Kearny Financial Corp. Reports Fiscal 2021 Third Quarter Results

Источник: Nasdaq GlobeNewswire / 29 апр 2021 15:15:01 America/Chicago

FAIRFIELD, N.J., April 29, 2021 (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 March 31, 2021 of $16.4 million, or $0.20 per diluted share, compared to $16.9 million, or $0.20 per diluted share, for the quarter ended December 31, 2020.

Craig L. Montanaro, President and Chief Executive Officer, commented, “This quarter’s performance was highlighted by double-digit margin expansion largely resulting from a 22 basis point decrease in the cost of our interest-bearing liabilities. The success we have had in shifting our funding mix, controlling operating expenses and building valuable long-term lending and deposit relationships serves us well today and into the future.”

With regard to the current credit environment, Mr. Montanaro further noted, “Despite an increase of $4.2 million in reserves on individually evaluated loans, largely attributable to two non-performing commercial real estate loans, asset quality remains solid. Our fortress-like balance sheet, comprised of significant levels of excess capital and a robust allowance for credit losses, positions us to withstand the ongoing economic impact of the pandemic while allowing us to take advantage of strategic capital deployment opportunities as they may arise.”

Balance Sheet

Deposits increased by $61.8 million to $5.37 billion at March 31, 2021 from $5.31 billion at December 31, 2020, reflecting growth of $227.8 million, or 6.8%, in core non-maturity deposits.
Loans receivable decreased by $30.4 million to $4.80 billion at March 31, 2021 from $4.83 billion at December 31, 2020. Included in the net decrease for the period was a reduction of $18.3 million in Paycheck Protection Program (“PPP”) loan balances.
Investment securities increased to $1.81 billion, or 24.5% of total assets, at March 31, 2021 from $1.73 billion at December 31, 2020, while borrowings remained relatively flat, increasing to $865.8 million, or 11.8% of total assets, from $865.7 million, or 11.8% of total assets, for those same comparative periods.

Earnings

Net Interest Income and Net Interest Margin

Net interest income increased by $3.1 million to $47.6 million for the quarter ended March 31, 2021 from $44.6 million for the quarter ended December 31, 2020. This increase was the result of a $3.2 million reduction in interest expense that was partially offset by an $80,000 decline in interest income. Included in net interest income was purchase accounting accretion of $4.8 million and $3.7 million, for the quarters ended March 31, 2021 and December 31, 2020, respectively.
Net interest margin increased by 19 basis points to 2.83% for the quarter ended March 31, 2021 from 2.64% for the quarter ended December 31, 2020. For those same comparative periods, yield on interest-earning assets increased by one basis point to 3.46% while the cost of interest-bearing liabilities decreased by 22 basis points to 0.75%.

Non-Interest Income

Fees and service charges totaled $1.3 million for the quarter ended March 31, 2021 compared to $1.9 million for the quarter ended December 31, 2020. This decrease was largely attributable to a decrease of $488,000 in loan pre-payment penalty income to $871,000 for the quarter ended March 31, 2021.
Gain on sale of loans totaled $943,000 for the quarter ended March 31, 2021 compared to $2.4 million for the quarter ended December 31, 2020. This decrease was largely attributable to the strategic decision to retain a greater percentage of originated loans within the portfolio, compared to the prior quarter.
Gain on sale and call of securities was $18,000 for the quarter ended March 31, 2021 compared to $813,000 for the quarter ended December 31, 2020. This decrease was largely attributable to a gain recorded in the prior comparative period in connection with a previously disclosed wholesale restructuring transaction.
Included in other non-interest income was a non-recurring gain of $837,000 attributable to the sale of two properties which previously served as Kearny Bank retail branch locations and were sold in connection with branch consolidation activities.

Non-Interest Expense

Non-interest expense decreased by $694,000 to $29.8 million for the quarter ended March 31, 2021 compared to $30.5 million for the quarter ended December 31, 2020. The decrease was largely attributable to $796,000 in debt extinguishment expense recognized in the prior comparative period with no such expense recognized in the current period.
Included in other non-interest expense for the quarter ended March 31, 2021 was an asset impairment charge of $375,000 related to the consolidation and closure of one additional branch location.
The efficiency and non-interest expense ratios were 56.15% and 1.62%, respectively, for the quarter ended March 31, 2021 as compared to 59.01% and 1.65%, respectively, for the quarter ended December 31, 2020.

Income Taxes

Income tax expense totaled $5.7 million for the quarter ended March 31, 2021 compared to $5.6 million for the quarter ended December 31, 2020, resulting in effective tax rates of 25.9% and 24.9%, respectively.

Performance Highlights

Return on average assets was 0.89% for the quarter ended March 31, 2021 as compared to 0.92% for the quarter ended December 31, 2020.
Return on average equity was 6.07% for the quarters ended March 31, 2021 and December 31, 2020. Return on average tangible equity was 7.57% for the quarter ended March 31, 2021 as compared to 7.52% for the quarter ended December 31, 2020.

