and performance.

~~Analytically evaluating the environmental loss factor allocation year over year and testing allocations for reasonableness.~~

Goodwill Impairment ~~Evaluation~~

- As described in Notes 1 ~~and 11~~ to the consolidated financial statements, the Company’s consolidated goodwill balance was ~~$210,895,000 at~~$210.9 million as of June 30, ~~2020,~~2023, which is allocated to the Company’s single reporting unit. Goodwill is tested for impairment at the reporting unit level at least annually, or more frequently ~~whenever~~if events or circumstances ~~occur~~change that ~~indicate that it is more-likely-than-not that an impairment loss has occurred.~~would more likely than not reduce the fair value of a reporting unit below its carrying amount. The annual quantitative assessment of goodwill for the Company’s single reporting unit was performed utilizing a discounted cash flow analysis (“income approach”) and estimates of selected market information (“market ~~approach”~~approaches”). The ~~results~~result of the income approach ~~were~~was weighted at ~~75% while~~50% and the results of the market ~~approach were weighted at 25%. The calculation~~approaches comprised the remaining 50% in determining the fair value of the Company’s single reporting unit. The fair value of the Company’s single reporting unit exceeded its carrying value and no impairment charges were recorded as of June 30, 2023. The goodwill impairment assessment involves significant estimates and subjective assumptions which require a high degree of management judgment. This judgment includes, but is not limited to, the selection of appropriate discount rates, the identification of relevant market comparables and the development of cash flow projections. The selection and weighting of the various fair value techniques may result in a higher or lower fair value. Judgment is applied in determining the weightings that are most representative of fair value.

We identified the goodwill impairment assessment of the Company as a critical audit matter. The principal considerations for this determination ~~was~~were the degree of auditor judgment in performing procedures over the key assumptions, which include ~~discounted~~discount rate, cost savings rate, expected future cash flows, ~~discount rate, prospective financial information,~~ and weighting allocation to valuation methodologies.

The primary procedures we performed to address this critical audit matter included:

•

~~Testing the effectiveness of controls over management’s goodwill impairment test including controls addressing:~~

o•Testing the effectiveness of controls over the valuation methodologies, assumptions and data used to estimate the fair value of the Company, including controls addressing:

~~Management’s review of the reasonableness and accuracy of the Company’s prospective financial information used in the discounted cash flow methodology.~~

o◦Management’s review of the reasonableness and accuracy of the Company’s expected future cash flows used in the income approach.

Managements evaluation of key assumptions used by a third-party valuation specialist, including discount rate, terminal growth rate, and control premium and allocated weightings incorporated into the methodologies used to determine fair value.

•◦Management’s evaluation of assumptions and inputs used, including discount rate, cost savings rate, comparable companies data, and allocated weightings incorporated into the methodologies used to determine fair value.

~~Substantively testing management’s estimate, including evaluating their judgements and assumptions, for estimating fair value the Company which included:~~

o◦Completeness and accuracy of key financial data used in the assessment.

~~Evaluation of key financial data for accuracy, including comparison of prospective financial information to the Company’s strategic plan.~~

o•Substantively testing management’s estimate, for estimating the fair value of the Company, which included:

~~Evaluation of management’s ability to reasonably forecast cash flows by comparing actual results to management’s historical forecasts.~~

o◦Testing of key financial data for completeness and accuracy.

~~Utilization of a Crowe LLP employed valuation specialist to evaluate appropriateness of valuation methodologies, discount rate, control premium, and overall reasonableness of the fair value.~~

o◦Evaluation of management’s ability to reasonably forecast cash flows.

~~Evaluation of management’s weighting allocation to each valuation methodology.~~

◦Utilization of an internal specialist to evaluate appropriateness of valuation methodologies, the discount rate assumption, cost savings rate, comparable companies data, and overall reasonableness of the fair value.

◦Evaluation of management’s weighting allocation to each valuation methodology.

/s/ Crowe LLP

We have served as the Company's auditor since 2017.

Livingston, New Jersey

August ~~28, 2020~~

~~F-5~~

25, 2023

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Table of Contents

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Consolidated Statements of Financial Condition

(In Thousands, Except Share and Per Share Data)


	June 30,							June 30,
	2020			2019				2023		2022
Assets							Assets
Cash and amounts due from depository institutions	$	20,391		$	19,032		Cash and amounts due from depository institutions	$	21,795	$	26,094
Interest-bearing deposits in other banks		160,576			19,903		Interest-bearing deposits in other banks	48,720		75,521
Cash and cash equivalents		180,967			38,935		Cash and cash equivalents	70,515		101,615
Investment securities available for sale, at fair value		1,385,703			714,263
Investment securities held to maturity (fair value $34,069 and $584,678), respectively		32,556			576,652
Investment securities available for sale (amortized cost of $1,383,867 and $1,462,124, respectively), net of allowance for credit losses of $0 at June 30, 2023 and June 30, 2022							Investment securities available for sale (amortized cost of $1,383,867 and $1,462,124, respectively), net of allowance for credit losses of $0 at June 30, 2023 and June 30, 2022	1,227,729		1,344,093
Investment securities held to maturity (fair value of $131,169 and $108,118, respectively), net of allowance for credit losses of $0 at June 30, 2023 and June 30, 2022							Investment securities held to maturity (fair value of $131,169 and $108,118, respectively), net of allowance for credit losses of $0 at June 30, 2023 and June 30, 2022	146,465		118,291
Loans held-for-sale		20,789			12,267		Loans held-for-sale	9,591		28,874
Loans receivable, including unaccreted yield adjustments of $(41,706) and $(52,025), respectively		4,498,397			4,678,928
Less: allowance for loan losses		(37,327	)		(33,274	)
Loans receivable							Loans receivable	5,829,421		5,417,845
Less: allowance for credit losses on loans							Less: allowance for credit losses on loans	(48,734)		(47,058)
Net loans receivable		4,461,070			4,645,654		Net loans receivable	5,780,687		5,370,787
Premises and equipment		57,389			56,854		Premises and equipment	48,309		53,281
Federal Home Loan Bank ("FHLB") of New York stock		58,654			64,190		Federal Home Loan Bank ("FHLB") of New York stock	71,734		47,144
Accrued interest receivable		17,373			19,360		Accrued interest receivable	28,133		20,466
Goodwill		210,895			210,895		Goodwill	210,895		210,895
Core deposit intangible		3,995			5,160
Core deposit intangibles							Core deposit intangibles	2,457		3,020
Bank owned life insurance		262,380			256,155		Bank owned life insurance	292,825		289,177
Deferred income tax assets, net		25,480			25,367		Deferred income tax assets, net	51,973		49,350
Other real estate owned		178			-		Other real estate owned	12,956		178
Other assets		40,746			9,077		Other assets	110,546		82,712
Total Assets	$	6,758,175		$	6,634,829		Total Assets	$	8,064,815	$	7,719,883

Liabilities and Stockholders' Equity							Liabilities and Stockholders' Equity
Liabilities							Liabilities
Deposits:							Deposits:
Non-interest-bearing	$	419,138		$	309,063		Non-interest-bearing	$	609,999	$	653,899
Interest-bearing		4,011,144			3,838,547		Interest-bearing	5,019,184		5,208,357
Total deposits		4,430,282			4,147,610		Total deposits	5,629,183		5,862,256
Borrowings		1,173,165			1,321,982		Borrowings	1,506,812		901,337
Advance payments by borrowers for taxes		16,569			16,887		Advance payments by borrowers for taxes	18,338		16,746
Other liabilities		53,982			21,191		Other liabilities	41,198		45,544
Total Liabilities		5,673,998			5,507,670		Total Liabilities	7,195,531		6,825,883

Stockholders' Equity							Stockholders' Equity
Preferred stock, $0.01 par value, 100,000,000 shares authorized; NaN issued and outstanding		-			-
Common stock, $0.01 par value; 800,000,000 shares authorized; 83,663,192 shares and 89,125,655 shares issued and outstanding, respectively		837			891
Preferred stock, $0.01 par value, 100,000,000 shares authorized; none issued and outstanding							Preferred stock, $0.01 par value, 100,000,000 shares authorized; none issued and outstanding	—		—
Common stock, $0.01 par value; 800,000,000 shares authorized; 65,864,075 shares and 68,666,323 shares issued and outstanding, respectively							Common stock, $0.01 par value; 800,000,000 shares authorized; 65,864,075 shares and 68,666,323 shares issued and outstanding, respectively	659		687
Paid-in capital		722,871			787,394		Paid-in capital	503,332		528,396
Retained earnings		387,911			366,679		Retained earnings	457,611		445,451
Unearned employee stock ownership plan shares; 2,960,289 shares and 3,160,987 shares, respectively		(28,699	)		(30,644	)
Accumulated other comprehensive income		1,257			2,839
Unearned employee stock ownership plan shares; 2,358,198 shares and 2,558,895 shares, respectively							Unearned employee stock ownership plan shares; 2,358,198 shares and 2,558,895 shares, respectively	(22,862)		(24,807)
Accumulated other comprehensive loss							Accumulated other comprehensive loss	(69,456)		(55,727)
Total Stockholders' Equity		1,084,177			1,127,159		Total Stockholders' Equity	869,284		894,000
Total Liabilities and Stockholders' Equity	$	6,758,175		$	6,634,829		Total Liabilities and Stockholders' Equity	$	8,064,815	$	7,719,883

~~See notes to consolidated financial statements.~~

~~F-6~~


See notes to consolidated financial statements.

F-5

Table of Contents

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Consolidated Statements of Income

(In Thousands, Except Per Share Data)


	Years Ended June 30,										Years Ended June 30,
		2020			2019			2018			2023		2022		2021
Interest Income										Interest Income
Loans	$	187,003		$	192,386		$	138,426		Loans	$	233,147	$	190,520	$	202,240
Taxable investment securities		39,321			37,213			27,053		Taxable investment securities	54,855		32,746		31,238
Tax-exempt investment securities		2,393			2,839			2,616		Tax-exempt investment securities	694		1,273		1,652
Other interest-earning assets		4,491			4,895			3,336		Other interest-earning assets	5,028		1,733		2,955
Total Interest Income		233,208			237,333			171,431		Total Interest Income	293,724		226,272		238,085

Interest Expense										Interest Expense
Deposits		58,852			52,511			29,649		Deposits	78,163		15,208		31,535
Borrowings		25,002			29,509			20,489		Borrowings	39,696		14,461		18,316
Total Interest Expense		83,854			82,020			50,138		Total Interest Expense	117,859		29,669		49,851
Net Interest Income		149,354			155,313			121,293		Net Interest Income	175,865		196,603		188,234
Provision for Loan Losses		4,197			3,556			2,706
Net Interest Income after Provision for Loan Losses		145,157			151,757			118,587
Provision for (reversal of) credit losses										Provision for (reversal of) credit losses	2,486		(7,518)		(1,121)
Net Interest Income after Provision for (Reversal of) Credit Losses										Net Interest Income after Provision for (Reversal of) Credit Losses	173,379		204,121		189,355

Non-Interest Income										Non-Interest Income
Fees and service charges		6,647			5,445			5,412		Fees and service charges	3,106		2,580		1,897
Gain (loss) on sale and call of securities		2,250			(323	)		8
Gain on sale of loans		3,186			580			1,004
Loss on sale and write down of other real estate owned		(28	)		(11	)		(19	)
(Loss) gain on sale and call of securities										(Loss) gain on sale and call of securities	(15,227)		(559)		767
(Loss) gain on sale of loans										(Loss) gain on sale of loans	(1,645)		2,539		5,574
(Loss) gain on sale of other real estate owned										(Loss) gain on sale of other real estate owned	(139)		5		—
Income from bank owned life insurance		6,225			6,339			5,362		Income from bank owned life insurance	8,645		6,167		6,267
Electronic banking fees and charges		1,245			1,050			1,101		Electronic banking fees and charges	1,759		1,626		1,717
Miscellaneous		194			475			395
Bargain purchase gain										Bargain purchase gain	—		—		3,053
Other income										Other income	6,252		1,576		1,751
Total Non-Interest Income		19,719			13,555			13,263		Total Non-Interest Income	2,751		13,934		21,026

Non-Interest Expense										Non-Interest Expense
Salaries and employee benefits		62,015			63,029			53,736		Salaries and employee benefits	75,589		76,264		68,800
Net occupancy expense of premises		11,424			11,220			9,178		Net occupancy expense of premises	12,036		14,114		12,673
Equipment and systems		11,755			12,273			9,482		Equipment and systems	14,577		15,886		14,870
Advertising and marketing		2,788			3,051			2,960		Advertising and marketing	2,122		2,059		2,161
Federal deposit insurance premium		286			1,779			1,516		Federal deposit insurance premium	5,133		2,455		1,940
Directors' compensation		3,079			3,044			2,820		Directors' compensation	1,364		2,132		2,993
Merger-related expenses		951			-			6,743		Merger-related expenses	—		—		4,349
Debt extinguishment expenses		2,156			-			-		Debt extinguishment expenses	—		—		796
Miscellaneous		13,170			14,847			11,415
Other expense										Other expense	12,930		12,798		17,303
Total Non-Interest Expense		107,624			109,243			97,850		Total Non-Interest Expense	123,751		125,708		125,885
Income before Income Taxes		57,252			56,069			34,000		Income before Income Taxes	52,379		92,347		84,496
Income tax expense		12,287			13,927			14,404		Income tax expense	11,568		24,800		21,263
Net Income	$	44,965		$	42,142		$	19,596		Net Income	$	40,811	$	67,547	$	63,233

Net Income per Common Share (EPS)										Net Income per Common Share (EPS)
Basic	$	0.55		$	0.46		$	0.24		Basic	$	0.63	$	0.95	$	0.77
Diluted	$	0.55		$	0.46		$	0.24		Diluted	$	0.63	$	0.95	$	0.77
Weighted Average Number of Common Shares Outstanding										Weighted Average Number of Common Shares Outstanding
Basic		82,409			91,054			82,587		Basic	64,804		70,911		82,387
Diluted		82,430			91,100			82,643		Diluted	64,804		70,933		82,391

~~See notes to consolidated financial statements.~~

~~F-7~~


See notes to consolidated financial statements.

F-6

Table of Contents

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

(In Thousands)


	Years Ended June 30,										Years Ended June 30,
		2020			2019			2018			2023		2022		2021
Net Income	$	44,965		$	42,142		$	19,596		Net Income	$	40,811	$	67,547	$	63,233
Other Comprehensive (Loss) Income, net of tax:										Other Comprehensive (Loss) Income, net of tax:
Net unrealized gain (loss) on securities available for sale		16,126			4,336			(1,423	)
Amortization of net unrealized loss on securities available for sale transferred to held to maturity		421			217			146
Net realized (gain) loss on sale and call of securities available for sale		(1,587	)		228			(12	)
Net unrealized loss on securities available for sale										Net unrealized loss on securities available for sale	(38,004)		(91,453)		(8,274)

Net realized loss (gain) on sale and call of securities available for sale										Net realized loss (gain) on sale and call of securities available for sale	10,811		397		(538)
Fair value adjustments on derivatives		(16,310	)		(20,298	)		17,212		Fair value adjustments on derivatives	13,211		28,481		13,470
Benefit plan adjustments		(232	)		(179	)		187		Benefit plan adjustments	253		704		229
Total Other Comprehensive (Loss) Income		(1,582	)		(15,696	)		16,110		Total Other Comprehensive (Loss) Income	(13,729)		(61,871)		4,887
Total Comprehensive Income	$	43,383		$	26,446		$	35,706		Total Comprehensive Income	$	27,082	$	5,676	$	68,120

~~See notes to consolidated financial statements.~~

~~F-8~~


See notes to consolidated financial statements.

F-7

Table of Contents

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Consolidated Statements of Changes in Stockholders’ Equity

(In Thousands, Except Per Share Data)

Common Stock

Paid-In

Retained

Unearned
ESOP

Accumulated
Other
Comprehensive

Shares

Amount

Capital

Earnings

Shares

Income

Total

Balance - June 30, 2017

84,351

$
844

$
728,790

$
361,039

$
(34,536
)

$
1,044

$
1,057,181

Net income

-

-

-

19,596

-

-

19,596

Other comprehensive income, net
  of income tax expense

-

-

-

-

-

16,110

16,110

ESOP shares committed to be
  released (201 shares)

-

-

903

-

1,946

-

2,849

Stock option exercise

10

-

102

-

-

-

102

Stock option expense

-

-

2,016

-

-

-

2,016

Share repurchases

(10,015
)

(100
)

(142,502
)

-

-

-

(142,602
)
Restricted stock plan shares
  earned (288 shares)

-

-

4,330

-

-

-

4,330

Cancellation of shares issued for
  restricted stock awards

(158
)

(2
)

(1,368
)

-

-

-

(1,370
)
Reclassification of stranded tax
  effects from Accumulated Other
  Comprehensive Income

-

-

-

(1,381
)

-

1,381

-

Acquisition of Clifton Bancorp

25,438

254

330,440

-

-

-

330,694

Cash dividends declared
  ($0.25 per common share)

-

-

-

(20,158
)

-

-

(20,158
)

Balance - June 30, 2018

99,626

$
996

$
922,711

$
359,096

$
(32,590
)

$
18,535

$
1,268,748


	Common Stock			Paid-In Capital		Retained Earnings		Unearned ESOP Shares		Accumulated Other Comprehensive Income		Total
	Shares	Amount
Balance - June 30, 2020	83,663	$	837	$	722,871	$	387,911	$	(28,699)	$	1,257	$	1,084,177

Cumulative effect of change in accounting principle - Topic 326	—	—		—		(14,239)		—		—		(14,239)
Balance - July 1, 2020 as adjusted for change in accounting principle	83,663	837		722,871		373,672		(28,699)		1,257		1,069,938
Net income	—	—		—		63,233		—		—		63,233
Other comprehensive income, net of income tax	—	—		—		—		—		4,887		4,887
ESOP shares committed to be released (201 shares)	—	—		123		—		1,946		—		2,069
Stock option exercise	41	—		373		—		—		—		373
Stock repurchases	(10,567)	(105)		(118,916)		—		—		—		(119,021)
Issuance of stock under stock benefit plans	54	1		(1)		—		—		—		—
Stock-based compensation expense	—	—		5,673		—		—		—		5,673
Cancellation of stock issued for restricted stock awards	(80)	(1)		(802)		—		—		—		(803)
Stock issued in conjunction with the acquisition of MSB Financial Corp.	5,854	58		45,075		—		—		—		45,133
Cash dividends declared ($0.35 per common share)	—	—		—		(28,538)		—		—		(28,538)

Balance - June 30, 2021	78,965	$	790	$	654,396	$	408,367	$	(26,753)	$	6,144	$	1,042,944

~~See notes to consolidated financial statements.~~

~~F-9~~


	Common Stock			Paid-In Capital		Retained Earnings		Unearned ESOP Shares		Accumulated Other Comprehensive Income (Loss)		Total
	Shares	Amount
Balance - June 30, 2021	78,965	$	790	$	654,396	$	408,367	$	(26,753)	$	6,144	$	1,042,944

Net income	—	—		—		67,547		—		—		67,547
Other comprehensive loss, net of income tax	—	—		—		—		—		(61,871)		(61,871)
ESOP shares committed to be released (201 shares)	—	—		600		—		1,946		—		2,546
Stock repurchases	(10,222)	(102)		(129,418)		—		—		—		(129,520)
Stock-based compensation expense	—	—		3,794		—		—		—		3,794
Cancellation of stock issued for restricted stock awards	(77)	(1)		(976)		—		—		—		(977)
Cash dividends declared ($0.43 per common share)	—	—		—		(30,463)		—		—		(30,463)

Balance - June 30, 2022	68,666	$	687	$	528,396	$	445,451	$	(24,807)	$	(55,727)	$	894,000


See notes to consolidated financial statements.

F-8

Table of Contents

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Consolidated Statements of Changes in Stockholders’ Equity

(In Thousands, Except Per Share Data)

Common Stock

Paid-In

Retained

Unearned
ESOP

Accumulated
Other
Comprehensive

Shares

Amount

Capital

Earnings

Shares

Income

Total

Balance - June 30, 2018

99,626

$
996

$
922,711

$
359,096

$
(32,590
)

$
18,535

$
1,268,748

Cumulative effect of change in
accounting principle for the
adoption of ASU 2017-08

-

-

-

(531
)

-

-

(531
)
Balance - July 1, 2018, as
adjusted for change in
accounting principle

99,626

996

922,711

358,565

(32,590
)

18,535

1,268,217

Net income

-

-

-

42,142

-

-

42,142

Other comprehensive loss, net
  of income tax expense

-

-

-

-

-

(15,696
)

(15,696
)
ESOP shares committed to be
  released (201 shares)

-

-

716

-

1,946

-

2,662

Stock option exercise

49

-

423

-

-

-

423

Stock option expense

-

-

2,005

-

-

-

2,005

Share repurchases

(10,625
)

(105
)

(141,603
)

-

-

-

(141,708
)
Issuance of shares under stock
benefit plans

233

2

(2
)

-

-

-

-

Restricted stock plan shares
  earned (284 shares)

-

-

4,131

-

-

-

4,131

Cancellation of shares issued for
  restricted stock awards

(157
)

(2
)

(987
)

-

-

-

(989
)
Cash dividends declared
  ($0.37 per common share)

-

-

-

(34,028
)

-

-

(34,028
)

Balance - June 30, 2019

89,126

$
891

$
787,394

$
366,679

$
(30,644
)

$
2,839

$
1,127,159


	Common Stock			Paid-In Capital		Retained Earnings		Unearned ESOP Shares		Accumulated Other Comprehensive Loss		Total
	Shares	Amount
Balance - June 30, 2022	68,666	$	687	$	528,396	$	445,451	$	(24,807)	$	(55,727)	$	894,000

Net income	—	—		—		40,811		—		—		40,811
Other comprehensive loss, net of income tax	—	—		—		—		—		(13,729)		(13,729)
ESOP shares committed to be released (201 shares)	—	—		(8)		—		1,945		—		1,937
Stock repurchases	(2,821)	(29)		(27,529)		—		—		—		(27,558)
Issuance of stock under stock benefit plans	61	1		(1)		—		—		—		—
Stock-based compensation expense	—	—		2,936		—		—		—		2,936
Cancellation of stock issued for restricted stock awards	(42)	—		(462)		—		—		—		(462)
Cash dividends declared ($0.44 per common share)	—	—		—		(28,651)		—		—		(28,651)

Balance - June 30, 2023	65,864	$	659	$	503,332	$	457,611	$	(22,862)	$	(69,456)	$	869,284

Common Stock

Paid-In

Retained

Unearned
ESOP

Accumulated
Other
Comprehensive

Shares

Amount

Capital

Earnings

Shares

Income

Total

Balance - June 30, 2019

89,126

$
891

$
787,394

$
366,679

$
(30,644
)

$
2,839

$
1,127,159

Net income

-

-

-

44,965

-

-

44,965

Other comprehensive loss, net
  of income tax benefit

-

-

-

-

-

(1,582
)

(1,582
)
ESOP shares committed to be
  released (201 shares)

-

-

409

-

1,945

-

2,354

Stock option expense

-

-

1,838

-

-

-

1,838

Share repurchases

(5,376
)

(53
)

(69,729
)

-

-

-

(69,782
)
Restricted stock plan shares
  earned (277 shares)

-

-

4,041

-

-

-

4,041

Cancellation of shares issued for
  restricted stock awards

(87
)

(1
)

(1,082
)

-

-

-

(1,083
)
Cash dividends declared
  ($0.29 per common share)

-

-

-

(23,733
)

-

-

(23,733
)

Balance - June 30, 2020

83,663

$
837

$
722,871

$
387,911

$
(28,699
)

$
1,257

$
1,084,177

~~See notes to consolidated financial statements.~~

~~F-10~~


See notes to consolidated financial statements.

F-9

Table of Contents

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(In Thousands)


	Years Ended June 30,										Years Ended June 30,
		2020			2019			2018			2023		2022		2021
Cash Flows from Operating Activities:										Cash Flows from Operating Activities:
Net income	$	44,965		$	42,142		$	19,596		Net income	$	40,811	$	67,547	$	63,233
Adjustment to reconcile net income to net cash provided by operating activities:										Adjustment to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of premises and equipment		4,647			4,322			3,224		Depreciation and amortization of premises and equipment	5,733		5,971		5,862
Net (accretion) amortization of premiums, discounts and loan fees and costs		(9,457	)		(11,500	)		986
Net accretion of yield adjustments										Net accretion of yield adjustments	(5,084)		(5,669)		(13,214)
Deferred income taxes and valuation allowance		665			4,538			6,700		Deferred income taxes and valuation allowance	2,789		5,023		4,154
Bargain purchase gain										Bargain purchase gain	—		—		(3,053)
Amortization of intangible assets		1,165			1,135			364		Amortization of intangible assets	563		685		980
Accretion of benefit plans’ unrecognized net gain		(328	)		(269	)		(39	)
Provision for loan losses		4,197			3,556			2,706
Loss on write-down and sales of other real estate owned		28			11			19
Amortization of benefit plans’ unrecognized net loss										Amortization of benefit plans’ unrecognized net loss	358		1,003		320
Provision for (reversal of) credit losses										Provision for (reversal of) credit losses	2,486		(7,518)		(1,121)
Loss (gain) on sale of other real estate owned										Loss (gain) on sale of other real estate owned	139		(5)		—
Loans originated for sale		(290,800	)		(65,691	)		(74,937	)	Loans originated for sale	(106,288)		(179,727)		(281,086)
Proceeds from sale of mortgage loans held-for-sale		285,436			54,812			79,509		Proceeds from sale of mortgage loans held-for-sale	127,416		196,796		290,530
Gain on sale of mortgage loans held-for-sale, net		(3,159	)		(524	)		(742	)
Realized (gain) loss on sale/call of securities available for sale		(2,250	)		323			(16	)
Realized loss on sale/call of securities held to maturity		-			-			8
Loss (gain) on sale of mortgage loans held-for-sale, net										Loss (gain) on sale of mortgage loans held-for-sale, net	1,700		(2,415)		(5,147)
Realized loss (gain) on sale/call of securities available for sale										Realized loss (gain) on sale/call of securities available for sale	15,227		559		(767)
Realized loss on debt extinguishment		2,156			-			-		Realized loss on debt extinguishment	—		—		796
Proceeds from sale of SBA loans		497			922			3,064
Realized gain on sale of SBA loans		(27	)		(56	)		(262	)
Realized loss on disposition of premises and equipment		383			22			10
Realized gain on sale of loans receivable										Realized gain on sale of loans receivable	(55)		(124)		(427)
Realized gain on disposition of premises and equipment										Realized gain on disposition of premises and equipment	(2,886)		(363)		(971)
Loss on write-down of premises		-			1,071			-		Loss on write-down of premises	—		—		1,938
Increase in cash surrender value of bank owned life insurance		(6,225	)		(6,339	)		(5,362	)	Increase in cash surrender value of bank owned life insurance	(8,645)		(6,167)		(6,267)
ESOP, stock option plan and restricted stock plan expenses		8,233			8,798			9,195
Decrease (increase) in interest receivable		1,987			(850	)		(1,875	)
(Increase) decrease in other assets		(35,290	)		2,508			138
(Decrease) increase in interest payable		(4,887	)		3,903			558
Increase (decrease) in other liabilities		17,885			(2,911	)		2,251
ESOP and stock-based compensation expense										ESOP and stock-based compensation expense	4,873		6,340		7,742
Increase in interest receivable										Increase in interest receivable	(7,667)		(1,104)		(288)
Decrease (increase) in other assets										Decrease (increase) in other assets	2,833		7,922		(4,454)
Increase (decrease) in interest payable										Increase (decrease) in interest payable	9,776		853		(638)
(Decrease) increase in other liabilities										(Decrease) increase in other liabilities	(14,530)		(8,306)		17,295
Net Cash Provided by Operating Activities		19,821			39,923			45,095		Net Cash Provided by Operating Activities	69,549		81,301		75,417

Cash Flows from Investing Activities:										Cash Flows from Investing Activities:
Purchases of:										Purchases of:
Investment securities available for sale		(487,898	)		(125,900	)		(189,255	)	Investment securities available for sale	(166,483)		(229,145)		(918,668)
Investment securities held to maturity		-			(55,247	)		(122,512	)	Investment securities held to maturity	(40,398)		(86,406)		(12,321)
Proceeds from:										Proceeds from:
Repayments/calls/maturities of investment securities available for sale		213,052			66,562			79,853		Repayments/calls/maturities of investment securities available for sale	124,687		330,152		517,511
Repayments/calls/maturities of investment securities held to maturity		6,175			67,704			92,437		Repayments/calls/maturities of investment securities held to maturity	12,095		6,116		6,595
Sale of investment securities available for sale		164,299			75,401			254,606		Sale of investment securities available for sale	105,199		100,336		98,084
Sale of investment securities held to maturity		-			-			211
Purchase of loans		(73,262	)		(166,811	)		(54,590	)	Purchase of loans	(702)		(123,389)		(81,707)
Net decrease (increase) in loans receivable		264,109			(75	)		(87,831	)
Net (increase) decrease in loans receivable										Net (increase) decrease in loans receivable	(435,111)		(467,236)		232,660
Proceeds from sale of loans receivable										Proceeds from sale of loans receivable	706		1,450		44,801
Purchase of interest rate caps		(1,476	)		-			-		Purchase of interest rate caps	(758)		—		—
Proceeds from sale of other real estate owned		-			714			2,492		Proceeds from sale of other real estate owned	315		708		—
Additions to premises and equipment		(5,960	)		(6,137	)		(8,268	)	Additions to premises and equipment	(1,355)		(2,920)		(5,458)
Proceeds from death benefit of bank owned life insurance										Proceeds from death benefit of bank owned life insurance	4,997		300		—
Proceeds from cash settlement of premises and equipment		395			108			-		Proceeds from cash settlement of premises and equipment	3,480		612		4,852
Purchase of FHLB stock		(4,500	)		(10,215	)		(7,646	)	Purchase of FHLB stock	(98,275)		(30,382)		(37)
Redemption of FHLB stock		10,036			5,029			8,957		Redemption of FHLB stock	73,685		19,853		25,421
Net cash acquired in acquisition		-			-			30,099		Net cash acquired in acquisition	—		—		4,296
Net Cash Provided by (Used in) Investing Activities	$	84,970		$	(148,867	)	$	(1,447	)
Net Cash Used in Investing Activities										Net Cash Used in Investing Activities	(417,918)		(479,951)		(83,971)

~~See notes to consolidated financial statements.~~

~~F-11~~


See notes to consolidated financial statements.

F-10

Table of Contents

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(In Thousands)


	Years Ended June 30,										Years Ended June 30,
		2020			2019			2018			2023		2022		2021
Cash Flows from Financing Activities:										Cash Flows from Financing Activities:
Net increase in deposits	$	283,726		$	76,081		$	194,174
Net (decrease) increase in deposits										Net (decrease) increase in deposits	(232,804)		377,606		596,583
Repayment of term FHLB advances		(3,508,146	)		(3,141,114	)		(2,520,334	)	Repayment of term FHLB advances	(5,650,000)		(4,100,000)		(2,847,796)
Proceeds from term FHLB advances		3,390,000			3,252,000			2,500,000		Proceeds from term FHLB advances	6,280,000		4,085,000		2,345,000
Net (decrease) increase in other short-term borrowings		(33,035	)		10,270			(2,030	)	Net (decrease) increase in other short-term borrowings	(25,000)		230,000		(48,635)
Net decrease in advance payments by borrowers for taxes		(318	)		(1,201	)		(400	)
Net increase (decrease) in advance payments by borrowers for taxes										Net increase (decrease) in advance payments by borrowers for taxes	1,592		994		(1,611)
Repurchase and cancellation of common stock of Kearny Financial Corp.		(69,782	)		(141,708	)		(142,602	)	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		(1,083	)		(989	)		(1,370	)	Cancellation of shares repurchased on vesting to pay taxes	(462)		(977)		(803)
Exercise of stock options		-			423			102		Exercise of stock options	—		—		373
Dividends paid		(24,121	)		(34,747	)		(20,561	)	Dividends paid	(28,499)		(30,693)		(28,648)
Net Cash Provided by Financing Activities		37,241			19,015			6,979
Net increase (decrease) in Cash and Cash Equivalents		142,032			(89,929	)		50,627
Net Cash Provided by (Used in) Financing Activities										Net Cash Provided by (Used in) Financing Activities	317,269		432,410		(104,558)
Net (Decrease) Increase in Cash and Cash Equivalents										Net (Decrease) Increase in Cash and Cash Equivalents	(31,100)		33,760		(113,112)
Cash and Cash Equivalents - Beginning		38,935			128,864			78,237		Cash and Cash Equivalents - Beginning	101,615		67,855		180,967
Cash and Cash Equivalents - Ending	$	180,967		$	38,935		$	128,864		Cash and Cash Equivalents - Ending	$	70,515	$	101,615	$	67,855

Supplemental Disclosures of Cash Flows Information:										Supplemental Disclosures of Cash Flows Information:
Cash paid during the year for:										Cash paid during the year for:
Income taxes, net of refunds	$	11,812		$	6,698		$	9,333		Income taxes, net of refunds	$	9,883	$	15,552	$	19,734
Interest	$	88,740		$	78,117		$	49,581		Interest	$	108,516	$	28,816	$	50,488

Non-cash investing and financing activities:										Non-cash investing and financing activities:
Transfers from loans receivable to loans held-for-sale										Transfers from loans receivable to loans held-for-sale	$	3,545	$	27,036	$	43,579
Acquisition of other real estate owned in settlement of loans	$	206		$	-		$	1,463		Acquisition of other real estate owned in settlement of loans	$	13,232	$	703	$	—
Fair value of assets acquired, net of cash and cash equivalents acquired	$	-		$	-		$	1,607,496		Fair value of assets acquired, net of cash and cash equivalents acquired	$	—	$	—	$	567,816
Fair value of liabilities assumed	$	-		$	-		$	1,375,859		Fair value of liabilities assumed	$	—	$	—	$	523,926

In conjunction with the adoption of ASU 2019-04, as detailed in Note 2 to the unaudited consolidated financial statements, the following qualifying held to maturity securities were transferred to available for sale:
Debt securities transferred from held to maturity to available for sale	$	537,732		$	-		$	-

In conjunction with the adoption of ASU 2016-02, as detailed in Note 2 to the unaudited consolidated financial statements, the following assets and liabilities were recognized:
Operating lease right-of-use assets	$	17,243		$	-		$	-
Operating lease liabilities	$	17,758		$	-		$	-

~~See notes to consolidated financial statements.~~

~~F-12~~


See notes to consolidated financial statements.

F-11

Table of Contents

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 1 - Summary of Significant Accounting Policies

Basis of Consolidated Financial Statement Presentation

The consolidated financial statements include the accounts of Kearny Financial Corp. (the “Company”), its wholly-owned subsidiary, Kearny Bank (the “Bank”) and the Bank’s wholly-owned subsidiaries, CJB Investment Corp. and ~~KFS Insurance Services, Inc.~~189-245 Berdan Avenue LLC. The Company conducts its business principally through the Bank. Management prepared the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”), including the elimination of all significant inter-company accounts and transactions during consolidation.

In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the dates of the ~~consolidated statements~~Consolidated Statements of ~~financial condition~~Financial Condition and revenues and expenses for the periods then ended. Actual results could differ significantly from those estimates.

Business of the Company and Subsidiaries

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 and using those deposits, together with other funds, to originate or purchase loans for its portfolio and invest in securities. Loans originated or purchased by the Bank generally include loans collateralized by residential and commercial real estate augmented by secured and unsecured loans to businesses and consumers. The investment securities purchased by the Bank generally include U.S. agency mortgage-backed securities, U.S. government and agency debentures, ~~bank-qualified municipal~~ obligations of state and political subdivisions, corporate bonds, asset-backed securities, collateralized loan obligations and subordinated debt.

At June 30, ~~2020,~~2023, the Bank had ~~2 wholly owned subsidiaries:~~two wholly-owned subsidiaries, CJB Investment Corp. and ~~KFS Insurances Services, Inc.~~189-245 Berdan Avenue LLC. CJB Investment Corp was organized under New Jersey law as a New Jersey Investment Company and remained active through the three-year period ended June 30, ~~2020. KFS Insurance Services, Inc.~~2023. 189-245 Berdan Avenue LLC was formed ~~for the primary purpose of acquiring insurance agencies. KFS Insurance Services Inc. was considered inactive~~ during the ~~three-year period~~year ended June 30, ~~2020.~~

~~Risks~~2023 for the purpose of ownership and ~~Uncertainties~~

~~On March 11, 2020, the World Health Organization declared the outbreak~~operation of ~~COVID-19 a global pandemic.~~ commercial real estate.

Subsequent Events

The ~~COVID-19 pandemic~~Company has ~~adversely affected,~~evaluated events and may continue to adversely affect local, national and global economic activity. Actions taken to help mitigate the spread of COVID-19 include restrictions on travel, localized quarantines, and government-mandated closures of certain businesses. The spread of the outbreak has caused significant disruptionstransactions occurring subsequent to the ~~U.S. economy and has disrupted banking and other~~statement of financial ~~activity~~condition date of June 30, 2023, for items that should potentially be recognized or disclosed in these consolidated financial statements. The evaluation was conducted through the ~~areas in which~~date this document was filed.

On July 27, 2023, the Company ~~operates.~~

~~On March 3, 2020, the Federal Open Market Committee reduced the targeted federal funds interest rate range by 50 basis points~~declared a quarterly cash dividend of $0.11 per share, paid on August 23, 2023 to 1.00 percent to 1.25 percent. This range was further reduced to 0 percent to 0.25 percent on March 16, 2020. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted to, among other provisions, provide emergency assistance for individuals, families and businesses affected by the COVID-19 pandemic. These reductions in interest rates and other effectsstockholders of ~~the COVID-19 pandemic may materially and adversely affect the Company's financial condition and results~~record as of operations in future periods. It is unknown how long the adverse conditions associated with the COVID-19 pandemic will last and what the complete financial effect will be to the Company. It is possible that estimates made in the financial statements could be materially and adversely impacted as a result of these conditions, including estimates regarding expected credit losses on loans receivable, other-than-temporary impairment of investment securities and impairment of goodwill.

August 9, 2023.

Cash and Cash Equivalents

Cash and cash equivalents include cash, deposits with other financial institutions with maturities fewer than 90 days, and federal funds sold. Net cash flows are reported for customer loan and deposit transactions, interest bearing deposits in other financial institutions and borrowings with original maturities fewer than 90 days.

~~F-13~~

~~KEARNY FINANCIAL CORP. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

~~Note 1 - Summary of Significant Accounting Policies (continued)~~

Securities

The Company classifies its investment securities as either available for sale or held to maturity. The Company does not use or maintain a trading account. Investment securities that management has the positive intent and ability to hold to maturity are classified as held to maturity and reported at amortized cost. Investment securities not classified as held to maturity are classified as available for sale and reported at fair value, with unrealized holding gains or losses, net of deferred income taxes, reported in the accumulated other comprehensive income (“OCI”) component of stockholders’ equity.

If the fair value of a security is less than its amortized cost, the security is deemed to be impaired. Management evaluates all securities with unrealized losses quarterly to determine if such impairments are temporary or other-than-temporary. The Company accounts for temporary impairments based upon their classification as either available for sale or held to maturity. Temporary impairments on available for sale securities are recognized, on a tax-effected basis, through OCI with offsetting entries adjusting the carrying value of the security and the balance of deferred taxes. Conversely, the Company does not adjust the carrying value of held to maturity securities for temporary impairments, although information concerning the amount and duration of impairments on held to maturity securities is disclosed in periodic financial statements.

