Kearny Financial Corp. Announces Second Quarter Fiscal 2022 Results and Declaration of Cash Dividend

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Kearny Bank

Thu, Jan 27, 2022, 2:15 PM 34 min read

FAIRFIELD, N.J., Jan. 27, 2022 (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 December 31, 2021 of $18.8 million, or $0.26 per diluted share, compared to $19.7 million, or $0.26 per diluted share, for the quarter ended September 30, 2021.

The Company also announced that its Board of Directors declared a quarterly cash dividend of $0.11 per share, payable on February 23, 2022 to stockholders of record as of February 9, 2022.

Craig L. Montanaro, President and Chief Executive Officer, commented, “We are pleased to report another quarter of strong financial performance highlighted by growth in our commercial loan and core non-maturity deposit portfolios. Equally as important was the continued advancement of our long-term goals of growing core earnings per share and leveraging tangible capital, which now stands at 11.2% of tangible assets.” Mr. Montanaro continued, “As of quarter-end our commercial loan pipeline stood at a historically high level, which bodes well for our loan growth prospects in the coming quarters.”

Regarding expectations for upcoming fed funds rate increases, Mr. Montanaro noted, “Our balance sheet is as well-positioned as it has ever been for the forecasted rising rate environment. Changes in the composition of our loan and deposit portfolios, which have taken place over the past few years, have increased the resiliency of our net interest income to movements in interest rates. In addition, over the past year we have proactively positioned our wholesale balance sheet with an eye towards the forthcoming increase in short-term rates.”

Balance Sheet

Loans receivable increased $37.1 million to $4.83 billion at December 31, 2021, from $4.79 billion at September 30, 2021, despite a record level of loan repayment activity during the quarter, which totaled $375.8 million.
Deposits increased $58.9 million to $5.45 billion at December 31, 2021, from $5.40 billion at September 30, 2021, reflecting growth of $167.1 million in interest-bearing non-maturity deposits, partially offset by the controlled run-off of time deposits and seasonal fluctuations in non-interest bearing deposits.
Investment securities decreased $44.4 million to $1.64 billion, or 22.9% of total assets, at December 31, 2021, from $1.69 billion, or 23.5% of total assets, at September 30, 2021.

Borrowings decreased $34.9 million to $686.1 million, or 9.5% of total assets, at December 31, 2021, from $721.0 million, or 10.0% of total assets, at September 30, 2021.

Earnings

Performance Highlights

Return on average assets was 1.05% for the quarter ended December 31, 2021 compared to 1.09% for the quarter ended September 30, 2021.
Return on average equity was 7.46% and 7.66% for the quarters ended December 31, 2021 and September 30, 2021, respectively. Return on average tangible equity was 9.49% and 9.67%, for those same comparative periods.

Net Interest Income and Net Interest Margin

Net interest margin contracted three basis points to 2.96% for the quarter ended December 31, 2021, from 2.99% for the quarter ended September 30, 2021. The decrease in net interest margin was due largely to a five basis point reduction in yield on earning assets, partially offset by a two basis point reduction in cost of interest-bearing liabilities. The reduction in yield on earning assets was partly attributable to declines in purchase accounting accretion and loan prepayment penalty income.
Net interest income decreased $903,000 to $48.7 million for the quarter ended December 31, 2021, from $49.6 million for the quarter ended September 30, 2021. Included in net interest income for the quarters ended December 31, 2021 and September 30, 2021, respectively, was purchase accounting accretion of $2.6 million and $2.9 million, and loan prepayment penalty income of $1.5 million and $1.7 million.

Non-Interest Income

Fees and service charges increased $91,000 to $698,000 for the quarter ended December 31, 2021 from $607,000 for the quarter ended September 30, 2021, which was largely attributable to growth in various deposit and loan-related fee categories.
Gain on sale of loans decreased $36,000 to $970,000 for the quarter ended December 31, 2021 from $1.0 million for the quarter ended September 30, 2021. This decrease largely reflected a lower average sales price of residential mortgage loans, partially offset by a modest increase in the volume of residential mortgage loans sold during the period.
Included in other income for the quarter ended December 31, 2021 were non-recurring gains of $356,000 attributable to the sale of one property recognized in conjunction with the Bank's ongoing retail branch consolidation efforts. No such gains were recorded during the quarter ended September 30, 2021.