Asset Quality

The balance of non-performing assets remained relatively stable at $71.6 million, or 0.97% of total assets, at March 31, 2021 compared $71.7 million, or 0.98% of total assets, at December 31, 2020.
Based on Section 4013 of the CARES Act, the Consolidated Appropriations Act, 2021 and related guidance promulgated by federal banking regulators, qualifying loan modifications, including short-term payment deferrals, are not considered to be troubled debt restructurings. As of March 31, 2021, the Company had active payment deferrals on 32 loans totaling $52.9 million, representing 1.10% of total loans.
Net charge offs totaled $750,000 for the quarter ended March 31, 2021 compared to $109,000 for the quarter ended December 31, 2020, reflecting annualized net charge off rates of 0.06% and 0.01% for the those same comparative periods. Net charge offs for the quarter were largely attributable to one Small Business Administration 7a loan totaling $675,000.
Provision for credit losses totaled $1.1 million for the quarter ended March 31, 2021 compared to a provision for credit losses reversal of $1.4 million for the quarter ended December 31, 2020. The comparatively higher level of provision primarily reflected an increase in reserves on individually evaluated loans of $4.2 million, partially offset by a release of reserves within the one- to four-family residential segments, reflecting the improving credit risk outlook for that asset class.
The increase in reserves on individually evaluated loans, noted above, was largely attributable to two non-performing commercial real estate loans, with principal balances totaling $9.8 million, secured by properties located in New York City.
The Allowance for Credit Losses (“ACL”) increased to $63.8 million at March 31, 2021 from $63.4 million at December 31, 2020, with such balances reflecting an ACL to total loans ratio of 1.32% and 1.30%, respectively, as of those dates.

Liquidity & Capital

At March 31, 2021, liquid assets included $109.0 million of short-term cash and equivalents supplemented by $1.78 billion of investment securities classified as available for sale. The Company had the capacity to borrow additional funds totaling $615.0 million via unsecured lines of credit and $1.81 billion and $257.0 million, without pledging additional collateral, from the FHLB of New York and Federal Reserve Bank, respectively.
During the quarter ended March 31, 2021, the Company repurchased 3,026,564 shares of common stock at a cost of $34.9 million, or $11.52 per share.
For the quarter ended March 31, 2021, book value per share increased by $0.12 to $12.98 while tangible book value per share increased by $0.03 to $10.36.
At March 31, 2021, the Company’s ratio of tangible equity to tangible assets equaled 11.89%. At March 31, 2021, the regulatory capital ratios, of both the Company and the Bank were in excess of the levels required by federal banking regulators to be classified as “well-capitalized” under regulatory guidelines.

Statements contained in this news release that are not historical facts are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties which could cause actual results to differ materially from those currently anticipated due to a number of factors, which include, but are not limited to, factors discussed in documents filed by the Company with the Securities and Exchange Commission from time to time. The Company does not undertake and specifically disclaims any obligation to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Company.

In addition, the COVID-19 pandemic is having an adverse impact on the Company, its customers and the communities it serves. Given its ongoing and dynamic nature, it is difficult to predict the full impact of the COVID-19 outbreak on our business. 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 or remain open. As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, we could be subject to any of the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations: the demand for our products and services may decline, making it difficult to grow assets and income; if the economy is unable to substantially reopen or remain open, and high levels of unemployment continue for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income; collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase; our allowance for credit losses may increase if borrowers experience financial difficulties, which will adversely affect our net income; the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us; as the result of the decline in the Federal Reserve Board’s target federal funds rate to near 0%, the yield on our assets may decline to a greater extent than the decline in our cost of interest-bearing liabilities, reducing our net interest margin and spread and reducing net income; due to a decline in our stock price or other factors, goodwill may become impaired and be required to be written down; and our cyber security risks are increased as the result of an increase in the number of employees working remotely.

Category: Earnings

Linked-Quarter Comparative Financial Analysis

Summary Balance Sheet	At									Variance
(Dollars and Shares in Thousands,	March 31,			December 31,			Variance			or Change
Except Per Share Data, Unaudited)	2021			2020			or Change			Pct.
Assets
Cash and cash equivalents	$	108,991		$	129,694		$	(20,703	)		-16.0	%
Securities available for sale		1,778,970			1,695,893			83,077			4.9	%
Securities held to maturity		27,168			29,549			(2,381	)		-8.1	%
Loans held-for-sale		5,172			12,601			(7,429	)		-59.0	%
Loans receivable		4,798,239			4,828,634			(30,395	)		-0.6	%
Less allowance for credit losses on loans		(63,762	)		(63,386	)		(376	)		0.6	%
Net loans receivable		4,734,477			4,765,248			(30,771	)		-0.6	%
Premises and equipment		60,360			61,181			(821	)		-1.3	%
Federal Home Loan Bank stock		45,578			45,578			-			0.0	%
Accrued interest receivable		20,562			19,826			736			3.7	%
Goodwill		210,895			210,895			-			0.0	%
Core deposit intangible		3,888			4,151			(263	)		-6.3	%
Bank owned life insurance		281,765			280,235			1,530			0.5	%
Deferred income taxes, net		32,230			30,846			1,384			4.5	%
Other real estate owned		178			178			-			0.0	%
Other assets		47,760			49,278			(1,518	)		-3.1	%
Total assets	$	7,357,994		$	7,335,153		$	22,841			0.3	%

Liabilities
Deposits	$	5,374,452		$	5,312,613		$	61,839			1.2	%
Borrowings		865,763			865,651			112			0.0	%
Advance payments by borrowers for taxes		15,300			16,100			(800	)		-5.0	%
Other liabilities		38,667			48,448			(9,781	)		-20.2	%
Total liabilities		6,294,182			6,242,812			51,370			0.8	%

Stockholders' Equity
Common stock		820			849			(29	)		-3.4	%
Paid-in capital		691,280			724,389			(33,109	)		-4.6	%
Retained earnings		397,594			388,376			9,218			2.4	%
Unearned ESOP shares		(27,239	)		(27,726	)		487			-1.8	%
Accumulated other comprehensive income		1,357			6,453			(5,096	)		-79.0	%
Total stockholders' equity		1,063,812			1,092,341			(28,529	)		-2.6	%
Total liabilities and stockholders' equity	$	7,357,994		$	7,335,153		$	22,841			0.3	%