The Company accounts for other-than-temporary impairments based upon several considerations. First, other-than-temporary impairments on securities that the Company intends to sell, or will, more likely than not, be required to sell prior to the full recovery of their fair value to a level equal to or exceeding their amortized cost, are recognized in earnings. If neither of these conditions regarding the likelihood of the securities’ sale are applicable, then the other-than-temporary impairment is bifurcated into credit and non-credit components. A credit impairment generally represents the amount by which the present value of the cash flows that are expected to be collected on an investment security fall below its amortized cost. A non-credit impairment represents the remaining portion of the impairment not otherwise designated as credit-related. The Company recognizes credit-related other-than-temporary impairments in earnings. Non-credit other-than-temporary impairments on investment securities are recognized in OCI.

Premiums on callable securities are amortized to the earliest call date whereas discounts on such securities are accreted to the maturity date utilizing the level-yield method. Premiums and discounts on all other securities are generally amortized or accreted to the maturity date utilizing the level-yield method taking into consideration the impact of principal amortization and prepayments, as applicable. Gain or loss on sales of securities is based on the specific identification method.

F-12

Table of Contents

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 1 - Summary of Significant Accounting Policies (continued)

Effective July 1, 2020, the Company adopted the provisions of ASC 326 and modified its accounting policy for the assessment of available for sale securities for impairment. Under ASC 326, for available for sale securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more than likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For securities available for sale that do not meet the above criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Company considers the extent to which fair value is less than amortized cost, any changes to the rating by a rating agency, and adverse conditions related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of the cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income, net of tax. The Company elected the practical expedient of zero loss estimates for securities issued by U.S. government entities and agencies. These securities are either explicitly or implicitly guaranteed by the U.S. government, are highly rate by major agencies and have a long history of no credit losses.

Under ASC 326, changes in the allowance for credit losses are recorded as provision for, or reversal of, credit loss expense. Losses are charged against the allowance when management believes the uncollectibility of an available for sale security is confirmed or when either of the criteria regarding intent or requirement to sell is met.

Concentration of Risk

Financial instruments which potentially subject the Company and its subsidiaries to concentrations of credit risk consist of cash and cash equivalents, investment securities and loans receivable. Cash and cash equivalents include deposits placed in other financial institutions.

Securities include concentrations of investments backed by U.S. government agencies and U.S. government sponsored enterprises (“GSEs”), including the Federal National Mortgage Association (“Fannie Mae”), the Federal Home Loan Mortgage Corporation (“Freddie Mac”), and the Government National Mortgage Association (“Ginnie Mae”). Additional concentration risk exists in the Company’s municipal and corporate obligations, asset-backed securities and collateralized loan obligations.

The Company’s lending activity is primarily concentrated in loans collateralized by real estate in the states of New Jersey and New York. As a result, credit risk is broadly dependent on the real estate market and general economic conditions in these states. Additionally, the Company’s lending policies limit the amount of credit extended to any single borrower and their related interests thereby limiting the concentration of credit risk to any single borrower.

Loans Receivable

Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at unpaid principal balances, net of deferred loan origination fees and costs, purchase discounts and premiums, purchase accounting fair value adjustments and the allowance for ~~loan~~credit losses. Interest income is accrued on the unpaid principal balance. Certain direct loan origination costs, net of loan origination fees, are deferred and amortized, using the level-yield method, as an adjustment of yield over the contractual lives of the related loans. Unearned premiums and discounts are amortized or accreted utilizing the level-yield method over the contractual lives of the related loans.

~~F-14~~

~~KEARNY FINANCIAL CORP. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

~~Note 1 - Summary of Significant Accounting Policies (continued)~~

Loans Held-for-Sale

Loans held-for-sale are carried at the lower of cost or estimated fair value, as determined on an aggregate basis. Net unrealized losses, if any, are recognized in a valuation allowance through a charge to earnings. Premiums and discounts and origination fees and costs on loans held-for-sale are deferred and recognized as a component of the gain or loss on sale. Gains and losses on sales of loans held-for-sale are recognized on settlement dates and are determined by the difference between the sale proceeds and the carrying value of the loans. These transactions are accounted for as sales based on satisfaction of the criteria for such accounting which provide that, as transferor, control over the loans have been surrendered.

F-13

Table of Contents

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 1 - Summary of Significant Accounting Policies (continued)

Past Due Loans

A loan’s past due status is generally determined based upon its principal and interest ~~payment~~ (“P&I”) payment delinquency status in conjunction with its past maturity status, where applicable. A loan’s P&I payment delinquency status is based upon the number of calendar days between the date of the earliest P&I payment due and the as of measurement date. A loan’s past maturity status, where applicable, is based upon the number of calendar days between a loan’s contractual maturity date and the as of measurement date. Based upon the larger of these criteria, loans are categorized into the following past due tiers for financial statement reporting and disclosure purposes: Current (including 1-29 days), 30-59 days, 60-89 days and 90 or more days.

Nonaccrual Loans

Loans are generally placed on nonaccrual status when contractual payments become 90 or more days past due or when the Company does not expect to receive all P&I payments owed substantially in accordance with the terms of the loan agreement, regardless of past due status. Loans that become 90 day past due, but are well secured and in the process of collection, may remain on accrual status. Nonaccrual loans are generally returned to accrual status when all payments due are brought current and the Company expects to receive all remaining P&I payments owed substantially in accordance with the terms of the loan agreement.

Payments received in cash on nonaccrual loans, including both the principal and interest portions of those payments, are generally applied to reduce the carrying value of the loan.

Classification of Assets

In compliance with the regulatory guidelines, the Company’s loan review system includes an evaluation process through which certain loans exhibiting adverse credit quality characteristics are classified as Special Mention, Substandard, Doubtful or Loss.

An asset is classified as Substandard if it is inadequately protected by the paying capacity and net worth of the obligor or the collateral pledged, if any. Substandard assets include those characterized by the distinct possibility that the insured institution will sustain some loss if the deficiencies are not corrected. Assets classified as Doubtful have all of the weaknesses inherent in those classified as Substandard, with the added characteristic that the weaknesses present make collection or liquidation in full highly questionable and improbable, on the basis of currently existing facts, conditions and values. Assets, or portions thereof, classified as Loss are considered uncollectible or of so little value that their continuance as assets is not warranted.

Assets which do not currently expose the Company to a sufficient degree of risk to warrant an adverse classification but have some credit deficiencies or other potential weaknesses are designated as Special Mention by management. Adversely classified assets together with those rated as Special Mention, are generally referred to as Classified Assets. Non-classified assets are internally rated within one of four Pass categories or as Watch with the latter denoting a potential deficiency or concern that warrants increased oversight or tracking by management until remediated.

Management generally performs a classification of assets review, including the regulatory classification of assets, on an ongoing basis. The results of the classification of assets review are validated by the Company’s third party loan review firm during their quarterly independent review. In the event of a difference in rating or classification between those assigned by the internal and external resources, the Company will generally utilize the more critical or conservative rating or classification. Final loan ratings and regulatory classifications are presented monthly to the Board of Directors and are reviewed by regulators during the examination process.

Management evaluates loans classified as substandard or doubtful for impairment in accordance with applicable accounting requirements. A valuation allowance is established through the provision for loan losses for any impairment identified through such evaluations.

~~F-15~~

F-14

Table of Contents

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 1 - Summary of Significant Accounting Policies (continued)

Allowance for Credit Losses

Effective July 1, 2020, the ~~extent~~Company adopted the provisions of ASC 326 and modified its accounting policy for the allowance for credit losses on loans. The allowance for credit losses represents the estimated amount considered necessary to cover lifetime expected credit losses inherent in financial assets at the balance sheet date. The measurement of expected credit losses is applicable to loans receivable and securities measured at amortized cost. It also applies to off-balance sheet credit exposures such as loan commitments and unused lines of credit. The allowance is established through a provision for credit losses that ~~impairment identified~~is charged against income. The methodology for determining the allowance for credit losses is considered a critical accounting policy by management because of the high degree of judgment involved, the subjectivity of the assumptions used, and the potential for changes in the forecasted economic environment that could result in changes to the amount of the recorded allowance for credit losses.

The allowance for credit losses is reported separately as a contra-asset on athe Consolidated Statements of Financial Condition. The expected credit losses for unfunded lending commitments and unfunded loan commitments is ~~classified as Loss, that portion~~reported on the Consolidated Statements of Financial Condition in other liabilities while the provision for credit losses related to unfunded commitments is reported in other non-interest expense.

Allowance for Credit Losses on Loans Receivable

The allowance for credit losses on loans is deducted from the amortized cost basis of the loan isto present the net amount expected to be collected. Expected losses are evaluated and calculated on a collective, or pooled, basis for those loans which share similar risk characteristics. At each reporting period, the Company evaluates whether loans within a pool continue to exhibit similar risk characteristics. If the risk characteristics of a loan change, such that they are no longer similar to other loans in the pool, the Company will evaluate the loan with a different pool of loans that share similar risk characteristics. If the loan does not share risk characteristics with other loans, the Company will evaluate the loan on an individual basis. The Company evaluates the pooling methodology at least annually. Loans are charged off against the allowance for ~~loan losses.~~ credit losses when the Company believes the balances to be uncollectible. Expected recoveries do not exceed the aggregate of amounts previously charged off or expected to be charged off.

The classification of loan impairment as Loss is based upon a confirmed expectation for loss. For loans primarily secured by real estate, the expectation for loss is generally confirmed when: (a) impairment is identified on a loan individually evaluated inCompany has chosen to segment its portfolio consistent with the manner ~~described below,~~in which it manages credit risk. Such segments include multi-family mortgage, nonresidential mortgage, commercial business, construction, one- to four-family residential mortgage, home equity and ~~(b)~~consumer. For most segments the Company calculates estimated credit losses using a probability of default and loss given default methodology, the results of which are applied to the aggregated discounted cash flow of each individual loan ~~is presumed~~within the segment. The point in time probability of default and loss given default are then conditioned by macroeconomic scenarios to ~~be collateral-dependent such~~incorporate reasonable and supportable forecasts that affect the ~~source of loan repayment is expected to arise solely from sale~~collectability of the collateral securing the applicable loan. Impairment identified on non-collateral-dependent loans may or may not be eligible for a Loss classification depending upon the other salient facts and circumstances that effect the manner and likelihood of loan repayment. However, loan impairment that is classified as Loss is charged off againstreported amount.

The Company estimates the allowance for ~~loan~~credit losses ~~concurrent with that classification.~~

on loans via a quantitative analysis which considers relevant available information from internal and external sources related to past events and current conditions, as well as the incorporation of reasonable and supportable forecasts. The ~~timeframe between when loan impairment is first identified by~~Company evaluates a variety of factors including third party economic forecasts, industry trends and other available published economic information in arriving at its forecasts. After the reasonable and supportable forecast period, the Company ~~and when such impairment may ultimately be charged off varies by loan type. For example, unsecured consumer and commercial loans~~reverts, on a straight-line basis, to the historical average economic variables. Expected credit losses are ~~generally classified as Loss at 120 days past due, resulting in their outstanding balances being charged off at that time. For~~estimated over the Company’s secured loans, the condition of collateral dependency generally serves as the basis upon which a Loss classification is ascribed to a loan’s impairment thereby confirming an expected loss and triggering charge off of that impairment. While the facts and circumstances that effect the manner and likelihood of repayment vary from loan to loan, the Company generally considers the referral of a loan to foreclosure, coupled with the absence of other viable sources of loan repayment, to be demonstrable evidence of collateral dependency. Depending upon the nature of the collections process applicable to a particular loan, an early determination of collateral dependency could result in a nearly concurrent charge off of a newly identified impairment. By contrast, a presumption of collateral dependency may only be determined after the completion of lengthy loan collection and/or workout efforts, including bankruptcy proceedings, which may extend several months or more after a loan’s impairment is first identified.

~~In a limited number of cases, the entire net carrying value of a loan may be determined to be impaired based upon a collateral-dependent impairment analysis. However, the borrower’s adherence to~~ contractual repayment terms precludes the recognition of a Loss classification and charge off. In these limited cases, a valuation allowance equal to 100% of the impaired loan’s carrying value may be maintained against the net carrying value of the asset.

~~Acquired Loans~~

~~Loans acquired through acquisitions are recorded at fair value with no carryover of the related allowance for credit losses. Determining the fair value~~term of the loans, ~~involves estimating the amount~~adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions, renewals, and ~~timing of principal and interest cash flows expected to be collected on the loans and discounting those cash flows at a market rate of interest.~~

~~The excess of cash flows expected at acquisition over the estimated fair value is referred to as the accretable yield and is recognized into interest income over the remaining life~~modifications unless either of the ~~loan. The difference between contractually required payments~~following applies: management has a reasonable expectation at ~~acquisition~~the reporting date that a troubled debt restructuring will be executed with an individual borrower or the renewal option is included in the original or modified contract at the reporting date and are not unconditionally cancelable by the ~~cash flows expected to be collected at acquisition is referred to as~~Company.

Also included in the nonaccretable yield. The nonaccretable yield represents estimated future credit losses expected to be incurred over the life of the loan. Subsequent decreases to the expected cash flows require us to evaluate the need for an allowance for credit losses. Subsequent improvements in expected cash flows result in the reversal of a corresponding amount of the nonaccretable yield which we then reclassify as accretable yield that is recognized into interest income over the remaining life of the loan using the interest method. Our evaluation of the amount of future cash flows that we expect to collect is performed in a similar manner as that used to determine our allowance for credit losses. Charge-offs of the principal amount on acquired loans would be first applied to the nonaccretable yield portion of the fair value adjustment.

~~Allowance for Loan Losses~~

The allowance for loan losses is a valuation account that reflects the Company’s estimation of the losses in its loan portfolio to the extent they are both probable and reasonable to estimate. The balance of the allowance is generally maintained through provisions for loan losses that are charged to income in the period that estimated losses on loans are ~~identified. The~~qualitative reserves to cover losses that are expected but, in the Company’s assessment, may not be adequately represented in the quantitative analysis or the forecasts described above. Factors that the Company ~~charges confirmed losses on~~considers include changes in lending policies and procedures, business conditions, the nature and size of the portfolio, portfolio concentrations, the volume and severity of past due loans ~~against~~and non-accrual loans, the ~~allowance~~effect of external factors such as ~~such losses~~competition, legal and regulatory requirements, among others. Qualitative loss factors are ~~identified. Recoveries on loans previously charged-off are added back~~applied to each portfolio segment with the amounts judgmentally determined by the relative risk to the ~~allowance.~~

~~F-16~~

most severe loss periods identified in the historical loan charge-offs of a peer group of similar-sized regional banks.

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Table of Contents

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 1 - Summary of Significant Accounting Policies (continued)

~~The Company’s allowance for loan loss calculation methodology utilizes~~

Individually Evaluated Loans

On a two-tier loss measurement process that is performed no less than quarterly. The Company first identifies the loans that must be reviewed individually for impairment. Factors considered in identifying individual loans to be reviewed include, but may not be limited to, loan type, classification status, contractual payment status, performance/accrual status and impaired status. Loans considered bycase-by-case basis, the Company tomay conclude that a loan should be ~~eligible for~~evaluated on an individual ~~impairment review include its commercial mortgage loans, construction loans, commercial business loans, one- to four-family mortgage loans, home equity loans and home equity lines of credit.~~

~~A loan is deemed to be impaired when,~~basis based on ~~current information and events, it is probable that~~its disparate risk characteristics. When the Company determines that a loan no longer shares similar risk characteristics with other loans in the portfolio, the allowance will be ~~unable to collect all amounts due according to the contractual terms of the loan agreement. Once a loan is~~ determined ~~to be impaired, management performs~~on an ~~analysis to determine the amount of impairment associated with that loan.~~

~~Impairment is measured based on~~individual basis using the present value of expected cash flows ~~discounted at the loans effective interest rate~~ or, ~~in the case of~~for collateral-dependent loans, the fair value of the collateral securing the loan, less costs to sell. In the case of real estate collateral, such values are generally determined based upon a market value obtained through an automated valuation module or prepared by a qualified, independent real estate appraiser. The value of non-real estate collateral is similarly determined based upon an independent assessment of fair market value by a qualified resource. The Company generally obtains independent appraisals on properties securing mortgage loans when such loans are initially placed in a nonperforming or impaired status with such values updated approximately every six to twelve months thereafter. Appraised values are typically updated at the point of foreclosure, where applicable, and updated approximately every six to twelve months thereafter.

The Company establishes valuation allowances in the fiscal period during which loan impairments are identified. Such valuation allowances are adjusted in subsequent fiscal periods, where appropriate, to reflect any changes in carrying value or fair value identified during subsequent impairment evaluations.

~~The second tier~~as of the ~~loss measurement process involves estimating the probable and estimable losses which addresses loans not otherwise reviewed individually for impairment~~reporting date, less estimated selling costs, as well as those individually reviewed loans that are determined to be non-impaired. Such loans include groups of smaller-balance homogeneous loans that may generally be excluded from individual impairment analysis, and therefore collectively evaluated for impairment, as well as the non-impaired loans within categories that are otherwise eligible for individual impairment review.

Valuation allowances established through the second tier of the loss measurement process utilize historical and environmental loss factors to collectively estimate the level of probable losses within defined segments of the Company’s loan portfolio. These segments aggregate homogeneous subsets of loans with similar risk characteristics based upon loan type. For allowance for loan loss calculation and reporting purposes, the Company currently stratifies its loan portfolio into ~~seven~~ primary categories: multi-family mortgage loans, non-residential mortgage loans, commercial business loans, construction loans, one- to four-family residential mortgage loans, home equity loans, and other consumer loans.

The risks presented by residential mortgage loans are primarily related to adverse changes in the borrower’s financial condition that threaten repayment of the loan in accordance with its contractual terms. Such risk to repayment can arise from job loss, divorce, illness and the personal bankruptcy of the borrower. For collateral dependent residential mortgage loans, additional risk of loss is presented by potential declines inapplicable. If the fair value of the collateral ~~securing~~is less than the amortized cost basis of the loan, the Company will charge off 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.

~~Home equity~~

Acquired Loans

Acquired loans are included in the Company's calculation of the allowance for credit losses. How the allowance on an acquired loan is recorded depends on whether or not it has been classified as a Purchased Credit Deteriorated (“PCD”) loan. PCD loans are loans acquired at a discount that is due, in part, to credit quality. PCD loans are accounted for in accordance with ASC Subtopic 326-20 and are initially recorded at fair value as determined by the sum of the present value of expected future cash flows and an allowance for credit losses at acquisition.

The allowance for PCD loans is recorded through a gross-up effect, while the allowance for acquired non-PCD loans is recorded through provision expense, consistent with originated loans. Thus, the determination of which loans are PCD and non-PCD can have a significant impact on the accounting for these loans. Subsequent to acquisition, the allowance for PCD loans will generally ~~share~~follow the same ~~risks~~estimation, provision and charge-off process as non-PCD acquired and originated loans.

Allowance for Credit Losses on Off-Balance Sheet Commitments

The Company is required to include unfunded commitments that are expected to be funded in the future within the allowance calculation, other than those that are unconditionally cancelable. To arrive at that reserve, the reserve percentage for each applicable ~~to residential mortgage loans. However,~~segment is applied to the ~~extent that such loans represent junior liens, they are comparatively more susceptible to such risks given their subordinate position behind senior liens.~~

In addition to sharing similar risks as those presented by residential mortgage loans, risks relating to multi-family and non-residential mortgage loans also arise from comparatively larger loan balances to single borrowers or groups of related borrowers. Moreover, the repayment of such loans is typically dependent on the successful operation of an underlying real estate project and may be further threatened by adverse changes to demand and supply of commercial real estate as well as changes generally impacting overall business or economic conditions.

~~F-17~~

~~KEARNY FINANCIAL CORP. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

~~Note 1 - Summary of Significant Accounting Policies (continued)~~

The risks presented by construction loans are generally considered to be greater than those attributable to residential and commercial mortgage loans. Risks from construction lending arise, in part, from the concentration of principal in a limited number of loans and borrowers and the effects of general economic conditions on developers and builders. Moreover, a construction loan can involve additional risks becauseunused portion of the ~~inherent difficulty in estimating both a property's value at completion of the project~~expected commitment balance and ~~the estimated cost, including interest, of the project. The nature of these loans is such that they are comparatively more difficult to evaluate and monitor than permanent mortgage loans.~~

Commercial business loans are also considered to present a comparatively greater risk of loss due to the concentration of principal in a limited number of loans and/or borrowers and the effects of general economic conditions on the business. Commercial business loans may be secured by varying forms of collateral including, but not limited to, business equipment, receivables, inventory and other business assets which may not provide an adequate source of repayment of the outstanding loan balance in the event of borrower default. Moreover, the repayment of commercial business loans is primarily dependent on the successful operation of the underlying business which may be threatened by adverse changes to the demand for the business’ products and/or services as well as the overall efficiency and effectiveness of the business’ operations and infrastructure.

Finally, our unsecured consumer loans generally have shorter terms and higher interest rates than other forms of lending but generally involve more credit risk due to the lack of collateral to secure the loan in the event of borrower default. Consumer loan repayment is dependent on the borrower's continuing financial stability, and therefore is more likely to be adversely affected by job loss, divorce, illness and personal bankruptcy. By contrast, our consumer loans also include account loans that are fully secured by the borrower’s deposit accounts and generally present nominal risk to the Company.

Each primary category is further stratified to distinguish between loans originated and purchased from loans acquired through business combinations. Where applicable, such categories separately identify loans that are supported by government guarantees, such as those issued by the SBA. Within these primary categories, loans are grouped into more granular segments based on common risk characteristics. For example, loans secured by real estate, such as residential and commercial mortgage loans, are generally grouped into segments by underlying property type while commercial business loans are grouped into segments based on business or industry type.

In regard to historical loss factors, the Company’s allowance for loan loss calculation performs an analysis of historical charge-offs and recoveries for each of the defined segments within the loan portfolio. The Company generally utilizes a ~~two-year~~ moving average of annualized net charge-off rates (charge-offs net of recoveries) by loan segment, where available, to calculate actual historical loss experience. The outstanding principal balance of the non-impaired portion of each loan segment is multiplied by the ~~applicable historical loss factor, which is updated quarterly, to estimate~~expected funding rate. To determine the ~~level of probable losses based upon the Company’s historical loss experience.~~

The second tier of the Company’s allowance for loan loss calculation also utilizes environmental loss factors to estimate the probable incurred losses within the loan portfolio. Environmental loss factors are based on specific quantitative and qualitative criteria that are used to assess the level of loss exposure arising from key sources of risk within the loan portfolio. Such sources of risk include those relating to the level of and trends in nonperforming loans; the level of and trends in credit risk management effectiveness, the levels and trends in lending resource capability; levels and trends in economic and market conditions; levels and trends in loan concentrations; levels and trends in loan composition and terms, levels and trends in independent loan review effectiveness; levels and trends in collateral values and the effects of other external factors.

~~As with historical loss factors,~~expected funding rate, the Company ~~generally utilizes~~uses a two-year moving average of quantitative and qualitative criteria values, where available, to determine environmental loss factor values. By doing so, estimated losses should be directionally consistent with the overall credit risk characteristics and performance of the loan portfolio over time. Where appropriate, the Company may extend or compress criteria look-back periods to properly reflect the level of credit risk and estimated losses within a specified subset of loans. The outstanding principal balance of the non-impaired portion ofhistorical utilization rate for each ~~loan segment is multiplied by the aggregate value of each environmental loss factor, which is updated quarterly, to estimate the level of probable losses attributable to that factor.~~

~~F-18~~

~~KEARNY FINANCIAL CORP. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

~~Note 1 - Summary of Significant Accounting Policies (continued)~~

~~The sum of the probable and estimable loan losses calculated through the first and second tiers of the loss measurement processes, as described~~segment. As noted above, represents the total targeted balance for the Company’s allowance for loan losses at the end of a fiscal period. The Company adjusts its balance of valuation allowances through the provision for loan losses as required to ensure that the balance of the allowance for credit losses on unfunded loan ~~losses reflects all probable and estimable loans losses at~~commitments is included in other liabilities on the ~~close~~Consolidated Statements of ~~the fiscal period. Notwithstanding calculation methodology~~Financial Condition and the ~~noted distinction between valuation allowances established on loans collectively versus individually evaluated for impairment,~~related credit expense is recorded in other non-interest expense in the ~~Company’s entire allowance for loan losses is available to cover all charge-offs that arise from the loan portfolio.~~

Although the Company’s allowance for loans losses is established in accordance with management’s best estimate, actual losses are dependent upon future events and, as such, further additions to the levelConsolidated Statements of ~~loan loss allowances may be necessary.~~

Income.

Troubled Debt Restructurings (“TDR”)

A modification to the terms of a loan is generally considered a TDR if the Company grants a concession to a borrower, that it would not otherwise consider, due to the borrower’s financial difficulties. In granting the concession, the Company’s general objective is to obtain more cash or other value from the borrower or otherwise increase the probability of repayment.

A TDR may include, but is not necessarily limited to, the modification of loan terms such as the reduction of the loan’s stated interest rate, extension of the maturity date and/or reduction or deferral of amounts owed under the terms of the loan agreement. In measuring the impairment associated with restructured loans that qualify as TDRs, the Company compares the present value of the cash flows that are expected to be received in accordance with the loan’s modified terms, discounted at the loan’s original contractual interest rate, with the pre-modification carrying value to measure impairment.

All restructured loans that qualify as TDRs are placed on nonaccrual status for a period of no less than six months after restructuring, irrespective of the borrower’s adherence to a TDR’s modified repayment terms during which time TDRs continue to be adversely classified and reported as impaired. TDRs may be returned to accrual status and a non-adverse classification if (1) the borrower has paid timely P&I payments in accordance with the terms of the restructured loan agreement for no less than six consecutive months after restructuring, and (2) the Company expects to receive all P&I payments owed substantially in accordance with the terms of the restructured loan agreement.

~~In March 2020, various regulatory agencies, including the Board~~

F-16

Table of ~~Governors~~Contents

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 1 - Summary of the Federal Reserve System and the Federal Deposit Insurance Corporation issued an interagency statement on loan modifications and reporting for financial institutions working with customers affected by COVID-19. The interagency statement was effective immediately and impacted accounting for loan modifications. The agencies confirmed with the staff of the FASB that short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief, are not to be considered TDRs. Provisions of the CARES Act largely mirrored the provisions of the interagency statement, providing that modified loans were not to be considered TDRs if they were performing at December 31, 2019 and other consideration set forth in the interagency statements were met. Borrowers considered current are those that are less than 30 days past due on their contractual payments at the time a modification program is implemented or at December 31, 2019.

Significant Accounting Policies (continued)

Premises and Equipment

Land is carried at cost. ~~Buildings~~Office buildings, leasehold improvements and ~~improvements, furnishings~~furniture, fixtures and equipment ~~and leasehold improvements~~ are carried at cost, less accumulated depreciation and ~~amortization computed utilizing~~amortization. Office buildings and furniture, fixtures and equipment are depreciated using the straight-line method over their estimated useful lives of the respective assets. Leasehold improvements are amortized using the straight-line method over the ~~following estimated useful lives:~~


		~~Years~~
~~Building and improvements~~		~~10 - 50~~
~~Furnishings and equipment~~		~~3 - 20~~
~~Leasehold improvements~~		~~Shorter of useful lives or lease term~~

~~F-19~~

~~KEARNY FINANCIAL CORP. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

~~Note 1 - Summary~~terms of ~~Significant Accounting Policies (continued)~~

the respective leases or lives of the assets, whichever is shorter.

Construction in progress primarily represents facilities under construction for future use in our business and includes all costs to acquire land and construct buildings, as well as capitalized interest during the construction period. Interest is capitalized at the Company’s average cost of interest-bearing liabilities.

~~Significant renewals~~

Other Real Estate Owned and ~~betterments~~Other Repossessed Assets

Properties and other assets acquired through foreclosure, deed in lieu of foreclosure or repossession are carried at estimated fair value, less estimated selling costs. The estimated fair value of real estate property and other repossessed assets is generally based on independent appraisals. When an asset is acquired, the excess of the loan balance over fair value, less estimated selling costs, is charged to the allowance for credit losses. Thereafter, decreases in the properties’ estimated fair value are charged to ~~premises~~income along with any additional property maintenance and ~~equipment. Maintenance and repairs are charged to expense~~protection expenses incurred in owning the ~~period incurred. Rental income is netted against occupancy costs in the consolidated statements of income.~~

properties.

Federal Home Loan Bank Stock

Federal law requires a member institution of the FHLB system to hold restricted stock of its district FHLB according to a predetermined formula. The restricted stock is carried at cost, less any applicable impairment. Both cash and stock dividends are reported as income.

Goodwill and Other Intangible Assets

Goodwill arises from business combinations and ~~other intangible assets principally represent~~is generally determined as the excess ~~cost~~of the fair value of the 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 ~~institutions~~acquisition date. Goodwill and intangible assets acquired in a purchase ~~transactions.~~business combination and determined to have an indefinite useful life are not amortized, but tested for impairment 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. The Company performed its annual impairment test during the fourth quarter of its fiscal year ended June 30, 2023. Intangible assets with definite useful lives are amortized over their estimated useful lives to their estimated residual values. Goodwill is ~~evaluated annually and~~the only intangible asset with an indefinite life on our audited Consolidated Statements of Financial Condition.

In assessing impairment, ~~loss recorded if indicated. The impairment test~~the Company has the option to perform a qualitative analysis to determine whether the existence of events or circumstances leads to a determination that it is ~~performed in two phases. The first step of the goodwill impairment test compares~~more-likely-than-not that the fair value of the reporting unit ~~with~~is less than its carrying ~~amount, including goodwill.~~amount. If, after assessing the totality of such events or circumstances, the Company determines it is not more-likely-than-not that the fair value of ~~the~~a reporting unit ~~exceeds~~is less than its carrying amount, then the Company would not be required to perform a quantitative impairment test.

For the year ended June 30, 2023, the annual quantitative assessment of goodwill ~~of the~~for our single reporting unit ~~is considered not impaired; however, if~~was performed utilizing a discounted cash flow analysis (“income approach”) and estimates of selected market information (“market approaches”). The income approach measures the ~~carrying amount of the reporting unit exceeds its fair value, an additional impairment evaluation must be performed. That additional evaluation compares the implied~~ fair value of an interest in a business by discounting expected future cash flows to present value. The market approaches take into consideration fair values of comparable companies operating in similar lines of business that are potentially subject to similar economic and environmental factors and could be considered reasonable investment alternatives. The result of the income approach was weighted at 50% and the results of the market approaches comprised the remaining 50% in determining the fair value of our single reporting ~~unit’s goodwill with~~unit. The results of the annual quantitative impairment analysis indicated that the fair value exceeded the carrying ~~amount of that goodwill. An impairment loss is recorded to the extent that the carrying amount of goodwill exceeds its implied fair value. NaN~~value for our single reporting unit.

No impairment charges were required to be recorded in the years ended June 30, ~~2020, 2019~~2023, 2022 or ~~2018.~~2021. If an impairment loss is determined to exist in the future, such loss will be reflected as an expense in the ~~consolidated statements~~Consolidated Statements of ~~income~~Income in the period in which the impairment loss is determined.

The balance of other intangible assets at June 30, ~~2020~~2023 and ~~2019~~2022 totaled ~~$4.0~~$2.5 million and ~~$5.2~~$3.0 million, respectively, representing the remaining unamortized balance of the core deposit intangibles ascribed to the value of deposits acquired by the Bank through the acquisition of ~~Central Jersey Bancorp in November 2010, Atlas Bank in June 2014 and~~ Clifton Bancorp Inc. in April ~~2018.~~

2018 and MSB Financial Corp. in July 2020.

F-17

Table of Contents

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 1 - Summary of Significant Accounting Policies (continued)

Bank Owned Life Insurance

Bank owned life insurance is accounted for using the cash surrender value method and is recorded at its net realizable value. The change in the net asset value is recorded as a component of non-interest income. A deferred liability has been recorded for the estimated cost of postretirement life insurance benefits accruing to applicable employees and directors covered by an endorsement split-dollar life insurance arrangement.

Transfers of Financial Assets

Transfers of financial assets are accounted for as sales, when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company - put presumptively beyond the reach of the transferor and its creditors, even in bankruptcy or other receivership, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity or the ability to unilaterally cause the holder to return specific assets.

Income Taxes

The Company and its subsidiaries file consolidated federal income tax returns. Federal income taxes are allocated to each entity based on their respective contributions to the taxable income of the consolidated income tax returns. Separate state income tax returns are filed for the Company and its subsidiaries on either a consolidated or unconsolidated basis as required by the jurisdiction. The federal income tax rate of 21% was applicable for the years ended June 30, 2020 and June 30, 2019. For the year ended June 30, 2018, the federal income tax rate applicable to the Company was 28% which reflected the transitional effect of a reduction in the Company’s federal income tax rate from 35%, applicable to the year ended June 30, 2017, to 21%, applicable to the year ended June 30, 2019.

~~F-20~~

~~KEARNY FINANCIAL CORP. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

~~Note 1 - Summary of Significant Accounting Policies (continued)~~

2023, 2022 or 2021.

Federal and state income taxes have been provided on the basis of the Company’s income or loss as reported in accordance with GAAP. The amounts reflected on the Company’s state and federal income tax returns differ from these provisions due principally to temporary differences in the reporting of certain items for financial statement reporting and income tax reporting purposes. The tax effect of these temporary differences is accounted for as deferred taxes applicable to future periods. Deferred income tax expense or benefit is determined by recognizing deferred tax assets and liabilities for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period that includes the enactment date. The realization of deferred tax assets is assessed and a valuation allowance provided for the full amount which is not more likely than not to be realized.

The Company identified 0no significant income tax uncertainties through the evaluation of its income tax positions as of June 30, ~~2020~~2023 and ~~2019.~~2022. Therefore, the Company has 0no unrecognized income tax benefits as of those dates. Our policy is to recognize interest and penalties on unrecognized tax benefits in income tax expense in the ~~consolidated statements~~Consolidated Statements of ~~income.~~Income. The Company recognized 0no material interest and penalties during the years ended June 30, ~~2020, 2019 and 2020.~~2023, 2022 or 2021. The tax years subject to examination by the taxing authorities are the years ended June 30, ~~2019, 2018~~2022, 2021 and ~~2017.~~

2020.

Retirement Plans

Pension expense is the net of service and interest cost, return on plan assets and amortization of gains and losses not immediately recognized. Employee 401(k) and profit sharing plan expense is the amount of matching contributions. Deferred compensation plan expense allocates the benefits over years of service.

Employee Stock Ownership Plan

The cost of shares issued to the ~~ESOP,~~Employee Stock Ownership Plan (the “ESOP”), but not yet allocated to participants, is shown as a reduction of shareholders’ equity. Compensation expense is based on the market price of shares as they are committed to be released to participant accounts. Dividends on allocated and unallocated ESOP shares either reduce retained earnings or reduce debt and accrued interest as determined by the ESOP Plan Administrator.

~~Other~~

F-18

Table of Contents

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 1 - Summary of Significant Accounting Policies (continued)

Comprehensive Income

Comprehensive income is ~~divided into~~comprised of net income and other comprehensive income (loss). Other comprehensive income (loss) includes items recorded in equity, such as unrealized gains and losses on securities available for sale, unrealized gains and losses on derivatives ~~unrealized gains and losses on securities transferred from available for sale to held to maturity~~ and amortization related to post-retirement obligations. Comprehensive income is presented in a separate Consolidated Statement of Comprehensive Income.

Loss Contingencies

Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe there now are such matters that will have a material effect on the financial statements.

Loan Commitments and Related Financial Instruments

Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit, issued to meet customer financing needs. The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay. Such financial instruments are recorded when they are funded. (See Note 17, Commitments, for additional information).

Derivatives and Hedging

The Company utilizes derivative instruments in the form of interest rate swaps and caps to hedge its exposure to interest rate risk in conjunction with its overall asset/liability management process. In accordance with accounting requirements, the Company formally designates all of its hedging relationships as either fair value hedges, intended to offset the changes in the value of certain financial instruments due to movements in interest rates, or cash flow hedges, intended to offset changes in the cash flows of certain financial instruments due to movement in interest rates, and documents the strategy for undertaking the hedge transactions, and its method of assessing ongoing effectiveness. The Company does not use derivative instruments for speculative purposes.

~~F-21~~

~~KEARNY FINANCIAL CORP. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

~~Note 1 - Summary of Significant Accounting Policies (continued)~~

All derivatives are recognized as either assets or liabilities in the Consolidated Financial Statements at their fair values. For ~~derivatives~~a derivative designated as a cash flow ~~hedges,~~hedge, the gain or loss on the derivative is recorded in other comprehensive income and subsequently reclassified into interest expense in the same period during which the hedged transaction affects earnings. For a derivative designated as a fair value hedge, the gain or loss on the derivative as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in current earnings.

Derivative instruments qualify for hedge accounting treatment only if they are designated as such on the date on which the derivative contract is entered and are expected to be, and are, effective in substantially reducing interest rate risk arising from the assets and liabilities identified as exposing the Company to risk. Those derivative financial instruments that do not meet the hedging criteria discussed below would be classified as undesignated derivatives and would be recorded at fair value with changes in fair value recorded in income.

The Company discontinues hedge accounting when (a) it determines that a derivative is no longer effective in offsetting changes in cash flows of a hedged item; (b) the derivative expires or is sold, terminated or exercised; (c) probability exists that the forecasted transaction will no longer occur; or (d) management determines that designating the derivative as a hedging instrument is no longer appropriate. In all cases in which hedge accounting is discontinued and a derivative remains outstanding, the Company will carry the derivative at fair value in the Consolidated Financial Statements, recognizing changes in fair value in current period income in the ~~consolidated statement~~Consolidated Statements of ~~income.~~

Income.

In accordance with the applicable accounting guidance, the Company takes into account the impact of collateral and master netting agreements that allow it to settle all derivative contracts held with a single counterparty on a net basis, and to offset the net derivative position with the related collateral when recognizing derivative assets and liabilities. As a result, the Company’s Statements of Financial Condition could reflect derivative contracts with negative fair values included in derivative assets, and contracts with positive fair values included in derivative liabilities.

F-19

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KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 1 - Summary of Significant Accounting Policies (continued)

The Company’s interest rate derivatives are comprised of interest rate swaps and caps hedging ~~floating-rate and forecasted issuances of fixed-rate liabilities~~variable rate wholesale funding and accounted for as cash flow hedges. The carrying value of interest rate derivatives is included in the balance of other assets or other liabilities and comprises the remaining unamortized cost of interest rate caps and the cumulative changes in the fair value of interest rate derivatives. Such changes in fair value are offset against accumulated other comprehensive income, net of deferred income tax.

In general, the cash flows received and/or exchanged with counterparties for those derivatives qualifying as interest rate hedges are generally classified in the financial statements in the same category as the cash flows of the items being hedged.

Interest differentials paid or received under the swap agreements are reflected as adjustments to interest expense. The notional amounts of the interest rate swaps are not exchanged and do not represent exposure to credit loss. In the event of default by a counter party, the risk in these transactions is the cost of replacing the agreements at current market rates.

Net Income per Common Share (“EPS”)

Basic EPS is based on the weighted average number of common shares actually outstanding adjusted for the ~~Employee Stock Ownership Plan (the “ESOP”)~~ESOP shares not yet committed to be released. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock, such as outstanding stock options or restricted stock units, were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company. Diluted EPS is calculated by adjusting the weighted average number of shares of common stock outstanding to include the effect of contracts or securities exercisable or which could be converted into common stock, if dilutive, using the treasury stock method. Shares issued and reacquired during any period are weighted for the portion of the period they were outstanding.

Fair Value of Financial Instruments

Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in Note ~~19.~~18, Fair Value of Financial Instruments. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect these estimates.