Non-Interest Expense

Non-interest expense decreased $2.1 million to $29.7 million for the quarter ended December 31, 2021, from $31.8 million for the quarter ended September 30, 2021. Salary and benefit expense decreased $521,000 from September 30, 2021 due largely to reductions in payroll tax and stock benefit plan expense. Net occupancy expense decreased $1.4 million primarily due to non-recurring expense of $1.6 million that was recorded in the prior comparative period and previously disclosed.
The efficiency and non-interest expense ratios were 56.17% and 1.65%, respectively, for the quarter ended December 31, 2021.

Income Taxes

Income tax expense decreased $471,000 to $6.8 million for the quarter ended December 31, 2021 compared to $7.3 million for the quarter ended September 30, 2021, resulting in effective tax rates of 26.6% and 26.9%, respectively.

Asset Quality

The balance of non-performing assets decreased $327,000 to $72.8 million, or 1.01% of total assets, at December 31, 2021, from $73.1 million, or 1.02% of total assets, at September 30, 2021. At December 31, 2021, the Company had active COVID-19 payment deferrals on five residential mortgage and home equity loans totaling $2.6 million, representing 0.05% of total loans.

Net charge offs totaled $1.1 million, or 0.10% of average loans, on an annualized basis, for the quarter ended December 31, 2021 compared to $980,000, or 0.08%, for the quarter ended September 30, 2021. All of the charge-offs recorded during the quarter ended December 31, 2021 had previously been individually reserved for within the allowance for credit losses ("ACL").
For the quarter ended December 31, 2021, the Company recorded a provision for credit loss reversal of $2.4 million, compared to a provision for credit loss reversal of $5.4 million for the quarter ended September 30, 2021. The reversal for the quarter ended December 31, 2021 was primarily related to a net reduction in reserves on individually evaluated loans and a reduction in the expected life of various segments of the loan portfolio.
The ACL decreased $3.6 million to $48.2 million, or 0.99% of total loans, at December 31, 2021, from $51.8 million, or 1.08% of total loans at September 30, 2021.

Capital

For the quarter ended December 31, 2021, book value per share increased by $0.17 to $13.55 while tangible book value per share increased by $0.09 to $10.64.
During the quarter ended December 31, 2021, the Company repurchased 2,289,537 shares of common stock at a cost of $30.0 million, or $13.10 per share. Through December 31, 2021, the Company repurchased a total of 2,502,676 shares, or 32.9% of the shares authorized for repurchase under the current repurchase program, at a total cost of $32.6 million or $13.05 per share.
At December 31, 2021, the Company’s tangible equity to tangible assets ratio equaled 11.2% while 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 has had, and may continue to have, an adverse impact on the Company, its clients and the communities it serves. Given its ongoing and dynamic nature, it is difficult to predict the full impact of the COVID-19 pandemic on our business. The extent of such impact will depend on future developments, which are highly uncertain, including whether the coronavirus can continue to be controlled and abated and if the economy is able to 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 remain open, 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

Kearny Financial Corp.
Consolidated Balance Sheets
(Unaudited)


(Dollars and Shares in Thousands, Except Per Share Data)	December 31, 2021			September 30, 2021			Variance or Change			Variance or Change Pct.
Assets
Cash and cash equivalents	$	60,452		$	54,070		$	6,382			11.8	%
Securities available for sale		1,591,066			1,651,156			(60,090	)		-3.6	%
Securities held to maturity		53,142			37,497			15,645			41.7	%
Loans held-for-sale		12,549			12,884			(335	)		-2.6	%
Loans receivable		4,826,404			4,789,339			37,065			0.8	%
Less: allowance for credit losses on loans		(48,216	)		(51,785	)		3,569			-6.9	%
Net loans receivable		4,778,188			4,737,554			40,634			0.9	%
Premises and equipment		54,067			55,236			(1,169	)		-2.1	%
Federal Home Loan Bank stock		36,622			36,615			7			0.0	%
Accrued interest receivable		18,495			19,541			(1,046	)		-5.4	%
Goodwill		210,895			210,895			-			0.0	%
Core deposit intangible		3,344			3,524			(180	)		-5.1	%
Bank owned life insurance		286,433			284,871			1,562			0.5	%
Deferred income taxes, net		25,709			27,771			(2,062	)		-7.4	%
Other real estate owned		658			178			480			269.7	%
Other assets		54,603			51,896			2,707			5.2	%
Total assets	$	7,186,223		$	7,183,688		$	2,535			0.0	%