Consolidated capital ratios
Equity to assets		14.46	%		14.89	%		-0.43	%
Tangible equity to tangible assets ⁽¹⁾		11.89	%		12.32	%		-0.44	%

Share data
Outstanding shares		81,943			84,938			(2,995	)		-3.5	%
Book value per share	$	12.98		$	12.86		$	0.12			0.9	%
Tangible book value per share⁽²⁾	$	10.36		$	10.33		$	0.03			0.3	%

_______________________
(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.

Summary Income Statement	For the three months ended									Variance
(Dollars and Shares in Thousands,	March 31,			December 31,			Variance			or Change
Except Per Share Data, Unaudited)	2021			2020			or Change			Pct.
Interest income
Loans	$	49,307		$	49,466		$	(159	)		-0.3	%
Taxable investment securities		7,891			7,707			184			2.4	%
Tax-exempt investment securities		410			433			(23	)		-5.3	%
Other interest-earning assets		705			787			(82	)		-10.4	%
Total Interest Income		58,313			58,393			(80	)		-0.1	%

Interest expense
Deposits		6,670			8,647			(1,977	)		-22.9	%
Borrowings		4,012			5,193			(1,181	)		-22.7	%
Total interest expense		10,682			13,840			(3,158	)		-22.8	%
Net interest income		47,631			44,553			3,078			6.9	%
Provision for (reversal of) credit losses		1,126			(1,365	)		2,491			182.5	%
Net interest income after provision for (reversal of) credit losses		46,505			45,918			587			1.3	%

Non-interest income
Fees and service charges		1,325			1,896			(571	)		-30.1	%
Gain on sale and call of securities		18			813			(795	)		-97.8	%
Gain on sale of loans		943			2,378			(1,435	)		-60.3	%
Income from bank owned life insurance		1,530			1,596			(66	)		-4.1	%
Electronic banking fees and charges		456			404			52			12.9	%
Other income		1,194			67			1,127			1682.1	%
Total non-interest income		5,466			7,154			(1,688	)		-23.6	%

Non-interest expense
Salaries and employee benefits		16,965			17,081			(116	)		-0.7	%
Net occupancy expense of premises		3,433			3,120			313			10.0	%
Equipment and systems		3,823			3,902			(79	)		-2.0	%
Advertising and marketing		567			513			54			10.5	%
Federal deposit insurance premium		488			490			(2	)		-0.4	%
Directors' compensation		748			748			-			0.0	%
Debt extinguishment expenses		-			796			(796	)		-100.0	%
Other expense		3,792			3,860			(68	)		-1.8	%
Total non-interest expense		29,816			30,510			(694	)		-2.3	%
Income before income taxes		22,155			22,562			(407	)		-1.8	%
Income taxes		5,732			5,614			118			2.1	%
Net income	$	16,423		$	16,948		$	(525	)		-3.1	%

Net income per common share (EPS)
Basic	$	0.20		$	0.20		$	0.00
Diluted	$	0.20		$	0.20		$	0.00

Dividends declared
Cash dividends declared per common share	$	0.09		$	0.08		$	0.01
Cash dividends declared	$	7,205		$	6,706		$	499
Dividend payout ratio		43.9	%		39.6	%		4.3	%

Weighted average number of common shares outstanding
Basic		80,673			85,120			(4,447	)
Diluted		80,690			85,123			(4,433	)

	For the three months ended									Variance
Average Balance Sheet Data	March 31,			December 31,			Variance			or Change
(Dollars in Thousands, Unaudited)	2021			2020			or Change			Pct.
Assets
Interest-earning assets:
Loans receivable, including loans held for sale	$	4,816,592		$	4,871,268		$	(54,676	)		-1.1	%
Taxable investment securities		1,674,223			1,544,095			130,128			8.4	%
Tax-exempt investment securities		73,573			79,044			(5,471	)		-6.9	%
Other interest-earning assets		169,291			266,114			(96,823	)		-36.4	%
Total interest-earning assets		6,733,679			6,760,521			(26,842	)		-0.4	%
Non-interest-earning assets		617,440			632,084			(14,644	)		-2.3	%
Total assets	$	7,351,119		$	7,392,605		$	(41,486	)		-0.6	%

Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Deposits:
Interest-bearing demand	$	1,831,617		$	1,683,222		$	148,395			8.8	%
Savings		1,084,981			1,058,675			26,306			2.5	%
Certificates of deposit		1,904,234			1,899,406			4,828			0.3	%
Total interest-bearing deposits		4,820,832			4,641,303			179,529			3.9	%
Borrowings:
Federal Home Loan Bank advances		865,690			1,057,958			(192,268	)		-18.2	%
Total interest-bearing liabilities		5,686,522			5,699,261			(12,739	)		-0.2	%
Non-interest-bearing liabilities:
Non-interest-bearing deposits		525,018			502,479			22,539			4.5	%
Other non-interest-bearing liabilities		57,018			73,683			(16,665	)		-22.6	%
Total non-interest-bearing liabilities		582,036			576,162			5,874			1.0	%
Total liabilities		6,268,558			6,275,423			(6,865	)		-0.1	%
Stockholders' equity		1,082,561			1,117,182			(34,621	)		-3.1	%
Total liabilities and stockholders' equity	$	7,351,119		$	7,392,605		$	(41,486	)		-0.6	%

Average interest-earning assets to average interest-bearing liabilities		118.41	%		118.62	%		-0.21	%		-0.2	%