~~F-22~~

~~KEARNY FINANCIAL CORP. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

~~Note 1 - Summary of Significant Accounting Policies (continued)~~

Operating Segments

Public companies are required to report certain financial information about significant revenue-producing segments of the business for which such information is available and utilized by the chief operating decision makers. Substantially all of the Company’s operations occur through the Bank and involve the delivery of loan and deposit products to customers. Management makes operating decisions and assesses performance based on an ongoing review of its banking operation, which constitutes the Company’s only operating segment for financial reporting ~~purposes~~.

purposes.

Stock Compensation Plans

Compensation expense related to stock options, non-vested stock awards and non-vested stock ~~awards~~units is based on the fair value of the award on the measurement date with expense recognized on a straight-line basis over the service period of the award. The fair value of stock options is estimated using the Black-Scholes valuation model. The fair value of non-vested stock awards and stock units is generally the closing market price of the Company’s common stock on the date of grant. The Company accounts for forfeitures as they occur.

Advertising and Marketing Expenses

The Company expenses advertising and marketing costs as incurred.

Reclassification

Certain reclassifications have been made in the consolidated financial statements to conform to the current year presentation. Such reclassifications had no impact on net income or stockholders’ equity as previously reported.

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KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 2 – Recent Accounting Pronouncements

In ~~June 2016,~~March 2022, the ~~FASB~~Financial Accounting Standards Board (the “FASB”) issued ASU ~~2016-13, Financial Instruments—Credit~~2022-02, “Financial Instruments-Credit Losses (Topic 326): ~~Measurement~~Troubled Debt Restructurings and Vintage Disclosures” to improve the usefulness of ~~Credit Losses on Financial Instruments. The~~information provided to investors about certain loan refinancings, restructurings and writeoffs. ASU ~~requires credit losses on most financial assets measured at amortized cost and certain other instruments to be measured using an expected credit loss model, referred to as~~2022-02 eliminates the current expected credit loss (“CECL”) model. The amendments in this update replace the incurred loss impairment methodology in current GAAP. Under the CECL model, entities will estimate credit losses over the entire contractual term of the instrument (considering estimated prepayments, but not expected extensions or modifications unless reasonable expectation of aaccounting guidance for troubled debt ~~restructuring exists) from the date of initial recognition of that instrument.~~restructurings by creditors and enhances disclosure requirements for certain modifications made to borrowers experiencing financial difficulty. In addition, an allowance will be established for loans that have been acquired in a business combination that currently do not have an allowance. As of June 30, 2020, approximately $923.9 million of acquired loans do not have an allowance.

~~The amendments in this update are effective~~ ~~for~~ASU 2022-02 requires public business entities to disclose current-period gross writeoffs for financing receivables and net investments in ~~fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company will apply~~leases by year of origination in the ~~standard’s provisions as a cumulative-effect adjustment to retained earnings as of July 1, 2020 (i.e. modified retrospective approach),~~ ~~consistent with regulatory expectations set forth in interagency guidance issued at the end of 2016.~~ The Company’s implementation efforts are continuing to focus on the completion of model validation, developing new disclosures, establishing formal policies and procedures and other governance and control documentation, as appropriate. Based on the Company’s loan portfolio balances, including the level of acquired loans and forecasted economic conditions as of July 1, 2020 management believes the adoption of CECL will result in a material increase to the allowance for credit losses. However, the final amount of the increase will be based on continued model validation, testing and adjusting model methodologies and refining our judgements used to calculate the estimate. The Company believes that regulatory capital adequacy requirements to which the Company and Bank are subject to will not be materially impacted following adoption on July 1, 2020. Upon adoption, the impact to the allowance for credit losses, currently allowance for loan and lease losses, will have an offsetting impact on retained earnings, and be net of tax.

~~F-23~~

~~KEARNY FINANCIAL CORP. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

~~Note 2 – Recent Accounting Pronouncements (continued)~~

~~In January 2017, the FASB issued~~ ~~ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment~~. This ASU simplifies subsequent measurement of goodwill by eliminating Step 2 of the impairment test while retaining the option to perform the qualitative assessment for a reporting unit to determine whether the quantitative impairment test is necessary. The ASU also eliminates the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. Therefore, the same impairment assessment applies to all reporting units. For public entities, ASU 2017-04 is effective for fiscal years beginning after December 15, 2019 with early adoption permitted for interim or annual goodwill impairment testing dates beginning after January 1, 2017. The Company adopted ASU 2017-04 on July 1, 2020 and its adoption is not expected to have significant impact on the Company’s audited consolidated financial statements.

~~In May 2019, the FASB issued~~ ~~ASU 2019-05~~, ~~“Financial Instruments - Credit Losses (Topic 326); Targeted Transition Relief”.~~ ASU 2019-05 provides transition relief by providing entities with an alternative to irrevocably elect the fair value option for eligible financial assets measured at amortized cost upon adoption of the credit losses standard. To be eligible for the transition election, the existing financial asset must otherwise be both within the scope of the new credit losses standard and eligible for the applying the fair value option in ASC 825-10.3. The election must be applied on an instrument-by-instrument basis and is not available for either available for sale or held to maturity debt securities.vintage disclosures. For entities that have adopted ASU 2016-13, ASU 2019-05 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted once ASU 2016-13 has been adopted. For entities that elect the fair value option, the difference between the carrying amount and the fair value of the financial asset would be recognized through a cumulative-effect adjustment to opening retained earnings net of tax, as of the date an entity adopted ASU 2016-13. Changes in fair value of that financial asset would subsequently be reported in current earnings. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements.

~~In November 2019, the FASB issued~~ ~~ASU 2019-11, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses”.~~ ASU 2019-11 clarifies the accounting treatment on the following issues: (i) negative allowances; (ii) troubled debt restructuring (TDR) transition; (iii) accrued interest disclosures; and (iv) collateral maintenance practical expedient. ASU 2019-11 will permit an entity to record negative allowances on write-offs or expected write-offs of the amortized cost basis of purchased financial assets with credit deterioration (PCD) within ASC 326-20’s scope. Regarding TDRs, the FASB tentatively approved a clarification to allow entities to calculate a prepayment-adjusted effective interest rate for TDRs existing as of the adoption date of ASC 326 based on the prepayment assumptions as of the adoption date rather than the restructuring date. In the previously issued ASU 2019-04, FASB allowed an entity to elect a practical expedient to disclose separately the total amount of accrued interest included in the amortized cost basis as a single balance to meet certain disclosure requirements. ASU 2019-11 extends this relief to all relevant disclosures involving amortized cost basis. A collateral maintenance practical expedient regarding collateral-dependent financial assets, will permit an allowance to be estimated as the difference between the value of the collateral net of costs to sell and the amortized cost basis of the loans. For entities that have not yet adopted ASU 2016-13, the effective dates and transition requirements for these amendments are the same as ASU 2016-13. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements.

~~F-24~~

~~KEARNY FINANCIAL CORP. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

~~Note 2 – Recent Accounting Pronouncements (continued)~~

~~In December 2019, the FASB issued~~ ~~ASU 2019-12, “Income taxes (Topic 740); Simplifying the Accounting for Income Taxes”.~~ ASU 2019-12 provides amendments intended to reduce the cost and complexity in accounting for income taxes while maintaining or improving the usefulness of the information provided to users of financial statements. ASU 2019-12 removes the following exceptions from ASC 740, Income Taxes: (i) exceptions to the incremental approach for intraperiod tax allocation; (ii) exceptions to accounting for basis differences when a foreign subsidiary becomes an equity method investment or a foreign equity method investment become a subsidiary; and (iii) exception in interim period income tax accounting for year-to-date losses that exceed anticipated losses. ASU 2019-12 provides the following amendments that simplify and improve guidance with Topic 740: (i) franchise taxes that are based partially on income; (ii) transactions that result in a step up in the tax basis of goodwill; (iii) separate financial statements of legal entities that are not subject to tax; (iv) enacted changes in tax laws in interim periods; and (v) employee stock ownership plans and investments in qualified affordable housing projects accounted for using the equity method. For public business entities, the amendments in ~~the~~ ASU ~~2019-12~~2022-02 are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, ~~2020. For all other entities,~~2022. Early adoption is permitted if an entity has adopted ASU 2016-13, including adoption in an interim period. If an entity elects to early adopt the amendments ~~are effective~~in ASU 2022-02, the guidance should be applied as of the beginning of the fiscal year that includes the interim period. An entity may elect to early adopt the amendments about TDRs and related disclosure enhancements separately from the amendments related to vintage disclosures. The amendments in ASU 2022-02 should be applied prospectively, but for ~~fiscal years beginning after December 15, 2021,~~the amendments related to the recognition and ~~interim periods within fiscal years beginning after December 15, 2022~~. measurement of TDRs, an entity has the option to apply a modified retrospective transition method that would result in a cumulative-effect adjustment to retained earnings in the period of adoption. The Company is currently evaluating the impact of ~~adopting~~the adoption of this ASU on its consolidated financial statements.

Adoption of New Accounting Standards

~~Effective July 1, 2019,~~

In December 2022, the ~~Company implemented~~ FASB issued ASU ~~No. 2016-02, “Leases~~2022-06, “Reference Rate Reform (Topic ~~842)” (modified by ASU 2018-01 – Leases (Topic 842)~~848): ~~Land Easement Practical Expedient for Transition to Topic 842) and ASU 2018-20 – Leases (Topic 842) Narrow – Scope Improvements for Lessors).~~ ASU 2016-02 requires the recognition of a right of use asset and related lease liability by lessees for leases classified as operating leases under current GAAP. Topic 842, which replaces the current guidance under Topic 840, retains a distinction between finance leases and operating leases. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee also will not significantly change from current GAAP. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize right of use assets and lease liabilities. Effective with the adoption on July 1, 2019, the Company recognized a “right-of-use-asset” and a “lease liability” for its operating leases and has elected to apply practical expedients pertaining to the ASU. The Company applied a modified retrospective transition approach for the applicable leases. ASU 2016-02 provides for a modified retrospective transition approach requiring lessees to recognize and measure leases on the balance sheet at the beginning of either the earliest period presented or asDeferral of the ~~beginning~~Sunset Date of Topic 848” that extends the period of ~~adoption. The Company elected to account for lease and non-lease components separately because such amounts are readily determinable under our lease contracts rather than elect~~time preparers can utilize the ~~practical expedient to account for~~reference rate reform relief guidance. In 2020, the ~~components as a single lease component. The Company elected to apply~~FASB issued ASU ~~2016-02 as~~2020-04, “Reference Rate Reform (Topic 848): Facilitation of the ~~beginning~~Effects of Reference Rate Reform on Financial Reporting” which provides optional guidance to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The objective of the guidance in Topic 848 is to provide relief during the temporary transition period, so the FASB included a sunset provision within Topic 848 based on expectations of when LIBOR would cease being published. In 2021, the UK Financial Conduct Authority delayed the intended cessation date of certain tenors of USD LIBOR to June 30, 2023. To ensure the relief in Topic 848 covers the period of ~~adoption (July 1, 2019) and did not restate comparative periods. Upon adoption~~time during which a significant number of modifications may take place, ASU ~~2016-02,~~2022-06 defers the ~~Company recorded a right-of-use asset~~sunset date of ~~approximately $17.2 million and a lease liability of approximately $17.8 million~~.

~~In October 2018,~~Topic 848 from December 31, 2022 to December 31, 2024, after which entities will no longer be permitted to apply the ~~FASB issued~~ ASU 2018-16, Derivatives and Hedging (Topic 815), Inclusion of the Secured Overnight Financing Rate (“SOFR”) Overnight Index Swap (“OIS”) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes. ~~This ASU permits the use of the OIS Rate based on SOFR as a benchmark interest rate for purposes of applying hedge accounting under~~relief in Topic 815. This is the fifth U.S. benchmark interest rate eligible for use in hedge accounting in addition to interest rates on direct Treasury obligations of the U.S. Government, the London Interbank Offered Rate swap rate, and the OIS Rate based on the Fed Funds Effective Rate and the Securities Industry and Financial Markets Association Municipal Swap Rate. The amendments in this ASU are required to be adopted concurrently with848. For all entities, the amendments in ASU 2022-06 are effective upon issuance. The Company adopted this ASU on December 21, 2022 on a prospective basis; therefore, there was no impact to its consolidated financial statements upon adoption.

In March 2022, the FASB issued ASU 2022-01, “Derivatives and Hedging (Topic 815): Fair Value Hedging - Portfolio Layer Method” which clarifies the guidance in ASC 815 on fair value hedge accounting of interest rate risk for portfolios of financial assets. This ASU amends the guidance in ASU 2017-12 ~~Derivatives~~(released in August 2017) that, among other things, established the last-of-layer method to enable fair value hedge accounting for these portfolios to be more accessible. ASU 2022-01 expands the current last-of-layer method to allow multiple hedged layers of a single closed portfolio under this method. To reflect that expansion, the last-of-layer method is renamed the portfolio layer method. The scope of last-of-layer hedging will be expanded so that the portfolio layer method can be utilized for nonprepayable financial assets. In addition, ASU 2022-01 specifies eligible hedging instruments in a single-layer hedge, provides additional guidance on the accounting for and ~~Hedging: Targeted Improvements to Accounting~~disclosure of hedge basis adjustments under the portfolio layer method, and specifies how hedge basis adjustments should be considered when determining credit losses for ~~Hedging Activities,~~ ~~for entities that have not adopted that guidance.~~the assets included in the closed portfolio. For public business entities, ~~that have previously adopted ASU 2017-12,~~ the amendments in ASU 2022-01 are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, ~~2018, and interim periods within those fiscal years.~~2022. Early adoption is permitted inon any ~~interim period if an entity already has adopted ASU 2017-12. The Company early adopted ASU 2017-12~~date on ~~July 1, 2017. The amendments in ASU 2018-16 should be applied on a prospective basis for qualifying new~~ or re-designated hedging relationships entered into on or after the date of adoption. The Company adopted ASU 2018-16 on July 1, 2019, and its adoption did not have a significant impact on the Company’s audited consolidated financial statements.

~~F-25~~

~~KEARNY FINANCIAL CORP. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

~~Note 2 – Recent Accounting Pronouncements (continued)~~

~~In April 2019, the FASB issued~~ ~~ASU 2019-04 Codification Improvements to Topic 326, Financial Instruments Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments.~~ ~~ASU 2019-04~~amends certain aspects of accounting for credit losses, hedging activities, and financial instruments addressed by ASUs 2016-13, 2016-01, and 2017-12, respectively. Significant amendments to ASU 2016-13 relate to the measurement of accrued interest, transfers between classifications or categories for loans and debt securities and including recoveries when estimating the allowance for credit losses. For Topic 825, the codification improvements to ASU 2016-01 provide scope clarification for Subtopics 320-10, Investments-Debt and Equity Securities-Overall, and 321-10, Investments-Equity Securities-Overall, held to maturity debt securities fair value disclosures, and re-measurement of equity securities at historical exchange rates. Significant amendments to ASU 2017-12 amends the guidance related to partial-term fair value hedges of interest rate risk, disclosure of fair value hedge basis adjustments, and scope for not-for-profit entities. ASU 2019-04 clarifies that an entity that reclassifies debt securities from the held to maturity category to available for sale as part of its transition would not (1) call in to question its held to maturity assertion for other securities held at the entity’s most recent reporting date, (2) be required to actually designate any reclassified security in a last-of-layer hedge, or (3) be restricted from selling any reclassified security. The Company adopted ASU 2019-04 on July 1, 2019. As part of the adoption, the Company reclassified $537.7 million of investment securities held to maturity to investment securities available for sale. The Company did not reclassify investment securities from held to maturity to available for sale upon the original adoption of the amendments in ASU 2017-12. Entities electing to reclassify investment securities upon adoption of the amendments in this update are required to reflect the reclassification as of the beginning of the first annual period beginning after the issuance of ASU ~~2019-04 (July~~2022-01 for any entity that has adopted the amendments in ASU 2017-12 for the corresponding period. The Company adopted this ASU on July 1, ~~2019).~~

2022 on a prospective basis; therefore, there was no impact to its consolidated financial statements upon adoption.

Note 3 – ~~Acquisition of Clifton Bancorp Inc.~~

O~~n April 2, 2018,~~Business Combination

On July 10, 2020, the Company completed its acquisition of ~~Clifton Bancorp Inc.~~MSB Financial Corp. (“~~Clifton”~~MSB”), the parent company of Clifton Savings Bank, a federally chartered stock savings bank. At the time of closing, Clifton had $1.7 billion in total assets, including $1.2 billion in net loans receivable and $332.2 million in securities, and $1.4 billion in total liabilities, including $945.0 million in deposits and $421.4 million in borrowings. The deposits acquired from Clifton were held across a network of 12 branches located in New Jersey throughout Bergen, Passaic, Hudson, and Essex counties.

~~Clifton’s stockholders’ equity totaled approximately $272.0 million at the time of closing. Under the terms of~~its subsidiary, Millington Bank. In accordance with the merger agreement, ~~each outstanding share~~approximately $9.8 million in cash and 5,853,811 shares of ~~Clifton~~Company common stock ~~was exchanged~~were distributed to former MSB shareholders in exchange for ~~1.191~~their shares of ~~the Company’s~~MSB common ~~stock, resulting in the Company issuing 25.4 million shares of common stock to Clifton stockholders in conjunction with the merger’s closing.~~

stock.

The assets acquired and liabilities assumed have been accounted for under the acquisition method of accounting. Management engaged a third-party specialist to develop the fair value estimate of certain MSB’s assets and liabilities as of the acquisition date. The assets and liabilities, both tangible and intangible, were recorded at their fair values as of ~~April 2, 2018~~July 10, 2020 based on management’s best estimate using the information available as of the merger date. The application of the acquisition method of accounting resulted in the recognition of ~~goodwill~~bargain purchase gain of ~~$102.3~~$3.1 million and a core deposit intangible of $6.4 million. Accounting guidance provides that an acquirer must recognize adjustments to provisional amounts that are identified during the measurement period, which runs through April 2, 2019, in the measurement period in which the adjustment amounts are determined. The acquirer must record in the financial statements, the effect on earnings of changes in depreciation, amortization or other income effects, if any, as a result of the changes to the provisional amounts, calculated as if the accounting had been completed at the acquisition date.$690,000. During the year ended June 30, ~~2019,~~2021, the Company completed all MSB tax returns ~~related to the operation of the combined entities through June 30, 2018~~ and determined that there were no material adjustments to the balance of deferred income ~~taxes~~tax assets or ~~goodwill~~bargain purchase gain associated with the ~~Clifton~~MSB acquisition.

F-21

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~~F-26~~

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 3 – ~~Acquisition of Clifton Bancorp Inc.~~Business Combination (continued)

The Company recorded the assets acquired and liabilities assumed through the merger at fair value as summarized in the following table:


	As Recorded by MSB		Fair Value Adjustments			As Recorded at Acquisition
	(In Thousands)
Cash paid for acquisition						$	9,830
Value of stock issued						45,133
Total purchase price						$	54,963

Cash and cash equivalents	$	14,126	$	—		$	14,126
Investment securities	4,000		(510)		(a)	3,490
Loans receivable	537,589		(7,345)		(b)	530,244
Allowance for loan losses	(6,037)		6,037		(c)	—
Premises and equipment	7,698		(3,221)		(d)	4,477
FHLB stock	3,345		—			3,345
Accrued interest receivable	1,701		—			1,701
Core deposit intangibles	—		690		(e)	690
Bank owned life insurance	14,663		—			14,663
Deferred income taxes, net	1,729		2,152		(f)	3,881
Other assets	4,830		495		(g)	5,325
Total assets acquired	$	583,644	$	(1,702)		$	581,942

Deposits	$	458,392	$	1,786	(h)	$	460,178
FHLB borrowings	62,900		—			62,900
Advance payments by borrowers for taxes	794		—			794
Other liabilities	810		(756)		(i)	54
Total liabilities assumed	$	522,896	$	1,030		$	523,926

Net assets acquired						$	58,016
Bargain purchase gain						$	(3,053)

As Recorded
by Clifton

Fair Value Adjustments

As Recorded
at Acquisition

(In Thousands)

Cash and cash equivalents
$
36,585

$
-

$
36,585

Investment securities

332,183

(5,270
)
(a)

326,913

Loans receivable

1,191,748

(74,927
)
(b)

1,116,821

Allowance for loan losses

(8,025
)

8,025

(c)

-

Premises and equipment

8,066

3,556

(d)

11,622

FHLB stock

20,357

-

20,357

Accrued interest receivable

4,142

-

4,142

Bank owned life insurance

63,231

-

63,231

Deferred income taxes, net

6,837

16,149

(e)

22,986

Core deposit and other intangibles

-

6,367

(f)

6,367

Other real estate owned

163

(23
)
(g)

140

Other assets

1,438

133

(h)

1,571

Total assets acquired
$
1,656,725

$
(45,990
)

$
1,610,735

Deposits
$
944,988

$
4,801

(i)
$
949,789

FHLB borrowings

421,400

(7,268
)
(j)

414,132

Advance payments by borrowers for taxes

9,777

-

9,777

Other liabilities

5,288

112

(k)

5,400

Total liabilities assumed
$
1,381,453

$
(2,355
)

$
1,379,098

Net assets acquired

$
231,637

Purchase price

333,941

Goodwill recorded in Merger

$
102,304

Explanation of certain fair value related adjustments:

~~(a)~~

~~Represents the fair value adjustments on investment securities.~~

~~(b)~~(a)Represents the fair value adjustments on investment securities.

~~Represents the fair value adjustments on the net book value of loans, which includes an interest rate mark and credit mark adjustment and the write-off of deferred fees/costs and premiums.~~

~~(c)~~(b)Represents the fair value adjustments on the net book value of loans, which includes an interest rate mark and credit mark adjustment and the reversal of deferred fees/costs and premiums.

~~Represents the elimination of Clifton’s allowance for loan losses.~~

~~(d)~~(c)Represents the elimination of MSB’s allowance for loan losses.

Represents the fair value adjustments to reflect the fair value of land and buildings and premises and equipment, which will be amortized on a straight-line basis over the estimated useful lives of the individual assets.

~~(e)~~(d)Represents the fair value adjustments to reflect the fair value of land and buildings and premises and equipment, which will be amortized on a straight-line basis over the estimated useful lives of the individual assets.

~~Represents an adjustment to net deferred tax assets resulting from the fair value adjustments related to the acquired assets, liabilities assumed and identifiable intangible assets recorded.~~

~~(f)~~(e)Represents the intangible assets recorded to reflect the fair value of core deposits. The core deposit asset was recorded as an identifiable intangible asset and will be amortized on an accelerated basis over the estimated average life of the deposit base.

Represents the intangible assets recorded to reflect the fair value of core deposits. The core deposit asset was recorded as an identifiable intangible asset and will be amortized on an accelerated basis over the estimated average life of the deposit base.

~~(g)~~(f)Represents an adjustment to net deferred tax assets resulting from the fair value adjustments related to the acquired assets, liabilities assumed and identifiable intangible assets recorded.

~~Represents an adjustment to reduce the carrying value of other real estate owned to fair value, less costs to sell.~~

~~(h)~~(g)Represents an adjustment to other assets acquired.

~~Represents an adjustment to other assets acquired.~~

~~(i)~~(h)Represents fair value adjustments on time deposits, which will be treated as a reduction of interest expense over the remaining term of the time deposits.

~~Represents fair value adjustments on time deposits, which will be treated as a reduction of interest expense over the remaining term of the time deposits.~~

~~(j)~~(i)Represents an adjustment to other liabilities assumed.

~~Represents the fair value adjustments on FHLB borrowings, which will be treated as an increase to interest expense over the life of the borrowings.~~

~~(k)~~

~~Represents an adjustment to other liabilities assumed.~~

F-22

~~F-27~~

Table of Contents

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 3 – ~~Acquisition of Clifton Bancorp Inc.~~Business Combination (continued)

The fair value of loans acquired from ~~Clifton were~~MSB was estimated using cash flow projections based on the remaining maturity and repricing terms. Cash flows were adjusted by estimating future credit losses and the rate of prepayments. Projected monthly cash flows were then discounted to present value using a risk-adjusted market rate for similar loans. There was no carryover of ~~Clifton’s~~MSB’s allowance for loan losses associated with the loans that were ~~acquired, as the~~acquired. For information regarding purchased loans ~~were initially recorded at fair value on the date of the Clifton merger. Management has~~which have been determined ~~that there were no material purchased credit-impaired loans in the Clifton merger.~~

to be PCD, refer to Note 5, Loans Receivable.

The core deposit intangible asset recognized is being amortized over its estimated useful life of approximately 10 years utilizing the sum-of-the-years digits method.

~~Goodwill is not amortized for book purposes; however, it is reviewed at least annually for impairment and is not deductible for tax purposes.~~

The fair value of land and buildings was estimated using appraisals. Acquired equipment was not material. Buildings are amortized over their estimated useful lives of approximately 35 to 46 years. Improvements and equipment are amortized or depreciated over their estimated useful lives ranging from one to 10 years.

The fair value of retail demand and interest bearing deposit accounts was assumed to approximate the carrying value as these accounts have no stated maturity and are payable on demand. The fair value of time deposits was estimated by discounting the contractual future cash flows using market rates offered for time deposits of similar remaining maturities.

Merger-related expenses were recorded in the Consolidated Statements of Income as a component of non-interest expense and include costs relating to the Company’s acquisition of MSB, as described above. These charges represent one-time costs associated with acquisition activities and are expensed as incurred. Direct acquisition and other charges were recorded in merger-related expense on the Consolidated Statements of Income. Direct acquisition and other charges incurred in connection with the ~~Clifton~~MSB merger ~~were expensed as incurred and~~ totaled ~~$6.7~~$4.3 million for the year ended June 30, ~~2018. These expenses were recorded in merger-related expense on the consolidated statements of income.~~

The following table presents selected pro forma financial information reflecting the Clifton merger assuming it was completed as of July 1, 2016. The unaudited pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of the financial results of the combined companies had the Clifton merger actually been completed at the beginning of the period presented, nor does it indicate future results for any other interim or full year period. Pro forma basic and diluted EPS were calculated using the Company’s actual weighted average shares outstanding for the period presented, plus the incremental shares issued, assuming the Clifton merger occurred at the beginning of the period presented. The unaudited pro forma information is based on the actual financial statements of the Company for the period presented, and on the actual financial statements of Clifton for the years ended March 31, 2018 until the date of the Clifton merger, at which time Clifton’s results of operations were included in the Company’s financial statements.

The unaudited supplemental pro forma information for year ended June 30, 2018 set forth below reflects adjustments related to (a) purchase accounting fair value adjustments; (b) amortization of core deposit and other intangibles; and (c) adjustments to interest income and expense due to amortization of premiums and accretion of discounts. Direct merger-related expenses incurred in the year ended June 30, 2018 are assumed to have occurred prior to July 1, 2018. Furthermore, the unaudited supplemental pro forma information does not reflect management’s estimate of any revenue enhancement opportunities or anticipated potential cost savings for periods that include data as of April 2, 2018 or earlier.

2021.

Unaudited Supplemental

Pro Forma Information

Year Ended June 30, 2018

Net interest income
$
169,094

Non-interest income

15,683

Non-interest expense

113,816

Net income available to common stockholders

40,216

Pro forma earnings per common share from continuing operations:

Basic
$
0.37

Diluted
$
0.37

~~F-28~~

~~KEARNY FINANCIAL CORP. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

Note 4 - Securities ~~Available for Sale~~

The following tables present the amortized cost, gross unrealized gains and losses and estimated fair ~~value of debt~~values for available for sale securities and ~~mortgage-backed~~the amortized cost, gross unrecognized gains and losses and estimated fair values for held to maturity securities ~~at June 30, 2020 and 2019 and stratification by contractual maturity of debt securities at June 30, 2020 are presented below~~ as of the dates indicated. As


	June 30, 2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Fair Value
	(In Thousands)
Available for sale:
Debt securities:

Asset-backed securities	$	138,281	$	4	$	2,115	$	—	$	136,170
Collateralized loan obligations	381,915		268		5,187		—		376,996
Corporate bonds	159,666		—		24,648		—		135,018
Total debt securities	679,862		272		31,950		—		648,184

Mortgage-backed securities:

Residential pass-through securities (1)	539,506		2		103,357		—		436,151
Commercial pass-through securities (1)	164,499		—		21,105		—		143,394
Total mortgage-backed securities	704,005		2		124,462		—		579,545

Total securities available for sale	$	1,383,867	$	274	$	156,412	$	—	$	1,227,729

(1)Government-sponsored enterprises.

F-23

Table of July 1, 2019, the Company adopted ASU 2019-04 and reclassified $537.7 million of securities held to maturity to securities available for sale. See Note 2, Recent Accounting Pronouncements, for further details regarding the adoption of ASU 2019-04.

Contents

June 30, 2020

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair
Value

(In Thousands)

Investment securities available for sale:

Debt securities:

Obligations of state and political subdivisions
$
52,843

$
1,211

$
-

$
54,054

Asset-backed securities

177,413

-

4,966

172,447

Collateralized loan obligations

198,619

-

4,831

193,788

Corporate bonds

142,942

1,267

570

143,639

Trust preferred securities

2,967

-

340

2,627

Total debt securities

574,784

2,478

10,707

566,555

Mortgage-backed securities:

Collateralized mortgage obligations ⁽¹⁾

30,043

860

-

30,903

Residential pass-through securities ⁽¹⁾

543,819

18,135

-

561,954

Commercial pass-through securities ⁽¹⁾

214,575

11,716

-

226,291

Total mortgage-backed securities

788,437

30,711

-

819,148

Total securities available for sale
$
1,363,221

$
33,189

$
10,707

$
1,385,703

~~(1)~~

~~Government-sponsored enterprises.~~

June 30, 2020

Amortized
Cost

Fair
Value

(In Thousands)

Debt securities available for sale:

Due in one year or less
$
5,424

$
5,429

Due after one year through five years

84,722

84,676

Due after five years through ten years

197,429

197,247

Due after ten years

287,209

279,203

Total
$
574,784

$
566,555

~~F-29~~

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 4 - Securities ~~Available~~(continued)


	June 30, 2022
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Fair Value
	(In Thousands)
Available for sale:
Debt securities:
Obligations of state and political subdivisions	$	28,485	$	39	$	89	$	—	$	28,435
Asset-backed securities	169,506		—		2,949		—		166,557
Collateralized loan obligations	315,693		—		7,880		—		307,813
Corporate bonds	159,871		175		6,649		—		153,397
Total debt securities	673,555		214		17,567		—		656,202

Mortgage-backed securities:
Collateralized mortgage obligations (1)	7,451		—		329		—		7,122
Residential pass-through securities (1)	595,337		45		80,624		—		514,758
Commercial pass-through securities (1)	185,781		1		19,771		—		166,011
Total mortgage-backed securities	788,569		46		100,724		—		687,891

Total securities available for sale	$	1,462,124	$	260	$	118,291	$	—	$	1,344,093

(1)Government-sponsored enterprises.


	June 30, 2023
	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Allowance for Credit Losses		Fair Value
	(In Thousands)
Held to maturity:
Debt securities:
Obligations of state and political subdivisions	$	16,051	$	—	$	321	$	—	$	15,730
Total debt securities	16,051		—		321		—		15,730

Mortgage-backed securities:
Residential pass-through securities (1)	118,166		—		12,736		—		105,430
Commercial pass-through securities (1)	12,248		—		2,239		—		10,009
Total mortgage-backed securities	130,414		—		14,975		—		115,439

Total securities held to maturity	$	146,465	$	—	$	15,296	$	—	$	131,169

(1)Government-sponsored enterprises.

F-24

Table of Contents

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 4 - Securities (continued)


	June 30, 2022
	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Allowance for Credit Losses		Fair Value
	(In Thousands)
Held to maturity:
Debt securities:
Obligations of state and political subdivisions	$	21,159	$	44	$	78	$	—	$	21,125
Total debt securities	21,159		44		78		—		21,125

Mortgage-backed securities:
Residential pass-through securities (1)	84,851		—		8,587		—		76,264
Commercial pass-through securities (1)	12,281		—		1,552		—		10,729
Total mortgage-backed securities	97,132		—		10,139		—		86,993

Total securities held to maturity	$	118,291	$	44	$	10,217	$	—	$	108,118

(1)Government-sponsored enterprises.

Excluding the balances of mortgage-backed securities, the following tables present the amortized cost and estimated fair values of debt securities available for ~~Sale~~sale and held to maturity, by contractual maturity, at June 30, 2023:


	June 30, 2023
	Amortized Cost		Fair Value
	(In Thousands)
Available for sale debt securities:
Due in one year or less	$	—	$	—
Due after one year through five years	21,865		21,526
Due after five years through ten years	363,433		339,589
Due after ten years	294,564		287,069
Total	$	679,862	$	648,184


	June 30, 2023
	Amortized Cost		Fair Value
	(In Thousands)
Held to maturity debt securities:
Due in one year or less	$	3,386	$	3,361
Due after one year through five years	12,054		11,776
Due after five years through ten years	611		593
Due after ten years	—		—
Total	$	16,051	$	15,730

F-25

Table of Contents

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 4 - Securities (continued)

June 30, 2019

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair
Value

(In Thousands)

Securities available for sale:

Debt securities:

U.S. agency securities
$
3,642

$
40

$
4

$
3,678

Obligations of state and political subdivisions

26,628

323

-

26,951

Asset-backed securities

178,168

1,465

320

179,313

Collateralized loan obligations

209,453

254

1,096

208,611

Corporate bonds

122,929

121

1,026

122,024

Trust preferred securities

3,967

-

211

3,756

Total debt securities

544,787

2,203

2,657

544,333

Mortgage-backed securities:

Collateralized mortgage obligations ⁽¹⁾

21,469

70

149

21,390

Residential pass-through securities ⁽¹⁾

44,611

156

464

44,303

Commercial pass-through securities ⁽¹⁾

101,421

2,816

-

104,237

Total mortgage-backed securities

167,501

3,042

613

169,930

Total securities available for sale
$
712,288

$
5,245

$
3,270

$
714,263

~~(1)~~

~~Government-sponsored enterprises.~~

Sales of securities available for sale were as follows for the periods presented below:


	June 30,			June 30,			June 30,				Year Ended June 30,
	2020			2019			2018				2023		2022		2021
	(In Thousands)										(In Thousands)
Available for sale securities sold:										Available for sale securities sold:
Proceeds from sales of securities	$	164,299		$	75,401		$	254,606		Proceeds from sales of securities	$	105,199	$	100,336	$	98,084

Gross realized gains	$	2,363		$	190		$	-		Gross realized gains	$	—	$	—	$	1,196
Gross realized losses		(145	)		(513	)		(31	)	Gross realized losses	(15,227)		(565)		(470)
Net gain (loss) on sales of securities	$	2,218		$	(323	)	$	(31	)
Net (loss) gain on sales of securities										Net (loss) gain on sales of securities	$	(15,227)	$	(565)	$	726

Calls of securities available for sale resulted in gross gains of $32,000 during the year ended June 30, 2020. During the year ended June 30, 2019 there were 0 gains or losses recorded on calls of securities available for sale. During the year ended June 30, 2018

Gains resulting from calls of securities available for sale ~~resulted in gross~~were as follows for the periods presented below:


	Year Ended June 30,
	2023		2022		2021
	(In Thousands)
Available for sale securities called:
Gross realized gains	$	—	$	6	$	41
Gross realized losses	—		—		—
Net gain on calls of securities	$	—	$	6	$	41

During the years ended June 30, 2023, 2022 and 2021, there were no gains or losses recorded on sales or calls of ~~$47,000.~~

~~Securities available for sale~~securities held to maturity.

The carrying value of securities pledged for borrowings at the FHLB and other institutions, and securities pledged for public funds and other purposes, were as follows ~~for~~as of the ~~periods~~dates presented below:

June 30,

June 30,

2020

2019

(In Thousands)

Available for sale securities pledged:

Pledged for borrowings at the FHLB of New York

$
155,288

$
24,099

Pledged to secure public funds on deposit

19,944

-

Pledged for potential borrowings at the Federal
Reserve Bank of New York

333,926

43,623

Pledged as collateral for depositor sweep accounts

7,830

1,322

Total available for sale securities pledged

$
516,988

$
69,044


	June 30, 2023		June 30, 2022
	(In Thousands)
Securities pledged:
Pledged for borrowings at the FHLB of New York	$	—	$	178,048
Pledged to secure public funds on deposit	201,239		357,841
Pledged for potential borrowings at the Federal Reserve Bank of New York	529,216		378,071
Total carrying value of securities pledged	$	730,455	$	913,960

~~F-30~~

F-26

Table of Contents

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note ~~5 –~~4 - Securities ~~Held to Maturity~~

(continued)

The ~~amortized cost,~~following tables present the gross ~~unrecognized gains~~unrealized losses on securities and ~~losses and~~the estimated fair value of ~~debt~~the related securities, aggregated by investment category and ~~mortgage-backed~~length of time that securities at June 30, 2020 and 2019 and stratification by contractual maturity of debt securities at June 30, 2020 are presented below as of the dates indicated. As of July 1, 2019, the Company adopted ASU 2019-04 and reclassified $537.7 million of securities held to maturity to securities available for sale. See Note 2, Recent Accounting Pronouncements, for further details regarding the adoption of ASU 2019-04.

June 30, 2020

Amortized
Cost

Gross
Unrecognized
Gains

Gross
Unrecognized
Losses

Fair
Value

(In Thousands)

Investment securities held to maturity:

Debt securities:

Obligations of state and political subdivisions
$
32,556

$
1,513

$
-

$
34,069

Total debt securities

32,556

1,513

-

34,069

Total securities held to maturity
$
32,556

$
1,513

$
-

$
34,069

June 30, 2020

Amortized
Cost

Fair
Value

(In Thousands)

Debt securities held to maturity:

Due in one year or less
$
6,618

$
6,655

Due after one year through five years

18,529

19,337

Due after five years through ten years

7,409

8,077

Total
$
32,556

$
34,069

June 30, 2019

Amortized
Cost

Gross
Unrecognized
Gains

Gross
Unrecognized
Losses

Fair
Value

(In Thousands)

Securities held to maturity:

Debt securities:

Obligations of state and political subdivisions
$
104,086

$
1,787

$
16

$
105,857

Corporate bonds

63,086

914

-

64,000

Total debt securities

167,172

2,701

16

169,857

Mortgage-backed securities:

Collateralized mortgage obligations ⁽¹⁾

46,370

568

168

46,770

Residential pass-through securities ⁽¹⁾

166,283

1,961

518

167,726

Commercial pass-through securities ⁽¹⁾

196,816

3,504

6

200,314

Non-agency securities

11

-

-

11

Total mortgage-backed securities

409,480

6,033

692

414,821

Total securities held to maturity
$
576,652

$
8,734

$
708

$
584,678

~~(1)~~

~~Government-sponsored enterprises.~~

~~F-31~~

~~KEARNY FINANCIAL CORP. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

~~Note 5 – Securities Held to Maturity (continued)~~

~~Sales of securities held to maturity were as follows for the periods presented below:~~

June 30,

June 30,

June 30,

2020

2019

2018

(In Thousands)

Held to maturity securities sold: ^{(1) (2)}

Proceeds from sales of securities

$
-

$
-

$
211

Gross realized gains

$
-

$
-

$
-

Gross realized losses

-

-

(8
)
Net (loss) gain on sales of securities

$
-

$
-

$
(8
)

~~(1)~~

~~During the years ended June 30, 2020 and June 30, 2019, there were 0 sales of securities held to maturity.~~

~~(2)~~

~~During the year ended June 30, 2018, the securities sold were limited to those securities where there was evidence of a deterioration of creditworthiness.~~

~~During the years ended June 30, 2020, 2019 and 2018, there were 0 gains or losses recorded on calls of securities held to maturity.~~

~~Securities held to maturity pledged for borrowings at the FHLB and other institutions, and securities pledged for public funds and other purposes, were as follows for the periods presented below:~~

June 30,

June 30,

2020

2019

(In Thousands)

Held to maturity securities pledged:

Pledged for borrowings at the FHLB of New York

$
-

$
136,696

Pledged to secure public funds on deposit

-

7,023

Pledged for potential borrowings at the Federal
Reserve Bank of New York

32,556

103,419

Pledged as collateral for depositor sweep accounts

-

12,884

Total held to maturity securities pledged

$
32,556

$
260,022

~~F-32~~

~~KEARNY FINANCIAL CORP. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

~~Note 6 – Impairment of Securities~~

~~The following two tables summarize the fair values and gross~~have been in a continuous unrealized ~~and unrecognized losses~~loss position within the available for sale ~~and held to maturity portfolios~~portfolio at June 30, ~~2020~~2023 and ~~June 30, 2019. The gross unrealized and unrecognized losses, presented by security type, represent temporary impairments~~2022:


	June 30, 2023
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Number of Securities	Fair Value		Unrealized Losses
	(Dollars in Thousands)
Securities Available for Sale:

Asset-backed securities	$	33,833	$	129	$	98,828	$	1,986	14	$	132,661	$	2,115
Collateralized loan obligations	46,903		135		294,813		5,052		26	341,716		5,187
Corporate bonds	25,511		1,354		109,507		23,294		31	135,018		24,648

Commercial pass-through securities	63,531		1,380		79,863		19,725		12	143,394		21,105
Residential pass-through securities	10,520		702		425,170		102,655		108	435,690		103,357

Total	$	180,298	$	3,700	$	1,008,181	$	152,712	191	$	1,188,479	$	156,412


	June 30, 2022
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Number of Securities	Fair Value		Unrealized Losses
	(Dollars in Thousands)
Securities Available for Sale:
Obligations of state and political subdivisions	$	11,310	$	89	$	—	$	—	30	$	11,310	$	89
Asset-backed securities	161,303		2,928		5,254		21		15	166,557		2,949
Collateralized loan obligations	236,967		6,435		70,846		1,445		24	307,813		7,880
Corporate bonds	129,407		6,464		3,815		185		27	133,222		6,649
Collateralized mortgage obligations	7,122		329		—		—		6	7,122		329
Commercial pass-through securities	63,045		3,194		102,817		16,577		21	165,862		19,771
Residential pass-through securities	237,928		26,566		274,197		54,058		106	512,125		80,624

Total	$	847,082	$	46,005	$	456,929	$	72,286	229	$	1,304,011	$	118,291

F-27

Table of ~~value within each portfolio as of the dates presented.~~

The tables are followed by a discussion that summarizes the Company’s rationale for recognizing certain impairments as temporary versus those, if any, are identified as other-than-temporary. Such rationale is presented by investment type and generally applies consistently to both the available for sale and held to maturity portfolios, except where specifically noted.