Liabilities
Deposits:
Non-interest-bearing		604,805		$	631,344		$	(26,539	)		-4.2	%
Interest-bearing		4,849,220			4,763,795			85,425			1.8	%
Total deposits		5,454,025			5,395,139			58,886			1.1	%
Borrowings		686,105			720,990			(34,885	)		-4.8	%
Advance payments by borrowers for taxes		16,772			16,222			550			3.4	%
Other liabilities		33,851			36,914			(3,063	)		-8.3	%
Total liabilities		6,190,753			6,169,265			21,488			0.3	%

Stockholders' Equity
Common stock		735			758			(23	)		-3.0	%
Paid-in capital		587,392			616,894			(29,502	)		-4.8	%
Retained earnings		431,549			420,701			10,848			2.6	%
Unearned ESOP shares		(25,780	)		(26,266	)		486			-1.9	%
Accumulated other comprehensive income		1,574			2,336			(762	)		-32.6	%
Total stockholders' equity		995,470			1,014,423			(18,953	)		-1.9	%
Total liabilities and stockholders' equity	$	7,186,223		$	7,183,688		$	2,535			0.0	%

Consolidated capital ratios
Equity to assets		13.85	%		14.12	%		-0.27	%
Tangible equity to tangible assets ⁽¹⁾		11.21	%		11.48	%		-0.27	%

Share data
Outstanding shares		73,453			75,800			(2,347	)		-3.1	%
Book value per share	$	13.55		$	13.38		$	0.17			1.3	%
Tangible book value per share⁽²⁾	$	10.64		$	10.55		$	0.09			0.8	%

________________________
(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
(Unaudited)

	Three Months Ended
(Dollars and Shares in Thousands, Except Per Share Data)	December 31, 2021			September 30, 2021			Variance or Change			Variance or Change Pct.
Interest income
Loans	$	47,575		$	48,230		$	(655	)		-1.4	%
Taxable investment securities		7,595			8,212			(617	)		-7.5	%
Tax-exempt investment securities		327			333			(6	)		-1.8	%
Other interest-earning assets		415			431			(16	)		-3.7	%
Total Interest Income		55,912			57,206			(1,294	)		-2.3	%

Interest expense
Deposits		3,663			4,065			(402	)		-9.9	%
Borrowings		3,562			3,551			11			0.3	%
Total interest expense		7,225			7,616			(391	)		-5.1	%
Net interest income		48,687			49,590			(903	)		-1.8	%
Reversal of provision for credit losses		(2,420	)		(5,400	)		2,980			-55.2	%
Net interest income after reversal of provision for credit losses		51,107			54,990			(3,883	)		-7.1	%

Non-interest income
Fees and service charges		698			607			91			15.0	%
Gain on sale and call of securities		-			1			(1	)		-100.0	%
Gain on sale of loans		970			1,006			(36	)		-3.6	%
Income from bank owned life insurance		1,562			1,561			1			0.1	%
Electronic banking fees and charges		421			407			14			3.4	%
Other income		482			218			264			121.1	%
Total non-interest income		4,133			3,800			333			8.8	%

Non-interest expense
Salaries and employee benefits		18,096			18,617			(521	)		-2.8	%
Net occupancy expense of premises		3,156			4,547			(1,391	)		-30.6	%
Equipment and systems		3,723			3,825			(102	)		-2.7	%
Advertising and marketing		448			392			56			14.3	%
Federal deposit insurance premium		721			492			229			46.5	%
Directors' compensation		649			803			(154	)		-19.2	%
Other expense		2,877			3,127			(250	)		-8.0	%
Total non-interest expense		29,670			31,803			(2,133	)		-6.7	%
Income before income taxes		25,570			26,987			(1,417	)		-5.3	%
Income taxes		6,801			7,272			(471	)		-6.5	%
Net income	$	18,769		$	19,715		$	(946	)		-4.8	%

Net income per common share (EPS)
Basic	$	0.26		$	0.26		$	0.00
Diluted	$	0.26		$	0.26		$	0.00

Dividends declared
Cash dividends declared per common share	$	0.11		$	0.10		$	0.01
Cash dividends declared	$	7,921		$	7,381		$	540
Dividend payout ratio		42.2	%		37.4	%		4.8	%

Weighted average number of common shares outstanding
Basic		72,011			74,537			(2,526	)
Diluted		72,037			74,556			(2,519	)

Kearny Financial Corp.
Average Balance Sheet Data
(Unaudited)