	For the three months ended
	March 31,			December 31,			Variance
Performance Ratio Highlights	2021			2020			or Change
Average yield on interest-earning assets:
Loans receivable, including loans held for sale		4.09	%		4.06	%		0.03	%
Taxable investment securities		1.89	%		2.00	%		-0.11	%
Tax-exempt investment securities ⁽¹⁾		2.23	%		2.19	%		0.04	%
Other interest-earning assets		1.67	%		1.18	%		0.49	%
Total interest-earning assets		3.46	%		3.45	%		0.01	%

Average cost of interest-bearing liabilities:
Deposits:
Interest-bearing demand		0.34	%		0.47	%		-0.13	%
Savings		0.21	%		0.33	%		-0.12	%
Certificates of deposit		0.96	%		1.22	%		-0.26	%
Total interest-bearing deposits		0.55	%		0.75	%		-0.20	%
Borrowings:
Federal Home Loan Bank advances		1.85	%		1.96	%		-0.11	%
Total interest-bearing liabilities		0.75	%		0.97	%		-0.22	%

Interest rate spread⁽²⁾		2.71	%		2.48	%		0.23	%
Net interest margin⁽³⁾		2.83	%		2.64	%		0.19	%

Non-interest income to average assets (annualized)		0.30	%		0.39	%		-0.09	%
Non-interest expense to average assets (annualized)		1.62	%		1.65	%		-0.03	%

Efficiency ratio⁽⁴⁾		56.15	%		59.01	%		-2.86	%

Return on average assets (annualized)		0.89	%		0.92	%		-0.03	%
Return on average equity (annualized)		6.07	%		6.07	%		0.00	%
Return on average tangible equity (annualized) ⁽⁵⁾		7.57	%		7.52	%		0.05	%

_______________________
(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

Summary Balance Sheet	At
(Dollars and Shares in Thousands,	March 31,			December 31,			September 30,			June 30,			March 31,
Except Per Share Data, Unaudited)	2021			2020			2020			2020			2020
Assets
Cash and cash equivalents	$	108,991		$	129,694		$	145,818		$	180,967		$	59,452
Securities available for sale		1,778,970			1,695,893			1,508,542			1,385,703			1,476,344
Securities held to maturity		27,168			29,549			31,576			32,556			34,618
Loans held-for-sale		5,172			12,601			20,170			20,789			11,245
Loans receivable		4,798,239			4,828,634			4,954,750			4,498,397			4,562,512
Less allowance for credit losses on loans		(63,762	)		(63,386	)		(64,860	)		(37,327	)		(37,191	)
Net loans receivable		4,734,477			4,765,248			4,889,890			4,461,070			4,525,321
Premises and equipment		60,360			61,181			61,808			57,389			58,985
Federal Home Loan Bank stock		45,578			45,578			55,118			58,654			59,324
Accrued interest receivable		20,562			19,826			20,368			17,373			19,036
Goodwill		210,895			210,895			210,895			210,895			210,895
Core deposit intangible		3,888			4,151			4,420			3,995			4,242
Bank owned life insurance		281,765			280,235			278,639			262,380			260,843
Deferred income taxes, net		32,230			30,846			33,319			25,480			27,150
Other real estate owned		178			178			178			178			178
Other assets		47,760			49,278			49,468			40,746			26,200
Total assets	$	7,357,994		$	7,335,153		$	7,310,209		$	6,758,175		$	6,773,833

Liabilities
Deposits	$	5,374,452		$	5,312,613		$	5,039,912		$	4,430,282		$	4,253,254
Borrowings		865,763			865,651			1,077,540			1,173,165			1,384,025
Advance payments by borrowers for taxes		15,300			16,100			17,008			16,569			16,492
Other liabilities		38,667			48,448			51,689			53,982			50,390
Total liabilities		6,294,182			6,242,812			6,186,149			5,673,998			5,704,161

Stockholders' Equity
Common stock		820			849			895			837			837
Paid-in capital		691,280			724,389			769,269			722,871			721,474
Retained earnings		397,594			388,376			378,134			387,911			380,671
Unearned ESOP shares		(27,239	)		(27,726	)		(28,212	)		(28,699	)		(29,185	)
Accumulated other comprehensive income (loss)		1,357			6,453			3,974			1,257			(4,125	)
Total stockholders' equity		1,063,812			1,092,341			1,124,060			1,084,177			1,069,672
Total liabilities and stockholders' equity	$	7,357,994		$	7,335,153		$	7,310,209		$	6,758,175		$	6,773,833

Consolidated capital ratios
Equity to assets		14.46	%		14.89	%		15.38	%		16.04	%		15.79	%
Tangible equity to tangible assets ⁽¹⁾		11.89	%		12.32	%		12.81	%		13.29	%		13.03	%

Share data
Outstanding shares		81,943			84,938			89,510			83,663			83,664
Book value per share	$	12.98		$	12.86		$	12.56		$	12.96		$	12.79
Tangible book value per share⁽²⁾	$	10.36		$	10.33		$	10.15		$	10.39		$	10.21

	At
Supplemental Balance Sheet Highlights	March 31,		December 31,		September 30,		June 30,		March 31,
(Dollars in Thousands, Unaudited)	2021		2020		2020		2020		2020
Cash and cash equivalents
Cash and due from depository institutions	$	20,502	$	23,968	$	18,628	$	20,391	$	20,200
Interest-bearing deposits in other banks		88,489		105,726		127,190		160,576		39,252
Total cash and cash equivalents	$	108,991	$	129,694	$	145,818	$	180,967	$	59,452