Contents

June 30, 2020

Less than 12 Months

12 Months or More

Total

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

Number of Securities

Fair
Value

Unrealized
Losses

(Dollars in Thousands)

Securities Available for Sale:

Asset-backed securities
$
146,494

$
3,962

$
25,954

$
1,004

16

$
172,448

$
4,966

Collateralized loan obligations

71,282

1,245

122,506

3,586

19

193,788

4,831

Corporate bonds

24,764

236

39,651

334

8

64,415

570

Trust preferred securities

-

-

2,626

340

2

2,626

340

Total
$
242,540

$
5,443

$
190,737

$
5,264

45

$
433,277

$
10,707

June 30, 2019

Less than 12 Months

12 Months or More

Total

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

Number of Securities

Fair
Value

Unrealized
Losses

(Dollars in Thousands)

Securities Available for Sale:

U.S. agency securities
$
-

$
-

$
1,122

$
4

5

$
1,122

$
4

Asset-backed securities

40,211

262

4,934

58

4

45,145

320

Collateralized loan obligations

44,061

75

115,914

1,021

15

159,975

1,096

Corporate bonds

47,486

509

44,462

517

11

91,948

1,026

Trust preferred securities

-

-

2,756

211

2

2,756

211

Collateralized mortgage
obligations

-

-

16,369

149

4

16,369

149

Residential pass-through
securities

-

-

33,519

464

6

33,519

464

Total
$
131,758

$
846

$
219,076

$
2,424

47

$
350,834

$
3,270

~~F-33~~

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note ~~6 – Impairment of~~4 - Securities (continued)

~~At June 30, 2020, there were 0~~

The following table presents the gross unrecognized losses on securities and the estimated fair value of the related securities, aggregated by investment category and length of time that securities have been in a continuous unrecognized loss position within the held to maturity portfolio at June 30, 2023 and 2022:


	June 30, 2023
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrecognized Losses		Fair Value		Unrecognized Losses		Number of Securities	Fair Value		Unrecognized Losses
	(Dollars in Thousands)
Securities Held to Maturity:
Obligations of state and political subdivisions	$	13,642	$	268	$	2,088	$	53	32	$	15,730	$	321
Commercial pass-through securities	—		—		10,009		2,239		1	10,009		2,239
Residential pass-through securities	38,135		319		67,295		12,417		9	105,430		12,736

Total	$	51,777	$	587	$	79,392	$	14,709	42	$	131,169	$	15,296


	June 30, 2022
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrecognized Losses		Fair Value		Unrecognized Losses		Number of Securities	Fair Value		Unrecognized Losses
	(Dollars in Thousands)
Securities Held to Maturity:
Obligations of state and political subdivisions	$	8,681	$	78	$	—	$	—	15	$	8,681	$	78
Commercial pass-through securities	10,729		1,552		—		—		1	10,729		1,552
Residential pass-through securities	76,264		8,587		—		—		8	76,264		8,587

Total	$	95,674	$	10,217	$	—	$	—	24	$	95,674	$	10,217

Available for sale securities ~~with unrecognized losses.~~

June 30, 2019

Less than 12 Months

12 Months or More

Total

Fair
Value

Unrecognized Losses

Fair
Value

Unrecognized Losses

Number of Securities

Fair
Value

Unrecognized
Losses

(Dollars in Thousands)

Securities Held to Maturity:

Obligations of state and political
subdivisions
$
274

$
1

$
7,149

$
15

19

$
7,423

$
16

Collateralized mortgage
obligations

-

-

9,347

168

5

9,347

168

Residential pass-through
securities

438

1

76,848

517

70

77,286

518

Commercial pass-through
securities

-

-

1,852

6

2

1,852

6

Total
$
712

$
2

$
95,196

$
706

96

$
95,908

$
708

~~In general, if the fair value of a debt security is less than its amortized cost basis at the time of evaluation, the security is impaired and the impairment is to be~~are evaluated to determine if ita decline in fair value below the amortized cost basis has resulted from a credit loss or from other factors. An impairment related to credit factors would be recorded through an allowance for credit losses. The allowance is limited to the amount by which the security’s amortized cost basis exceeds the fair value. An impairment that has not been recorded through an allowance for credit losses shall be recorded through other ~~than temporary. The Company evaluates~~comprehensive income, net of applicable taxes. Investment securities will be written down to fair value through the impaired securities in its portfolio for possible other than temporary impairment (“OTTI”) on at least a quarterly basis. The following represents the circumstances under which an impaired security is determined to be other-than-temporarily impaired: (i) when the CompanyConsolidated Statement of Income if management intends to sell, ~~the impaired debt security; (ii) when the Company more likely than not will~~or may be required to sell, the ~~impaired debt security~~securities before ~~recovery~~they recover in value. The issuers of ~~its amortized cost; or (iii) when an impaired debt security does not meet either of the two conditions above, but the Company does not expect to recover the entire amortized cost of the security.~~

In the first two circumstances noted above, the amount of OTTI to be recognized in earnings is the entire difference between the security’s amortized cost basis and its fair value at the balance sheet date. In the third circumstance, however, the OTTI is to be separated into the amount representing the credit loss from the amount related to all other factors. The credit loss component is to be recognized in earnings while the non-credit loss component is to be recognized in other comprehensive income. In these cases, OTTI is generally predicated on an adverse change in cash flows versus those expected at the time of purchase. The absence of an adverse change in expected cash flows generally indicates that a security’s impairment is related to other non-credit loss factors and is thereby generally not recognized as OTTI.

~~F-34~~

~~KEARNY FINANCIAL CORP. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

~~Note 6 – Impairment of Securities (continued)~~

The Company considers a variety of factors when determining whether a credit loss exists for an impaired security including, but not limited to (i) the length of time and the extent to which the fair value has been less than the amortized cost basis; (ii) adverse conditions specifically related to the security, an industry, or a geographic area; (iii) the historical and implied volatility of the fair value of the security; (iv) the payment structure of the debt security; (v) actual or expected failure of the issuer of the securitysecurities continue to make ~~scheduled~~timely principal and interest payments and none of these securities were past due or ~~principal payments; (vi) changes to~~were placed in nonaccrual status at June 30, 2023. Management believes that the rating of the security by external rating agencies; and (vii) recoveries or additional declines in fair value subsequent to the balance sheet date. The Company regularly monitors the historical cash flows and financial strength of all issuers and/or guarantors to confirm that security impairment, where applicable, is not due to an actual or expected adverse change in security cash flows that would result in the recognition of credit-related OTTI.

~~The~~ unrealized losses on ~~the Company’s~~these securities are ~~due to the combined effects~~a function of ~~several market-related factors including~~ changes in market interest rates and credit spreads, not changes in ~~market~~ credit ~~spreads. Those market conditions may fluctuate over time resulting in certain securities being impaired~~quality. No allowance for ~~periods in excess~~credit losses was recorded at June 30, 2023 on available for sale securities.

The sale of 12 months. However, the longevity of such impairment is not necessarily reflective of an expectation for an adverse change in cash flows signifying a credit loss. Unrealized losses within the asset-backed securities and collateralized loan obligation categories are reflective of such changes in market credit spreads however are not necessarily indicative of OTTI. No issuers within these investment categories have defaulted on their interest payments, the Company has the stated ability and intent to hold until forecasted recovery those securities so designated and does not intend to sell the temporarily impaired available for sale securities ~~prior to~~during the ~~recovery~~year ended June 30, 2023 was part of ~~their fair value to~~ a ~~level equal to or greater than~~wholesale restructuring and the ~~Company’s amortized cost. Furthermore, the~~proceeds were reinvested in higher yielding securities. The Company ~~has concluded that the possibility of being~~was not required to sell these securities.

At June 30, 2023, the held to maturity securities ~~prior to their anticipated recovery is unlikely.~~

~~In light~~portfolio consisted of agency mortgage-backed securities and obligations of state and political subdivisions. The mortgage-backed securities are issued by U.S. government agencies and are implicitly guaranteed by the U.S. government. The obligations of state and political subdivisions in the portfolio are highly rated by major rating agencies and have a long history of no credit losses. The Company regularly monitors the obligations of state and political subdivisions sector of the market and reviews collectability including such factors ~~noted above,~~as the ~~Company does not consider its balance~~financial condition of ~~securities with unrealized~~the issuers as well as credit ratings in effect as of the reporting period. No allowance for credit losses was recorded at June 30, ~~2020 and June 30, 2019,~~2023 on held to ~~be other-than-temporarily impaired as~~maturity securities.

F-28

Table of ~~those dates.~~

~~F-35~~

Contents

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 75 – Loans Receivable

The following table sets forth the composition of the Company’s loan portfolio at June 30, ~~2020~~2023 and 2022:


	June 30, 2023		June 30, 2022
	(In Thousands)
Commercial loans:
Multi-family mortgage	$	2,761,775	$	2,409,090
Nonresidential mortgage	968,574		1,019,838
Commercial business	146,861		176,807
Construction	226,609		140,131
Total commercial loans	4,103,819		3,745,866

One- to four-family residential mortgage	1,700,559		1,645,816

Consumer loans:
Home equity loans	43,549		42,028
Other consumer	2,549		2,866
Total consumer loans	46,098		44,894

Total loans	5,850,476		5,436,576

Unaccreted yield adjustments (1)	(21,055)		(18,731)

Total loans receivable, net of yield adjustments	$	5,829,421	$	5,417,845

___________________________

(1)At June 30, ~~2019:~~

2023, included a fair value adjustment to the carrying amount of hedged one- to four-family residential mortgage loans.

June 30,

June 30,

2020

2019

(In Thousands)

Commercial loans:

Multi-family
$
2,059,568

$
1,946,391

Nonresidential

960,853

1,258,869

Commercial business ⁽¹⁾

138,788

65,763

Construction

20,961

13,907

Total commercial loans

3,180,170

3,284,930

One- to four-family residential mortgage loans

1,273,022

1,344,044

Consumer loans:

Home equity loans and lines of credit

82,920

96,165

Other consumer loans

3,991

5,814

Total consumer loans

86,911

101,979

Total loans

4,540,103

4,730,953

Unaccreted yield adjustments

(41,706
)

(52,025
)

Total loans receivable, net of yield adjustments
$
4,498,397

$
4,678,928

~~(1)~~

~~Includes Payroll Protection Program (“PPP”) loans of $69.0 million as of June 30, 2020.~~

The Bank has granted loans to officers and directors of the Company and its subsidiaries and to their associates. As of June 30, ~~2020~~2023 and ~~2019~~2022, such loans totaled approximately ~~$2.4~~$2.5 million and ~~$3.6~~$2.6 million, respectively. During the year ended June 30, ~~2020~~2023, the Bank granted 2no new loans to related parties. During the year ended June 30, 2022, the Bank granted two new loans to related parties totaling ~~$1.0~~$1.8 million.

F-29

Table of Contents

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 5 – Loans Receivable (continued)

Past Due Loans

Past due status is based on the contractual payment terms of the loans. The following tables present the payment status of past due loans as of June 30, 2023 and 2022, by loan segment:


	Payment Status June 30, 2023
	30-59 Days		60-89 Days		90 Days and Over		Total Past Due		Current		Total
	(In Thousands)
Multi-family mortgage	$	2,958	$	—	$	10,756	$	13,714	$	2,748,061	$	2,761,775
Nonresidential mortgage	792		—		8,233		9,025		959,549		968,574
Commercial business	528		16		236		780		146,081		146,861
Construction	—		—		—		—		226,609		226,609
One- to four-family residential mortgage	2,019		1,202		3,731		6,952		1,693,607		1,700,559
Home equity loans	25		—		50		75		43,474		43,549
Other consumer	—		—		—		—		2,549		2,549
Total loans	$	6,322	$	1,218	$	23,006	$	30,546	$	5,819,930	$	5,850,476


	Payment Status June 30, 2022
	30-59 Days		60-89 Days		90 Days and Over		Total Past Due		Current		Total
	(In Thousands)
Multi-family mortgage	$	3,148	$	3,056	$	7,788	$	13,992	$	2,395,098	$	2,409,090
Nonresidential mortgage	4,026		—		18,132		22,158		997,680		1,019,838
Commercial business	98		57		155		310		176,497		176,807
Construction	—		—		—		—		140,131		140,131
One- to four-family residential mortgage	1,525		253		3,455		5,233		1,640,583		1,645,816
Home equity loans	28		35		—		63		41,965		42,028
Other consumer	—		—		—		—		2,866		2,866
Total loans	$	8,825	$	3,401	$	29,530	$	41,756	$	5,394,820	$	5,436,576

Nonperforming Loans

Loans are generally placed on nonaccrual status when contractual payments become 90 or more days past due or when the Company does not expect to receive all P&I payment owed substantially in accordance with the terms of the loan agreement, regardless of past due status. Loans that become 90 days past due, but are well secured and in the process of collection, may remain on accrual status. Nonaccrual loans are generally returned to accrual status when all payments due are brought current and the Company expects to receive all remaining P&I payments owed substantially in accordance with the terms of the loan agreement. Payments received in cash on nonaccrual loans, including both the principal and interest portions of those payments, are generally applied to reduce the carrying value of the loan. The Company did not recognize interest income on non-accrual loans during the years ended June 30, 2023, 2022 and 2021.

F-30

Table of Contents

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 5 – Loans Receivable (continued)

The following tables present information relating to the Company’s nonperforming loans as of June 30, 2023 and 2022:


	Performance Status June 30, 2023
	90 Days and Over Past Due Accruing		Nonaccrual Loans with Allowance for Credit Losses		Nonaccrual Loans with no Allowance for Credit Losses		Total Nonperforming		Performing		Total
	(In Thousands)
Multi-family mortgage	$	—	$	5,686	$	13,428	$	19,114	$	2,742,661	$	2,761,775
Nonresidential mortgage	—		11,815		4,725		16,540		952,034		968,574
Commercial business	—		71		181		252		146,609		146,861
Construction	—		—		—		—		226,609		226,609
One- to four-family residential mortgage	—		1,640		5,031		6,671		1,693,888		1,700,559
Home equity loans	—		—		50		50		43,499		43,549
Other consumer	—		—		—		—		2,549		2,549
Total loans	$	—	$	19,212	$	23,415	$	42,627	$	5,807,849	$	5,850,476


	Performance Status June 30, 2022
	90 Days and Over Past Due Accruing		Nonaccrual Loans with Allowance for Credit Losses		Nonaccrual Loans with no Allowance for Credit Losses		Total Nonperforming		Performing		Total
	(In Thousands)
Multi-family mortgage	$	—	$	8,367	$	18,286	$	26,653	$	2,382,437	$	2,409,090
Nonresidential mortgage	—		12,602		19,292		31,894		987,944		1,019,838
Commercial business	—		212		81		293		176,514		176,807
Construction	—		—		1,561		1,561		138,570		140,131
One- to four-family residential mortgage	—		3,543		4,946		8,489		1,637,327		1,645,816
Home equity loans	—		302		1,129		1,431		40,597		42,028
Other consumer	—		—		—		—		2,866		2,866
Total loans	$	—	$	25,026	$	45,295	$	70,321	$	5,366,255	$	5,436,576

Troubled Debt Restructurings

On a case-by-case basis, the Company may agree to modify the contractual terms of a loan to assist a borrower who may be experiencing financial difficulty, as well as to preserve the Company’s position in the loan. If the borrower is experiencing financial difficulties and a concession has been made at the time of such modification, the loan is classified as a TDR. The Company had TDRs totaling $17.4 million and $22.2 million as of June 30, 2023 and 2022, respectively. The allowance for credit losses associated with the TDRs presented in the tables below totaled $274,000 and $365,000 as of June 30, 2023 and 2022, respectively. As of June 30, 2023, there were no significant commitments to lend additional funds to borrowers whose loans had been restructured in a TDR.

F-31

Table of Contents

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 5 – Loans Receivable (continued)

The following tables present total TDRs at June 30, 2023 and 2022:


	June 30, 2023
	Accrual			Non-accrual			Total
	# of Loans	Amount		# of Loans	Amount		# of Loans	Amount
	(Dollars In Thousands)
Commercial loans:
Multi-family mortgage	—	$	—	2	$	5,400	2	$	5,400
Nonresidential mortgage	3	170		2	700		5	870
Commercial business	6	3,197		—	—		6	3,197
Construction	—	—		—	—		—	—
Total commercial loans	9	3,367		4	6,100		13	9,467

One- to four-family residential mortgage	39	6,752		4	774		43	7,526

Consumer loans:
Home equity loans	6	368		—	—		6	368
Total	54	$	10,487	8	$	6,874	62	$	17,361


	June 30, 2022
	Accrual			Non-accrual			Total
	# of Loans	Amount		# of Loans	Amount		# of Loans	Amount
	(Dollars In Thousands)
Commercial loans:
Multi-family mortgage	—	$	—	2	$	5,626	2	$	5,626
Nonresidential mortgage	4	389		2	1,565		6	1,954
Commercial business	5	3,631		2	82		7	3,713
Construction	—	—		1	1,561		1	1,561
Total commercial loans	9	4,020		7	8,834		16	12,854

One- to four-family residential mortgage	29	4,488		16	3,314		45	7,802

Consumer loans:
Home equity loans	5	164		2	1,364		7	1,528
Total	43	$	8,672	25	$	13,512	68	$	22,184

F-32

Table of Contents

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 5 – Loans Receivable (continued)

The following table presents information regarding TDRs that occurred during the years ended June 30, 2023 and 2022:


	Year Ended June 30, 2023					Year Ended June 30, 2022
	# of Loans	Pre-modification Recorded Investment		Post-modification Recorded Investment		# of Loans	Pre-modification Recorded Investment		Post-modification Recorded Investment
	(Dollars In Thousands)
Multi-family mortgage	—	$	—	$	—	2	$	12,091	$	12,073
Nonresidential mortgage	1	313		345		—	—		—
Commercial business	2	74		74		—	—		—
One- to four-family residential mortgage	2	708		705		13	3,812		3,924
Home equity loans	1	35		35		2	1,477		1,477
Total	6	$	1,130	$	1,159	17	$	17,380	$	17,474

During the year ended June 30, ~~2019~~2023, there were charge-offs of $121,000 related to TDRs. During the ~~Bank granted 1 new~~year ended June 30, 2022, there were no charge-offs related to TDRs. During the year ended June 30, 2023, there were two TDR defaults totaling $649,000. During the year ended June 30, 2022, there were three TDR defaults totaling $305,000.

Loan modifications generally involve a reduction in interest rates and/or extension of maturity dates and also may include step up interest rates in their modified terms which will impact their weighted average yield in the future. The loans which qualified as TDRs during the year ended June 30, 2023, capitalized prior past due amounts, reduced the interest rate or modified the repayment terms.

Individually Analyzed Loans

Individually analyzed loans include loans which do not share similar risk characteristics with other loans. TDRs will generally be evaluated for individual impairment, however, after a period of sustained repayment performance which permits the credit to be returned to accrual status, a TDR would generally be removed from individual impairment analysis and returned to its corresponding pool. As of June 30, 2023, the carrying value of individually analyzed loans, including loans acquired with deteriorated credit quality that were individually analyzed, totaled $42.6 million, of which $38.2 million were considered collateral dependent.

For collateral dependent loans where management has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and repayment of the loan is to ~~related parties totaling $453,000.~~

~~Note 8 – Loan Quality~~be provided substantially through the operation or sale of the collateral, the allowance for credit losses is measured based on the difference between the fair value of the collateral, less costs to sell, and the ~~Allowance~~amortized cost basis of the loan as of the measurement date. See Note 18 for ~~Loan Losses~~additional disclosure regarding fair value of individually analyzed collateral dependent loans.

F-33

Table of Contents

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 5 – Loans Receivable (continued)

The following table presents the carrying value and related allowance of collateral dependent individually analyzed loans at the dates indicated:


	June 30, 2023				June 30, 2022
	Carrying Value		Related Allowance		Carrying Value		Related Allowance
	(In Thousands)
Commercial loans:
Multi-family mortgage	$	19,114	$	326	$	26,653	$	849
Nonresidential mortgage (1)	16,207		3,001		30,733		2,696

Construction	—		—		1,561		—
Total commercial loans	35,321		3,327		58,947		3,545

One- to four-family residential mortgage (2)	2,875		—		4,305		77

Consumer loans:
Home equity loans (2)	—		—		35		—

Total	$	38,196	$	3,327	$	63,287	$	3,622

(1)Secured by income-producing nonresidential property.

(2)Secured by one- to four-family residential properties.

Credit Quality Indicators

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually to classify the loans as to credit risk. The Company uses the following definitions for risk ratings:

Pass – Loans that are well protected by the current net worth and paying capacity of the obligor (or guarantors, if any) or by the fair value, less cost to acquire and sell, of any underlying collateral in a timely manner.

Special Mention – Loans which do not currently expose the Company to a sufficient degree of risk to warrant an adverse classification but have some credit deficiencies or other potential weaknesses.

Substandard – Loans which are inadequately protected by the paying capacity and net worth of the obligor or the collateral pledged, if any. Substandard assets include those characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

Doubtful – Loans which have all of the weaknesses inherent in those classified as Substandard, with the added characteristic that the weaknesses present make collection or liquidation in full highly questionable and improbable, on the basis of currently existing facts, conditions and values.

Loss – Loans which considered uncollectible or of so little value that their continuance as assets is not warranted.

F-34

Table of Contents

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 5 – Loans Receivable (continued)

The following table presents the risk category of loans as of June 30, 2023 by loan segment and vintage year:


	Term Loans by Origination Year for Fiscal Years ended June 30,												Revolving Loans
	2023		2022		2021		2020		2018		Prior				Total
	(In Thousands)
Multi-family mortgage:
Pass	$	603,260	$	954,554	$	213,482	$	198,969	$	226,929	$	510,485	$	—	$	2,707,679
Special Mention	—		—		—		—		6,006		6,647		—		12,653
Substandard	—		—		9,809		—		9,432		22,202		—		41,443
Doubtful	—		—		—		—		—		—		—		—
Total multi-family mortgage	603,260		954,554		223,291		198,969		242,367		539,334		—		2,761,775
Nonresidential mortgage:
Pass	109,725		220,443		83,032		51,933		59,197		414,742		6,000		945,072
Special Mention	—		—		—		—		—		378		—		378
Substandard	—		—		708		—		919		21,497		—		23,124
Doubtful	—		—		—		—		—		—		—		—
Total nonresidential mortgage	109,725		220,443		83,740		51,933		60,116		436,617		6,000		968,574
Commercial business:
Pass	10,364		28,644		25,304		7,875		1,731		8,776		59,031		141,725
Special Mention	—		—		—		47		176		2,456		371		3,050
Substandard	—		—		—		395		60		1,385		246		2,086
Doubtful	—		—		—		—		—		—		—		—
Total commercial business	10,364		28,644		25,304		8,317		1,967		12,617		59,648		146,861
Construction loans:
Pass	25,070		36,389		143,086		12,275		2,961		1,093		5,735		226,609
Special Mention	—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—
Total construction loans	25,070		36,389		143,086		12,275		2,961		1,093		5,735		226,609
Residential mortgage:
Pass	195,521		454,504		491,460		80,431		45,741		422,472		—		1,690,129
Special Mention	—		—		—		—		1,168		425		—		1,593
Substandard	—		542		—		—		80		8,215		—		8,837
Doubtful	—		—		—		—		—		—		—		—
Total residential mortgage	195,521		455,046		491,460		80,431		46,989		431,112		—		1,700,559
Home equity loans:
Pass	7,682		2,567		607		1,264		2,478		7,280		21,384		43,262
Special Mention	—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		287		—		287
Doubtful	—		—		—		—		—		—		—		—
Total home equity loans	7,682		2,567		607		1,264		2,478		7,567		21,384		43,549
Other consumer loans
Pass	367		247		110		494		302		912		42		2,474
Special Mention	—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		75		75
Other consumer loans	367		247		110		494		302		912		117		2,549
Total loans	$	951,989	$	1,697,890	$	967,598	$	353,683	$	357,180	$	1,429,252	$	92,884	$	5,850,476

F-35

Table of Contents

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 5 – Loans Receivable (continued)

The following table presents the risk category of loans as of June 30, 2022 by loan segment and vintage year:


	Term Loans by Origination Year for Fiscal Years ended June 30,												Revolving Loans
	2022		2021		2020		2018		2017		Prior				Total
	(In Thousands)
Multi-family mortgage:
Pass	$	963,263	$	250,385	$	211,101	$	264,174	$	248,058	$	438,642	$	—	$	2,375,623
Special Mention	—		—		—		—		—		6,814		—		6,814
Substandard	—		—		—		9,821		5,935		10,897		—		26,653
Doubtful	—		—		—		—		—		—		—		—
Total multi-family mortgage	963,263		250,385		211,101		273,995		253,993		456,353		—		2,409,090
Nonresidential mortgage:
Pass	231,777		87,309		53,983		60,714		49,285		491,849		6,052		980,969
Special Mention	—		—		—		—		—		591		—		591
Substandard	—		720		—		933		4,026		32,599		—		38,278
Doubtful	—		—		—		—		—		—		—		—
Total nonresidential mortgage	231,777		88,029		53,983		61,647		53,311		525,039		6,052		1,019,838
Commercial business:
Pass	46,888		38,791		12,155		3,581		4,861		6,455		58,662		171,393
Special Mention	—		—		62		186		2,173		873		215		3,509
Substandard	—		38		319		—		1,347		61		58		1,823
Doubtful	—		—		—		—		—		80		2		82
Total commercial business	46,888		38,829		12,536		3,767		8,381		7,469		58,937		176,807
Construction loans:
Pass	16,407		95,526		10,337		3,039		6,509		1,017		5,735		138,570
Special Mention	—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		1,561		—		1,561
Doubtful	—		—		—		—		—		—		—		—
Total construction loans	16,407		95,526		10,337		3,039		6,509		2,578		5,735		140,131
Residential mortgage:
Pass	472,160		524,163		88,645		49,316		55,139		442,517		374		1,632,314
Special Mention	—		—		—		1,205		—		621		—		1,826
Substandard	—		—		—		83		—		11,593		—		11,676
Doubtful	—		—		—		—		—		—		—		—
Total residential mortgage	472,160		524,163		88,645		50,604		55,139		454,731		374		1,645,816
Home equity loans:
Pass	3,197		692		1,681		3,117		2,027		7,321		22,334		40,369
Special Mention	—		—		—		—		—		—		—		—
Substandard	—		—		—		120		—		1,539		—		1,659
Doubtful	—		—		—		—		—		—		—		—
Total home equity loans	3,197		692		1,681		3,237		2,027		8,860		22,334		42,028
Other consumer loans
Pass	442		308		471		375		258		895		34		2,783
Special Mention	—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		83		83
Other consumer loans	442		308		471		375		258		895		117		2,866
Total loans	$	1,734,134	$	997,932	$	378,754	$	396,664	$	379,618	$	1,455,925	$	93,549	$	5,436,576

F-36

Table of Contents

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 5 – Loans Receivable (continued)

Purchased Credit Deteriorated Loans

PCD loans are acquired loans that, as of the acquisition date, have experienced a more-than-insignificant deterioration in credit quality since origination. Non-PCD loans are acquired loans that have experienced no or insignificant deterioration in credit quality since origination. To distinguish between the two types of acquired loans, the Company evaluates risk characteristics that have been determined to be indicators of deteriorated credit quality. The determining criteria may involve loan specific characteristics such as payment status, debt service coverage or other changes in creditworthiness since the loan was originated, while others are relevant to recent economic conditions, such as borrowers in industries impacted by the pandemic.

As part of the acquisition of MSB, the Company purchased loans, for which there was, at acquisition, evidence of more than insignificant deterioration of credit quality since origination. The carrying amount of those loans is as follows:


	At July 10, 2020
	(In Thousands)
Purchase price of PCD loans at acquisition	$	65,347
Allowance for credit losses at acquisition	3,901
Non-credit discount at acquisition	167
Par value of acquired PCD loans at acquisition	$	69,415

Residential Mortgage Loans in Foreclosure

The Company may obtain physical possession of one- to four-family real estate collateralizing a residential mortgage loan or nonresidential real estate collateralizing a nonresidential mortgage loan via foreclosure or through an in-substance repossession. As of June 30, ~~2020, we~~2023, the Company held ~~1 single-family properties~~one nonresidential property with a carrying value of $13.0 million in other real estate owned ~~with aggregate carrying values of $178,000~~ that ~~were~~was acquired through ~~foreclosures~~foreclosure on ~~residential~~a nonresidential mortgage ~~loans.~~loan. As of that same date, wethe Company held 9three residential mortgage loans with aggregate carrying values totaling ~~$1.9~~$950,000 and six commercial mortgage loans with aggregate carrying values totaling $9.2 million which were in the process of foreclosure.

As of June 30, ~~2019, we~~2022, the Company held 0one single-family ~~properties~~property in other real estate owned with a carrying value of $178,000 that ~~were~~was acquired through ~~foreclosures~~foreclosure on a residential mortgage ~~loans.~~loan. As of that same date, wethe Company held 11seven residential mortgage loans with aggregate carrying values totaling ~~$2.1~~$1.5 million which were in the process of foreclosure.

~~The states~~

F-37

Table of New Jersey and New York have issued executive orders which declared moratoriums on removing individuals from a residential property as a result of an eviction or foreclosure proceeding. The New Jersey order will be in effect for at least 60 days and the New York order will be in effect until at least September 4, 2020. In response to these orders, on March 28, 2020, the Company temporarily suspended residential property foreclosure sales and evictions.

~~F-36~~

Contents

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 86 – ~~Loan Quality and the~~ Allowance for ~~Loan~~Credit Losses ~~(continued)~~

Adoption of Topic 326

On July 1, 2020, the Company adopted ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which replaced the incurred loss methodology with an expected loss methodology, referred to as the “CECL” methodology. See Note 1, Summary of Significant Accounting Policies, for additional information on the adoption of Topic 326.

Allowance for Credit Losses on Loans Receivable

The following tables present the balance of the allowance for ~~loan~~credit losses (“ACL”) at June 30, ~~2020~~2023 and ~~2019~~2022. The balance of the ACL is based ~~upon~~on the ~~calculation~~CECL methodology, ~~described in Note 1.~~as noted above. The tables identify the valuation allowances attributable to specifically identified impairments on individually ~~evaluated~~analyzed loans, including those acquired with deteriorated credit quality, as well as valuation allowances for impairments on loans ~~evaluated collectively.~~collectively evaluated. The tables include the underlying balance of loans receivable applicable to each category as of those ~~dates as well as~~dates.


	Allowance for Credit Losses June 30, 2023
	Loans acquired with deteriorated credit quality individually analyzed		Loans acquired with deteriorated credit quality collectively evaluated		Loans individually analyzed		Loans collectively evaluated		Total allowance for credit losses
	(In Thousands)
Multi-family mortgage	$	—	$	—	$	326	$	26,036	$	26,362
Nonresidential mortgage	—		70		3,001		5,882		8,953
Commercial business	—		9		20		1,411		1,440
Construction	—		—		—		1,336		1,336
One- to four-family residential mortgage	3		132		70		10,032		10,237
Home equity loans	—		—		—		338		338
Other consumer	—		—		—		68		68
Total loans	$	3	$	211	$	3,417	$	45,103	$	48,734


	Balance of Loans Receivable June 30, 2023
	Loans acquired with deteriorated credit quality individually analyzed		Loans acquired with deteriorated credit quality collectively evaluated		Loans individually analyzed		Loans collectively evaluated		Total loans
	(In Thousands)
Multi-family mortgage	$	—	$	—	$	19,114	$	2,742,661	$	2,761,775
Nonresidential mortgage	333		3,562		16,207		948,472		968,574
Commercial business	—		4,237		252		142,372		146,861
Construction	—		5,735		—		220,874		226,609
One- to four-family residential mortgage	570		4,433		6,101		1,689,455		1,700,559
Home equity loans	25		—		25		43,499		43,549
Other consumer	—		—		—		2,549		2,549
Total loans	$	928	$	17,967	$	41,699	$	5,789,882	$	5,850,476
Unaccreted yield adjustments									(21,055)
Loans receivable, net of yield adjustments									$	5,829,421

F-38

Table of Contents

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 6 – Allowance for Credit Losses (continued)


	Allowance for Credit Losses June 30, 2022
	Loans acquired with deteriorated credit quality individually analyzed		Loans acquired with deteriorated credit quality collectively evaluated		Loans individually analyzed		Loans collectively evaluated		Total allowance for credit losses
	(In Thousands)
Multi-family mortgage	$	—	$	—	$	849	$	24,472	$	25,321
Nonresidential mortgage	—		73		2,696		7,821		10,590
Commercial business	—		9		16		1,767		1,792
Construction	—		—		—		1,486		1,486
One- to four-family residential mortgage	—		229		148		7,163		7,540
Home equity loans	26		—		—		219		245
Other consumer	—		—		—		84		84
Total loans	$	26	$	311	$	3,709	$	43,012	$	47,058


	Balance of Loans Receivable June 30, 2022
	Loans acquired with deteriorated credit quality individually analyzed		Loans acquired with deteriorated credit quality collectively evaluated		Loans individually analyzed		Loans collectively evaluated		Total loans
	(In Thousands)
Multi-family mortgage	$	—	$	—	$	26,653	$	2,382,437	$	2,409,090
Nonresidential mortgage	377		5,033		31,517		982,911		1,019,838
Commercial business	—		1,267		293		175,247		176,807
Construction	—		5,735		1,561		132,835		140,131
One- to four-family residential mortgage	87		6,460		8,402		1,630,867		1,645,816
Home equity loans	329		58		1,102		40,539		42,028
Other consumer	—		—		—		2,866		2,866
Total loans	$	793	$	18,553	$	69,528	$	5,347,702	$	5,436,576
Unaccreted yield adjustments									(18,731)
Loans receivable, net of yield adjustments									$	5,417,845

F-39

Table of Contents

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 6 – Allowance for Credit Losses (continued)

The following tables present the activity in the ~~allowance for loan losses~~ACL on loans for the years ended June 30, ~~2020, 2019~~2023, 2022 and ~~2018. Unless otherwise noted, the balance~~2021:


	Changes in the Allowance for Credit Losses Year Ended June 30, 2023
	Balance at June 30, 2022		Charge-offs		Recoveries		Provision for (reversal of) credit losses		Balance at June 30, 2023
	(In Thousands)
Multi-family mortgage	$	25,321	$	(493)	$	—	$	1,534	$	26,362
Nonresidential mortgage	10,590		(39)		—		(1,598)		8,953
Commercial business	1,792		(364)		29		(17)		1,440
Construction	1,486		—		—		(150)		1,336
One- to four-family residential mortgage	7,540		—		2		2,695		10,237
Home equity loans	245		—		—		93		338
Other consumer	84		—		55		(71)		68
Total loans	$	47,058	$	(896)	$	86	$	2,486	$	48,734


	Changes in the Allowance for Credit Losses Year Ended June 30, 2022
	Balance at June 30, 2021		Charge-offs		Recoveries		(Reversal of) provision for credit losses		Balance at June 30, 2022
	(In Thousands)
Multi-family mortgage	$	28,450	$	(1,896)	$	—	$	(1,233)	$	25,321
Nonresidential mortgage	16,243		(2,646)		812		(3,819)		10,590
Commercial business	2,086		(193)		160		(261)		1,792
Construction	1,170		—		—		316		1,486
One- to four-family residential mortgage	9,747		—		147		(2,354)		7,540
Home equity loans	433		—		27		(215)		245
Other consumer	36		(2)		2		48		84
Total loans	$	58,165	$	(4,737)	$	1,148	$	(7,518)	$	47,058


	Changes in the Allowance for Loan Losses Year Ended June 30, 2021
	Balance at June 30, 2020 (prior to adoption of ASC 326):		Impact of adopting Topic 326		Charge-offs		Recoveries		Initial allowance on PCD loans		(Reversal of) provision for credit losses		Balance at June 30, 2021
	(In Thousands)
Multi-family mortgage	$	20,916	$	8,408	$	—	$	—	$	250	$	(1,124)	$	28,450
Nonresidential mortgage	8,763		2,390		(80)		—		1,720		3,450		16,243
Commercial business	1,926		(421)		(1,446)		17		1,007		1,003		2,086
Construction	236		80		—		—		99		755		1,170
One- to four-family residential mortgage	4,860		9,106		(13)		4		720		(4,930)		9,747
Home equity loans	568		92		(32)		—		105		(300)		433
Other consumer	58		(15)		(41)		9		—		25		36
Total loans	$	37,327	$	19,640	$	(1,612)	$	30	$	3,901	$	(1,121)	$	58,165

F-40

Table of ~~loans reported in the tables below excludes yield adjustments and the allowance for loan loss.~~

Contents

Allowance for Loan Losses

At June 30, 2020

Multi-Family Mortgage

Non-
Residential
Mortgage

Commercial
Business

Construction

Residential
Mortgage

Home
Equity
Loans

Other
Consumer

Total

(In Thousands)

Balance of allowance for loan losses:

Loans acquired with deteriorated
  credit quality
$
-

$
-

$
-

$
-

$
-

$
-

$
-

$
-

Loans individually
  evaluated for impairment

-

41

47

-

1

-

-

89

Loans collectively
  evaluated for impairment

20,916

8,722

1,879

236

4,859

568

58

37,238

Total allowance for loan losses
$
20,916

$
8,763

$
1,926

$
236

$
4,860

$
568

$
58

$
37,327

Balance of Loans Receivable

At June 30, 2020

Multi-Family Mortgage

Non-
Residential
Mortgage

Commercial
Business

Construction

Residential
Mortgage

Home
Equity
Loans

Other
Consumer

Total

(In Thousands)

