Kearny Financial Corp. Announces First Quarter Fiscal 2025 Results and Declaration of Cash Dividend
FAIRFIELD, N.J., Oct. 24, 2024 (GLOBE NEWSWIRE) -- Kearny Financial Corp. (NASDAQ GS: KRNY) (the "Company"), the holding company of Kearny Bank (the "Bank"), reported net income for the quarter ended September 30, 2024 of $6.1 million, or $0.10 per diluted share, compared to a GAAP net loss of $90.1 million, or $1.45 per diluted share, for the quarter ended June 30, 2024. The net loss for the quarter ended June 30, 2024 included a goodwill impairment of $95.3 million, as previously disclosed. Excluding this item, net income for the quarter ended September 30, 2024 increased $496,000 from adjusted net income of $5.6 million for the quarter ended June 30, 2024.
The Company also announced that its Board of Directors has declared a quarterly cash dividend of $0.11 per share, payable on November 20, 2024, to stockholders of record as of November 6, 2024.
Craig L. Montanaro, President and Chief Executive Officer, commented, "I'm pleased to report that this quarter saw our net interest margin reach its inflection point and begin to ascend. Despite four basis points of quarterly compression, each successive month of the quarter reflected an increase in our net interest margin. The recent fed funds rate reduction of 50 basis points has already begun translating into a cost of funds benefit in October. Additional fed funds rate cuts, which the market is anticipating, will be a positive catalyst for our liability-sensitive balance sheet."
Mr. Montanaro continued, "Regarding asset quality, our loan portfolio remains strong. Minimal exposure to New York City rent-regulated multifamily and office real estate, coupled with our robust commercial real estate ACL coverage ratios and peer-leading charge-off ratios, leaves us well-positioned in the current environment."
Balance Sheet
Total assets were $7.77 billion at September 30, 2024, an increase of $88.9 million, or 1.2%, from June 30, 2024.
Investment securities totaled $1.20 billion at September 30, 2024, a decrease of $5.5 million, or 0.5%, from June 30, 2024.
Loans receivable totaled $5.78 billion at September 30, 2024, an increase of $51.5 million, or 0.9%, from June 30, 2024, primarily reflecting growth in one- to four-family residential mortgage loans and construction loans.
Deposits were $5.47 billion at September 30, 2024, an increase of $312.4 million, or 6.1%, from June 30, 2024. This increase was largely the result of a reallocation from Federal Home Loan Bank ("FHLB") advances into brokered certificates of deposits, due to the relatively more favorable economics of brokered deposits compared to advances.
Borrowings were $1.48 billion at September 30, 2024, a decrease of $229.9 million, or 13.4%, from June 30, 2024, primarily reflecting a decrease in FHLB borrowings offset by an increase in brokered certificates of deposits, as noted above.
At September 30, 2024, the Company maintained available secured borrowing capacity with the FHLB and the Federal Reserve Discount Window of $2.06 billion, an increase of $240.0 million from June 30, 2024, and represents 26.5% of total assets.
Earnings
Net Interest Income and Net Interest Margin
Net interest margin contracted four basis points to 1.80% for the quarter ended September 30, 2024. The decrease for the quarter was driven by increases in the cost and average balances of interest-bearing deposits and a decrease in the average balance of interest-earning assets, partially offset by decreases in the average balances of interest-bearing borrowings and higher yields on interest-earning assets.
For the quarter ended September 30, 2024, net interest income decreased $830,000 to $32.4 million from $33.3 million for the quarter ended June 30, 2024. Included in net interest income for the quarters ended September 30, 2024 and June 30, 2024, respectively, was purchase accounting accretion of $649,000 and $612,000, and loan prepayment penalty income of $52,000 and $366,000.
Non-Interest Income
Non-interest income decreased $1.2 million to income of $4.6 million for the quarter ended September 30, 2024, from $5.8 million for the quarter ended June 30, 2024. Included in non-interest income for the quarter ended June 30, 2024 was a non-recurring contract renewal bonus of $750,000 and $1.1 million in non-recurring payments on two life insurance policies, partially offset by a $392,000 non-recurring exchange charge related to the December 2023 Bank Owned Life Insurance ("BOLI") restructure. No such non-recurring items were recorded during the quarter ended September 30, 2024.
Income from BOLI decreased $642,000 to $2.6 million for the quarter ended September 30, 2024 from $3.2 million for the quarter ended June 30, 2024, primarily driven by the non-recurring items recorded for the quarter ended June 30, 2024, as disclosed above.
Non-Interest Expense
For the quarter ended September 30, 2024, non-interest expense decreased $96.8 million, or 76.5%, to $29.8 million from $126.6 million for the quarter ended June 30, 2024, driven by a non-cash goodwill impairment recognized in the prior comparative period. Excluding the goodwill impairment, adjusted non-interest expense increased $605,000 from $29.2 million, primarily driven by increases in salary and benefits expense and other expense.