Securities available for sale
Debt securities:
Municipal and state obligations	$	43,060	$	47,763	$	50,877	$	54,054	$	58,151
Asset-backed securities		250,741		255,407		258,801		172,447		169,102
Collateralized loan obligations		169,776		196,685		196,398		193,788		189,565
Corporate bonds		173,462		167,168		122,276		143,639		163,715
Trust preferred securities		2,881		2,866		2,773		2,627		2,852
Debt securities		639,920		669,889		631,125		566,555		583,385

Mortgage-backed securities:
Collateralized mortgage obligations		16,800		20,510		25,770		30,903		34,671
Residential pass-through securities		806,655		705,991		625,715		561,954		607,113
Commercial pass-through securities		315,595		299,503		225,932		226,291		251,175
Mortgage-backed securities		1,139,050		1,026,004		877,417		819,148		892,959
Total securities available for sale	$	1,778,970	$	1,695,893	$	1,508,542	$	1,385,703	$	1,476,344

Securities held to maturity
Debt securities:
Municipal and state obligations	$	27,168	$	29,549	$	31,576	$	32,556	$	34,618
Total securities held to maturity	$	27,168	$	29,549	$	31,576	$	32,556	$	34,618

Total securities	$	1,806,138	$	1,725,442	$	1,540,118	$	1,418,259	$	1,510,962

	At
Supplemental Balance Sheet Highlights	March 31,			December 31,			September 30,			June 30,			March 31,
(Dollars in Thousands, Unaudited)	2021			2020			2020			2020			2020
Loan portfolio composition:
Commercial loans:
Multi-family	$	2,055,396		$	2,076,483		$	2,110,300		$	2,059,568		$	1,879,907
Nonresidential		1,110,765			1,123,695			1,124,330			960,853			1,202,652
Commercial business		183,181			202,010			255,888			138,788			73,922
Construction		95,533			90,398			79,178			20,961			17,880
Total commercial loans		3,444,875			3,492,586			3,569,696			3,180,170			3,174,361
One- to four-family residential mortgage loans		1,323,485			1,305,351			1,353,197			1,273,022			1,338,099
Consumer loans:
Home equity loans and lines of credit		59,721			65,298			71,540			82,920			87,909
Other consumer loans		3,445			4,123			4,136			3,991			4,604
Total consumer loans		63,166			69,421			75,676			86,911			92,513
Total loans, excluding yield adjustments		4,831,526			4,867,358			4,998,569			4,540,103			4,604,973
Unaccreted yield adjustments		(33,287	)		(38,724	)		(43,819	)		(41,706	)		(42,461	)
Loans receivable, net of yield adjustments		4,798,239			4,828,634			4,954,750			4,498,397			4,562,512
Less allowance for credit losses on loans		(63,762	)		(63,386	)		(64,860	)		(37,327	)		(37,191	)
Net loans receivable	$	4,734,477		$	4,765,248		$	4,889,890		$	4,461,070		$	4,525,321

Loan portfolio allocation:
Commercial loans:
Multi-family		42.5	%		42.7	%		42.2	%		45.3	%		40.8	%
Nonresidential		23.0	%		23.1	%		22.5	%		21.2	%		26.1	%
Commercial business		3.8	%		4.2	%		5.1	%		3.1	%		1.6	%
Construction		2.0	%		1.8	%		1.6	%		0.4	%		0.4	%
Total commercial loans		71.3	%		71.8	%		71.4	%		70.0	%		68.9	%
One- to four-family residential mortgage loans		27.4	%		26.8	%		27.1	%		28.1	%		29.1	%
Consumer loans:
Home equity loans and lines of credit		1.2	%		1.3	%		1.4	%		1.8	%		1.9	%
Other consumer loans		0.1	%		0.1	%		0.1	%		0.1	%		0.1	%
Total consumer loans		1.3	%		1.4	%		1.5	%		1.9	%		2.0	%
Total loans, excluding yield adjustments		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

Asset quality:
Nonperforming assets:
Accruing loans - 90 days and over past due	$	2		$	-		$	238		$	5		$	12
Nonaccrual loans		71,416			71,472			44,837			36,691			35,384
Total nonperforming loans		71,418			71,472			45,075			36,696			35,396
Other real estate owned		178			178			178			178			178
Total nonperforming assets	$	71,596		$	71,650		$	45,253		$	36,874		$	35,574

Nonperforming loans (% total loans)		1.49	%		1.48	%		0.91	%		0.82	%		0.78	%
Nonperforming assets (% total assets)		0.97	%		0.98	%		0.62	%		0.55	%		0.53	%

Allowance for credit losses on loans (ACL):
ACL to total loans		1.32	%		1.30	%		1.30	%		0.82	%		0.81	%
ACL to nonperforming loans		89.28	%		88.69	%		143.89	%		101.72	%		105.07	%
Net charge offs	$	750		$	109		$	67		$	38		$	16
Average net charge off rate (annualized)		0.06	%		0.01	%		0.01	%		0.00	%		0.00	%

	At
Supplemental Balance Sheet Highlights	March 31,			December 31,			September 30,			June 30,			March 31,
(Dollars in Thousands, Unaudited)	2021			2020			2020			2020			2020
Funding by type:
Deposits:
Non-interest-bearing deposits	$	545,746		$	518,828		$	487,710		$	419,138		$	321,824
Interest-bearing demand		1,923,184			1,752,699			1,561,135			1,264,151			1,134,420
Savings		1,105,481			1,075,122			1,025,245			906,597			848,950
Certificates of deposit		1,800,041			1,965,964			1,965,822			1,840,396			1,948,060
Interest-bearing deposits		4,828,706			4,793,785			4,552,202			4,011,144			3,931,430
Total deposits		5,374,452			5,312,613			5,039,912			4,430,282			4,253,254