Balance of loans receivable:

Loans acquired with deteriorated
  credit quality
$
-

$
-

$
222

$
-

$
77

$
-

$
-

$
299

Loans individually
  evaluated for impairment

2,962

24,048

5,567

-

10,689

1,557

-

44,823

Loans collectively
  evaluated for impairment

2,056,606

936,805

132,999

20,961

1,262,256

81,363

3,991

4,494,981

Total loans
$
2,059,568

$
960,853

$
138,788

$
20,961

$
1,273,022

$
82,920

$
3,991

$
4,540,103

Unaccreted yield
  adjustments

(41,706
)
Loans receivable, net of
   yield adjustments

$
4,498,397

~~F-37~~

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 86 – ~~Loan Quality and the~~ Allowance for ~~Loan~~Credit Losses (continued)

Allowance for Loan Losses

At June 30, 2019

Multi-Family Mortgage

Non-
Residential
Mortgage

Commercial
Business

Construction

Residential
Mortgage

Home
Equity
Loans

Other
Consumer

Total

(In Thousands)

Balance of allowance for loan losses:

Loans acquired with deteriorated
  credit quality
$
-

$
-

$
-

$
-

$
-

$
-

$
-

$
-

Loans individually
  evaluated for impairment

-

-

-

-

31

-

-

31

Loans collectively
  evaluated for impairment

16,959

9,672

2,467

136

3,346

491

172

33,243

Total allowance for loan losses
$
16,959

$
9,672

$
2,467

$
136

$
3,377

$
491

$
172

$
33,274

Balance of Loans Receivable

At June 30, 2019

Multi-Family Mortgage

Non-
Residential
Mortgage

Commercial
Business

Construction

Residential
Mortgage

Home
Equity
Loans

Other
Consumer

Total

(In Thousands)

Balance of loans receivable:

Loans acquired with deteriorated
  credit quality
$
-

$
-

$
242

$
-

$
84

$
-

$
-

326

Loans individually
  evaluated for impairment

70

8,900

1,213

-

12,545

1,531

-

24,259

Loans collectively
  evaluated for impairment

1,946,321

1,249,969

64,308

13,907

1,331,415

94,634

5,814

4,706,368

Total loans
$
1,946,391

$
1,258,869

$
65,763

$
13,907

$
1,344,044

$
96,165

$
5,814

$
4,730,953

Unaccreted yield
  adjustments

(52,025
)
Loans receivable, net of
   yield adjustments

$
4,678,928

~~F-38~~

~~KEARNY FINANCIAL CORP. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

~~Note 8 – Loan Quality and the~~ Allowance for ~~Loan~~Credit Losses ~~(continued)~~

on Off Balance Sheet Commitments

Allowance for Loan Losses

Year Ended June 30, 2020

Multi-Family Mortgage

Non-
Residential
Mortgage

Commercial
Business

Construction

Residential
Mortgage

Home
Equity
Loans

Other
Consumer

Total

(In Thousands)

Changes in the allowance for loan
losses for the year ended
June 30, 2020:

At June 30, 2019:
$
16,959

$
9,672

$
2,467

$
136

$
3,377

$
491

$
172

$
33,274

Total charge offs

-

-

(50
)

-

-

-

(139
)

(189
)
Total recoveries

-

10

2

-

-

-

33

45

Total provisions

3,957

(919
)

(493
)

100

1,483

77

(8
)

4,197

Total allowance for loan losses
$
20,916

$
8,763

$
1,926

$
236

$
4,860

$
568

$
58

$
37,327

Allowance for Loan Losses

Year Ended June 30, 2019

Multi-Family Mortgage

Non-
Residential
Mortgage

Commercial
Business

Construction

Residential
Mortgage

Home
Equity
Loans

Other
Consumer

Total

(In Thousands)

Changes in the allowance for loan
losses for the year ended
June 30, 2019:

At June 30, 2018:
$
14,946

$
9,787

$
2,552

$
258

$
2,479

$
430

$
413

$
30,865

Total charge offs

-

(54
)

(861
)

-

(83
)

-

(285
)

(1,283
)
Total recoveries

-

6

47

-

-

-

83

136

Total provisions

2,013

(67
)

729

(122
)

981

61

(39
)

3,556

Total allowance for loan losses
$
16,959

$
9,672

$
2,467

$
136

$
3,377

$
491

$
172

$
33,274

~~F-39~~

~~KEARNY FINANCIAL CORP. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

~~Note 8 – Loan Quality and the Allowance for Loan Losses (continued)~~

Allowance for Loan Losses

Year Ended June 30, 2018

Multi-Family Mortgage

Non-
Residential
Mortgage

Commercial
Business

Construction

Residential
Mortgage

Home
Equity
Loans

Other
Consumer

Total

(In Thousands)

Changes in the allowance for loan
losses for the year ended
June 30, 2018:

At June 30, 2017:
$
13,941

$
9,939

$
1,709

$
35

$
2,384

$
501

$
777

$
29,286

Total charge offs

-

(45
)

(145
)

-

(521
)

(18
)

(829
)

(1,558
)
Total recoveries

-

-

90

-

172

65

104

431

Total provisions

1,005

(107
)

898

223

444

(118
)

361

2,706

Total allowance for loan losses
$
14,946

$
9,787

$
2,552

$
258

$
2,479

$
430

$
413

$
30,865

The following ~~tables present key indicators of credit quality regarding~~table presents the ~~Company’s loan portfolio based upon loan classification and contractual payment status at June 30, 2020 and 2019:~~

Credit-Rating Classification of Loans Receivable

At June 30, 2020

Multi-Family Mortgage

Non-
Residential
Mortgage

Commercial
Business

Construction

Residential
Mortgage

Home
Equity
Loans

Other
Consumer

Total

(In Thousands)

Pass
$
2,055,520

$
932,202

$
132,818

$
20,961

$
1,258,246

$
81,120

$
3,979

$
4,484,846

Special Mention

1,086

4,373

2,585

-

981

157

5

9,187

Substandard

2,962

24,278

3,385

-

13,795

1,643

6

46,069

Doubtful

-

-

-

-

-

-

1

1

Total loans
$
2,059,568

$
960,853

$
138,788

$
20,961

$
1,273,022

$
82,920

$
3,991

$
4,540,103

Credit-Rating Classification of Loans Receivable

At June 30, 2019

Multi-Family Mortgage

Non-
Residential
Mortgage

Commercial
Business

Construction

Residential
Mortgage

Home
Equity
Loans

Other
Consumer

Total

(In Thousands)

Pass
$
1,945,205

$
1,249,438

$
59,768

$
13,907

$
1,328,811

$
94,544

$
5,776

$
4,697,449

Special Mention

1,116

-

3,894

-

629

28

14

5,681

Substandard

70

9,431

2,101

-

14,604

1,593

23

27,822

Doubtful

-

-

-

-

-

-

1

1

Total loans
$
1,946,391

$
1,258,869

$
65,763

$
13,907

$
1,344,044

$
96,165

$
5,814

$
4,730,953

~~F-40~~

~~KEARNY FINANCIAL CORP. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

~~Note 8 – Loan Quality and the Allowance for Loan Losses (continued)~~

Contractual Payment Status of Loans Receivable

At June 30, 2020

Multi-Family Mortgage

Non-
Residential
Mortgage

Commercial
Business

Construction

Residential
Mortgage

Home
Equity
Loans

Other
Consumer

Total

(In Thousands)

Current
$
2,059,568

$
941,714

$
138,439

$
20,961

$
1,264,267

$
82,358

$
3,981

$
4,511,288

Past due:

30-59 days

-

-

-

-

3,211

169

-

3,380

60-89 days

-

14,478

-

-

1,038

13

5

15,534

90 days and over

-

4,661

349

-

4,506

380

5

9,901

Total past due

-

19,139

349

-

8,755

562

10

28,815

Total loans
$
2,059,568

$
960,853

$
138,788

$
20,961

$
1,273,022

$
82,920

$
3,991

$
4,540,103

Contractual Payment Status of Loans Receivable

At June 30, 2019

Multi-Family Mortgage

Non-
Residential
Mortgage

Commercial
Business

Construction

Residential
Mortgage

Home
Equity
Loans

Other
Consumer

Total

(In Thousands)

Current
$
1,946,391

$
1,256,892

$
65,668

$
13,907

$
1,338,347

$
95,793

$
5,754

$
4,722,752

Past due:

30-59 days

-

-

95

-

1,680

197

25

1,997

60-89 days

-

-

-

-

473

36

13

522

90 days and over

-

1,977

-

-

3,544

139

22

5,682

Total past due

-

1,977

95

-

5,697

372

60

8,201

Total loans
$
1,946,391

$
1,258,869

$
65,763

$
13,907

$
1,344,044

$
96,165

$
5,814

$
4,730,953

~~F-41~~

~~KEARNY FINANCIAL CORP. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

~~Note 8 – Loan Quality and the Allowance for Loan Losses (continued)~~

~~The following tables present information relating to the Company’s nonperforming and impaired loans at June 30, 2020 and 2019. Loans reported as 90 days and over past due and accruing~~activity in the ~~table immediately below are also reported~~ACL on off balance sheet commitments recorded in ~~the preceding contractual payment status table under the heading 90 days and over past due.~~

Performance Status of Loans Receivable

At June 30, 2020

Multi-Family Mortgage

Non-
Residential
Mortgage

Commercial
Business

Construction

Residential
Mortgage

Home
Equity
Loans

Other
Consumer

Total

(In Thousands)

Performing
$
2,056,606

$
936,917

$
138,196

$
20,961

$
1,264,663

$
82,078

$
3,986

$
4,503,407

Nonperforming:

90 days and over past due accruing

-

-

-

-

-

-

5

5

Nonaccrual

2,962

23,936

592

-

8,359

842

-

36,691

Total nonperforming

2,962

23,936

592

-

8,359

842

5

36,696

Total loans
$
2,059,568

$
960,853

$
138,788

$
20,961

$
1,273,022

$
82,920

$
3,991

$
4,540,103

Performance Status of Loans Receivable

At June 30, 2019

Multi-Family Mortgage

Non-
Residential
Mortgage

Commercial
Business

Construction

Residential
Mortgage

Home
Equity
Loans

Other
Consumer

Total

(In Thousands)

Performing
$
1,946,321

$
1,249,969

$
65,294

$
13,907

$
1,334,101

$
95,299

$
5,792

$
4,710,683

Nonperforming:

90 days and over past due accruing

-

-

-

-

-

-

22

22

Nonaccrual

70

8,900

469

-

9,943

866

-

20,248

Total nonperforming

70

8,900

469

-

9,943

866

22

20,270

Total loans
$
1,946,391

$
1,258,869

$
65,763

$
13,907

$
1,344,044

$
96,165

$
5,814

$
4,730,953

~~F-42~~

~~KEARNY FINANCIAL CORP. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

~~Note 8 – Loan Quality and the Allowance~~other non-interest expense for ~~Loan Losses (continued)~~

Impairment Status of Loans Receivable

At or Year Ended June 30, 2020

Multi-Family Mortgage

Non-
Residential
Mortgage

Commercial
Business

Construction

Residential
Mortgage

Home
Equity
Loans

Other
Consumer

Total

(In Thousands)

Carrying value of impaired loans:

Non-impaired loans
$
2,056,606

$
936,805

$
132,999

$
20,961

$
1,262,256

$
81,363

$
3,991

$
4,494,981

Impaired loans:

Impaired loans with no allowance
  for impairment

2,962

22,516

5,622

10,659

1,557

-

43,316

Impaired loans with allowance
  for impairment:

Recorded investment

-

1,532

167

-

107

-

-

1,806

Allowance for impairment

-

(41
)

(47
)

-

(1
)

-

-

(89
)
Balance of impaired loans net
  of allowance for impairment

-

1,491

120

-

106

-

-

1,717

Total impaired loans, excluding
  allowance for impairment:

2,962

24,048

5,789

-

10,766

1,557

-

45,122

Total loans
$
2,059,568

$
960,853

$
138,788

$
20,961

$
1,273,022

$
82,920

$
3,991

$
4,540,103

Unpaid principal balance
  of impaired loans:

Total impaired loans
$
3,544

$
25,898

$
8,778

$
73

$
12,908

$
1,950

$
-

$
53,151

For the year ended
  June 30, 2020:

Average balance of impaired loans
$
2,334

$
13,450

$
3,934

$
-

$
10,761

$
1,568

$
-

$
32,047

Interest earned on impaired loans
$
28

$
2

$
273

$
-

$
122

$
34

$
-

$
459

~~F-43~~

~~KEARNY FINANCIAL CORP. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

~~Note 8 – Loan Quality and the Allowance for Loan Losses (continued)~~

Impairment Status of Loans Receivable

At June 30, 2019

Multi-Family Mortgage

Non-
Residential
Mortgage

Commercial
Business

Construction

Residential
Mortgage

Home
Equity
Loans

Other
Consumer

Total

(In Thousands)

Carrying value of impaired loans:

Non-impaired loans
$
1,946,321

$
1,249,969

$
64,308

$
13,907

$
1,331,415

$
94,634

$
5,814

$
4,706,368

Impaired loans:

Impaired loans with no allowance
  for impairment

70

8,900

1,455

-

12,266

1,531

-

24,222

Impaired loans with allowance
  for impairment:

Recorded investment

-

-

-

-

363

-

-

363

Allowance for impairment

-

-

-

-

(31
)

-

-

(31
)
Balance of impaired loans net
  of allowance for impairment

-

-

-

-

332

-

-

332

Total impaired loans, excluding
  allowance for impairment:

70

8,900

1,455

-

12,629

1,531

-

24,585

Total loans
$
1,946,391

$
1,258,869

$
65,763

$
13,907

$
1,344,044

$
96,165

$
5,814

$
4,730,953

Unpaid principal balance
  of impaired loans:

Total impaired loans
$
779

$
10,200

$
3,987

$
73

$
14,985

$
1,924

$
-

$
31,948

For the year ended
  June 30, 2019:

Average balance of impaired loans
$
91

$
8,242

$
2,212

$
-

$
12,883

$
1,547

$
-

$
24,975

Interest earned on impaired loans
$
-

$
-

$
67

$
-

$
129

$
34

$
-

$
230

Impairment Status of Loans Receivable

Year Ended June 30, 2018

Multi-Family Mortgage

Non-
Residential
Mortgage

Commercial
Business

Construction

Residential
Mortgage

Home
Equity
Loans

Other
Consumer

Total

(In Thousands)

For the year ended
June 30, 2018:

Average balance of impaired loans
$
136

$
6,484

$
2,690

$
106

$
9,465

$
1,667

$
-

$
20,548

Interest earned on impaired loans
$
-

$
5

$
44

$
-

$
131

$
32

$
-

$
212

~~F-44~~

~~KEARNY FINANCIAL CORP. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

~~Note 8 – Loan Quality and the Allowance for Loan Losses (continued)~~

~~The following tables present information regarding the restructuring of the Company’s troubled debts during~~ the years ended June 30, ~~2020, June 30, 2019~~2023, 2022 and ~~June 30, 2018 and any defaults~~2021:


	Year Ended June 30,
	2023		2022		2021
	(In Thousands)
Balance at beginning of the period	$	1,041	$	1,708	$	—
Impact of adopting Topic 326 (1)	—		—		536
(Reversal of) provision for credit losses	(300)		(667)		1,172
Balance at end of the period	$	741	$	1,041	$	1,708

(1)Adoption of ~~TDRs during that year that were restructured within 12 months of the date of default:~~

CECL accounting standard effective July 1, 2020.

Troubled Debt Restructurings of Loans Receivable

Year Ended June 30, 2020

Multi-Family Mortgage

Non-
Residential
Mortgage

Commercial
Business

Construction

Residential
Mortgage

Home
Equity
Loans

Other
Consumer

Total

(Dollars in Thousands)

Troubled debt restructuring activity
  for the year ended
  June 30, 2020:

Number of loans

1

1

5

-

5

1

-

13

Pre-modification outstanding
  recorded investment
$
3,062

$
521

$
4,349

$
-

$
1,285

$
82

$
-

$
9,299

Post-modification outstanding
  recorded investment

2,996

517

4,415

-

1,220

81

-

9,229

Reserves included in and charge offs
against the allowance for loan loss
recognized at modification

-

-

15

-

1

-

-

16

-

.

Troubled debt restructuring defaults
  for the year ended
  June 30, 2020:

Number of loans

-

-

-

-

-

-

-

-

Outstanding recorded investment
$
-

$
-

$
-

$
-

$
-

$
-

$
-

$
-

Troubled Debt Restructurings of Loans Receivable

Year Ended June 30, 2019

Multi-Family Mortgage

Non-
Residential
Mortgage

Commercial
Business

Construction

Residential
Mortgage

Home
Equity
Loans

Other
Consumer

Total

(Dollars in Thousands)

Troubled debt restructuring activity
  for the year ended
  June 30, 2019:

Number of loans

-

2

6

-

8

1

-

17

Pre-modification outstanding
  recorded investment
$
-

$
3,329

$
1,468

$
-

$
1,523

$
109

$
-

$
6,429

Post-modification outstanding
  recorded investment

-

3,329

1,488

-

1,576

123

-

6,516

Reserves included in and charge offs
against the allowance for loan loss
recognized at modification

-

2

-

-

2

-

-

4

Troubled debt restructuring defaults
  for the year ended
  June 30, 2019:

Number of loans

-

-

-

-

-

-

-

-

Outstanding recorded investment
$
-

$
-

$
-

$
-

$
-

$
-

$
-

$
-

~~F-45~~

~~KEARNY FINANCIAL CORP. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

Note ~~8 – Loan Quality and the Allowance for Loan Losses (continued)~~

Troubled Debt Restructurings of Loans Receivable

Year Ended June 30, 2018

Multi-Family Mortgage

Non-
Residential
Mortgage

Commercial
Business

Construction

Residential
Mortgage

Home
Equity
Loans

Other
Consumer

Total

(Dollars in Thousands)

Troubled debt restructuring activity
  for the year ended
  June 30, 2018:

Number of loans

-

2

-

-

6

2

-

10

Pre-modification outstanding
  recorded investment
$
-

$
315

$
-

$
-

$
1,635

$
90

$
-

$
2,040

Post-modification outstanding
  recorded investment

-

330

-

-

1,981

88

-

2,399

Reserves included in and charge offs
against the allowance for loan loss
recognized at modification

-

7

-

-

145

2

-

154

Troubled debt restructuring defaults
  for the year ended
  June 30, 2018:

Number of loans

-

-

-

-

-

-

-

-

Outstanding recorded investment
$
-

$
-

$
-

$
-

$
-

$
-

$
-

$
-

~~The manner in which the terms of a loan are modified through a troubled debt restructuring generally includes one or more of the following changes to the loan’s repayment terms:~~

•

~~Interest Rate Reduction: Temporary or permanent reduction of the interest rate charged against the outstanding balance of the loan.~~

•

~~Capitalization of Prior Past Dues: Capitalization of prior amounts due to the outstanding balance of the loan.~~

•

~~Extension of Maturity or Balloon Date: Extending the term of the loan past its original balloon or maturity date.~~

•

~~Deferral of Principal Payments: Temporary deferral of the principal portion of a loan payment.~~

•

~~Payment Recalculation and Re-amortization: Recalculation of the recurring payment obligation and resulting loan amortization/repayment schedule based on the loan’s modified terms.~~

~~F-46~~

~~KEARNY FINANCIAL CORP. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

~~Note 8 – Loan Quality and the Allowance for Loan Losses (continued)~~

In March 2020, various regulatory agencies, including the Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corporation issued an interagency statement on loan modifications and reporting for financial institutions working with customers affected by COVID-19. The interagency statement was effective immediately and impacted accounting for loan modifications. The agencies confirmed with the staff of the FASB that short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief, are not to be considered TDRs. This includes short-term (e.g., three to six months), modifications such as payment deferrals, fee waivers, extension of repayment terms, or other delays in payment that are insignificant. Provisions of the CARES Act largely mirrored the provisions of the interagency statement, providing that modified loans were not to be considered TDRs if they were performing at December 31, 2019 and other consideration set forth in the interagency statements were met. Borrowers considered current are those that are less than 30 days past due on their contractual payments at the time a modification program is implemented or at December 31, 2019. Through June 30, 2020, the Company had modified a total of 711 non-TDR loans with an aggregate principal balance of $781.3 million.

~~The following table sets forth the composition of these loans by loan segments as of June 30, 2020:~~

~~F-47~~

~~KEARNY FINANCIAL CORP. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

~~Note 9~~7 – Leases

The Company ~~adopted ASU 2016-02, “Leases (Topic 842)~~”leases certain premises and all subsequent ASUs that modified Topic 842 on July 1, 2019. Topic 842 requires lessees to recognize a lease liability and a right-of-use asset, measured at the present value of the future minimum lease payments, at the lease commencement date. At the time of adoption,equipment under operating lease right-of-use assets of approximately $17.2 million and operating lease liabilities of approximately $17.8 million were recorded in other assets and other liabilities, respectively, on our Consolidated Statements of Financial Condition. The calculated amount of the right-of-use asset and lease liabilities are impacted by the length of the lease term and the discount rate used to calculate the present value of the minimum lease payments. The discount rate used in determining the lease liability for each individual lease was the Company’s incremental borrowing rate at the time of adoption of ASU 2016-02, on a collateralized basis, over a similar term.

leases. As of June 30, ~~2020,~~2023, the Company had right-of-use assets totaling $16.1 million and lease liabilities totaling $17.2 million, which were recorded in other assets and other liabilities, respectively, on the Statement of Financial Condition. By comparison at June 30, 2022, the Company had right-of-use assets of totaling $18.4 million and lease liabilities of totaling $19.2 million.

As of June 30, 2023, the weighted average remaining lease term for operating leases was ~~8.41~~6.56 years and the weighted average discount rate used in the measurement of operating lease liabilities was ~~2.49%~~2.70%.

~~The Company has elected to account for lease and non-lease components separately since such amounts are readily determinable under the Company’s lease contracts.~~ Total operating lease costs for the ~~year ended June 30, 2020 was $4.0 million.~~ ~~Net rent expense for~~ years ended June 30, ~~2019~~2023, 2022 and ~~June 30, 2018 prior to the adoption of ASU 2016-02~~2021 was ~~$3.2~~$3.7 million, $3.7 million and ~~$2.3~~$3.8 million, respectively.

There were 0no sale and leaseback transactions, leveraged leases or lease transactions with related parties during the year ended June 30, ~~2020.~~2023. At June 30, ~~2020,~~2023, the Company had 0no leases that had not yet commenced.

A maturity analysis of operating lease liabilities and reconciliation of the undiscounted cash flows to the total operating lease liability at June 30, ~~2020~~2023 and 2022 is as follows:


	June 30,				June 30,
	2020				2023		2022
	(In Thousands)				(In Thousands)
Less than one year	$	3,212		Less than one year	$	3,445	$	3,614
After one year but within two years		3,004		After one year but within two years	3,183		3,187
After two years but within three years		2,405		After two years but within three years	3,071		2,905
After three years but within four years		1,739		After three years but within four years	2,963		2,817
After four years but within five years		1,509		After four years but within five years	1,941		2,707
Greater than five years		7,373		Greater than five years	4,305		5,956
Total undiscounted cash flows		19,242		Total undiscounted cash flows	18,908		21,186
Less: discount on cash flows		(2,115	)	Less: discount on cash flows	(1,687)		(2,001)
Total lease liability	$	17,127		Total lease liability	$	17,221	$	19,185

~~F-48~~

F-41

Table of Contents

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 108 – Premises and Equipment


	June 30,					June 30,
	2020		2019			2023		2022
	(In Thousands)					(In Thousands)
Land	$	12,376	$	13,118	Land	$	11,773	$	12,192
Buildings and improvements		46,219		46,802	Buildings and improvements	45,886		48,156
Leasehold improvements		10,234		7,852	Leasehold improvements	12,029		11,336
Furnishings and equipment		24,719		22,985	Furnishings and equipment	29,720		29,431
Construction in progress		4,174		4,690	Construction in progress	71		426
		97,722		95,447		99,479		101,541
Less accumulated depreciation and amortization		40,333		38,593	Less accumulated depreciation and amortization	51,170		48,260
Total premises and equipment	$	57,389	$	56,854	Total premises and equipment	$	48,309	$	53,281

Depreciation expense on premises and equipment for the fiscal years ended June 30, ~~2020, 2019~~2023, 2022 and ~~2018~~2021 totaled ~~$4.6~~$5.7 million, ~~$4.3~~$6.0 million and ~~3.2~~$5.9 million, respectively.

Note 119 – Goodwill and Other Intangible Assets

	Goodwill		Core Deposit Intangibles
	(In Thousands)						Goodwill		Core Deposit Intangibles
Balance at June 30, 2017	$	108,591	$	292
Acquisition of Clifton Bancorp Inc.		102,304		6,367
							(In Thousands)
Balance at June 30, 2020						Balance at June 30, 2020	$	210,895	$	3,995
Acquisition of MSB Financial Corp.						Acquisition of MSB Financial Corp.	—		690
Amortization		-		(364	)	Amortization	—		(980)
Balance at June 30, 2018		210,895		6,295
Balance at June 30, 2021						Balance at June 30, 2021	210,895		3,705
Amortization		-		(1,135	)	Amortization	—		(685)
Balance at June 30, 2019		210,895		5,160
Balance at June 30, 2022						Balance at June 30, 2022	210,895		3,020
Amortization		-		(1,165	)	Amortization	—		(563)
Balance at June 30, 2020	$	210,895	$	3,995
Balance at June 30, 2023						Balance at June 30, 2023	$	210,895	$	2,457

Scheduled amortization of core deposit intangibles for each of the next five years and thereafter is as follows:


Year Ending June 30,	Year Ending June 30,	Core Deposit Intangible Amortization		Year Ending June 30,	Core Deposit Intangible Amortization
		(In Thousands)			(In Thousands)
	2021	$	885
	2022		595
	2023		484
	2024		454
	2025		428
2024				2024	$	526
2025				2025	495
2026				2026	467
2027				2027	441
2028				2028	353
Thereafter	Thereafter		1,149	Thereafter	175

~~F-49~~

F-42

Table of Contents

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 1210 – Deposits

Deposits at June 30, 2023 and 2022 are summarized as follows:


	June 30,											June 30,
	2020					2019						2023				2022
	Balance		Weighted Average Interest Rate			Balance		Weighted Average Interest Rate				Balance		Weighted Average Interest Rate		Balance		Weighted Average Interest Rate
	(Dollars in Thousands)											(Dollars in Thousands)
Non-interest-bearing demand	$	419,138		0.00	%	$	309,063		0.00	%	Non-interest-bearing demand	$	609,999	0.00	%	$	653,899	0.00	%
Interest-bearing demand		1,264,151		0.54			843,432		0.94		Interest-bearing demand	2,252,912		2.43		2,265,597		0.56
Savings		906,597		0.83			790,658		0.73		Savings	748,721		0.48		1,053,198		0.17
Certificates of deposits		1,840,396		1.79			2,204,457		2.16		Certificates of deposits	2,017,551		3.02		1,889,562		0.80
Total deposits	$	4,430,282		1.07	%	$	4,147,610		1.48	%	Total deposits	$	5,629,183	2.12	%	$	5,862,256	0.50	%

Brokered deposits at June 30, 2023 and 2022 are summarized as follows:


	June 30,											June 30,
	2020					2019						2023				2022
	Balance		Weighted Average Interest Rate			Balance		Weighted Average Interest Rate				Balance		Weighted Average Interest Rate		Balance		Weighted Average Interest Rate
	(Dollars in Thousands)											(Dollars in Thousands)
Certificates of deposits	$	31,379		2.16	%	$	235,805		2.42	%	Certificates of deposits	$	635,314	4.28	%	$	761,862	1.14	%
Total brokered deposits	$	31,379		2.16	%	$	235,805		2.42	%	Total brokered deposits	$	635,314	4.28	%	$	761,862	1.14	%

A summary of certificates of deposit by maturity at June 30, 2023 follows:

June 30,

2020

(In Thousands)

One year or less

$
1,515,042

After one year to two years

170,914

After two years to three years

84,803

After three years to four years

26,519

After four years to five years

37,129

After five years

5,989

Total certificates of deposit

$
1,840,396


	June 30,
	2023
	(In Thousands)
One year or less	$	1,896,132
After one year to two years	71,317
After two years to three years	23,155
After three years to four years	13,775
After four years to five years	7,590
After five years	5,582
Total certificates of deposit	$	2,017,551

Certificates of deposit with balances of $250,000 or more at June 30, ~~2020~~2023 and ~~2019,~~2022, totaled approximately ~~$297.0~~$883.7 million and ~~$521.8~~$897.4 million, respectively. The Bank’s deposits are insurable to applicable limits by the ~~Federal Deposit Insurance Corporation.~~

~~F-50~~

FDIC.

F-43

Table of Contents

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 1311 – Borrowings

Borrowings at June 30, 2023 and 2022 consisted of the following:


	June 30, 2023		June 30, 2022
	(In Thousands)
FHLB advances	$	1,281,812	$	651,337
Overnight borrowings(1)	225,000		250,000
Total borrowings	$	1,506,812	$	901,337

(1)At June 30, 2023, represented $125.0 million of FHLB overnight line of credit borrowings and $100.0 million of unsecured overnight borrowings from other financial institutions. At June 30, 2022, represented FHLB overnight line of credit borrowings.

Fixed-rate advances from FHLB of New York mature as follows:


	June 30, 2020						June 30, 2019							June 30, 2023				June 30, 2022
	Balance			Weighted Average Interest Rate			Balance			Weighted Average Interest Rate				Balance		Weighted Average Interest Rate		Balance		Weighted Average Interest Rate
	(Dollars in Thousands)													(Dollars in Thousands)
By remaining period to maturity:													By remaining period to maturity:
Less than one year	$	865,000			0.45	%	$	873,400			2.49	%	Less than one year	$	972,500	5.36	%	$	520,000	2.04	%
One to two years		27,000			2.85			64,046			1.87		One to two years	103,500		2.68		22,500		2.63
Two to three years		145,000			3.04			62,700			2.46		Two to three years	6,500		2.82		103,500		2.68
Three to four years		22,500			2.63			155,000			3.00		Three to four years	—		—		6,500		2.82
Four to five years		103,500			2.68			22,500			2.63		Four to five years	200,000		3.98		—		—
Greater than five years		6,500			2.82			110,000			2.69		Greater than five years	—		—		—		—
Total advances		1,169,500			1.08	%		1,287,646			2.54	%	Total advances	1,282,500		4.92	%	652,500		2.17	%
Unamortized fair value adjustments		(2,071	)					(4,435	)				Unamortized fair value adjustments	(688)				(1,163)
Total advances, net of fair value adjustments	$	1,167,429					$	1,283,211					Total advances, net of fair value adjustments	$	1,281,812			$	651,337

At June 30, ~~2020,~~2023, FHLB advances and overnight line of credit borrowings were collateralized by the FHLB capital stock owned by the Bank and mortgage loans with carrying values totaling approximately $4.60 billion. At June 30, 2022, FHLB advances and overnight line of credit borrowings were collateralized by the FHLB capital stock owned by the Bank and mortgage loans and securities with carrying values totaling approximately ~~$3.21~~$3.58 billion and ~~$155.3~~$178.0 million, respectively. At June 30, 2019, FHLB advances were collateralized by the FHLB capital stock owned by the Bank and mortgage loans and securities with carrying values totaling approximately $3.04 billion and $160.8 million, respectively.

~~Borrowings at June 30, 2020 and 2019 also included overnight borrowings in the form~~

F-44

Table of depositor sweep accounts totaling $5.7 million and $8.8 million, respectively. Depositor sweep accounts are short term borrowings representing funds that are withdrawn from a customer’s noninterest-bearing deposit account and invested in an uninsured overnight investment account that is collateralized by specified investment securities owned by the Bank. Borrowings at June 30, 2019 also included other overnight borrowings totaling $30.0 million, while there were 0 such borrowings at June 30, 2020.

~~F-51~~

Contents

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 1412 – Derivative Instruments and Hedging Activities

Risk Management Objective of Using Derivatives

The Company uses various financial instruments, including derivatives, to manage its exposure to interest rate risk. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to specific wholesale funding ~~positions.~~

positions and assets.

Fair Values of Derivative Instruments on the Statement of Financial Condition

The ~~table~~tables below ~~presents~~present the fair value of the Company’s derivative financial instruments as well as their classification on the Statement of Financial Condition as of June 30, ~~2020~~2023 and ~~June 30, 2019:~~

2022:

June 30, 2020

Asset Derivatives

Liability Derivatives

Location

Fair Value

Location

Fair Value

(In Thousands)

Derivatives designated as hedging
instruments:

Interest rate contracts
Other assets

$
235

Other liabilities

$
18,177

Total

$
235

$
18,177

June 30, 2023

Asset Derivatives

Liability Derivatives

Location

Fair Value

Location

Fair Value

(In Thousands)

Derivatives designated as hedging instruments:

Interest rate contracts

Other assets

71,624

Other liabilities

—

Total

71,624

—

June 30, 2019

Asset Derivatives

Liability Derivatives

Location

Fair Value

Location

Fair Value

(In Thousands)

Derivatives designated as hedging
instruments:

Interest rate contracts
Other assets

$
3,856

Other liabilities

$
140

Total

$
3,856

$
140

June 30, 2022

Asset Derivatives

Liability Derivatives

Location

Fair Value

Location

Fair Value

(In Thousands)

Derivatives designated as hedging instruments:

Interest rate contracts

Other assets

41,223

Other liabilities

—

Total

41,223

—

Cash Flow Hedges of Interest Rate Risk

The ~~Company’s objectives in using~~Company uses derivatives ~~are primarily~~ to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company has entered into interest rate swaps, interest rate caps and ~~caps~~an interest rate floor as part of its interest rate risk management strategy. These interest rate products are designated as cash flow hedges. As of June 30, ~~2020,~~2023, the Company had a total of 1613 interest rate swaps and caps with a total notional amount of ~~$1.32~~$1.45 billion hedging specific wholesale funding ~~positions.~~

positions and one interest rate floor with a notional amount of $100.0 million hedging floating-rate available for sale securities.

For derivatives designated as cash flow hedges, the gain or loss on the derivatives is recorded in other comprehensive income (loss), net of tax, and subsequently reclassified into interest expense in the same period during which the hedged transaction affects earnings.

~~Amounts~~

For cash flow hedges on the Company's wholesale funding positions, amounts reported in accumulated other comprehensive income (loss) related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s hedged variable rate wholesale funding positions. During the year ended June 30, ~~2020,~~2023, the Company ~~had $1.9~~reclassified $20.4 million ~~of reclassifications to~~as a reduction in interest expense. During the next 12 months, the Company estimates that ~~$8.1~~$33.8 millionwill be reclassified as ~~an increase~~a reduction in interest expense.

~~F-52~~

For cash flow hedges on the Company’s assets, amounts reported in accumulated other comprehensive income (loss) related to derivatives will be reclassified to interest income as interest payments are received on the Company’s hedged variable rate assets. During the year ended June 30, 2023, the Company did not reclassify any amount to interest income. During the next twelve months, the Company estimates that $200,000 will be reclassified as a reduction in interest income.

F-45

Table of Contents

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 1412 – Derivative Instruments and Hedging Activities (continued)

The table below presents the pre-tax effects of the Company’s derivative instruments designated as cash flow hedges on the Consolidated Statements of Income for the years ended June 30, 2023, 2022 and 2021:


	Year Ended June 30,
	2023		2022		2021
	(In Thousands)
Amount of gain recognized in other comprehensive income	$	39,002	$	35,844	$	10,825
Amount of gain (loss) reclassified from accumulated other comprehensive income to interest expense	20,393		(4,273)		(8,281)

Fair Value Hedges of Interest Rate Risk

The Company is exposed to changes in the fair value of certain of its fixed-rate assets due to changes in benchmark interest rates. The Company uses interest rate swaps to manage its exposure to changes in fair value on these instruments attributable to changes in the designated benchmark interest rate. Interest rate swaps designated as fair value hedges involve the payment of fixed-rate amounts to a counterparty in exchange for the Company receiving variable-rate payments over the life of the agreements without the exchange of the underlying notional amount. Such derivatives are used to hedge the changes in fair value of certain of its pools of fixed rate assets. As of June 30, ~~2020,~~2023, the Company had five interest rate swaps with a notional amount of $675.0 million hedging fixed-rate residential mortgage loans.

For derivatives designated and that qualify as fair value hedges, the gain or loss on the derivatives as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in interest income.

The table below presents the effects of the Company’s derivative instruments designated as fair value hedges on the Consolidated Statements of Income for the year ended June 30, ~~2019 and~~2023. There were no fair value hedges for the years ended June 30, ~~2018:~~

2022 and 2021:


	Year Ended June 30,
	2023
	(In Thousands)
Loss on hedged items recorded in interest income on loans	$	(11,437)
Gain on hedges recorded in interest income on loans	14,563

As of June 30, 2023, the following amounts were recorded on the Statement of Financial Condition related to cumulative basis adjustment for fair value hedges. There were no fair value hedges at June 30, 2022:


	June 30, 2023
Loans receivable:
Carrying amount of the hedged assets	$	663,563
Fair value hedging adjustment included in the carrying amount of the hedged assets	(11,437)

Year Ended June 30, 2020

Amount of Gain
(Loss) Recognized
in OCI on
Derivatives

Location of Gain
(Loss) Reclassified
from Accumulated
OCI into Income

Amount of Gain
(Loss) Reclassified
from Accumulated
OCI into Income

(In Thousands)

Derivatives in cash flow
hedging relationships:

Interest rate contracts
$
(21,264
)

Interest expense

$
1,870

Total
$
(21,264
)

$
1,870

(1)This amount includes the amortized cost basis of the closed portfolios of loans receivable used to designate hedging relationships in which the hedged item is the stated amount of assets in the closed portfolios anticipated to be outstanding for the designated hedge period. At June 30, 2023, the amortized cost basis of the closed portfolios used in these hedging relationships was $1.10 billion.