Salary and benefits expense increased $232,000 primarily driven by annual merit increases and higher payroll taxes, partially offset by a non-recurring decrease in stock-based compensation.
Other expense increased $344,000 primarily driven by an increase of $243,000 in the provision for credit losses on off balance sheet commitments.
Income Taxes
Income tax expense totaled $1.1 million for the quarter ended September 30, 2024, compared to an income tax benefit of $917,000 for the quarter ended June 30, 2024. The increase in income tax expense was primarily due to higher pre-tax income in the current quarter, coupled with a partial reversal of the deferred tax liability associated with the previously recorded goodwill impairment in the prior quarter.
Asset Quality
The balance of non-performing assets remained steady at $39.9 million, or 0.51% of total assets, at September 30, 2024, and $39.9 million, or 0.52% of total assets, at June 30, 2024, respectively.
Net charge-offs totaled $124,000, or 0.01% of average loans, on an annualized basis, for the quarter ended September 30, 2024, compared to $3.5 million, or 0.25% of average loans, on an annualized basis, for the quarter ended June 30, 2024.
For the quarter ended September 30, 2024, the Company recorded a provision for credit losses of $108,000, compared to $3.5 million for the quarter ended June 30, 2024. The provision for credit loss expense for the quarter ended September 30, 2024 was primarily driven by loan growth.
The allowance for credit losses ("ACL") was $44.9 million, or 0.78% of total loans, at September 30, 2024 and remained unchanged from June 30, 2024.
Capital
For the quarter ended September 30, 2024, book value per share decreased $0.06, or 0.5%, to $11.64 while tangible book value per share decreased $0.05, or 0.5%, to $9.85.
At September 30, 2024, total stockholders' equity included after-tax net unrealized losses on securities available for sale of $76.0 million, partially offset by after-tax unrealized gains on derivatives of $11.0 million. After-tax net unrecognized losses on securities held to maturity of $8.2 million were not reflected in total stockholders' equity.
At September 30, 2024, the Company's tangible equity to tangible assets ratio equaled 8.31% and the regulatory capital ratios of both the Company and the Bank were in excess of the levels required by federal banking regulators to be classified as "well-capitalized" under regulatory guidelines.
This earnings release should be read in conjunction with Kearny Financial Corp.'s Q1 2025 Investor Presentation, a copy of which is available through the Investor Relations link located at the bottom of the page of our website at www.kearnybank.com and via a Current Report on Form 8-K on the website of the Securities and Exchange Commission at www.sec.gov.
Statements contained in this news release that are not historical facts are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties which could cause actual results to differ materially from those currently anticipated due to a number of factors, which include, but are not limited to, factors discussed in documents filed by the Company with the Securities and Exchange Commission from time to time. The Company does not undertake and specifically disclaims any obligation to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Company.
Category: Earnings
For further information contact:Keith Suchodolski, Senior Executive Vice President and Chief Operating Officer, orSean Byrnes, Executive Vice President and Chief Financial OfficerKearny Financial Corp.(973) 244-4500
Linked-Quarter Comparative Financial Analysis
Kearny Financial Corp.Consolidated Balance Sheets(Unaudited)
(Dollars and Shares in Thousands,Except Per Share Data)
September 30,2024
June 30,2024
Variance or Change
Variance or Change Pct.