Borrowings:
Federal Home Loan Bank advances		865,763			865,651			1,077,540			1,167,429			1,177,319
Overnight borrowings		-			-			-			-			200,000
Depositor sweep accounts		-			-			-			5,736			6,706
Total borrowings		865,763			865,651			1,077,540			1,173,165			1,384,025

Total funding	$	6,240,215		$	6,178,264		$	6,117,452		$	5,603,447		$	5,637,279

Loans as a % of deposits		88.2	%		89.9	%		97.4	%		101.2	%		106.7	%
Deposits as a % of total funding		86.1	%		86.0	%		82.4	%		79.1	%		75.4	%
Borrowings as a % of total funding		13.9	%		14.0	%		17.6	%		20.9	%		24.6	%

Funding by source:
Retail funding:
Non-interest-bearing deposits	$	545,746		$	518,828		$	487,710		$	419,138		$	321,824
Interest-bearing demand		1,923,184			1,752,699			1,561,135			1,264,151			1,134,420
Savings		1,105,481			1,075,122			1,025,245			906,597			848,950
Certificates of deposit		1,508,494			1,658,277			1,775,189			1,773,257			1,833,081
Total retail deposits		5,082,905			5,004,926			4,849,279			4,363,143			4,138,275
Depositor sweep accounts		-			-			-			5,736			6,706
Total retail funding		5,082,905			5,004,926			4,849,279			4,368,879			4,144,981

Wholesale funding:
Certificates of deposit (listing service)	$	32,952		$	43,112		$	57,251		$	35,760		$	33,608
Certificates of deposit (brokered)		258,595			264,575			133,382			31,379			81,371
Total wholesale deposits		291,547			307,687			190,633			67,139			114,979
FHLB advances		865,763			865,651			1,077,540			1,167,429			1,177,319
Overnight borrowings		-			-			-			-			200,000
Total wholesale funding		1,157,310			1,173,338			1,268,173			1,234,568			1,492,298

Total funding	$	6,240,215		$	6,178,264		$	6,117,452		$	5,603,447		$	5,637,279

Retail funding as a % of total funding		81.5	%		81.0	%		79.3	%		78.0	%		73.5	%
Wholesale funding as a % of total funding		18.5	%		19.0	%		20.7	%		22.0	%		26.5	%

Summary Income Statement	For the three months ended
(Dollars and Shares in Thousands,	March 31,			December 31,			September 30,			June 30,			March 31,
Except Per Share Data, Unaudited)	2021			2020			2020			2020			2020
Interest income
Loans	$	49,307		$	49,466		$	52,180		$	46,192		$	46,603
Taxable investment securities		7,891			7,707			7,336			9,769			10,526
Tax-exempt investment securities		410			433			454			487			547
Other interest-earning assets		705			787			914			903			1,100
Total interest income		58,313			58,393			60,884			57,351			58,776

Interest expense
Deposits		6,670			8,647			11,062			12,439			14,768
Borrowings		4,012			5,193			5,660			4,462			6,398
Total interest expense		10,682			13,840			16,722			16,901			21,166
Net interest income		47,631			44,553			44,162			40,450			37,610
Provision for (reversal of) credit losses		1,126			(1,365	)		4,059			174			6,270
Net interest income after provision for (reversal of) credit losses		46,505			45,918			40,103			40,276			31,340

Non-interest income
Fees and service charges		1,325			1,896			1,076			1,696			1,338
Gain (loss) on sale and call of securities		18			813			(377	)		19			2,234
Gain on sale of loans		943			2,378			1,890			1,348			565
Income from bank owned life insurance		1,530			1,596			1,596			1,537			1,532
Electronic banking fees and charges		456			404			405			325			309
Bargain purchase gain		-			-			3,053			-			-
Other income		1,194			67			90			77			223
Total non-interest income		5,466			7,154			7,733			5,002			6,201

Non-interest expense
Salaries and employee benefits		16,965			17,081			16,977			15,527			15,537
Net occupancy expense of premises		3,433			3,120			3,122			2,688			2,685
Equipment and systems		3,823			3,902			3,570			2,948			2,672
Advertising and marketing		567			513			500			751			612
Federal deposit insurance premium		488			490			472			286			-
Directors' compensation		748			748			748			769			771
Merger-related expenses		-			-			4,349			447			285
Debt extinguishment expenses		-			796			-			-			2,156
Other expense		3,792			3,860			3,835			3,475			3,344
Total non-interest expense		29,816			30,510			33,573			26,891			28,062
Income before income taxes		22,155			22,562			14,263			18,387			9,479
Income taxes		5,732			5,614			2,884			4,698			225
Net income	$	16,423		$	16,948		$	11,379		$	13,689		$	9,254

Net income per common share (EPS)
Basic	$	0.20		$	0.20		$	0.13		$	0.17		$	0.11
Diluted	$	0.20		$	0.20		$	0.13		$	0.17		$	0.11

Dividends declared
Cash dividends declared per common share	$	0.09		$	0.08		$	0.08		$	0.08		$	0.08
Cash dividends declared	$	7,205		$	6,706		$	6,917		$	6,449		$	6,479
Dividend payout ratio		43.9	%		39.6	%		60.8	%		47.1	%		70.0	%

Weighted average number of common shares outstanding
Basic		80,673			85,120			86,008			80,678			81,339
Diluted		80,690			85,123			86,009			80,680			81,358