Year Ended June 30, 2019

Amount of Gain
(Loss) Recognized
in OCI on
Derivatives

Location of Gain
(Loss) Reclassified
from Accumulated
OCI into Income

Amount of Gain
(Loss) Reclassified
from Accumulated
OCI into Income

(In Thousands)

Derivatives in cash flow
hedging relationships:

Interest rate contracts
$
(21,409
)

Interest expense

$
6,753

Total
$
(21,409
)

$
6,753

F-46

Year Ended June 30, 2018

Amount of Gain
(Loss) Recognized
in OCI on
Derivatives

Location of Gain
(Loss) Reclassified
from Accumulated
OCI into Income

Amount of Gain
(Loss) Reclassified
from Accumulated
OCI into Income

(In Thousands)

Derivatives in cash flow
hedging relationships:

Interest rate contracts
$
22,734

Interest expense

$
(2,826
)
Total
$
22,734

$
(2,826
)

Table of Contents

~~F-53~~

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 1412 – Derivative Instruments and Hedging Activities (continued)

Offsetting Derivatives

The ~~table~~tables below ~~presents~~present a gross presentation, the effects of offsetting, and a net presentation of the Company’s derivatives in the Consolidated Statement of Financial Condition as of June 30, ~~2020~~2023 and ~~June 30, 2019,~~2022, respectively. The net amounts presented for derivative assets or liabilities can be reconciled to the tabular disclosure of fair value. The tabular disclosure of fair value provides the location that derivative assets and liabilities are presented on the Consolidated Statement of ~~Condition.~~

June 30, 2020

Gross Amounts Not Offset

Gross Amount Recognized

Gross Amounts Offset

Net Amounts Presented

Financial Instruments

Cash Collateral Received

Net Amount

(In Thousands)

Assets:

Interest rate contracts
$
592

$
(357
)

$
235

$
-

$
-

$
235

Total
$
592

$
(357
)

$
235

$
-

$
-

$
235

Gross Amounts Not Offset

Gross Amount Recognized

Gross Amounts Offset

Net Amounts Presented

Financial Instruments

Cash Collateral Posted

Net Amount

(In Thousands)

Liabilities:

Interest rate contracts
$
18,534

$
(357
)

$
18,177

$
-

$
(18,177
)

$
-

Total
$
18,534

$
(357
)

$
18,177

$
-

$
(18,177
)

$
-

June 30, 2019

Gross Amounts Not Offset

Gross Amount Recognized

Gross Amounts Offset

Net Amounts Presented

Financial Instruments

Cash Collateral Received

Net Amount

(In Thousands)

Assets:

Interest rate contracts
$
5,334

$
(1,478
)

$
3,856

$
-

$
-

$
3,856

Total
$
5,334

$
(1,478
)

$
3,856

$
-

$
-

$
3,856

Gross Amounts Not Offset

Gross Amount Recognized

Gross Amounts Offset

Net Amounts Presented

Financial Instruments

Cash Collateral Posted

Net Amount

(In Thousands)

Liabilities:

Interest rate contracts
$
1,618

$
(1,478
)

$
140

$
-

$
-

$
140

Total
$
1,618

$
(1,478
)

$
140

$
-

$
-

$
140

~~F-54~~

~~KEARNY FINANCIAL CORP. AND SUBSIDIARIES~~

~~Notes to Consolidated~~ Financial ~~Statements~~

~~Note 14 – Derivative Instruments and Hedging Activities (continued)~~

~~Credit-risk-related~~Condition.


	June 30, 2023
							Gross Amounts Not Offset
	Gross Amount Recognized		Gross Amounts Offset		Net Amounts Presented		Financial Instruments		Cash Collateral Received (Posted)		Net Amount
	(In Thousands)
Assets:
Interest rate contracts	$	72,418	$	(794)	$	71,624	$	—	$	—	$	71,624
Total	$	72,418	$	(794)	$	71,624	$	—	$	—	$	71,624




Liabilities:
Interest rate contracts	$	794	$	(794)	$	—	$	—	$	—	$	—
Total	$	794	$	(794)	$	—	$	—	$	—	$	—


	June 30, 2022
							Gross Amounts Not Offset
	Gross Amount Recognized		Gross Amounts Offset		Net Amounts Presented		Financial Instruments		Cash Collateral Received (Posted)		Net Amount
	(In Thousands)
Assets:
Interest rate contracts	$	41,223	$	—	$	41,223	$	—	$	—	$	41,223
Total	$	41,223	$	—	$	41,223	$	—	$	—	$	41,223

Credit Risk-Related Contingent Features

The Company has agreements with each of its derivative counterparties that contain a provision where if the Company defaults on any of its indebtedness, then the Company could also be declared in default on its derivative obligations and could be required to terminate its derivative positions with the counterparty. The Company also has agreements with its derivative counterparties that contain a provision where if the Company fails to maintain its status as a well-capitalized institution, then the Company could be required to terminate its derivative positions with the counterparty. As of June 30, ~~2020,~~2023, none of the ~~termination value of~~Company’s derivatives were in a net liability ~~position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to those agreements was $18.3 million.~~

position.

As required under the enforceable master netting arrangement with its derivatives counterparties, at June 30, ~~2020~~2023 and June 30, 2022, the Company ~~posted financial collateral of $18.2 million that~~ was not ~~included as an offsetting amount. By comparison, at June 30, 2019, the Company received~~required to post financial ~~collateral of $5.0 million that was not included as offsetting amount.~~

collateral.

In addition to the derivative instruments noted above, the Company’s pipeline of loans held for sale at June 30, ~~2020~~2023 and ~~June 30, 2019,~~2022, included ~~$127.2~~$11.7 million and ~~$46.2~~$20.3 million, respectively, of ~~in-process~~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 within a predetermined timeframe after the sale commitment is established. The Company’s pipeline of loans held for salewhich are considered free-standing derivative instruments whose fair values are not material to our financial condition or results of operations.

F-47

Table of Contents

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 1513 – Benefit Plans

Components of Net Periodic Expense

The following table sets forth the aggregate net periodic benefit expense for the Bank’s Benefit Equalization Plan, Postretirement Welfare Plan, Directors’ Consultation and Retirement Plan, ~~and~~ Atlas Bank Retirement Income Plan and Supplemental Executive Retirement Plan:


										Affected Line Item in the Consolidated
	Years Ended June 30,									Statements of Income		Year Ended June 30,						Affected Line Item in the Consolidated Statements of Income
		2020			2019			2018				2023		2022		2021		Affected Line Item in the Consolidated Statements of Income
	(In Thousands)											(In Thousands)
Service cost	$	78		$	54		$	48		Salaries and employee benefits	Service cost	$	281	$	547	$	106	Salaries and employee benefits
Interest cost		326			378			373		Miscellaneous non-interest expense	Interest cost	369		279		262		Other expense
Amortization of unrecognized loss		19			43			45		Miscellaneous non-interest expense
(Accretion) amortization of unrecognized (gain) loss											(Accretion) amortization of unrecognized (gain) loss	(24)		80		83		Other expense
Expected return on assets		(112	)		(112	)		(120	)	Miscellaneous non-interest expense	Expected return on assets	(99)		(110)		(113)		Other expense
Net periodic benefit cost	$	311		$	363		$	346			Net periodic benefit cost	$	527	$	796	$	338

The other components of net periodic benefit cost are required to be presented in the Consolidated Statements of Income separately from the service cost component. The table above details the affected line items within the Consolidated Statements of Income related to the net periodic benefit costs for the periods noted.

~~F-55~~

~~KEARNY FINANCIAL CORP. AND SUBSIDIARIES~~

~~Notes~~

ESOP

In conjunction to ~~Consolidated Financial Statements~~

~~Note 15 – Benefit Plans (continued)~~

~~Employee Stock Ownership Plan~~

Inthe Company’s initial public stock offering in February 2005, the Bank established an ~~Employee Stock Ownership Plan (“ESOP”)~~ESOP for all eligible ~~employees who complete a twelve-month period of employment with the Bank. Eligible employees may enter the plan on January 1~~^st ~~or July 1~~^st ~~following the plan year they have attained the age of 21 and complete at least 1,000 hours of service in a plan year.~~employees. The ESOP ~~used $17,457,000 in~~purchased 2,409,764 shares of Company’s common stock with proceeds ~~from~~of a ~~term~~ loan ~~obtained~~ from the Company to ~~purchase 2,409,764 shares of Company common stock. Principal on~~ the ~~term loan was originally payable in equal installments through the maturity date of March 31, 2017~~ESOP. In connection with the ~~loan carrying an interest rate~~completion of ~~5.50%. The Bank made discretionary contributions~~the Company’s mutual to stock conversion in May 2015, the ESOP that provided the funding it needed to pay the scheduled principal and loan payments to the Company under the terms of the original ESOP loan agreement. Such discretionary contributions were typically reduced by the amount of dividends paid onpurchased an additional 3,612,500 shares of the Company’s common stock ~~held by~~at a price of $10.00 per share with the ~~ESOP.~~

~~In May 2015, the Bank augmented its ESOP by using $36,125,000 in~~ proceeds ~~from~~of a new ~~term~~ loan ~~obtained~~ from the Company to the ~~ESOP to purchase an additional 3,612,500 shares of~~ESOP. The Company ~~common stock. The proceeds from~~refinanced the ~~new term loan included an additional $3,788,000 to refinance the remaining~~ outstanding balance and accrued interest owed under the original ESOP term loan. The original principal balance of the Company’s consolidated term loan to the ESOP totaled $39,913,000 with equal quarterly installments of principal and interest ~~payable over 20 years at~~balance of $3.8 million and borrowed an ~~annual interest rate of 3.25%. As with~~additional $36.1 million to purchase the ~~original term loan, the Bank expects to make~~additional shares. The Company makes discretionary contributions to the ESOP equaling ~~the~~ principal and interest payments owed on the ESOP’s loan to the Company. ~~As above, such~~Such payments may be reduced by the amount of dividends paid on shares of the Company’s common stock held by the ESOP.

~~Shares purchased with the~~ The outstanding loan proceeds provide collateral for the term loan and are held in a suspense account for future allocations among participants. Contributions to the ESOP and shares released from the suspense account are to be allocated among the participants on the basis of compensation, as described by the ESOP, in the year of allocation.

principal balance at June 30, 2023 was $26.4 million.

ESOP shares pledged as collateral are initially recorded as unearned ESOP shares in the ~~consolidated statements~~Consolidated Statements of financial condition. On a monthly basis, 16,725 shares are committed to be released, compensation expense is recorded equal to the number of shares committed to be released times the monthly average market price of the shares, and the committed shares become outstanding for basic net income per common share computations.Financial Condition. ESOP compensation expense was approximately ~~$2,354,000, $2,464,000~~$1.9 million, $2.5 million and ~~$2,641,000~~$2.1 million for the years ended June 30, ~~2020, 2019~~2023, 2022 and ~~2018, respectively.~~

2021, respectively, representing the fair value of shares allocated or committed to be released during the year.

At June 30, ~~2020~~2023 and ~~2019,~~2022, the ESOP shares were as follows:

June 30,

2020

2019

(In Thousands)

Allocated shares

1,924

1,862

Total shares distributed to employees

1,038

899

Shares committed to be released

100

100

Unearned shares

2,960

3,161

Total ESOP shares

6,022

6,022

Fair value of unearned ESOP shares
$
24,213

$
42,010


	June 30,
	2023		2022
	(In Thousands)
Shares purchased by ESOP	6,022		6,022
Less: Shares allocated	3,564		3,363
Less: Shares committed to be released	100		100
Remaining unearned ESOP shares	2,358		2,559

Fair value of unearned ESOP shares	$	16,624	$	28,430

F-48

Table of Contents

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 13 – Benefit Plans (continued)

Employee Stock Ownership Plan Benefit Equalization Plan ("(“ESOP ~~BEP"~~BEP”)

The Bank has a non-qualified plan to compensate its executive officers who participate in the ~~Bank's~~Bank’s ESOP for certain benefits lost under such plan by reason of benefit limitations imposed by the Internal Revenue Code (“IRC”). The ESOP BEP expense was approximately ~~$24,000, $47,000~~$17,000, $40,000 and ~~$24,000~~$37,000 for the years ended June 30, ~~2020, 2019~~2023, 2022 and ~~2018,~~2021, respectively. The liability totaled approximately ~~$20,000~~$16,000 and ~~$19,500~~$20,000 at June 30, ~~2020~~2023 and ~~2019,~~2022, respectively.

~~F-56~~

~~KEARNY FINANCIAL CORP. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

~~Note 15 – Benefit Plans (continued)~~

Employees’ Savings and Profit Sharing Plan

The Bank sponsors the ~~Employees'~~Employees’ Savings and Profit Sharing Plan and Trust (the “Plan”), pursuant to Section 401(k) of the Internal Revenue Code, for all eligible employees. Employees may elect to contribute up to 75% of their compensation subject to the limitations imposed by the Internal Revenue Code. The Bank will contribute a matching contribution up to 3.5% of an eligible employee’s salary deferral contribution, provided the eligible employee has contributed 6%. The Plan expense amounted to approximately ~~$1,147,000, $1,047,000~~$1.4 million, $1.4 million and ~~$872,000~~$1.3 million for the years ended June 30, ~~2020, 2019~~2023, 2022 and ~~2018,~~2021, respectively.

Multi-Employer Retirement Plan

The Bank participates in the Pentegra Defined Benefit Plan for Financial Institutions (“The Pentegra DB Plan”), a tax-qualified defined-benefit pension plan. The Pentegra DB Plan’s Employer Identification Number is 13-5645888 and the Plan Number is 001. The Pentegra DB Plan operates as a multi-employer plan for accounting purposes and as a multiple-employer plan under the Employee Retirement Income Security Act of 1974 and the IRC. There are no collective bargaining agreements in place that require contributions to the Pentegra DB Plan.

The Pentegra DB Plan is a single plan under Internal Revenue Code Section 413(c) and, as a result, all of the assets stand behind all of the liabilities. Accordingly, under the Pentegra DB Plan contributions made by a participating employer may be used to provide benefits to participants of other participating employers.

The Pentegra DB Plan is non-contributory and covers all eligible employees. In April 2007, the Board of Directors of the Bank approved, effective July 1, 2007, freezing all future benefit accruals under the Pentegra DB Plan.

Funded status (market value of plan assets divided by funding target) of the Pentegra DB Plan based on valuation reports as of July 1, ~~2019~~2022 and ~~2018~~2021 was ~~104.08%~~103.17% and ~~107.73%~~113.78%, respectively. Total contributions, made to the Pentegra DB Plan, which include contributions from all participating employers and not just the Company, as reported on Form 5500, were ~~$138.3~~$142.4 million and ~~$164.6~~$248.6 million for the plan years ended June 30, ~~2019~~2022 and ~~June 30, 2018,~~2021, respectively. The Bank’s contributions to the Pentegra DB Plan were not more than 5% of the total contributions to the Pentegra DB Plan. During the years ended June 30, ~~2020, 2019~~2023, 2022 and ~~2018,~~2021, the total expense recorded for the Pentegra DB Plan was approximately ~~$340,000, $967,000~~$180,000, $372,000 and ~~$1,115,000,~~$329,000, respectively.

~~F-57~~

F-49

Table of Contents

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 1513 – Benefit Plans (continued)

Atlas Bank Retirement Income Plan (“ABRIP”)

Through the merger with Atlas Bank, the Company acquired a non-contributory defined benefit pension plan covering all eligible employees of Atlas Bank. Effective January 31, 2013, the ABRIP was frozen by Atlas Bank. All benefits for eligible participants accrued in the ABRIP to the freeze date have been retained. The benefits are based on years of service and employee’s compensation. The ABRIP is funded in conformity with funding requirements of applicable government regulations.

The following tables set forth the ABRIP’s funded status and net periodic benefit cost:


	June 30,							June 30,
		2020			2019			2023			2022
	(In Thousands)							(In Thousands)
Change in benefit obligation:							Change in benefit obligation:
Projected benefit obligation - beginning	$	2,553		$	2,716		Projected benefit obligation - beginning	$	1,816		$	2,149
Interest cost		77			108		Interest cost	78			62
Actuarial (gain) loss		(228	)		(58	)
Actuarial gain							Actuarial gain	(46)			(247)
Benefit payments		(117	)		(213	)	Benefit payments	(148)			(148)
Projected benefit obligation - ending	$	2,285		$	2,553		Projected benefit obligation - ending	$	1,700		$	1,816

Change in plan assets:							Change in plan assets:
Fair value of assets - beginning	$	3,223		$	3,440		Fair value of assets - beginning	$	2,907		$	3,220
Actual return on assets		193			(4	)	Actual return on assets	(42)			(165)
Benefit payments		(117	)		(213	)	Benefit payments	(148)			(148)
Fair value of assets - ending	$	3,299		$	3,223		Fair value of assets - ending	$	2,717		$	2,907

Reconciliation of funded status:							Reconciliation of funded status:
Projected benefit obligation	$	(2,285	)	$	(2,553	)	Projected benefit obligation	$	(1,700)		$	(1,816)
Fair value of assets		3,299			3,223		Fair value of assets	2,717			2,907
Funded status included in other assets	$	1,014		$	670		Funded status included in other assets	$	1,017		$	1,091

Accumulated benefit obligation	$	(2,285	)	$	(2,553	)	Accumulated benefit obligation	$	(1,700)		$	(1,816)

Valuation assumptions							Valuation assumptions
Discount rate		2.75	%		3.75	%	Discount rate	5.00		%	4.50		%
Salary increase rate	N/A			N/A			Salary increase rate	N/A			N/A

	Years Ended June 30,
		2020			2019			2018			Years Ended June 30,
	(In Thousands)										2023			2022			2021
Net periodic benefit cost/(credit):
											(In Thousands)
Net periodic benefit cost:										Net periodic benefit cost:
Interest cost	$	77		$	108		$	109		Interest cost	$	78		$	62		$	61
Expected return on assets		(112	)		(112	)		(120	)	Expected return on assets	(99)			(110)			(113)
Amortization of net loss		4			57			52		Amortization of net loss	28			21			22
Total benefit cost (credit)	$	(31	)	$	53		$	41
Total expense (benefit)										Total expense (benefit)	$	7		$	(27)		$	(30)

Valuation assumptions										Valuation assumptions
Discount rate		3.75	%		4.25	%		4.00	%	Discount rate	4.50		%	3.00		%	2.75		%
Long term rate of return on plan assets		3.50	%		3.50	%		3.50	%	Long term rate of return on plan assets	3.50		%	3.50		%	3.50		%

~~F-58~~

F-50

Table of Contents

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 1513 – Benefit Plans (continued)

The Bank does not expect to contribute to the ABRIP in the year ending June 30, ~~2021.~~

2024.

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:

Benefit Payments

(In Thousands)

Years ending June 30:

2021
$
144

2022

144

2023

142

2024

139

2025

140

2026-2030

666


	Benefit Payments
	(In Thousands)
Years ending June 30:
2024	$	146
2025	147
2026	148
2027	145
2028	140
2029-2033	637

At June 30, ~~2020~~2023 and ~~2019,~~2022, unrecognized net loss of ~~$523,000~~$475,000 and ~~$837,000,~~$475,000, respectively, was included in accumulated other comprehensive ~~income. For the fiscal year ending June 30, 2021, $22,000 of unrecognized net loss is expected to be recognized as a component of net periodic benefit cost.~~

income (loss).

The assets of the ABRIP are invested in a Guaranteed Deposit Fund (“GDF”) with Prudential Financial, Inc. The GDF is a group annuity fund invested in public and private-issue debt securities through various sub-accounts. The underlying assets are valued based on quoted prices for similar assets with similar terms and other observable market data and have no redemption restrictions. The investments in the plan were monitored to ensure that they complied with the investment policies set forth in the plan document. The plan’s assets were reviewed periodically by management, which included an analysis of the asset allocation and the performance of the GDF prepared by Prudential Financial, Inc.

The overall investment objective of the ABRIP is to ensure safety of principal and seek an attractive rate of return. The GDF utilizes a full spectrum of fixed income asset classes to provide the opportunity to maximize portfolio returns and diversification.

The fair ~~values~~value of the ABRIP’s assets at June 30, ~~2020~~2023 and ~~2019~~2022 by asset category (see Note 1918 for the definitions of levels), are as follows:

June 30, 2020

Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Total

(In Thousands)

Prudential Guaranteed Deposit Fund
$
-

$
3,299

$
-

$
3,299


	June 30, 2023
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
	(In Thousands)
Prudential Guaranteed Deposit Fund	$	—	$	2,717	$	—	$	2,717


	June 30, 2022
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
	(In Thousands)
Prudential Guaranteed Deposit Fund	$	—	$	2,907	$	—	$	2,907

~~F-59~~

F-51

Table of Contents

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 1513 – Benefit Plans (continued)

Benefit Equalization Plan (“BEP”)

The Bank has an unfunded non-qualified plan to compensate executive officers of the Bank who participate in the Bank’s qualified defined benefit plan for certain benefits lost under such plans by reason of benefit limitations imposed by Sections 415 and 401 of the IRC. There were approximately ~~$237,000, $235,000~~$244,000, $241,000 and ~~$233,000~~$239,000 in contributions made to and benefits paid under the BEP during each of the years ended June 30, ~~2020, 2019~~2023, 2022 and ~~2018,~~2021, respectively.

The following tables set forth the BEP’s funded status and components of net periodic benefit cost:


	June 30,							June 30,
		2020			2019			2023			2022
	(In Thousands)							(In Thousands)
Change in benefit obligation:							Change in benefit obligation:
Projected benefit obligation - beginning	$	3,105		$	3,053		Projected benefit obligation - beginning	$	2,592		$	2,999
Interest cost		112			125		Interest cost	111			86
Actuarial loss/(gain)		226			162
Actuarial gain							Actuarial gain	(34)			(252)
Benefit payments		(237	)		(235	)	Benefit payments	(244)			(241)
Projected benefit obligation - ending	$	3,206		$	3,105		Projected benefit obligation - ending	$	2,425		$	2,592

Change in plan assets:							Change in plan assets:
Fair value of assets - beginning	$	-		$	-		Fair value of assets - beginning	$	—		$	—
Contributions		237			235		Contributions	244			241
Benefit payments		(237	)		(235	)	Benefit payments	(244)			(241)
Fair value of assets - ending	$	-		$	-		Fair value of assets - ending	$	—		$	—

Reconciliation of funded status:							Reconciliation of funded status:
Accumulated benefit obligation	$	(3,206	)	$	(3,105	)	Accumulated benefit obligation	$	(2,425)		$	(2,592)

Projected benefit obligation	$	(3,206	)	$	(3,105	)	Projected benefit obligation	$	(2,425)		$	(2,592)
Fair value of assets		-			-		Fair value of assets	—			—
Funded status included in other liabilities	$	(3,206	)	$	(3,105	)	Funded status included in other liabilities	$	(2,425)		$	(2,592)

Valuation assumptions							Valuation assumptions
Discount rate		2.75	%		3.75	%	Discount rate	5.00		%	4.50		%
Salary increase rate	N/A			N/A			Salary increase rate	N/A			N/A


	Years Ended June 30,										Years Ended June 30,
		2020			2019			2018			2023			2022			2021
	(In Thousands)										(In Thousands)
Net periodic benefit cost:										Net periodic benefit cost:
Interest cost	$	112		$	125		$	124		Interest cost	$	111		$	86		$	85
Amortization of net actuarial loss		56			44			48		Amortization of net actuarial loss	46			71			75
Total expense	$	168		$	169		$	172		Total expense	$	157		$	157		$	160

Valuation assumptions										Valuation assumptions
Discount rate		3.75	%		4.25	%		4.00	%	Discount rate	4.50		%	3.00		%	2.75		%
Salary increase rate	N/A			N/A			N/A			Salary increase rate	N/A			N/A			N/A

~~F-60~~

~~KEARNY FINANCIAL CORP. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

~~Note 15 – Benefit Plans (continued)~~

It is estimated that contributions of approximately ~~$236,000~~$241,000 will be made during the year ending June 30, ~~2021.~~

2024.

F-52

Table of Contents

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 13 – Benefit Plans (continued)

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:

Benefit Payments

(In Thousands)

Years ending June 30:

2021
$
236

2022

234

2023

231

2024

228

2025

224

2026-2030

1,046


	Benefit Payments
	(In Thousands)
Years ending June 30:
2024	$	241
2025	237
2026	232
2027	227
2028	221
2029-2033	999

In April 2007, the Board of Directors of the Bank approved, effective July 1, 2007, freezing all future benefit accruals under the BEP related to the Bank’s defined benefit pension plan.

At June 30, ~~2020~~2023 and ~~2019,~~2022, unrecognized net loss of ~~$1,157,000~~$626,000 and ~~$987,000,~~$707,000, respectively, was included in accumulated other comprehensive ~~income. For the fiscal year ending June 30, 2021, $75,000 of unrecognized net loss is expected to be recognized as a component of net periodic benefit cost.~~

~~F-61~~

~~KEARNY FINANCIAL CORP. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

~~Note 15 – Benefit Plans (continued)~~

income (loss).

Postretirement Welfare Plan

The Bank has an unfunded postretirement group term life insurance plan covering all eligible employees. The benefits are based on age and years of service. During the years ended June 30, ~~2020, 2019~~2023, 2022 and ~~2018,~~2021, contributions and benefits paid totaled ~~$11,000, $6,000~~$13,000, $12,000 and ~~$7,000,~~$12,000, respectively.

The following tables set forth the accrued accumulated postretirement benefit obligation and the net periodic benefit cost:


	June 30,							June 30,
		2020			2019			2023			2022
	(In Thousands)							(In Thousands)
Change in benefit obligation:							Change in benefit obligation:
Projected benefit obligation - beginning	$	710		$	617		Projected benefit obligation - beginning	$	1,085		$	1,108
Service cost		78			54		Service cost	95			116
Interest cost		26			26		Interest cost	48			33
Actuarial loss/(gain)		188			19
Actuarial gain							Actuarial gain	(214)			(160)
Premiums/claims paid		(11	)		(6	)	Premiums/claims paid	(13)			(12)
Plan amendments							Plan amendments	35			—
Projected benefit obligation - ending	$	991		$	710		Projected benefit obligation - ending	$	1,036		$	1,085

Change in plan assets:							Change in plan assets:
Fair value of assets - beginning	$	-		$	-		Fair value of assets - beginning	$	—		$	—
Contributions		11			6		Contributions	13			12
Premiums/claims paid		(11	)		(6	)	Premiums/claims paid	(13)			(12)
Fair value of assets - ending	$	-		$	-		Fair value of assets - ending	$	—		$	—

Reconciliation of funded status:							Reconciliation of funded status:
Projected benefit obligation	$	(991	)	$	(710	)	Projected benefit obligation	$	(1,036)		$	(1,085)
Fair value of assets		-			-		Fair value of assets	—			—
Funded status included in other liabilities	$	(991	)	$	(710	)	Funded status included in other liabilities	$	(1,036)		$	(1,085)

Valuation assumptions							Valuation assumptions
Discount rate		2.75	%		3.75	%	Discount rate	5.00		%	4.50		%
Salary increase rate		3.25	%		3.25	%	Salary increase rate	3.25		%	3.25		%

Years Ended June 30,

2020

2019

2018

(In Thousands)

Net periodic benefit cost:

Service cost
$
78

$
54

$
48

Interest cost

26

26

23

Amortization of net actuarial gain

(41
)

(49
)

(55
)
Total expense (benefit)
$
63

$
31

$
16

Valuation assumptions

Discount rate

3.75
%

4.25
%

4.00
%
Salary increase rate

3.25
%

3.25
%

3.25
%

F-53

~~F-62~~

Table of Contents

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 1513 – Benefit Plans (continued)


	Years Ended June 30,
	2023			2022			2021
	(In Thousands)
Net periodic benefit cost:
Service cost	$	95		$	116		$	106
Interest cost	48			33			27
Amortization of net actuarial gain	(28)			(12)			(14)
Total expense	$	115		$	137		$	119

Valuation assumptions
Discount rate	4.50		%	3.00		%	2.75		%
Salary increase rate	3.25		%	3.25		%	3.25		%

It is estimated that contributions of approximately ~~$40,000~~$54,000 will be made during the year ending June 30, ~~2021.~~

2024.

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:

Benefit Payments

(In Thousands)

Years ending June 30:

2021
$
40

2022

47

2023

54

2024

63

2025

70

2026-2030

438


	Benefit Payments
	(In Thousands)
Years ending June 30:
2024	$	54
2025	62
2026	74
2027	82
2028	99
2029-2033	580

At June 30, ~~2020~~2023 and ~~2019,~~2022, unrecognized net gain of ~~$240,000~~$529,000 and ~~$468,000,~~$377,000, respectively, were included in accumulated other comprehensive ~~income. For the fiscal year ending June 30, 2021, $14,000~~income (loss).

F-54

Table of ~~unrecognized net gain is expected to be recognized as a component of net periodic benefit cost.~~

~~F-63~~

Contents

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 1513 – Benefit Plans (continued)

Directors’ Consultation and Retirement Plan (“DCRP”)

The Bank has an unfunded retirement plan for non-employee directors. The benefits are payable based on term of service as a director. ~~During each of the years ended June 30, 2020, 2019 and 2018, contributions and benefits paid totaled $60,000, $60,000 and $60,000, respectively.~~

~~The following table sets forth the DCRP’s funded status and components of net periodic cost:~~

June 30,

2020

2019

(In Thousands)

Change in benefit obligation:

Projected benefit obligation - beginning

$
2,975

$
2,843

Interest cost

110

119

Actuarial loss/(gain)

244

73

Benefit payments

(60
)

(60
)
Projected benefit obligation - ending

$
3,269

$
2,975

Change in plan assets:

Fair value of assets - beginning

$
-

$
-

Contributions

60

60

Benefit payments

(60
)

(60
)
Fair value of assets - ending

$
-

$
-

Reconciliation of funded status:

Accumulated benefit obligation

$
(3,269
)

$
(2,975
)

Projected benefit obligation

$
(3,269
)

$
(2,975
)
Fair value of assets

-

-

Funded status included in other liabilities

$
(3,269
)

$
(2,975
)

Valuation assumptions

Discount rate

2.75
%

3.75
%
Salary increase rate

N/A

N/A

Years Ended June 30,

2020

2019

2018

(In Thousands)

Net periodic benefit cost:

Service cost
$
-

$
-

$
-

Interest cost

110

119

118

Amortization of net actuarial gain

-

(9
)

-

Total expense (benefit)
$
110

$
110

$
118

Valuation assumptions

Discount rate

3.75
%

4.25
%

4.00
%
Salary increase rate
N/A

N/A

N/A

~~It is estimated that contributions of approximately $24,000 will be made during the year ending June 30, 2021.~~

~~F-64~~

~~KEARNY FINANCIAL CORP. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

~~Note 15 – Benefit Plans (continued)~~

~~The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:~~

Benefit Payments

(In Thousands)

Years ending June 30:

2021
$
24

2022

50

2023

108

2024

126

2025

162

2026-2030

1,136

In December 2015, the Board of Directors of the Bank approved freezing all future benefit accruals under the DCRP effective December 31, 2015.

During the years ended June 30, 2023, 2022 and 2021, contributions and benefits paid totaled $49,000, $49,000 and $69,000, respectively.

The following table sets forth the DCRP’s funded status and components of net periodic cost:


	June 30,
	2023			2022
	(In Thousands)
Change in benefit obligation:
Projected benefit obligation - beginning	$	2,646		$	3,116
Interest cost	117			92
Actuarial gain	(194)			(513)
Benefit payments	(49)			(49)
Projected benefit obligation - ending	$	2,520		$	2,646

Change in plan assets:
Fair value of assets - beginning	$	—		$	—
Contributions	49			49
Benefit payments	(49)			(49)
Fair value of assets - ending	$	—		$	—

Reconciliation of funded status:
Accumulated benefit obligation	$	(2,520)		$	(2,646)

Projected benefit obligation	$	(2,520)		$	(2,646)
Fair value of assets	—			—
Funded status included in other liabilities	$	(2,520)		$	(2,646)

Valuation assumptions
Discount rate	5.00		%	4.50		%
Salary increase rate	N/A			N/A


	Years Ended June 30,
	2023			2022			2021
	(In Thousands)
Net periodic benefit cost:
Interest cost	$	117		$	92		$	89
Amortization of net actuarial gain	(69)			—			—
Total expense	$	48		$	92		$	89

Valuation assumptions
Discount rate	4.50		%	3.00		%	2.75		%
Salary increase rate	N/A			N/A			N/A

F-55

Table of Contents

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 13 – Benefit Plans (continued)

It is estimated that contributions of approximately $72,000 will be made during the year ending June 30, 2024.

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:


	Benefit Payments
	(In Thousands)
Years ending June 30:
2024	$	72
2025	118
2026	138
2027	157
2028	176
2029-2033	1,301

At June 30, ~~2020~~2023 and ~~2019~~2022, unrecognized net gain of ~~$30,000~~$840,000 and ~~$273,000,~~$716,000, respectively, was included in accumulated other comprehensive ~~income. For~~income (loss).

Supplemental Executive Retirement Plan (“SERP”)

On June 16, 2021, the ~~fiscal year ending June 30, 2021, 0 unrecognized net gain or net loss~~Bank approved the SERP, effective as of July 1, 2021. The SERP is ~~expected~~a non-qualified deferred compensation plan which provides participants with a retirement benefit equal to ~~be recognized as a component~~the present value of an annual benefit of 50% of the participant’s highest annual base salary. In December 2022, the Board of Directors of the Bank approved freezing all future benefit accruals under the SERP effective December 31, 2022.

The following tables set forth the SERP’s funded status and net periodic benefit ~~cost.~~

~~F-65~~

cost:


	June 30,
	2023			2022
	(In Thousands)
Change in benefit obligation:
Projected benefit obligation - beginning	$	437		$	—
Service cost	185			431
Interest cost	11			6
Projected benefit obligation - ending	$	633		$	437

Reconciliation of funded status:
Projected benefit obligation	$	(633)		$	(437)
Fair value of assets	—			—
Funded status included in other liabilities	$	(633)		$	(437)

Valuation assumptions
Discount rate	3.00		%	3.00		%
Salary increase rate	N/A			4.00		%

F-56

Table of Contents

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 1513 – Benefit Plans (continued)


	Year Ended June 30,
	2023			2022
	(In Thousands)
Net periodic benefit cost:
Service cost	$	185		$	431
Interest cost	11			6
Total expense	$	196		$	437

Valuation assumptions
Discount rate	3.00		%	3.00		%
Salary increase rate	4.00		%	4.00		%

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:


	Benefit Payments
	(In Thousands)
Years ending June 30:
2024	$	—
2025	—
2026	—
2027	—
2028	—
2029-2033	633

Note 14 – Stock Based Compensation ~~Plans~~

Kearny Financial Corp. 2021 Equity Incentive Plan (“2021 Plan”)

At the Company’s ~~2016~~2021 Annual Meeting of ~~Stockholder’s~~Stockholders held on October ~~27, 2016,~~28, 2021, the stockholders approved the 2021 Plan which provides for the grant of stock options, restricted stock and restricted stock units (“RSUs”). The 2021 Plan authorized the issuance of up to 7,500,000 shares (the “Share Limit”); provided, however that the Share Limit is reduced, on a one-for-one-basis, for each share of common stock subject to a stock option grant, and on a three-for-one basis for each share of common stock issued pursuant to restricted stock awards or RSUs.

During the years ended June 30, 2023 and 2022, the Company granted 323,218 RSUs (comprised of 238,121 service-based RSUs and 85,097 performance-based RSUs) and 251,905 RSUs (comprised of 181,588 service-based RSUs and 70,317 performance-based RSUs), respectively. The service-based RSUs generally vest in three tranches over a period of 3.0 years and the performance-based RSUs will cliff vest upon the achievement of performance measures over a three-year period. The total number of performance-based RSUs that will vest, if any, will depend on whether and to what extent the performance measures are achieved. Common stock will be issued from authorized shares upon the vesting of the RSUs. At June 30, 2023, there were 5,825,421 shares remaining available for future grants of stock options, restricted stock or RSUs under the 2021 Plan, subject to the limitations noted above.

Kearny Financial Corp. 2016 Equity Incentive Plan (“2016 Plan”) ~~which provides for the grant of stock options and restricted stock awards. The 2016 Plan authorized up to 3,687,628 shares as stock option~~

No grants ~~and 1,523,696 shares as restricted stock awards.~~

~~At June 30, 2020, there~~ were ~~572,628 shares remaining available for future stock option grants and 53,706 shares remaining available for future restricted stock awards~~made under the 2016 Plan during the years ended June 30, 2023 and 2022. As of October 28, 2021, the 2016 Plan was frozen and the Company no longer makes grants under the 2016 Plan.

Stock options granted under the 2016 Plan vest in equal installments over a five-year service period. Stock options were granted at an exercise price equal to the fair value of the Company's common stock on the grant date based on the closing market price and have an expiration period of 10 years.

~~The fair value of~~ No stock options were granted ~~as part~~during the years ended June 30, 2023, 2022 and 2021.

F-57

Table of ~~the 2016 Plan was estimated utilizing the Black-Scholes option pricing model using the following assumptions for the periods presented below:~~

Contents

Years Ended June 30,

2020

2019

2018

Weighted average risk-free interest rate

-

2.09%

-

Expected dividend yield

-

1.77%

-

Weighted average volatility factor of the expected
market price of the Company's stock

-

14.03%

-

Weighted average expected life of the
options (in years)

-

4.9

-

Weighted average fair value of options granted

-

$
2.54

-

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

~~The weighted average expected life of the stock option represents the period of time that stock options are expected~~

Notes to be outstanding and is estimated using historical data of stock option exercises and forfeitures. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. The expected volatility is based on the historical market price volatility of the Company's stock. The expected dividend yield reflects the expected level of regular cash dividends declared and paid to shareholders, based on the Company's dividend payout ratio of approximately 50% of net income, in relation to the market price of the Company's capital stock at the time of grant. The Company recognizes compensation expense for the fair values of these awards, which have graded vesting, on a straight-line basis over the requisite service period of the awards.

Consolidated Financial Statements

Note 14 – Stock Based Compensation (continued)

There were 0no restricted stock awards granted during the years ended June 30, 2023 and 2022. There were 53,706 restricted stock awards granted during the year ended June 30, ~~2020.~~ 2021.

2021 Plan and 2016 Plan

The ~~Company awarded 233,000 shares of restricted stock during~~following table presents stock-based compensation expense for the ~~year~~years ended June 30, ~~2019. There were 0 restricted stock awards granted during the year ended June 30, 2018.~~

2023, 2022 and 2021:


	Years Ended June 30,
	2023		2022		2021
Stock option expense	$	153	$	849	$	1,823
Restricted stock expense	725		2,049		3,850
Restricted stock unit expense	2,058		896		—
Total stock-based compensation expense	$	2,936	$	3,794	$	5,673

During the years ended June 30, ~~2020, 2019~~2023, 2022 and 2018, the Company recorded $5.9 million, $6.1 million and $6.3, million, respectively, of share-based compensation expense, comprised of stock option expense of $1.8 million, $2.0 million and $2.0, million respectively, and restricted stock expense of $4.0 million, $4.1 million and $4.3, million, respectively.

~~During the years ended June 30, 2020, 2019 and 2018,~~2021, the income tax benefit attributed to ~~non-qualified stock options~~our stock-based compensation expense was ~~approximately $432,000, $453,000 and 520,000, respectively, and attributed to restricted stock expense was approximately $1.5 million, $1.5~~$836,000, $1.0 million and ~~$1.5,~~$1.6 million, respectively.

~~F-66~~

~~KEARNY FINANCIAL CORP. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

~~Note 15 – Benefit Plans (continued)~~

Stock Options

The following is a summary of the ~~Company's~~Company’s stock option activity and related information for its option plans for the year ended June 30, ~~2020:~~

2023:

	Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
	(In Thousands)							(In Thousands)			Options	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at June 30, 2019		3,448		$	14.92	7.5 years		$	540
											(In Thousands)				(In Thousands)
Outstanding at June 30, 2022										Outstanding at June 30, 2022	3,253	$	14.97	4.5 years	$	61
Granted		-			-		-			Granted	—	—		—
Exercised		-			-		-			Exercised	—	—		—
Forfeited		(154	)		15.35					Forfeited	(269)	14.76
Outstanding at June 30, 2020		3,294		$	14.90	6.5 years		$	11
Outstanding at June 30, 2023										Outstanding at June 30, 2023	2,984	$	14.99	3.5 years	$	—

Exercisable at June 30, 2020		1,928		$	14.82	6.2 years		$	11
Exercisable at June 30, 2023										Exercisable at June 30, 2023	2,924	$	15.03	3.5 years	$	—

The Company generally issues shares from authorized but unissued shares upon the exercise of vested options.

There were 0no vested options exercised during the ~~year~~years ended June 30, ~~2020.~~2023 and 2022. A total of ~~48,314~~41,412 vested options, with an aggregate intrinsic value of ~~$235,000,~~$158,000, were exercised during the year ended June 30, ~~2019.~~2021. In fulfillment of these exercises, the Company issued ~~48,314~~41,412 shares from authorized but unissued shares. ~~A total of 9,565 vested options, with an aggregate intrinsic value of $38,000, were exercised during the year ended June 30, 2018.~~

The cash proceeds from stock option exercises during the year ended June 30, ~~2019~~2021 totaled approximately ~~$423,000.~~$373,000. A portion of such exercises represented disqualifying dispositions of incentive stock options for which the Company recognized ~~$69,000~~$47,000 in income tax benefit. The cash proceeds from stock option exercises during the year ended June 30, 2018 totaled approximately $102,000. A portion of such exercises represented disqualifying dispositions of incentive stock options for which the Company recognized $13,000 in income tax benefit.