Assets
Cash and cash equivalents
$
155,574
$
63,864
$
91,710
143.6
%
Securities available for sale
1,070,811
1,072,833
(2,022
)
-0.2
%
Securities held to maturity
132,256
135,742
(3,486
)
-2.6
%
Loans held-for-sale
8,866
6,036
2,830
46.9
%
Loans receivable
5,784,246
5,732,787
51,459
0.9
%
Less: allowance for credit losses on loans
(44,923
)
(44,939
)
(16
)
—%
Net loans receivable
5,739,323
5,687,848
51,475
0.9
%
Premises and equipment
45,189
44,940
249
0.6
%
Federal Home Loan Bank stock
57,706
80,300
(22,594
)
-28.1
%
Accrued interest receivable
29,467
29,521
(54
)
-0.2
%
Goodwill
113,525
113,525
—
—
%
Core deposit intangible
1,805
1,931
(126
)
-6.5
%
Bank owned life insurance
300,186
297,874
2,312
0.8
%
Deferred income taxes, net
50,131
50,339
(208
)
-0.4
%
Other assets
67,540
98,708
(31,168
)
-31.6
%
Total assets
$
7,772,379
$
7,683,461
$
88,918
1.2
%
Liabilities
Deposits:
Non-interest-bearing
$
592,099
$
598,366
$
(6,267
)
-1.0
%
Interest-bearing
4,878,413
4,559,757
318,656
7.0
%
Total deposits
5,470,512
5,158,123
312,389
6.1
%
Borrowings
1,479,888
1,709,789
(229,901
)
-13.4
%
Advance payments by borrowers for taxes
17,824
17,409
415
2.4
%
Other liabilities
52,618
44,569
8,049
18.1
%
Total liabilities
7,020,842
6,929,890
90,952
1.3
%
Stockholders' Equity
Common stock
646
644
2
0.3
%
Paid-in capital
493,523
493,680
(157
)
—
%
Retained earnings
342,522
343,326
(804
)
-0.2
%
Unearned ESOP shares
(20,430
)
(20,916
)
486
2.3
%
Accumulated other comprehensive loss
(64,724
)
(63,163
)
(1,561
)
-2.5
%
Total stockholders' equity
751,537
753,571
(2,034
)
-0.3
%
Total liabilities and stockholders' equity
$
7,772,379
$
7,683,461
$
88,918
1.2
%
Consolidated capital ratios
Equity to assets
9.67
%
9.81
%
-0.14
%
Tangible equity to tangible assets (1)
8.31
%
8.43
%
-0.12
%
Share data
Outstanding shares
64,580
64,434
146
0.2
%
Book value per share
$
11.64
$
11.70
$
(0.06
)
-0.5
%
Tangible book value per share (2)
$
9.85
$
9.90
$
(0.05
)
-0.5
%
_________________________
(1) Tangible equity equals total stockholders' equity reduced by goodwill and core deposit intangible assets. Tangible assets equals total assets reduced by goodwill and core deposit intangible assets. (2) Tangible book value equals total stockholders' equity reduced by goodwill and core deposit intangible assets.
Kearny Financial Corp.Consolidated Statements of Income (Loss)(Unaudited)
(Dollars and Shares in Thousands,Except Per Share Data)
Three Months Ended
Variance or Change
Variance or Change Pct.
September 30,2024
June 30,2024
Interest income
Loans
$
66,331
$
65,819
$
512
0.8
%
Taxable investment securities
14,384
14,802
(418
)
-2.8
%
Tax-exempt investment securities
71
80
(9
)
-11.3%
Other interest-earning assets
2,466
2,289
177
7.7
%
Total interest income
83,252
82,990
262
0.3
%
Interest expense
Deposits
35,018
32,187
2,831
8.8
%
Borrowings
15,788
17,527
(1,739
)
-9.9
%
Total interest expense
50,806
49,714
1,092
2.2
%
Net interest income
32,446
33,276
(830
)
-2.5
%
Provision for credit losses
108
3,527
(3,419
)
-96.9
%
Net interest income after provision for credit losses
32,338
29,749
2,589
8.7
%
Non-interest income
Fees and service charges
635
580
55
9.5
%
Gain on sale of loans
200
111
89
80.2
%
Income from bank owned life insurance
2,567
3,209
(642
)
-20.0
%
Electronic banking fees and charges
391
1,130
(739
)
-65.4
%
Other income
833
776
57
7.3
%
Total non-interest income
4,626
5,806
(1,180
)
-20.3
%
Non-interest expense
Salaries and employee benefits
17,498
17,266
232
1.3
%
Net occupancy expense of premises
2,798
2,738
60
2.2
%
Equipment and systems
3,860
3,785
75
2.0
%
Advertising and marketing
342
480
(138
)
-28.8
%
Federal deposit insurance premium
1,563
1,532
31
2.0
%
Directors' compensation
361
360
1
0.3
%
Goodwill impairment
—
97,370
(97,370
)
-100.0
%
Other expense
3,364
3,020
344
11.4
%
Total non-interest expense
29,786
126,551
(96,765
)
-76.5
%
Income (loss) before income taxes
7,178
(90,996
)
98,174
107.9
%
Income taxes
1,086
(917
)
2,003
-218.4
%
Net income (loss)
$
6,092
$
(90,079
)
$
96,171
106.8
%
Net income (loss) per common share (EPS)
Basic
$
0.10
$
(1.45
)
$
1.55
Diluted
$
0.10
$
(1.45
)
$
1.55
Dividends declared
Cash dividends declared per common share
$
0.11
$
0.11
$
—
Cash dividends declared
$
6,896
$
6,903
$
(7
)
Dividend payout ratio
113.2
%
-7.7
%
120.9
%
Weighted average number of common shares outstanding
Basic
62,389
62,254
135
Diluted
62,420
62,254
166
Kearny Financial Corp.Average Balance Sheet Data(Unaudited)
(Dollars in Thousands)
Three Months Ended
Variance or Change
Variance or Change Pct.