	For the three months ended
Average Balance Sheet Data	March 31,			December 31,			September 30,			June 30,			March 31,
(Dollars in Thousands, Unaudited)	2021			2020			2020			2020			2020
Assets
Interest-earning assets:
Loans receivable, including loans held for sale	$	4,816,592		$	4,871,268		$	4,958,293		$	4,567,229		$	4,503,996
Taxable investment securities		1,674,223			1,544,095			1,350,511			1,369,014			1,406,973
Tax-exempt investment securities		73,573			79,044			82,603			89,263			101,771
Other interest-earning assets		169,291			266,114			247,543			141,964			104,241
Total interest-earning assets		6,733,679			6,760,521			6,638,950			6,167,470			6,116,981
Non-interest-earning assets		617,440			632,084			624,252			605,876			598,335
Total assets	$	7,351,119		$	7,392,605		$	7,263,202		$	6,773,346		$	6,715,316

Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Deposits:
Interest-bearing demand	$	1,831,617		$	1,683,222		$	1,464,238		$	1,189,044		$	1,112,080
Savings		1,084,981			1,058,675			1,006,075			876,580			838,501
Certificates of deposit		1,904,234			1,899,406			1,988,689			1,879,039			2,004,785
Total interest-bearing deposits		4,820,832			4,641,303			4,459,002			3,944,663			3,955,366
Borrowings:
Federal Home Loan Bank advances		865,690			1,057,958			1,130,836			1,202,522			1,208,627
Other borrowings		-			-			3,568			96,770			87,072
Total borrowings		865,690			1,057,958			1,134,404			1,299,292			1,295,699
Total interest-bearing liabilities		5,686,522			5,699,261			5,593,406			5,243,955			5,251,065
Non-interest-bearing liabilities:
Non-interest-bearing deposits		525,018			502,479			479,141			380,067			317,530
Other non-interest-bearing liabilities		57,018			73,683			79,620			72,007			55,456
Total non-interest-bearing liabilities		582,036			576,162			558,761			452,074			372,986
Total liabilities		6,268,558			6,275,423			6,152,167			5,696,029			5,624,051
Stockholders' equity		1,082,561			1,117,182			1,111,035			1,077,317			1,091,265
Total liabilities and stockholders' equity	$	7,351,119		$	7,392,605		$	7,263,202		$	6,773,346		$	6,715,316

Average interest-earning assets to average interest-bearing liabilities		118.41	%		118.62	%		118.69	%		117.61	%		116.49	%

	For the three months ended
	March 31,			December 31,			September 30,			June 30,			March 31,
Performance Ratio Highlights	2021			2020			2020			2020			2020
Average yield on interest-earning assets:
Loans receivable, including loans held for sale		4.09	%		4.06	%		4.21	%		4.05	%		4.14	%
Taxable investment securities		1.89	%		2.00	%		2.17	%		2.85	%		2.99	%
Tax-exempt investment securities ⁽¹⁾		2.23	%		2.19	%		2.20	%		2.18	%		2.15	%
Other interest-earning assets		1.67	%		1.18	%		1.48	%		2.54	%		4.22	%
Total interest-earning assets		3.46	%		3.45	%		3.67	%		3.72	%		3.84	%

Average cost of interest-bearing liabilities:
Deposits:
Interest-bearing demand		0.34	%		0.47	%		0.60	%		0.72	%		1.17	%
Savings		0.21	%		0.33	%		0.57	%		0.81	%		0.85	%
Certificates of deposit		0.96	%		1.22	%		1.50	%		1.82	%		1.94	%
Total interest-bearing deposits		0.55	%		0.75	%		0.99	%		1.26	%		1.49	%
Borrowings:
Federal Home Loan Bank advances		1.85	%		1.96	%		2.00	%		1.47	%		2.03	%
Other borrowings		0.00	%		0.00	%		0.04	%		0.13	%		1.17	%
Total borrowings		1.85	%		1.96	%		2.00	%		1.37	%		1.98	%
Total interest-bearing liabilities		0.75	%		0.97	%		1.20	%		1.29	%		1.61	%

Interest rate spread⁽²⁾		2.71	%		2.48	%		2.47	%		2.43	%		2.23	%
Net interest margin⁽³⁾		2.83	%		2.64	%		2.66	%		2.62	%		2.46	%

Non-interest income to average assets (annualized)		0.30	%		0.39	%		0.43	%		0.30	%		0.37	%
Non-interest expense to average assets (annualized)		1.62	%		1.65	%		1.85	%		1.59	%		1.67	%

Efficiency ratio⁽⁴⁾		56.15	%		59.01	%		64.69	%		59.16	%		64.05	%

Return on average assets (annualized)		0.89	%		0.92	%		0.63	%		0.81	%		0.55	%
Return on average equity (annualized)		6.07	%		6.07	%		4.10	%		5.08	%		3.39	%
Return on average tangible equity (annualized) ⁽⁵⁾		7.57	%		7.52	%		5.08	%		6.35	%		4.23	%

This document contains certain non-GAAP financial measures in addition to results presented in accordance with Generally Accepted Accounting Principles (“GAAP”). These non-GAAP measures provide additional information which allow readers to evaluate the ongoing performance of the Company. They are not a substitute for GAAP measures; they should be read and used in conjunction with the Company’s GAAP financial information. A reconciliation of non-GAAP financial measures to GAAP measures is included below. In all cases, it should be understood that non-GAAP per share measures do not depict amounts that accrue directly to the benefit of shareholders.