Expected future compensation expense relating to the ~~1,366,000~~60,000 non-vested options outstanding as of June 30, ~~2020~~2023 is ~~$2.9 million~~$59,000 over a weighted average period of ~~3.5~~0.5 years.

Restricted Stock

Restricted shares awarded under the 2016 Plan generally vest in equal installments over a five-year service period. In addition to the requisite service period, the vesting of certain restricted shares awarded to management are also conditioned upon the achievement of one or more objective performance factors established by the Compensation Committee of the ~~Company's~~Company’s Board of Directors. In accordance with the terms of the 2016 Plan, such factors may be based on the performance of the Company as a whole or on any one or more business units of the Company or its subsidiaries. Performance factors may be measured relative to a peer group, an index or certain financial targets established in the Company's strategic business plan and budget.

~~The vesting~~

F-58

Table of ~~the applicable performance-based restricted shares over the fourth year of the~~ ~~five-year~~Contents service period was conditioned upon the achievement of the Company's earning-based performance targets for the fiscal year ended June 30, 2020. Such performance targets were established by the Board of Directors in the Company's strategic business plan and budget for that period.

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 14 – Stock Based Compensation (continued)

The Company fully achieved the applicable performance targets for fiscal ~~2020~~2022 and therefore expects that all eligible performance-based restricted shares will successfully vest over the fourth year of the five-year service period. For the fiscal year ended June 30, 2019, the Company fully achieved the applicable performance targets and all eligible performance-based restricted shares successfully vested induring the ~~third~~ year ~~of the~~ ~~five-year~~ ~~service period.~~

ended June 30, 2023.

The performance factors and underlying cost basis of the remaining unvested performance-based restricted shares ~~that~~ are ~~scheduled to vest over the final year of the service period is~~ generally expected to be determined annually concurrent with the anniversary date of the original grants.

~~F-67~~

~~KEARNY FINANCIAL CORP. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

~~Note 15 – Benefit Plans (continued)~~

For service based awards management recognizes compensation expense for the fair value of restricted shares on a straight-line basis over the requisite service period. For performance vesting awards management recognizes compensation expense for the fair value of restricted shares on a straight-line basis over the requisite service period; however, if the corporate performance goals to which the vesting of such shares are tied are not achieved, recognized compensation expense is adjusted accordingly.

The following is a summary of the ~~status of the Company's non-vested~~Company’s restricted share ~~awards as of June 30, 2020 and changes during~~award activity for the year ended June 30, ~~2020:~~

2023:

	Vesting Contingent on Service Conditions					Vesting Contingent on Performance and Service Conditions
	Restricted Shares			Weighted Average Grant Date Fair Value		Restricted Shares			Weighted Average Grant Date Fair Value			Vesting Contingent on Service Conditions			Vesting Contingent on Performance and Service Conditions
	(In Thousands)					(In Thousands)						Restricted Shares	Weighted Average Grant Date Fair Value		Restricted Shares	Weighted Average Grant Date Fair Value
Non-vested at June 30, 2019		610		$	14.90		325		$	14.77
												(In Thousands)			(In Thousands)
Non-vested at June 30, 2022											Non-vested at June 30, 2022	75	$	13.34	61	$	13.33
Granted		-			-		-			-	Granted	—	—		—	—
Vested		(186	)		14.98		(94	)		14.95	Vested	(32)	13.38		(25)	13.38
Forfeited		(4	)		15.35		(4	)		15.35	Forfeited	—	—		—	—
Non-vested at June 30, 2020		420		$	14.86		227		$	14.69
Non-vested at June 30, 2023											Non-vested at June 30, 2023	43	$	13.31	36	$	13.30

During the years ended June 30, ~~2020, 2019~~2023, 2022 and ~~2018,~~2021, the total fair value of vested restricted shares were ~~$4,192,204, $4,128,492~~$767,000, $4.3 million and ~~$4,354,754,~~$4.2 million, respectively. Expected future compensation expense relating to the ~~646,750~~78,826 non-vested restricted shares at June 30, ~~2020~~2023 is ~~$7.0~~$527,000 over a weighted average period of 2.9 years.

Restricted Stock Units

RSUs awarded under the 2021 Plan generally vest in equal installments over a specified service period. In addition to the requisite service period, the vesting of certain RSUs are also conditioned upon the achievement of one or more objective performance measures established by the Compensation Committee of the Company’s Board of Directors. In accordance with the terms of the 2021 Plan, such measures may be based on the performance of the Company as a whole or on any one or more business units of the Company or its subsidiaries. Performance measures may be measured relative to a peer group, an index or certain financial targets established in the Company’s strategic business plan and budget.

For service-based RSUs, the Company recognizes compensation expense for the fair value of RSUs on a straight-line basis over the requisite service period of each tranche. For performance-based RSUs, the Company recognizes compensation expense for the fair value of RSUs on a straight-line basis over the requisite service period; however, the compensation will be adjusted accordingly based on the achievement of the performance measures.

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Table of Contents

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 14 – Stock Based Compensation (continued)

The following is a summary of the Company’s RSU activity for the year ended June 30, 2023:


	Vesting Contingent on Service Conditions			Vesting Contingent on Performance and Service Conditions
	Restricted Stock Units	Weighted Average Grant Date Fair Value		Restricted Stock Units	Weighted Average Grant Date Fair Value
	(In Thousands)			(In Thousands)
Non-vested at June 30, 2022	182	$	13.68	70	$	13.68
Granted	238	11.85		85	11.85
Vested	(61)	13.68		—	—
Forfeited	(17)	12.73		—	—
Non-vested at June 30, 2023	342	$	12.45	155	$	12.68

Expected future compensation expense relating to the 497,664 non-vested RSUs at June 30, 2023 is $3.6 million over a weighted average period of ~~3.5~~2.1 years.

~~F-68~~

~~KEARNY FINANCIAL CORP. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

Note 1615 – Stockholders’ Equity

Regulatory Capital

Federal banking regulators impose various restrictions or requirements on the ability of savings institutions to make capital distributions, including cash dividends. A savings institution that is a subsidiary of a savings and loan holding company, such as the Bank, must file an application or a notice with federal banking regulators at least 30 days before making a capital distribution. A savings institution must file an application for prior approval of a capital distribution if: (i) it is not eligible for expedited treatment under the applications processing rules of federal banking regulators; (ii) the total amount of all capital distributions, including the proposed capital distribution, for the applicable calendar year would exceed an amount equal to the savings institution’s net income for that year to date plus the institution’s retained net income for the preceding two years; (iii) it would not adequately be capitalized after the capital distribution; or (iv) the distribution would violate an agreement with federal banking regulators or applicable regulations. Federal banking regulators may disapprove a notice or deny an application for a capital distribution if: (i) the savings institution would be undercapitalized following the capital distribution; (ii) the proposed capital distribution raises safety and soundness concerns; or (iii) the capital distribution would violate a prohibition contained in any statute, regulation or agreement.

During the fiscal year ended June 30, 2019, applications for capital distributions from the Bank to the Company were approved by federal banking regulators in the amount of $100.0 million and $130.0 million which was paid by the Bank to the Company in September 2018 and March 2019, respectively. Also, during the fiscal year ended June 30, 2019,2023, an application for quarterly capital distributions from the Bank to the Company was approved by federal banking regulators. The amount of dividends payable is based on 7560 percent of quarterly net income of the Bank.

During the years ended June 30, ~~2020~~2023, 2022 and ~~2019,~~2021, dividends paid by the Bank to the Company, in conjunction with quarterly capital distributions, as discussed above, totaled ~~$30.0~~$26.3 million, $56.7 million and ~~$25.1~~$43.9 million, respectively.

The Bank and ~~consolidated~~the Company are subject to various regulatory capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, - and possibly additional discretionary, – actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank and consolidated Company must meet specific capital guidelines that involve quantitative measures of their respective assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank’s and consolidated Company’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weighting, and other factors.

The minimum capital level requirements applicable to both the Bank and the consolidated Company include: (i) a common equity Tier 1 capital ratio of 4.5%; (ii) a Tier 1 capital ratio of 6%; (iii) a total capital ratio of 8%; and (iv) a Tier 1 leverage ratio of 4% for all institutions. The ~~previously amended rules~~Bank and the consolidated Company are also ~~established~~required to maintain a “capital conservation buffer” of 2.5% above the ~~new~~ regulatory minimum capital ratios ~~and when fully phased in, would result~~which results in the following minimum ratios: (i) a common equity Tier 1 capital ratio of 7.0%; (ii) a Tier 1 capital ratio of 8.5%; and (iii) a total capital ratio of 10.5%. The capital conservation buffer requirement began phasing in at January 1, 2016 at 0.625% of risk-weighted assets and increased each calendar year until it was fully implemented in at 2.5% on January 1, 2019. An institution will be subject to limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses if its capital level falls below the buffer amount. These limitations will establish a maximum percentage of eligible retained income that could be utilized for such actions.

~~As a result~~

F-60

Table of the Economic Growth, Regulatory Relief, and Consumer Protection Act, the federal banking agencies have adopted a rule to establish for institutions with assets of less than $10 billion that meet other specified criteria a community bank leverage ratio (“CBLR”) that such institutions may elect to utilize in lieu of the generally applicable leverage and risk-based capital requirements noted above. The federal banking agencies have adopted 9% as the applicable ratio, effective March 31, 2020, and as a result of the Coronavirus Aid, Relief and Economic Security (“CARES”) Act, temporarily reduced the ratio to 8% in response to COVID-19. Institutions with capital meeting the specified requirements and electing to follow the alternative framework will be considered compliant with all applicable regulatory capital and leverage requirements, including the requirement to be “well capitalized.” The Company has elected not to utilize the CBLR framework at this time.

~~F-69~~

Contents

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 1615 – Stockholders’ Equity (continued)

At June 30, 2023 and 2022, the regulatory capital ratios, of both the Company and the Bank were in excess of the levels required by federal banking regulators to be classified as “well-capitalized” under regulatory guidelines.

The following tables present information regarding the Bank’s regulatory capital levels at June 30, ~~2020~~2023 and ~~2019:~~

2022:


	At June 30, 2020																At June 30, 2023
	Actual					For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions						Actual				For Capital Adequacy Purposes				To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio				Amount		Ratio		Amount		Ratio		Amount		Ratio
	(Dollars in Thousands)																(Dollars in Thousands)
Total capital (to risk-weighted assets)	$	816,577		21.38	%	$	305,562		8.00	%	$	381,953		10.00	%	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)		779,250		20.40	%		229,172		6.00	%		305,562		8.00	%	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)		779,250		20.40	%		171,879		4.50	%		248,269		6.50	%	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)		779,250		11.95	%		260,893		4.00	%		326,116		5.00	%	Tier 1 capital (to adjusted total assets)	659,783		8.15	%	323,922		4.00	%	404,902		5.00	%


	At June 30, 2019																At June 30, 2022
	Actual					For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions						Actual				For Capital Adequacy Purposes				To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio				Amount		Ratio		Amount		Ratio		Amount		Ratio
	(Dollars in Thousands)																(Dollars in Thousands)
Total capital (to risk-weighted assets)	$	787,219		19.50	%	$	322,974		8.00	%	$	403,718		10.00	%	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)		753,945		18.68	%		242,231		6.00	%		322,974		8.00	%	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)		753,945		18.68	%		181,673		4.50	%		262,417		6.50	%	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)		753,945		11.78	%		256,116		4.00	%		320,145		5.00	%	Tier 1 capital (to adjusted total assets)	642,336		8.70	%	295,163		4.00	%	368,954		5.00	%

The following ~~table presents~~tables present information regarding the consolidated Company’s regulatory capital levels at June 30, ~~2020~~2023 and ~~June 30, 2019:~~

2022:


	At June 30, 2020											At June 30, 2023
	Actual					For Capital Adequacy Purposes						Actual				For Capital Adequacy Purposes
	Amount		Ratio			Amount		Ratio				Amount		Ratio		Amount		Ratio
	(Dollars in Thousands)											(Dollars in Thousands)
Total capital (to risk-weighted assets)	$	906,058		23.61	%	$	306,958		8.00	%	Total capital (to risk-weighted assets)	$	770,621	14.75	%	$	418,015	8.00	%
Tier 1 capital (to risk-weighted assets)		868,731		22.64	%		230,219		6.00	%	Tier 1 capital (to risk-weighted assets)	734,987		14.07	%	313,511		6.00	%
Common equity tier 1 capital (to risk-weighted assets)		868,731		22.64	%		172,664		4.50	%	Common equity tier 1 capital (to risk-weighted assets)	734,987		14.07	%	235,133		4.50	%
Tier 1 capital (to adjusted total assets)		868,731		13.27	%		261,783		4.00	%	Tier 1 capital (to adjusted total assets)	734,987		9.07	%	324,170		4.00	%


	At June 30, 2019											At June 30, 2022
	Actual					For Capital Adequacy Purposes						Actual				For Capital Adequacy Purposes
	Amount		Ratio			Amount		Ratio				Amount		Ratio		Amount		Ratio
	(Dollars in Thousands)											(Dollars in Thousands)
Total capital (to risk-weighted assets)	$	941,319		23.22	%	$	324,246		8.00	%	Total capital (to risk-weighted assets)	$	778,253	15.17	%	$	410,515	8.00	%
Tier 1 capital (to risk-weighted assets)		908,045		22.40	%		243,184		6.00	%	Tier 1 capital (to risk-weighted assets)	748,315		14.58	%	307,886		6.00	%
Common equity tier 1 capital (to risk-weighted assets)		908,045		22.40	%		182,388		4.50	%	Common equity tier 1 capital (to risk-weighted assets)	748,315		14.58	%	230,914		4.50	%
Tier 1 capital (to adjusted total assets)		908,045		14.14	%		256,856		4.00	%	Tier 1 capital (to adjusted total assets)	748,315		10.14	%	295,290		4.00	%

~~F-70~~

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KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 1615 – Stockholders’ Equity (continued)

Based upon the most recent notification from the FDIC dated March 2, 2020, the Bank was categorized as well capitalized as of December 31, 2019 under the regulatory framework for prompt corrective action. There are no conditions existing or events which have occurred since notification that management believes have changed the Bank’s category.

Stock Repurchase Plans

On August 1, 2022, the Company announced the authorization of a new stock repurchase plan to repurchase up to 4,000,000 shares, and the completion of the Company’s previous stock repurchase plan, which authorized the repurchase of 7,602,021 shares.

During the year ended June 30, ~~2020~~2023, the Company repurchased ~~5,375,551~~a total of 2,820,398 shares of its common stock. The shares were acquired and cancelled in conjunction with the Company’s fourth repurchase plan announced in March 2019 through which it originally authorized the repurchase of 9,218,324 shares, or 10% of the Company’s outstanding shares. Coupled with the 3,081,743 shares previously repurchased during the fiscal year ended June 30, 2019, the shares associated with the fourth program were repurchasedstock at a total cost of ~~$111.1~~$27.4 million, ~~and~~or $9.73 per share, including 2,495,253 shares, or 62.4% of the shares authorized for repurchase under the current repurchase program, at ~~an average~~a cost of ~~$13.14~~$23.8 million, or $9.54 per share. ~~On March 25, 2020 the Company temporarily suspended its stock repurchase program.~~

During the year ended June 30, 2019, the Company repurchased 10,624,840 shares of its common stock. Of these shares repurchased, 7,543,097 shares were acquired and cancelled in conjunction with the Company’s third repurchase plan announced in April 2018 through which it originally authorized the repurchase of 10,238,557 shares, or 10% of the Company’s outstanding shares. Coupled with the 2,695,460 shares previously repurchased during the fiscal year ended June 30, 2018, the shares associated with the third program were repurchased at a total cost of $138.8 million and at an average cost of $13.55 per share.

The remaining 3,081,743 shares repurchased during fiscal 2019 were acquired and cancelled in conjunction with the Company’s fourth share repurchase program announced in March 2019 through which it authorized the repurchase of 9,218,324 shares, or 10% of the Company’s outstanding shares. Such shares were repurchased at a total cost of $41.3 million and at an average cost of $13.41 per share.

~~F-71~~

~~KEARNY FINANCIAL CORP. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

Note 1716 – Income Taxes

The components of income taxes are as follows:


	Years Ended June 30,								Years Ended June 30,
		2020			2019		2018		2023		2022		2021
	(In Thousands)								(In Thousands)
Current income tax expense:								Current income tax expense:
Federal	$	6,745		$	5,656	$	5,121	Federal	$	6,145	$	12,720	$	12,051
State		4,877			3,733		2,516	State	2,634		7,057		5,058
		11,622			9,389		7,637		8,779		19,777		17,109
Deferred income tax benefit:
Deferred income tax expense:								Deferred income tax expense:
Federal		1,153			3,842		5,455	Federal	1,902		2,895		2,673
State		235			368		656	State	887		2,128		2,016
		1,388			4,210		6,111		2,789		5,023		4,689
Valuation allowance		(723	)		328		656	Valuation allowance	—		—		(535)

Total income tax expense	$	12,287		$	13,927	$	14,404	Total income tax expense	$	11,568	$	24,800	$	21,263

F-62

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KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 16 – Income Taxes (continued)

The following table presents a reconciliation between the reported income taxes for the periods presented and the income taxes which would be computed by applying the federal income tax rates applicable to those periods. The federal income tax rate of 21%, was applicable for the years ended June 30, ~~2020~~2023, 2022 and June 30, 2019. The federal income tax rate of 28%, applicable for the year ended June 30, 2018, reflects the transitional effect of a reduction in the Company’s federal income tax rate from 35%, applicable to the year ended June 30, 2017, to 21%, applicable to the year ended June 30, 2019.

2021.


	Years Ended June 30,										Years Ended June 30,
		2020			2019			2018			2023			2022			2021
	(Dollars In Thousands)										(Dollars In Thousands)
Income before income taxes	$	57,252		$	56,069		$	34,000		Income before income taxes	$	52,379		$	92,347		$	84,496
Statutory federal tax rate		21	%		21	%		28	%	Statutory federal tax rate	21		%	21		%	21		%
Federal income tax expense at statutory rate	$	12,023		$	11,774		$	9,520		Federal income tax expense at statutory rate	$	11,000		$	19,393		$	17,744
(Reduction) increases in income taxes resulting from:										(Reduction) increases in income taxes resulting from:
Tax exempt interest		(497	)		(589	)		(724	)	Tax exempt interest	(143)			(266)			(345)
State tax, net of federal tax effect		3,914			3,510			2,256		State tax, net of federal tax effect	2,781			7,257			5,464
Incentive stock options compensation expense		78			88			142		Incentive stock options compensation expense	12			45			85
Income from bank-owned life insurance		(1,314	)		(1,329	)		(1,439	)	Income from bank-owned life insurance	(1,840)			(1,281)			(1,255)
Disqualifying disposition on incentive stock options		-			(24	)		(11	)	Disqualifying disposition on incentive stock options	—			—			(33)
Non-deductible merger-related expenses		148			-			557		Non-deductible merger-related expenses	—			—			49
Tax benefit arising from the adoption of the CARES Act provisions		(1,624	)		-			2,924
Bargain purchase gain										Bargain purchase gain	—			—			(641)

Other items, net		282			169			523		Other items, net	(242)			(348)			730
		13,010			13,599			13,748			11,568			24,800			21,798
Valuation allowance		(723	)		328			656		Valuation allowance	—			—			(535)

Total income tax expense	$	12,287		$	13,927		$	14,404		Total income tax expense	$	11,568		$	24,800		$	21,263
Effective income tax rate		21.46	%		24.84	%		42.36	%	Effective income tax rate	22.09		%	26.86		%	25.16		%

The effective income tax rate represents total income tax expense divided by income before income taxes. Retained earnings at June 30, ~~2020,~~2023, includes approximately ~~$36.9~~$38.4 million of bad debt allowance, pursuant to the IRC, for which income taxes have not been provided. If such amount is used for purposes other than to absorb bad debts, including distributions in liquidation, it will be subject to income tax at the then current rate.

~~F-72~~

~~KEARNY FINANCIAL CORP. AND SUBSIDIARIES~~

~~Notes~~

A tax position is recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term more likely than not means a likelihood of more than 50 percent; the terms examined and upon examination also include resolution of the related appeals or litigation process, if any. A tax position that meets the more likely than not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more likely than not recognition threshold considers the facts, circumstances, and information available at the reporting date and is subject to ~~Consolidated Financial Statements~~

~~Note 17 – Income Taxes (continued)~~

~~The Company maintained a~~management’s judgment.

Realization of deferred tax assets is dependent upon the generation of future taxable income or the existence of sufficient taxable income within the carryover period. A valuation allowance ~~during the year ended June 30, 2019 against a~~is provided when it is more likely than not that some portion of the deferred tax ~~asset arising from~~assets will not be realized. In assessing the ~~carryover associated with~~need for a valuation allowance, management considers the scheduled reversal of the deferred tax liabilities, the level of historical taxable income, and the projected future taxable income over the periods in which the temporary differences comprising the deferred tax assets will be deductible. Based on its ~~charitable contribution to the KearnyBank Foundation made in conjunction with the Company’s second step conversion and stock offering. As~~assessments as of June 30, ~~2020, this valuation allowance~~2023 and 2022, the Company determined it is ~~no longer in place.~~

~~The Company maintained a valuation allowance during the year ended June 30, 2020, against a~~more likely than not that all deferred tax ~~asset arising from fair value adjustments on investment securities acquired in a prior acquisition.~~ assets will be realized.

During the year ended June 30, ~~2020,~~2021, the Company reversed a ~~portion of that~~ valuation allowance totaling ~~$591,000 that~~$535,000 which was associated with the realization of a capital loss ~~carryforwards that were determined~~carryforward.

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KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to ~~be realizable due to the sale of investment securities at the Bank’s New Jersey investment company subsidiary. T~~he reversal of the remaining portion of this deferred tax asset would result in capital losses. The company has deemed it more likely than not that the Company will not generate capital gains in the carryover period to offset the capital losses.

During the year ended June 30, 2020, income tax expense reflected a $1.6 million reduction in income tax expense attributable to the carryback of net operating losses into prior periods at a higher statutory federal tax rate than is currently in effect for the Company. This carryback was permitted by tax law changes enacted by the CARES Act, which was signed into law on March 27, 2020.

Consolidated Financial Statements

Note 16 – Income Taxes (continued)

The tax effects of existing temporary differences that give rise to deferred income tax assets and liabilities are as follows:

June 30,

2020

2019

(In Thousands)

Deferred income tax assets:

Purchase accounting

$
11,668

$
15,137

Accumulated other comprehensive income

Defined benefit plans

416

319

Derivatives

5,730

-

Unrealized loss on securities available for sale
transferred to held to maturity

-

175

Allowance for loan losses

11,047

9,831

Benefit plans

2,290

2,280

Compensation

1,287

1,246

Stock-based compensation

2,482

1,973

Uncollected interest

1,362

1,070

Depreciation

268

-

Charitable contribution carryover

-

186

Net operating loss carryover

6

919

Capital loss carryforward

329

814

Other items

1,049

587

37,934

34,537

Valuation allowance

(535
)

(1,258
)

37,399

33,279

Deferred income tax liabilities:

Deferred loan fees and costs

-

1,584

Accumulated other comprehensive income

Derivatives

-

1,094

Unrealized gain on securities available for sale

6,541

573

Goodwill

4,655

4,608

Other items

723

53

11,919

7,912

Net deferred income tax asset

$
25,480

$
25,367


	June 30,
	2023		2022
	(In Thousands)
Deferred income tax assets:
Purchase accounting	$	4,098	$	6,327
Accumulated other comprehensive income:
Defined benefit plans	—		26

Unrealized loss on securities available for sale	45,018		34,104
Allowance for credit losses	14,211		13,809
Benefit plans	2,603		2,494
Compensation	1,440		2,023
Stock-based compensation	3,161		2,834
Uncollected interest	1,313		1,705
Depreciation	2,335		1,931
Net operating loss carryover	2		4
Capital loss carryforward	191		141
Other items	839		844
	75,211		66,242


Deferred income tax liabilities:
Deferred loan fees and costs	1,710		838
Accumulated other comprehensive income:
Derivatives	16,940		11,542
Defined benefit plans	78		—
Goodwill	4,510		4,510
Other items	—		2
	23,238		16,892
Net deferred income tax asset	$	51,973	$	49,350

~~F-73~~

~~KEARNY FINANCIAL CORP. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

~~Note 17 – Income Taxes (continued)~~

The Company has various state and local NOL carryforwards which will begin to expire in the year ending June 30, 2025.

The Company and its subsidiaries are subject to U.S. federal income tax, as well as income tax of the state of New Jersey and various other states. The Company is generally no longer subject to examination by federal, state and local taxing authorities for tax years prior to June 30, ~~2017.~~

2020.

F-64

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KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 1817 – Commitments

The Bank is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit. These transactions involve elements of credit and interest rate risk in excess of the amounts recognized in the ~~consolidated statements~~Consolidated Statements of ~~financial condition.~~Financial Condition. The Bank's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual notional amount of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained if deemed necessary by the Bank upon extension of credit is based on management’s credit evaluation of the borrower. AAt June 30, ~~2020~~2023 and ~~2019,~~2022, the Bank had ~~$145.1~~$251.2 million and ~~$110.1~~$510.5 million in commitments to originate loans, including unused lines of credit.

The Bank is party to standby letters of credit through which it guarantees certain specific business obligations of its commercial customers. The balance of standby letters of credit at June 30, ~~2020~~2023 and ~~2019~~2022 were approximately ~~$217,000~~$115,000 and ~~$612,000,~~$130,000, respectively.

In addition to the commitments noted above, at June 30, ~~2020,~~2023, the Company’s pipeline of loans held for sale included ~~$127.2~~$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 within a predetermined timeframe after the sale commitment is established.

The Company and subsidiaries are also party to litigation which arises primarily in the ordinary course of business. In the opinion of management, the ultimate disposition of such litigation should not have a material adverse effect on the consolidated financial position of the Company.

~~F-74~~

~~KEARNY FINANCIAL CORP. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

Note 1918 – Fair Value of Financial Instruments

~~In January 2016, the FASB issued~~ ~~ASU 2016-01, “Financial Instruments”.~~ This guidance amends existing guidance to improve accounting standards for financial instruments including clarification and simplification of accounting and disclosure requirements and the requirement for public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes. The Company adopted the guidance effective July 1, 2018. Upon adoption, the fair value of the Company’s loan portfolio is now presented using an exit price method.

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:

F-65

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KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 18 – Fair Value of Financial Instruments (continued)

Assets Measured on a Recurring Basis:

The following methods and significant assumptions were used to estimate the fair values of the Company’s assets measured at fair value on a recurring basis at June 30, ~~2020~~2023 and ~~June 30, 2019:~~

2022:

Investment Securities Available for Sale

The Company’s available for sale investment securities are reported at fair value utilizing Level 2 inputs. For these securities, the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the securities’ terms and conditions, among other things. From time to time, the Company validates prices supplied by the independent pricing service by comparison to prices obtained from third-party sources or derived using internal models.

Derivatives

The Company has contracted with a third party vendor to provide periodic valuations for its interest rate derivatives to determine the fair value of its interest rate caps and swaps. The vendor utilizes standard valuation methodologies applicable to interest rate derivatives such as discounted cash flow analysis and extensions of the Black-Scholes model. Such valuations are based upon readily observable market data and are therefore considered Level 2 valuations by the Company.

~~F-75~~

~~KEARNY FINANCIAL CORP. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

~~Note 19 – Fair Value of Financial Instruments (continued)~~

Those assets and liabilities measured at fair value on a recurring basis are summarized below:


	June 30, 2020									June 30, 2023
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
	(In Thousands)									(In Thousands)
Assets:									Assets:
Debt securities available for sale:									Debt securities available for sale:
Obligations of state and political subdivisions		-		54,054		-		54,054

Asset-backed securities		-		172,447		-		172,447	Asset-backed securities	$	—	$	136,170	$	—	$	136,170
Collateralized loan obligations		-		193,788		-		193,788	Collateralized loan obligations	—		376,996		—		376,996
Corporate bonds		-		143,639		-		143,639	Corporate bonds	—		135,018		—		135,018
Trust preferred securities		-		2,627		-		2,627
Total debt securities		-		566,555		-		566,555	Total debt securities	—		648,184		—		648,184

Mortgage-backed securities available for sale:									Mortgage-backed securities available for sale:
Collateralized mortgage obligations		-		30,903		-		30,903

Residential pass-through securities		-		561,954		-		561,954	Residential pass-through securities	—		436,151		—		436,151
Commercial pass-through securities		-		226,291		-		226,291	Commercial pass-through securities	—		143,394		—		143,394
Total mortgage-backed securities		-		819,148		-		819,148	Total mortgage-backed securities	—		579,545		—		579,545
Total securities available for sale	$	-	$	1,385,703	$	-	$	1,385,703	Total securities available for sale	$	—	$	1,227,729	$	—	$	1,227,729

Interest rate contracts		-		235		-		235	Interest rate contracts	$	—	$	71,624	$	—	$	71,624

Total assets	$	-	$	1,385,938	$	-	$	1,385,938	Total assets	$	—	$	1,299,353	$	—	$	1,299,353

Liabilities:
Interest rate contracts	$	-	$	18,177	$	-	$	18,177
Total liabilities	$	-	$	18,177	$	-	$	18,177

~~F-76~~

F-66

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KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 1918 – Fair Value of Financial Instruments (continued)


	June 30, 2019									June 30, 2022
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
	(In Thousands)									(In Thousands)
Assets:									Assets:
Debt securities available for sale:									Debt securities available for sale:
U.S. agency securities	$	-	$	3,678	$	-	$	3,678
Obligations of state and political subdivisions		-		26,951		-		26,951	Obligations of state and political subdivisions	$	—	$	28,435	$	—	$	28,435
Asset-backed securities		-		179,313		-		179,313	Asset-backed securities	—		166,557		—		166,557
Collateralized loan obligations		-		208,611		-		208,611	Collateralized loan obligations	—		307,813		—		307,813
Corporate bonds		-		122,024		-		122,024	Corporate bonds	—		153,397		—		153,397
Trust preferred securities		-		2,756		1,000		3,756
Total debt securities		-		543,333		1,000		544,333	Total debt securities	—		656,202		—		656,202

Mortgage-backed securities available for sale:									Mortgage-backed securities available for sale:
Collateralized mortgage obligations		-		21,390		-		21,390	Collateralized mortgage obligations	—		7,122		—		7,122
Residential pass-through securities		-		44,303		-		44,303	Residential pass-through securities	—		514,758		—		514,758
Commercial pass-through securities		-		104,237		-		104,237	Commercial pass-through securities	—		166,011		—		166,011
Total mortgage-backed securities		-		169,930		-		169,930	Total mortgage-backed securities	—		687,891		—		687,891
Total securities available for sale		-		713,263		1,000		714,263	Total securities available for sale	$	—	$	1,344,093	$	—	$	1,344,093

Interest rate contracts		-		3,856		-		3,856	Interest rate contracts	$	—	$	41,223	$	—	$	41,223

Total assets	$	-	$	717,119	$	1,000	$	718,119	Total assets	$	—	$	1,385,316	$	—	$	1,385,316

Liabilities:
Interest rate contracts	$	-	$	140	$	-	$	140
Total liabilities	$	-	$	140	$	-	$	140

Assets Measured on a Non-Recurring Basis:

The following methods and assumptions were used to estimate the fair values of the Company’s assets measured at fair value on a non-recurring basis at June 30, ~~2020~~2023 and ~~June 30, 2019:~~

~~Impaired Loans~~

~~An impaired loan~~2022:

Individually Analyzed Collateral Dependent Loans:

The fair value of collateral dependent loans that are individually analyzed is ~~evaluated and valued at~~determined based upon the ~~time the loan is identified as impaired at the lower of cost or~~appraised fair value. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Fair value is measured based on the value of the underlying collateral, ~~securing~~less costs to sell. Such collateral primarily consists of real estate and, to a lesser extent, other business assets. Management may also adjust appraised values to reflect estimated changes in market values or apply other adjustments to appraised values resulting from its knowledge of the loan and is classified at a Level 3 in the fair value hierarchy. Once a loan is identified as individually impaired, management measures impairment in accordance with the FASB’s guidance on accounting by creditors for impairment of a loan with the fair value estimated usingcollateral. Internal valuations may be utilized to determine the fair value of ~~the collateral reduced by estimated disposal costs. Those impaired~~other business assets. For non-collateral-dependent loans, ~~not requiring an allowance represent loans for which the~~management estimates fair value using discounted cash flows based on inputs that are largely unobservable and instead reflect management’s own estimates of the ~~expected repayments or collateral exceeds the recorded investments~~assumptions as a market participant would in pricing such loans. ~~Impaired~~Individually analyzed collateral dependent loans are ~~reviewed and evaluated on at least~~considered a ~~quarterly basis for additional impairment and adjusted accordingly.~~

~~F-77~~

~~KEARNY FINANCIAL CORP. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

~~Note 19 – Fair Value of Financial Instruments (continued)~~

Level 3 valuation by the Company.

Other Real Estate Owned

Other real estate owned is recorded at estimated fair value, less estimated selling costs when acquired, thus establishing a new cost basis. Fair value is generally based on independent appraisals. These appraisals include adjustments to comparable assets based on the appraisers’ market knowledge and experience. When an asset is acquired, the excess of the loan balance over fair value, less estimated selling costs, is charged to the allowance for ~~loan~~credit losses. If further declines in the estimated fair value of the asset occur, a write-down is recorded through expense. The valuation of foreclosed assets is subjective in nature and may be adjusted in the future because of changes in economic conditions.

F-67

Table of Contents

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 18 – Fair Value of Financial Instruments (continued)

Those assets and liabilities measured at fair value on a non-recurring basis are summarized below:

	June 30, 2020
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total			June 30, 2023
	(In Thousands)									Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Impaired loans:
										(In Thousands)
Collateral dependent loans:									Collateral dependent loans:
Residential mortgage	$	-	$	-	$	2,339	$	2,339	Residential mortgage	$	—	$	—	$	449	$	449
Non-residential mortgage		-		-		2,282		2,282
Commercial business		-		-		129		129
Multi-family mortgage									Multi-family mortgage	—		—		7,300		7,300
Nonresidential mortgage									Nonresidential mortgage	—		—		9,972		9,972
Total	$	-	$	-	$	4,750	$	4,750	Total	$	—	$	—	$	17,721	$	17,721

Other real estate owned, net:									Other real estate owned, net:
Residential mortgage	$	-	$	-	$	178	$	178

Nonresidential									Nonresidential	$	—	$	—	$	12,956	$	12,956
Total	$	-	$	-	$	178	$	178	Total	$	—	$	—	$	12,956	$	12,956

June 30, 2019

Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Total

(In Thousands)

Impaired loans:

Residential mortgage
$
-

$
-

$
3,071

$
3,071

Non-residential mortgage

-

-

791

791

Commercial business

-

-

16

16

Total
$
-

$
-

$
3,878

$
3,878


	June 30, 2022
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
	(In Thousands)
Collateral dependent loans:
Residential mortgage	$	—	$	—	$	2,035	$	2,035
Multi-family mortgage	—		—		7,517		7,517
Nonresidential mortgage	—		—		11,479		11,479
Total	$	—	$	—	$	21,031	$	21,031

Other real estate owned, net:
Residential	$	—	$	—	$	178	$	178
Total	$	—	$	—	$	178	$	178

~~F-78~~

F-68

Table of Contents

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 1918 – Fair Value of Financial Instruments (continued)

The following table presents additional quantitative information about assets measured at fair value on a non-recurring basis and for which the Company has utilized adjusted Level 3 inputs to determine fair value:


	June 30, 2023
	Fair Value		Valuation Techniques		Unobservable Input		Range	Weighted Average
	(Dollars in Thousands)
Collateral dependent loans:
Residential mortgage	$	449	Market valuation of underlying collateral	(1)	Adjustments to reflect current conditions/selling costs	(2)	6.93%	6.93	%
Multi-family mortgage	7,300		Market valuation of underlying collateral	(1)	Adjustments to reflect current conditions/selling costs	(2)	6% - 9%	7.78	%
Nonresidential mortgage	9,972		Market valuation of underlying collateral	(1)	Adjustments to reflect current conditions/selling costs	(2)	9% - 16%	11.78	%
Total	$	17,721

Other real estate owned, net:

Nonresidential	$	12,956	Market valuation of underlying collateral	(3)	Adjustments to reflect current conditions/selling costs	(2)	4.00%	4.00	%
Total	$	12,956


	June 30, 2022
	Fair Value		Valuation Techniques		Unobservable Input		Range	Weighted Average
	(Dollars in Thousands)
Collateral dependent loans:
Residential mortgage	$	2,035	Market valuation of underlying collateral	(1)	Adjustments to reflect current conditions/selling costs	(2)	7% - 10%	8.97	%
Multi-family mortgage	7,517		Market valuation of underlying collateral	(1)	Adjustments to reflect current conditions/selling costs	(2)	10% - 12%	11.06	%
Nonresidential mortgage	11,479		Market valuation of underlying collateral	(1)	Adjustments to reflect current conditions/selling costs	(2)	9% - 18%	12.72	%
Total	$	21,031

Other real estate owned, net:
Residential	$	178	Market valuation of underlying collateral	(3)	Adjustments to reflect current conditions/selling costs	(2)	6.00%	6.00	%
Total	$	178

June 30, 2020

Fair
Value

Valuation
Techniques

Unobservable
Input

Range

Weighted
Average

(In Thousands)

Impaired loans:

Residential mortgage
$
2,339

Market valuation of
underlying collateral
⁽¹⁾
Adjustments to reflect current
conditions/selling costs
⁽²⁾
7% - 9%

8.17
%
Non-residential mortgage

2,282

Market valuation of
underlying collateral
⁽¹⁾
Adjustments to reflect current
conditions/selling costs
⁽²⁾
9% - 12%

10.27
%
Commercial business

129

Market valuation of
underlying collateral
⁽¹⁾
Adjustments to reflect current
conditions/selling costs
⁽²⁾
0% - 0%

0.00
%
Total
$
4,750

Other real estate owned, net:

Residential mortgage
$
178

Market valuation of
underlying collateral
⁽³⁾
Adjustments to reflect current
conditions/selling costs
⁽²⁾
6.00%

6.00
%
Total
$
178

June 30, 2019

Fair
Value

Valuation
Techniques

Unobservable
Input

Range

Weighted
Average

(In Thousands)

Impaired loans:

Residential mortgage
$
3,071

Market valuation of
underlying collateral
⁽¹⁾
Adjustments to reflect current
conditions/selling costs
⁽²⁾
6% - 8%

7.03
%
Non-residential mortgage

791

Market valuation of
underlying collateral
⁽¹⁾
Adjustments to reflect current
conditions/selling costs
⁽²⁾
10% - 11%

10.08
%
Commercial business

16

Market valuation of
underlying collateral
⁽¹⁾
Adjustments to reflect current
conditions/selling costs
⁽²⁾
9% - 10%

9.36
%
Total
$
3,878

~~(1)~~

~~The fair value basis of impaired~~(1) The fair value basis of collateral dependent loans is generally determined based on an independent appraisal of the fair value of a loan’s underlying collateral.

~~(2)~~

~~The fair value basis of impaired~~(2) The fair value basis of collateral dependent loans and other real estate owned is adjusted to reflect management estimates of selling costs including, but not ~~necessarily~~ limited to, real estate brokerage commissions and title transfer fees.

~~(3)~~

(3) The fair value basis of other real estate owned is generally determined based upon the lower of an independent appraisal of the property’s fair value or the applicable listing price or contracted sales price.