September 30,2024
June 30,2024
Assets
Interest-earning assets:
Loans receivable, including loans held for sale
$
5,761,593
$
5,743,008
$
18,585
0.3
%
Taxable investment securities
1,314,945
1,343,541
(28,596
)
-2.1
%
Tax-exempt investment securities
12,244
13,737
(1,493
)
-10.9
%
Other interest-earning assets
131,981
128,257
3,724
2.9
%
Total interest-earning assets
7,220,763
7,228,543
(7,780
)
-0.1
%
Non-interest-earning assets
467,670
466,537
1,133
0.2
%
Total assets
$
7,688,433
$
7,695,080
$
(6,647
)
-0.1
%
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Deposits:
Interest-bearing demand
$
2,282,608
$
2,310,521
$
(27,913
)
-1.2
%
Savings
668,240
631,622
36,618
5.8
%
Certificates of deposit
1,755,589
1,613,798
141,791
8.8
%
Total interest-bearing deposits
4,706,437
4,555,941
150,496
3.3
%
Borrowings:
Federal Home Loan Bank advances
1,325,583
1,507,192
(181,609
)
-12.0
%
Other borrowings
237,011
228,461
8,550
3.7
%
Total borrowings
1,562,594
1,735,653
(173,059
)
-10.0
%
Total interest-bearing liabilities
6,269,031
6,291,594
(22,563
)
-0.4
%
Non-interest-bearing liabilities:
Non-interest-bearing deposits
599,095
589,438
9,657
1.6
%
Other non-interest-bearing liabilities
69,629
62,978
6,651
10.6
%
Total non-interest-bearing liabilities
668,724
652,416
16,308
2.5
%
Total liabilities
6,937,755
6,944,010
(6,255
)
-0.1
%
Stockholders' equity
750,678
751,070
(392
)
-0.1
%
Total liabilities and stockholders' equity
$
7,688,433
$
7,695,080
$
(6,647
)
-0.1
%
Average interest-earning assets to average interest-bearing liabilities
115.18
%
114.89
%
0.29
%
0.3
%
Kearny Financial Corp.Performance Ratio Highlights(Unaudited)
Three Months Ended
Variance or Change
September 30,2024
June 30,2024
Average yield on interest-earning assets:
Loans receivable, including loans held for sale
4.61
%
4.58
%
0.03
%
Taxable investment securities
4.38
%
4.41
%
-0.03
%
Tax-exempt investment securities (1)
2.32
%
2.32
%
—
%
Other interest-earning assets
7.47
%
7.14
%
0.33
%
Total interest-earning assets
4.61
%
4.59
%
0.02
%
Average cost of interest-bearing liabilities:
Deposits:
Interest-bearing demand
3.13
%
3.06
%
0.07
%
Savings
1.05
%
0.63
%
0.42
%
Certificates of deposit
3.51
%
3.35
%
0.16
%
Total interest-bearing deposits
2.98
%
2.83
%
0.15
%
Borrowings:
Federal Home Loan Bank advances
3.82
%
3.86
%
-0.04
%
Other borrowings
5.28
%
5.24
%
0.04
%
Total borrowings
4.04
%
4.04
%
—
%
Total interest-bearing liabilities
3.24
%
3.16
%
0.08
%
Interest rate spread (2)
1.37
%
1.43
%
-0.06
%
Net interest margin (3)
1.80
%
1.84
%
-0.04
%
Non-interest income to average assets (annualized)
0.24
%
0.30
%
-0.06
%
Non-interest expense to average assets (annualized)
1.55
%
6.58
%
-5.03
%
Efficiency ratio (4)
80.35
%
323.81
%
-243.46
%
Return on average assets (annualized)
0.32
%
-4.68
%
5.00
%
Return on average equity (annualized)
3.25
%
-47.97
%
51.22
%
Return on average tangible equity (annualized) (5)
3.89
%
3.33
%
0.56
%
_________________________
(1) The yield on tax-exempt investment securities has not been adjusted to reflect their tax-effective yield.(2) Interest income divided by average interest-earning assets less interest expense divided by average interest-bearing liabilities.(3) Net interest income divided by average interest-earning assets.(4) Non-interest expense divided by the sum of net interest income and non-interest income.(5) Average tangible equity equals total average stockholders' equity reduced by average goodwill and average core deposit intangible assets.
Five-Quarter Financial Trend Analysis
Kearny Financial Corp.Consolidated Balance Sheets
(Dollars and Shares in Thousands,Except Per Share Data)
September 30,2024
June 30,2024
March 31,2024
December 31,2023
September 30,2023
(Unaudited)
(Audited)
(Unaudited)
(Unaudited)
(Unaudited)
Assets
Cash and cash equivalents
$