Reconciliation of GAAP to Non-GAAP	For the three months ended
(Dollars in Thousands,	March 31,			December 31,			September 30,			June 30,			March 31,
Except Per Share Data, Unaudited)	2021			2020			2020			2020			2020
Adjusted net income:
Net income (GAAP)	$	16,423		$	16,948		$	11,379		$	13,689		$	9,254
Non-recurring transactions - net of tax:
Bargain purchase gain		-			-			(3,053	)		-			-
Provision for credit losses on non-PCD loans		-			-			3,563			-			-
Merger-related expenses		-			-			3,123			426			269
Branch consolidation expenses		264			243			-			-			-
Net effect of sales and calls of securities		(13	)		(571	)		-			-			(1,575	)
Debt extinguishment expenses		-			559			-			-			1,520
Reversal of income tax valuation allowance		-			(523	)		-			-			(591	)
Tax benefit arising from adoption of the CARES Act provisions		-			-			-			-			(1,624	)
Net effect of sales of other assets		(587	)		-			-			-			-
Net income (non-GAAP)	$	16,087		$	16,656		$	15,012		$	14,115		$	7,253

Calculation of pre-tax, pre-provision net revenue:
Net income (GAAP)	$	16,423		$	16,948		$	11,379		$	13,689		$	9,254
Adjustments to net income (GAAP):
Provision for income taxes		5,732			5,614			2,884			4,698			225
Provision for (reversal of) credit losses		1,126			(1,365	)		4,059			174			6,270
Pre-tax, pre-provision net revenue (non-GAAP)	$	23,281		$	21,197		$	18,322		$	18,561		$	15,749

Adjusted earnings per share:
Weighted average common shares - basic		80,673			85,120			86,008			80,678			81,339
Weighted average common shares - diluted		80,690			85,123			86,009			80,680			81,358

Earnings per share - basic (GAAP)	$	0.20		$	0.20		$	0.13		$	0.17		$	0.11
Earnings per share - diluted (GAAP)	$	0.20		$	0.20		$	0.13		$	0.17		$	0.11

Adjusted earnings per share - basic (non-GAAP)	$	0.20		$	0.20		$	0.17		$	0.17		$	0.09
Adjusted earnings per share - diluted (non-GAAP)	$	0.20		$	0.20		$	0.17		$	0.17		$	0.09

Adjusted return on average assets:
Total average assets	$	7,351,119		$	7,392,605		$	7,263,202		$	6,773,346		$	6,715,316

Return on average assets (GAAP)		0.89	%		0.92	%		0.63	%		0.81	%		0.55	%
Adjusted return on average assets (non-GAAP)		0.88	%		0.90	%		0.83	%		0.83	%		0.43	%

Adjusted return on average equity:
Total average equity	$	1,082,561		$	1,117,182		$	1,111,035		$	1,077,317		$	1,091,265

Return on average equity (GAAP)		6.07	%		6.07	%		4.10	%		5.08	%		3.39	%
Adjusted return on average equity (non-GAAP)		5.94	%		5.96	%		5.40	%		5.24	%		2.66	%

Reconciliation of GAAP to Non-GAAP	For the three months ended
(Dollars in Thousands,	March 31,			December 31,			September 30,			June 30,			March 31,
Except Per Share Data, Unaudited)	2021			2020			2020			2020			2020
Adjusted return on average tangible equity:
Total average equity	$	1,082,561		$	1,117,182		$	1,111,035		$	1,077,317		$	1,091,265
Less: average goodwill		(210,895	)		(210,895	)		(210,895	)		(210,895	)		(210,895	)
Less: average other intangible assets		(4,045	)		(4,317	)		(4,341	)		(4,124	)		(4,408	)
	$	867,621		$	901,970		$	895,799		$	862,298		$	875,962

Return on average tangible equity (non-GAAP)		7.57	%		7.52	%		5.08	%		6.35	%		4.23	%
Adjusted return on average tangible equity (non-GAAP)		7.42	%		7.39	%		6.70	%		6.55	%		3.31	%

Adjusted non-interest expense ratio:
Non-interest expense (GAAP)	$	29,816		$	30,510		$	33,573		$	26,891		$	28,062
Non-recurring transactions:
Merger-related expenses		-			-			(4,349	)		(447	)		(285	)
Branch consolidation expenses		(375	)		(347	)		-			-			-
Debt extinguishment expenses		-			(796	)		-			-			(2,156	)
Non-interest expense (non-GAAP)	$	29,441		$	29,367		$	29,224		$	26,444		$	25,621

Non-interest expense ratio (GAAP)		1.62	%		1.65	%		1.85	%		1.59	%		1.67	%
Adjusted non-interest expense ratio (non-GAAP)		1.60	%		1.59	%		1.61	%		1.56	%		1.53	%

Adjusted efficiency ratio:
Non-interest expense (non-GAAP)	$	29,441		$	29,367		$	29,224		$	26,444		$	25,621

Net interest income (GAAP)	$	47,631		$	44,553		$	44,162		$	40,450		$	37,610
Total non-interest income (GAAP)		5,466			7,154			7,733			5,002			6,201
Non-recurring transactions:
Net effect of sales and calls of securities		(18	)		(813	)		-			-			(2,234	)
Bargain purchase gain		-			-			(3,053	)		-			-
Net effect of sales of other assets		(837	)		-			-			-			-
Total revenue (non-GAAP)	$	52,242		$	50,894		$	48,842		$	45,452		$	41,577

Efficiency ratio (GAAP)		56.15	%		59.01	%		64.69	%		59.16	%		64.05	%
Adjusted efficiency ratio (non-GAAP)		56.36	%		57.70	%		59.83	%		58.18	%		61.62	%

For further information contact:
Craig L. Montanaro, President and Chief Executive Officer, or
Keith Suchodolski, Executive Vice President and Chief Financial Officer
Kearny Financial Corp.
(973) 244-4500

Kearny Financial Corp. Reports Fiscal 2021 Third Quarter Results

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