At June 30, ~~2020, impaired~~2023, collateral dependent loans valued using Level 3 inputs comprised loans with principal ~~balances~~balance totaling ~~$4.8~~$21.0 million and valuation ~~allowances~~allowance of ~~$89,000~~$3.3 million reflecting an aggregate fair ~~values~~value of ~~$4.8~~$17.7 million. By comparison, at June 30, ~~2019, impaired~~2022, collateral dependent loans valued using Level 3 inputs comprised loans with principal ~~balances~~balance totaling ~~$3.9~~$24.6 million and valuation allowances of ~~$31,000~~$3.6 million reflecting an aggregate fair ~~values~~value of ~~$3.9~~$21.0 million.

F-69

Table of Contents

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 18 – Fair Value of Financial Instruments (continued)

Once a loan is foreclosed, the fair value of the other real estate owned continues to be evaluated based upon the fair value of the repossessed real estate originally securing the loan. At June 30, ~~2020,~~2023 and 2022, the Company held other real estate owned totaling $13.0 million and $178,000, respectively, whose carrying value was written down utilizing Level 3 inputs. ~~At June 30, 2019, the Company held 0 other real estate owned whose carrying value was written down utilizing Level 3 inputs.~~

~~F-79~~

~~KEARNY FINANCIAL CORP. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

~~Note 19 – Fair Value of 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, ~~2020~~2023 and ~~June 30, 2019:~~

2022:


	June 30, 2020											June 30, 2023
	Carrying Amount		Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			Carrying Amount		Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In Thousands)											(In Thousands)
Financial assets:											Financial assets:
Cash and cash equivalents	$	180,967	$	180,967	$	180,967	$	-	$	-	Cash and cash equivalents	$	70,515	$	70,515	$	70,515	$	—	$	—
Investment securities available for sale		1,385,703		1,385,703		-		1,385,703		-	Investment securities available for sale	1,227,729		1,227,729		—		1,227,729		—
Investment securities held to maturity		32,556		34,069		-		34,069		-	Investment securities held to maturity	146,465		131,169		—		131,169		—
Loans held-for-sale		20,789		21,550		-		21,550		-	Loans held-for-sale	9,591		9,442		—		9,442		—
Net loans receivable		4,461,070		4,462,232		-		-		4,462,232	Net loans receivable	5,780,687		5,261,808		—		—		5,261,808
FHLB Stock		58,654		-		-		-		-	FHLB Stock	71,734		—		—		—		—
Interest receivable		17,373		17,373		4		4,154		13,215	Interest receivable	28,133		28,133		14		8,924		19,195
Interest rate contracts		235		235		-		235		-	Interest rate contracts	71,624		71,624		—		71,624		—

Financial liabilities:											Financial liabilities:
Deposits		4,430,282		4,449,877		2,589,886		-		1,859,991	Deposits	3,611,632		3,611,632		3,611,632		—		—
Certificates of deposits											Certificates of deposits	2,017,551		1,989,434		—		—		1,989,434
Borrowings		1,173,165		1,215,529		-		-		1,215,529	Borrowings	1,506,812		1,498,920		—		—		1,498,920
Interest payable on deposits		395		395		295		-		100	Interest payable on deposits	6,826		6,826		1,933		—		4,893
Interest payable on borrowings		1,723		1,723		-		-		1,723	Interest payable on borrowings	5,282		5,282		—		—		5,282
Interest rate contracts		18,177		18,177		-		18,177		-

June 30, 2019

Carrying
Amount

Fair
Value

Quoted
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
$
38,935

$
38,935

$
38,935

$
-

$
-

Investment securities available for sale

714,263

714,263

-

713,263

1,000

Investment securities held to maturity

576,652

584,678

-

584,678

-

Loans held-for-sale

12,267

12,501

-

12,501

-

Net loans receivable

4,645,654

4,630,853

-

-

4,630,853

FHLB Stock

64,190

-

-

-

-

Interest receivable

19,360

19,360

11

5,278

14,071

Interest rate contracts

3,856

3,856

-

3,856

-

Financial liabilities:

Deposits

4,147,610

4,152,558

1,943,154

-

2,209,404

Borrowings

1,321,982

1,337,560

-

-

1,337,560

Interest payable on deposits

3,106

3,106

367

-

2,739

Interest payable on borrowings

3,899

3,899

-

-

3,899

Interest rate contracts

140

140

-

140

-

F-70

~~F-80~~

Table of Contents

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 1918 – Fair Value of Financial Instruments (continued)


	June 30, 2022
	Carrying Amount		Fair Value		Quoted 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

Commitments.

~~Commitments.~~ The fair value of commitments to fund credit lines and originate or participate in loans held in portfolio or loans held for sale is estimated using fees currently charged to enter into similar agreements taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed rate loan commitments, including those relating to loans held for sale that are considered derivative instruments for financial statement reporting purposes, the fair value also considers the difference between current levels of interest and the committed rates. The carrying value, represented by the net deferred fee arising from the unrecognized commitment, and the fair value, determined by discounting the remaining contractual fee over the term of the commitment using fees currently charged to enter into similar agreements with similar credit risk, is not considered material for disclosure.

Limitations. Fair value estimates are made at a specific point in time based on relevant market information and information about the financial instruments. These estimates do not reflect any premium or discount that could result from offering for sale at one time the entire holdings of a particular financial instrument. Because no fair value exists for a significant portion of the financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments and other factors. These estimates are subjective in nature, involve uncertainties and matters of judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

The fair value estimates are based on existing on-and-off balance sheet financial instruments without attempting to value anticipated future business and the value of assets and liabilities that are not considered financial instruments. Other significant assets and liabilities that are not considered financial assets and liabilities include premises and equipment, and advances from borrowers for taxes and insurance. In addition, the ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in any of the estimates.

Finally, reasonable comparability between financial institutions may not be likely due to the wide range of permitted valuation techniques and numerous estimates which must be made given the absence of active secondary markets for many of the financial instruments. This lack of uniform valuation methodologies introduces a greater degree of subjectivity to these estimated fair values.

F-71

Table of Contents

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 2019 – Comprehensive Income

The components of accumulated other comprehensive (loss) income included in stockholders’ equity are as follows:

	June 30,
	2020			2019				June 30,
	(In Thousands)							2023		2022
Net unrealized gain (loss) on securities available for sale	$	22,482		$	1,975
Tax effect		(6,541	)		(573	)
Net of tax amount		15,941			1,402
								(In Thousands)
Net unrealized loss on securities available for sale transferred to held to maturity		-			(596	)
Net unrealized loss on securities available for sale							Net unrealized loss on securities available for sale	$	(156,138)	$	(118,031)
Tax effect		-			175		Tax effect	45,018		34,104
Net of tax amount		-			(421	)	Net of tax amount	(111,120)		(83,927)

Fair value adjustments on derivatives		(19,418	)		3,716		Fair value adjustments on derivatives	58,414		39,805
Tax effect		5,730			(1,094	)	Tax effect	(16,940)		(11,542)
Net of tax amount		(13,688	)		2,622		Net of tax amount	41,474		28,263

Benefit plan adjustments		(1,412	)		(1,083	)	Benefit plan adjustments	268		(89)
Tax effect		416			319		Tax effect	(78)		26
Net of tax amount		(996	)		(764	)	Net of tax amount	190		(63)

Total accumulated other comprehensive income	$	1,257		$	2,839
Total accumulated other comprehensive loss							Total accumulated other comprehensive loss	$	(69,456)	$	(55,727)

~~F-81~~

~~KEARNY FINANCIAL CORP. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

~~Note 20 – Comprehensive Income (continued)~~

Other comprehensive (loss) income and related tax effects are presented in the following table:


	Years Ended June 30,
	2023		2022		2021
	(In Thousands)
Net unrealized loss on securities available for sale	$	(53,334)	$	(128,601)	$	(11,704)



Net realized loss (gain) on securities available for sale (1)	15,227		559		(767)

Fair value adjustments on derivatives	18,609		40,117		19,106

Benefit plans:
(Accretion) amortization of actuarial (gain) loss (2)	(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

Years Ended June 30,

2020

2019

2018

(In Thousands)

Net unrealized holding gain (loss) on
  securities available for sale
$
22,758

$
5,973

$
(1,919
)

Amortization of net unrealized holding gain (loss) on
  securities available for sale transferred to
  held to maturity⁽¹⁾

596

291

222

Net realized (gain) loss on securities available for sale ⁽²⁾

(2,251
)

323

(17
)

Fair value adjustments on derivatives

(23,134
)

(28,165
)

25,560

Benefit plans:

Amortization of:

Actuarial loss⁽³⁾

19

43

45

Net actuarial (loss) gain

(348
)

(313
)

205

Net change in benefit plan accrued expense

(329
)

(270
)

250

Other comprehensive (loss) income before taxes

(2,360
)

(21,848
)

24,096

Tax effect

778

6,152

(7,986
)
Total comprehensive (loss) income
$
(1,582
)

$
(15,696
)

$
16,110

(1)Represents amounts reclassified out of accumulated other comprehensive (loss) income and included in gain on sale of securities on the Consolidated Statements of Income.

~~Represents amounts reclassified out of accumulated other comprehensive income and included in interest income on taxable securities.~~

(2)Represents amounts reclassified out of accumulated other comprehensive (loss) income and included in the computation of net periodic pension expense. See Note 13 – Benefit Plans for additional information.

~~Represents amounts reclassified out of accumulated other comprehensive income and included in gain on sale of securities on the consolidated statements of income.~~

~~(3)~~

Represents amounts reclassified out of accumulated other comprehensive income and included in the computation of net periodic pension expense. See Note 15 – Benefit Plans for additional information.

F-72

Table of Contents

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 2120 – Revenue Recognition

~~Effective July 1, 2018, the Company adopted ASU 2014-09~~ ~~Revenue from Contracts with Customers~~ and all subsequent amendments to the ASU (collectively, "ASC 606”), which (i) creates a single framework for recognizing revenue from contracts with customers that fall within its scope and (ii) revises when it is appropriate to recognize a gain (loss) from the transfer of nonfinancial assets, such as OREO. The majority of the Company’s revenues come from interest income and other sources, including loans, leases, securities, and derivatives that are outside the scope of ASC 606. The Company’s services that fall within the scope of ASC 606 are presented within noninterest income and are recognized as revenue as the Company satisfies its obligation to the customer. Services within the scope of ASC 606 include deposit service charges on deposits, interchange income, and the sale of OREO.

The Company, using a modified retrospective transition approach, determined that there was no cumulative effect adjustment to retained earnings as a result of adopting the new standard, nor did the standard have a material impact on our consolidated financial statements including the timing or amounts of revenue recognized.

~~F-82~~

~~KEARNY FINANCIAL CORP. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

~~Note 21 – Revenue Recognition (continued)~~

All of the Company’s revenue from contracts with customers ~~within~~in the scope of ASC 606 is recognized within noninterest income. The following table presents the Company’s sources of noninterest income for the years ended June 30, ~~2020~~2023, 2022 and ~~June 30, 2019.~~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
Loan-related fees and charges (1)	1,225		847		485
(Loss) gain on sale and call of securities (1)	(15,227)		(559)		767
(Loss) gain on sale of loans (1)	(1,645)		2,539		5,574
(Loss) gain on sale of other real estate owned	(139)		5		—
Income from bank owned life insurance (1)	8,645		6,167		6,267
Electronic banking fees and charges (interchange income)	1,759		1,626		1,717
Bargain purchase gain (1)	—		—		3,053
Miscellaneous (1)	6,252		1,576		1,751
Total non-interest income	$	2,751	$	13,934	$	21,026

Years Ended June 30,

2020

2019

(In Thousands)

Non-interest income:

Deposit-related fees and charges
$
1,626

$
1,536

Loan-related fees and charges ⁽¹⁾

5,020

3,909

Gain (loss) on sale and call of securities ⁽¹⁾

2,250

(323
)
Gain on sale of loans ⁽¹⁾

3,186

580

Loss on sale and write down of other real estate owned

(28
)

(11
)
Income from bank owned life insurance ⁽¹⁾

6,225

6,339

Electronic banking fees and charges (interchange income)

1,246

1,050

Miscellaneous ⁽¹⁾

194

475

Total non-interest income
$
19,719

$
13,555

(1)Not within the scope of ASC 606.

~~(1)~~

~~Not within the scope of ASC 606.~~

A description of the Company’s revenue streams accounted for under ASC 606 is as follows:

Service Charges on Deposit Accounts

The Company earns fees from deposit customers for transaction-based, account maintenance, and overdraft services. Transaction-based fees, which include services such as ATM use fees, stop payment charges, statement rendering, and ACH fees, are recognized at the time the transaction is executed at the point in the time the Company fulfills the customer’s request. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of a month, representing the period over which the Company satisfies the performance obligation. Overdraft fees are recognized at the point in time that the overdraft occurs. Service charges on deposits are withdrawn from the customer’s account balance.

Gains/Losses on Sales of OREO

The Company records a gain or loss from the sale of OREO when control of the property transfers to the buyer, which generally occurs at the time of an executed deed. Gain/Losses on the sales of OREO falls within the scope of ASC 606, if the Company finances the transaction. Under ASC 606, if the Company finances the sale of OREO to the buyer, the Company is required to assess whether the buyer is committed to perform their obligations under the contract and whether the collectability of the transaction price is probable. Once these criteria are met, the OREO asset is derecognized and the gain or loss on sale is recorded upon the transfer of control of the property to the buyer. In determining the gain or loss on the sale, the Company adjusts the transaction price and related gain (loss) on sale if a significant financing component is present. Generally, the Company does not finance the sale of OREO properties.

Interchange Income

The Company earns interchange fees from debit and credit card holder transactions conducted through various payment networks. Interchange fees from cardholder transactions are recognized daily, concurrently with the transaction processing services provided by an outsourced technology solution.

~~F-83~~

F-73

Table of Contents

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 2221 – Parent Only Financial Information

Kearny Financial Corp. operates its wholly owned subsidiary Kearny Bank and the Bank’s wholly-owned ~~subsidiaries.~~subsidiaries 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, ~~2020~~2023 and ~~2019,~~2022, and for each of the years in the three-year period ended June 30, ~~2020.~~

2023.

Condensed Statements of Financial Condition


						June 30,
	June 30, 2020		June 30, 2019			2023		2022
	(In Thousands)					(In Thousands)
Assets					Assets

Cash and amounts due from depository institutions	$	42,632	$	106,625	Cash and amounts due from depository institutions	$	48,839	$	77,750
Investment securities held to maturity		15,000		15,000

Loans receivable		31,661		33,307	Loans receivable	26,384		28,201
Investment in subsidiary		994,696		973,059	Investment in subsidiary	794,080		788,021
Other assets		1,109		114	Other assets	827		448
Total Assets	$	1,085,098	$	1,128,105	Total Assets	$	870,130	$	894,420

Liabilities and Stockholders' Equity					Liabilities and Stockholders' Equity

Other liabilities		921		946	Other liabilities	846		420
Stockholders' equity		1,084,177		1,127,159	Stockholders' equity	869,284		894,000
Total Liabilities and Stockholders' Equity	$	1,085,098	$	1,128,105	Total Liabilities and Stockholders' Equity	$	870,130	$	894,420

Condensed Statements of Income and Comprehensive Income

	Years Ended June 30,
		2020			2019			2018		Years Ended June 30,
	(In Thousands)									2023		2022		2021
										(In Thousands)
Dividends from subsidiary	$	30,039		$	255,117		$	-	Dividends from subsidiary	$	26,282	$	156,728	$	178,918
Interest income		2,108			2,162			2,292	Interest income	1,749		1,508		1,993
Equity in undistributed earnings (loss) of subsidiaries		14,984			(212,868	)		19,420
Equity in undistributed earnings of subsidiaries									Equity in undistributed earnings of subsidiaries	14,912		(88,452)		(114,969)
Total income		47,131			44,411			21,712	Total income	42,943		69,784		65,942

Directors' compensation		332			340			283	Directors' compensation	532		530		308
Other expenses		1,853			1,922			1,740	Other expenses	1,715		1,976		2,660
Total expense		2,185			2,262			2,023	Total expense	2,247		2,506		2,968
Income before income taxes		44,946			42,149			19,689	Income before income taxes	40,696		67,278		62,974
Income tax expense		(19	)		7			93	Income tax expense	(115)		(269)		(259)
Net income	$	44,965		$	42,142		$	19,596	Net income	$	40,811	$	67,547	$	63,233
Comprehensive income	$	43,383		$	26,446		$	35,706	Comprehensive income	$	27,082	$	5,676	$	68,120

~~F-84~~

F-74

Table of Contents

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 2221 – Parent Only Financial Information (continued)

Condensed Statements of Cash Flows


	Years 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

F-75

Table of Contents

Years Ended June 30,

2020

2019

2018

(In Thousands)

Cash Flows from Operating Activities:

Net income
$
44,965

$
42,142

$
19,596

Adjustment to reconcile net income to net cash provided by operating activities:

Equity in undistributed earnings of subsidiaries

(14,984
)

212,868

(19,420
)
(Increase) decrease in other assets

(583
)

1,116

27

(Decrease) increase in other liabilities

(50
)

(9
)

761

Net Cash Provided by Operating Activities

29,348

256,117

964

Cash Flows from Investing Activities:

Repayment of loan to ESOP

1,645

1,596

1,545

Sale of investment securities available for sale

-

-

3,738

Net cash acquired in acquisition

-

-

14,297

Net Cash Provided by Investing Activities

1,645

1,596

19,580

Cash Flows from Financing Activities:

Exercise of stock options

-

423

102

Cash dividends paid

(24,121
)

(34,747
)

(20,561
)
Repurchase and cancellation of common stock of Kearny Financial Corp.

(69,782
)

(141,708
)

(142,602
)
Cancellation of shares repurchased on vesting to pay taxes

(1,083
)

(989
)

(1,370
)
Net Cash Used In Financing Activities

(94,986
)

(177,021
)

(164,431
)
Net (Decrease) Increase in Cash and Cash Equivalents

(63,993
)

80,692

(143,887
)
Cash and Cash Equivalents - Beginning

106,625

25,933

169,820

Cash and Cash Equivalents - Ending
$
42,632

$
106,625

$
25,933

~~F-85~~

KEARNY FINANCIAL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 2322 – Net Income per Common Share (EPS)

Basic EPS is based on the weighted average number of common shares actually outstanding, including both vested and unvested restricted stock awards, adjusted for ESOP shares not yet committed to be released. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock, such as outstanding stock options or unvested RSUs, were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company. Diluted EPS is calculated by adjusting the weighted average number of shares of common stock outstanding to include the effect of contracts or securities exercisable or which could be converted into common stock, if dilutive, using the treasury stock method. Shares issued and reacquired during any period are weighted for the portion of the period they were outstanding.

The following ~~is a reconciliation of~~schedule shows the ~~numerators and denominators of the basic and diluted~~Company’s earnings per share ~~computations:~~

calculations for the periods presented:

Year Ended June 30, 2020

Income
(Numerator)

Shares
(Denominator)

Per
Share
Amount

(In Thousands, Except Per Share Data)

Net income
$
44,965

Basic earnings per share, income available
to common stockholders
$
44,965

82,409

$
0.55

Effect of dilutive securities:

Stock options

-

21

$
44,965

82,430

$
0.55


	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

Year Ended June 30, 2019

Income
(Numerator)

Shares
(Denominator)

Per
Share
Amount

(In Thousands, Except Per Share Data)

Net income
$
42,142

Basic earnings per share, income available
to common stockholders
$
42,142

91,054

$
0.46

Effect of dilutive securities:

Stock options

-

46

$
42,142

91,100

$
0.46

Year Ended June 30, 2018

Income
(Numerator)

Shares
(Denominator)

Per
Share
Amount

(In Thousands, Except Per Share Data)

Net income
$
19,596

Basic earnings per share, income available
to common stockholders
$
19,596

82,587

$
0.24

Effect of dilutive securities:

Stock options

-

56

$
19,596

82,643

$
0.24

Stock options for 2,983,530, 3,115,000 ~~3,269,000~~ and ~~3,170,000~~3,246,138 shares of common stock were not considered in computing diluted earnings per share at June 30, ~~2020, 2019~~2023, 2022 and ~~2018,~~2021, respectively, because they were considered anti-dilutive.

~~F-86~~

~~KEARNY FINANCIAL CORP. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

~~Note 24 – Quarterly Results of Operations (Unaudited)~~

~~The following is a condensed summary of quarterly results of operations for the years ended~~ In addition, 497,664 and 251,905 RSUs were not considered in computing diluted earnings per share at June 30, ~~2020~~2023 and ~~2019:~~

2022, respectively, because they were considered anti-dilutive.

Year Ended June 30, 2020

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter

September 30

December 31

March 31

June 30

(In Thousands, Except Per Share Data)

Interest income
$
59,899

$
57,182

$
58,776

$
57,351

Interest expense

23,212

22,575

21,166

16,901

Net interest income

36,687

34,607

37,610

40,450

(Reversal of) provision for loan losses

(782
)

(1,465
)

6,270

174

Net interest income after provision for
loan losses

37,469

36,072

31,340

40,276

Non-interest income

3,962

4,554

6,201

5,002

Non-interest expense

26,244

26,427

28,062

26,891

Income before Income Taxes

15,187

14,199

9,479

18,387

Income taxes

3,817

3,547

225

4,698

Net Income
$
11,370

$
10,652

$
9,254

$
13,689

Net income per common share:

Basic
$
0.13

$
0.13

$
0.11

$
0.17

Diluted
$
0.13

$
0.13

$
0.11

$
0.17

Weighted average number of common shares
outstanding

Basic

84,756

82,831

81,339

80,678

Diluted

84,793

82,876

81,358

80,680

Dividends declared per common share
$
0.06

$
0.07

$
0.08

$
0.08

F-76

~~F-87~~

~~KEARNY FINANCIAL CORP. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

~~Note 24 – Quarterly Results~~Table of ~~Operations (Unaudited) (continued)~~Contents

Year Ended June 30, 2019

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter

September 30

December 31

March 31

June 30

(In Thousands, Except Per Share Data)

Interest income
$
58,206

$
60,022

$
59,657

$
59,448

Interest expense

18,026

20,673

21,019

22,302

Net interest income

40,180

39,349

38,638

37,146

Provision for (reversal of) loan losses

2,100

971

(179
)

664

Net interest income after provision for
loan losses

38,080

38,378

38,817

36,482

Non-interest income

3,182

3,309

3,676

3,388

Non-interest expense

26,457

27,270

26,771

28,745

Income before Income Taxes

14,805

14,417

15,722

11,125

Income taxes

3,659

3,649

4,305

2,314

Net Income
$
11,146

$
10,768

$
11,417

$
8,811

Net income per common share:

Basic
$
0.12

$
0.12

$
0.13

$
0.10

Diluted
$
0.12

$
0.12

$
0.13

$
0.10

Weighted average number of common shares
outstanding

Basic

95,127

92,434

89,488

87,090

Diluted

95,181

92,480

89,532

87,132

Dividends declared per common share
$
0.20

$
0.05

$
0.06

$
0.06

SIGNATURES

~~Note 25 – Subsequent Events~~

~~As defined in FASB ASC 855, “Subsequent Events~~”, subsequent events are events or transactions that occur after the balance sheet date but before financial statements are issued or available to be issued. Financial statements are considered issued when they are widely distributed to stockholders and other financial statement users for general use and reliance in a form and format that complies with U.S. GAAP.

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 was distributed to former MSB shareholders in exchange for their shares of MSB common stock. As a result of the merger, the Company acquired approximately $500 million in loans, assumed approximately $400 million in deposits and acquired 4 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 value of the assets acquired and liabilities assumed.

~~SIGNATURES~~

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.


	KEARNY FINANCIAL CORP.

Dated: August ~~28, 2020~~ 25, 2023			/s/ Craig L. Montanaro
	By:	~~By:~~	Craig L. Montanaro President and Chief Executive Officer

Pursuant to the requirement of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on August ~~28, 2020~~25, 2023 on behalf of the Registrant and in the capacities indicated.


/s/ Craig L. Montanaro		/s/ Keith Suchodolski
Craig L. Montanaro President, Chief Executive Officer and Director (Principal Executive Officer)		Keith Suchodolski Senior Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)


/s/ Theodore J. Aanensen	/s/ Raymond E. Chandonnet
Theodore J. Aanensen Director		Raymond E. Chandonnet Director

/s/ Curtland E. Fields
/s/ John N. Hopkins
Curtland E. Fields Director		John N. Hopkins Director

/s/ Catherine A. Lawton
~~John N. Hopkins~~ ~~Director~~	~~Catherine A. Lawton~~ ~~Director~~


/s/ John J. Mazur, Jr.
Catherine A. Lawton Director		John J. Mazur, Jr. Director

/s/ Joseph P. Mazza
~~John J. Mazur, Jr.~~ ~~Director~~	~~Joseph P. Mazza~~ ~~Director~~


/s/ John F. McGovern
Joseph P. Mazza Director		John F. McGovern Director

/s/ Leopold W. Montanaro
~~John F. McGovern~~ ~~Director~~	~~Leopold W. Montanaro~~ ~~Director~~


/s/ Christopher Petermann
Leopold W. Montanaro Director		Christopher Petermann Director

/s/ Charles J. Pivirotto
~~Christopher Petermann~~ ~~Director~~	~~Charles J. Pivirotto~~ ~~Director~~


/s/ John F. Regan
Charles J. Pivirotto Director		John F. Regan Director

/s/ Melvina Wong-Zaza
Melvina Wong-Zaza Director

	June 30, 2020
	Real-Estate Secured							Non-Real Estate Secured				Total
	# of Loans		Balance		LTV			# of Loans		Balance		# of Loans		Balance
	(Dollars In Thousands)
Hotel		4	$	4,421		52	%		7	$	1,566		11	$	5,987
Restaurant		15		9,529		52	%		35		3,172		50		12,701
Retail shopping center		114		297,773		54	%		2		58		116		297,831
Entertainment & recreation		4		5,211		44	%		14		784		18		5,995
Wholesale commercial business		-		-	N/A				15		20,841		15		20,841
Wholesale consumer unsecured		-		-	N/A				133		449		133		449
Total		137	$	316,934		54	%		206	$	26,870		343	$	343,804

	Multi-Family Mortgage		Non- Residential Mortgage		Commercial Business		Construction		Residential Mortgage		Home Equity Loans		Other Consumer		Total
	(In Thousands)
Amounts due:
Within one year	$	56,868	$	14,925	$	13,091	$	17,297	$	1,422	$	691	$	1,690	$	105,984
After one year:
1 to 3 years		116,562		170,326		82,916		3,664		10,796		3,084		393		387,741
3 to 5 years		248,034		117,551		15,060		-		17,649		3,959		57		402,310
5 to 10 years		1,410,898		421,046		20,475		-		116,108		25,002		45		1,993,574
10 to 15 years		79,691		83,553		2,644		-		111,845		29,913		26		307,672
Over 15 years		147,515		153,452		4,602		-		1,015,202		20,271		1,780		1,342,822
Total due after one year		2,002,700		945,928		125,697		3,664		1,271,600		82,229		2,301		4,434,119

Total amount due	$	2,059,568	$	960,853	$	138,788	$	20,961	$	1,273,022	$	82,920	$	3,991	$	4,540,103

CDs over 100,000:	At June 30,
	2020		2019		2018
	(In Thousands)
Maturity Period
Within three months	$	278,157	$	300,464	$	134,479
Three through six months		262,561		363,801		115,748
Six through twelve months		307,769		243,061		370,853
Over twelve months		166,508		410,220		528,709

Total certificates of deposit	$	1,014,995	$	1,317,546	$	1,149,789

	At June 30,
	2015		2016		2017		2018		2019		2020
Kearny Financial Corp.	$	100	$	113	$	135	$	124	$	126	$	80
NASDAQ Composite		100		98		126		156		168		213
SNL Thrift Index		100		101		119		130		117		95
SNL Thrift $5B - $10B Index		100		105		128		160		147		111
SNL Thrift MHC Index		100		106		107		112		120		101

			June 30, 2020
			Net Interest Income (“NII”)
Change in Interest Rates	Balance Sheet Composition	Measurement Period	$ Amount of NII		$ Change in NII			% Change in NII
			(Dollars In Thousands)
+300 bps	Static	One Year	$	146,062	$	(9,010	)		(5.81	)	%
+200 bps	Static	One Year		150,502		(4,570	)		(2.95	)
+100 bps	Static	One Year		154,612		(460	)		(0.30	)
0 bps	Static	One Year		155,072		-			-
-100 bps	Static	One Year		162,070		6,998			4.51

	(A)		(B)		(C)
	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights		Weighted Average Exercise Price of Outstanding Options, Warrants and Rights		Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans - Excluding Securities Reflected in Column (A)
Equity compensation plans approved by stockholders ⁽¹⁾:
2005 Stock Compensation and Incentive Plan		179,452	$	10.28		-
2016 Equity Incentive Plan		3,761,750	$	15.17		626,334

Equity compensation plans not approved by stockholders:
None.		-	$	-		-

Total		3,941,202	$	14.95		626,334


Management Report on Internal Control Over Financial Reporting						~~F-1~~ F-1
Report of Independent Registered Public Accounting Firm						~~F-2~~ F-2
Consolidated Statements of Financial Condition as of June 30, ~~2020~~2023 and ~~2019~~2022						~~F-6~~ F-5
Consolidated Statements of Income For the Years Ended June 30, ~~2020, 2019~~2023, 2022 and ~~2018~~2021						~~F-7~~ F-6
Consolidated Statements of Comprehensive Income For the Years Ended June 30, ~~2020, 2019~~2023, 2022 and ~~2018~~2021						~~F-8~~ F-7
Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended June 30, ~~2020, 2019~~2023, 2022 and ~~2018~~2021						~~F-9~~ F-8
Consolidated Statements of Cash Flows for the Years Ended June 30, ~~2020, 2019~~2023, 2022 and ~~2018~~2021						~~F-11~~ F-10
Notes to Consolidated Financial Statements						~~F-13~~ F-12

	Common Stock						Paid-In			Retained			Unearned ESOP			Accumulated Other Comprehensive
	Shares			Amount			Capital			Earnings			Shares			Income		Total
Balance - June 30, 2017		84,351		$	844		$	728,790		$	361,039		$	(34,536	)	$	1,044	$	1,057,181

Net income		-			-			-			19,596			-			-		19,596
Other comprehensive income, net of income tax expense		-			-			-			-			-			16,110		16,110
ESOP shares committed to be released (201 shares)		-			-			903			-			1,946			-		2,849
Stock option exercise		10			-			102			-			-			-		102
Stock option expense		-			-			2,016			-			-			-		2,016
Share repurchases		(10,015	)		(100	)		(142,502	)		-			-			-		(142,602	)
Restricted stock plan shares earned (288 shares)		-			-			4,330			-			-			-		4,330
Cancellation of shares issued for restricted stock awards		(158	)		(2	)		(1,368	)		-			-			-		(1,370	)
Reclassification of stranded tax effects from Accumulated Other Comprehensive Income		-			-			-			(1,381	)		-			1,381		-
Acquisition of Clifton Bancorp		25,438			254			330,440			-			-			-		330,694
Cash dividends declared ($0.25 per common share)		-			-			-			(20,158	)		-			-		(20,158	)

Balance - June 30, 2018		99,626		$	996		$	922,711		$	359,096		$	(32,590	)	$	18,535	$	1,268,748

	As Recorded by Clifton			Fair Value Adjustments				As Recorded at Acquisition
	(In Thousands)
Cash and cash equivalents	$	36,585		$	-			$	36,585
Investment securities		332,183			(5,270	)	(a)		326,913
Loans receivable		1,191,748			(74,927	)	(b)		1,116,821
Allowance for loan losses		(8,025	)		8,025		(c)		-
Premises and equipment		8,066			3,556		(d)		11,622
FHLB stock		20,357			-				20,357
Accrued interest receivable		4,142			-				4,142
Bank owned life insurance		63,231			-				63,231
Deferred income taxes, net		6,837			16,149		(e)		22,986
Core deposit and other intangibles		-			6,367		(f)		6,367
Other real estate owned		163			(23	)	(g)		140
Other assets		1,438			133		(h)		1,571
Total assets acquired	$	1,656,725		$	(45,990	)		$	1,610,735

Deposits	$	944,988		$	4,801		(i)	$	949,789
FHLB borrowings		421,400			(7,268	)	(j)		414,132
Advance payments by borrowers for taxes		9,777			-				9,777
Other liabilities		5,288			112		(k)		5,400
Total liabilities assumed	$	1,381,453		$	(2,355	)		$	1,379,098

Net assets acquired								$	231,637
Purchase price									333,941
Goodwill recorded in Merger								$	102,304

	Unaudited Supplemental
	Pro Forma Information
	Year Ended June 30, 2018


Net interest income	$	169,094
Non-interest income		15,683
Non-interest expense		113,816
Net income available to common stockholders		40,216
Pro forma earnings per common share from continuing operations:
Basic	$	0.37
Diluted	$	0.37

Balance of Loans Receivable
At June 30, 2020

	Multi-Family Mortgage		Non- Residential Mortgage		Commercial Business		Construction		Residential Mortgage		Home Equity Loans		Other Consumer		Total
	(In Thousands)
Balance of loans receivable:

Loans acquired with deteriorated credit quality	$	-	$	-	$	222	$	-	$	77	$	-	$	-	$	299
Loans individually evaluated for impairment		2,962		24,048		5,567		-		10,689		1,557		-		44,823
Loans collectively evaluated for impairment		2,056,606		936,805		132,999		20,961		1,262,256		81,363		3,991		4,494,981

Total loans	$	2,059,568	$	960,853	$	138,788	$	20,961	$	1,273,022	$	82,920	$	3,991	$	4,540,103
Unaccreted yield adjustments																(41,706	)
Loans receivable, net of yield adjustments															$	4,498,397

Allowance for Loan Losses
Year Ended June 30, 2020

	Multi-Family Mortgage		Non- Residential Mortgage			Commercial Business			Construction		Residential Mortgage		Home Equity Loans		Other Consumer			Total
	(In Thousands)
Changes in the allowance for loan losses for the year ended June 30, 2020:

At June 30, 2019:	$	16,959	$	9,672		$	2,467		$	136	$	3,377	$	491	$	172		$	33,274

Total charge offs		-		-			(50	)		-		-		-		(139	)		(189	)
Total recoveries		-		10			2			-		-		-		33			45
Total provisions		3,957		(919	)		(493	)		100		1,483		77		(8	)		4,197

Total allowance for loan losses	$	20,916	$	8,763		$	1,926		$	236	$	4,860	$	568	$	58		$	37,327

Allowance for Loan Losses
Year Ended June 30, 2019

	Multi-Family Mortgage		Non- Residential Mortgage			Commercial Business			Construction			Residential Mortgage			Home Equity Loans		Other Consumer			Total
	(In Thousands)
Changes in the allowance for loan losses for the year ended June 30, 2019:

At June 30, 2018:	$	14,946	$	9,787		$	2,552		$	258		$	2,479		$	430	$	413		$	30,865

Total charge offs		-		(54	)		(861	)		-			(83	)		-		(285	)		(1,283	)
Total recoveries		-		6			47			-			-			-		83			136
Total provisions		2,013		(67	)		729			(122	)		981			61		(39	)		3,556

Total allowance for loan losses	$	16,959	$	9,672		$	2,467		$	136		$	3,377		$	491	$	172		$	33,274

Performance Status of Loans Receivable
At June 30, 2020

	Multi-Family Mortgage		Non- Residential Mortgage		Commercial Business		Construction		Residential Mortgage		Home Equity Loans		Other Consumer		Total
	(In Thousands)
Performing	$	2,056,606	$	936,917	$	138,196	$	20,961	$	1,264,663	$	82,078	$	3,986	$	4,503,407
Nonperforming:
90 days and over past due accruing		-		-		-		-		-		-		5		5
Nonaccrual		2,962		23,936		592		-		8,359		842		-		36,691
Total nonperforming		2,962		23,936		592		-		8,359		842		5		36,696

Total loans	$	2,059,568	$	960,853	$	138,788	$	20,961	$	1,273,022	$	82,920	$	3,991	$	4,540,103

Impairment Status of Loans Receivable
At or Year Ended June 30, 2020

	Multi-Family Mortgage		Non- Residential Mortgage			Commercial Business			Construction		Residential Mortgage			Home Equity Loans		Other Consumer		Total
	(In Thousands)
Carrying value of impaired loans:

Non-impaired loans	$	2,056,606	$	936,805		$	132,999		$	20,961	$	1,262,256		$	81,363	$	3,991	$	4,494,981
Impaired loans:
Impaired loans with no allowance for impairment		2,962		22,516			5,622					10,659			1,557		-		43,316
Impaired loans with allowance for impairment:
Recorded investment		-		1,532			167			-		107			-		-		1,806
Allowance for impairment		-		(41	)		(47	)		-		(1	)		-		-		(89	)
Balance of impaired loans net of allowance for impairment		-		1,491			120			-		106			-		-		1,717
Total impaired loans, excluding allowance for impairment:		2,962		24,048			5,789			-		10,766			1,557		-		45,122

Total loans	$	2,059,568	$	960,853		$	138,788		$	20,961	$	1,273,022		$	82,920	$	3,991	$	4,540,103

Unpaid principal balance of impaired loans:
Total impaired loans	$	3,544	$	25,898		$	8,778		$	73	$	12,908		$	1,950	$	-	$	53,151

For the year ended June 30, 2020:
Average balance of impaired loans	$	2,334	$	13,450		$	3,934		$	-	$	10,761		$	1,568	$	-	$	32,047
Interest earned on impaired loans	$	28	$	2		$	273		$	-	$	122		$	34	$	-	$	459

	Year Ended June 30, 2020
	Amount of Gain (Loss) Recognized in OCI on Derivatives			Location of Gain (Loss) Reclassified from Accumulated OCI into Income	Amount of Gain (Loss) Reclassified from Accumulated OCI into Income
	(In Thousands)
Derivatives in cash flow hedging relationships:
Interest rate contracts	$	(21,264	)	Interest expense	$	1,870
Total	$	(21,264	)		$	1,870

	Year Ended June 30, 2020
	Income (Numerator)		Shares (Denominator)		Per Share Amount
	(In Thousands, Except Per Share Data)

Net income	$	44,965
Basic earnings per share, income available to common stockholders	$	44,965		82,409	$	0.55
Effect of dilutive securities:
Stock options		-		21
	$	44,965		82,430	$	0.55

	Year Ended June 30, 2020
	First Quarter			Second Quarter			Third Quarter		Fourth Quarter
	September 30			December 31			March 31		June 30
	(In Thousands, Except Per Share Data)
Interest income	$	59,899		$	57,182		$	58,776	$	57,351
Interest expense		23,212			22,575			21,166		16,901
Net interest income		36,687			34,607			37,610		40,450
(Reversal of) provision for loan losses		(782	)		(1,465	)		6,270		174
Net interest income after provision for loan losses		37,469			36,072			31,340		40,276
Non-interest income		3,962			4,554			6,201		5,002
Non-interest expense		26,244			26,427			28,062		26,891
Income before Income Taxes		15,187			14,199			9,479		18,387
Income taxes		3,817			3,547			225		4,698
Net Income	$	11,370		$	10,652		$	9,254	$	13,689

Net income per common share:
Basic	$	0.13		$	0.13		$	0.11	$	0.17
Diluted	$	0.13		$	0.13		$	0.11	$	0.17

Weighted average number of common shares outstanding
Basic		84,756			82,831			81,339		80,678
Diluted		84,793			82,876			81,358		80,680

Dividends declared per common share	$	0.06		$	0.07		$	0.08	$	0.08

~~Maryland~~

~~30-0870244~~

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer
Identification No.)

120 Passaic Avenue, Fairfield, New Jersey

(Address of Principal Executive Offices)

(Zip Code)