	Three Months Ended
(Dollars in Thousands)	December 31, 2021			September 30, 2021			Variance or Change			Variance or Change Pct.
Assets
Interest-earning assets:
Loans receivable, including loans held for sale	$	4,822,959		$	4,835,676		$	(12,717	)		-0.3	%
Taxable investment securities		1,610,395			1,649,953			(39,558	)		-2.4	%
Tax-exempt investment securities		57,686			59,115			(1,429	)		-2.4	%
Other interest-earning assets		77,811			85,749			(7,938	)		-9.3	%
Total interest-earning assets		6,568,851			6,630,493			(61,642	)		-0.9	%
Non-interest-earning assets		611,390			616,735			(5,345	)		-0.9	%
Total assets	$	7,180,241		$	7,247,228		$	(66,987	)		-0.9	%

Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Deposits:
Interest-bearing demand	$	2,027,021		$	1,954,271		$	72,750			3.7	%
Savings		1,086,903			1,102,865			(15,962	)		-1.4	%
Certificates of deposit		1,693,423			1,798,473			(105,050	)		-5.8	%
Total interest-bearing deposits		4,807,347			4,855,609			(48,262	)		-1.0	%
Borrowings:
Federal Home Loan Bank advances		666,029			665,915			114			0.0	%
Other borrowings		26,033			28,532			(2,499	)		-8.8	%
Total borrowings		692,062			694,447			(2,385	)		-0.3	%
Total interest-bearing liabilities		5,499,409			5,550,056			(50,647	)		-0.9	%
Non-interest-bearing liabilities:
Non-interest-bearing deposits		624,200			610,271			13,929			2.3	%
Other non-interest-bearing liabilities		50,870			56,893			(6,023	)		-10.6	%
Total non-interest-bearing liabilities		675,070			667,164			7,906			1.2	%
Total liabilities		6,174,479			6,217,220			(42,741	)		-0.7	%
Stockholders' equity		1,005,762			1,030,008			(24,246	)		-2.4	%
Total liabilities and stockholders' equity	$	7,180,241		$	7,247,228		$	(66,987	)		-0.9	%

Average interest-earning assets to average interest-bearing liabilities		119.45	%		119.47	%		-0.02	%		0.0	%

Kearny Financial Corp.
Performance Ratio Highlights
(Unaudited)

	Three Months Ended
	December 31,			September 30,			Variance
	2021			2021			or Change
Average yield on interest-earning assets:
Loans receivable, including loans held for sale		3.95	%		3.99	%	-0.04	%
Taxable investment securities		1.89	%		1.99	%	-0.10	%
Tax-exempt investment securities ⁽¹⁾		2.26	%		2.25	%	0.01	%
Other interest-earning assets		2.13	%		2.01	%	0.12	%
Total interest-earning assets		3.40	%		3.45	%	-0.05	%

Average cost of interest-bearing liabilities:
Deposits:
Interest-bearing demand		0.22	%		0.23	%	-0.01	%
Savings		0.11	%		0.12	%	-0.01	%
Certificates of deposit		0.53	%		0.57	%	-0.04	%
Total interest-bearing deposits		0.30	%		0.33	%	-0.03	%
Borrowings:
Federal Home Loan Bank advances		2.14	%		2.13	%	0.01	%
Other borrowings		0.09	%		0.10	%	-0.01	%
Total borrowings		2.06	%		2.05	%	0.01	%
Total interest-bearing liabilities		0.53	%		0.55	%	-0.02	%

Interest rate spread⁽²⁾		2.87	%		2.90	%	-0.03	%
Net interest margin⁽³⁾		2.96	%		2.99	%	-0.03	%

Non-interest income to average assets (annualized)		0.23	%		0.21	%	0.02	%
Non-interest expense to average assets (annualized)		1.65	%		1.76	%	-0.11	%

Efficiency ratio⁽⁴⁾		56.17	%		59.57	%	-3.40	%

Return on average assets (annualized)		1.05	%		1.09	%	-0.04	%
Return on average equity (annualized)		7.46	%		7.66	%	-0.20	%
Return on average tangible equity (annualized) ⁽⁵⁾		9.49	%		9.67	%	-0.18	%

________________________
(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

Consolidated Balance Sheets	At
(Dollars and Shares in Thousands, Except Per Share Data)	December 31, 2021			September 30, 2021			June 30, 2021			March 31, 2021			December 31, 2020
	(Unaudited)			(Unaudited)			(Audited)			(Unaudited)			(Unaudited)
Assets
Cash and cash equivalents	$	60,452		$	54,070		$	67,855		$	108,991		$	129,694
Securities available for sale		1,591,066			1,651,156			1,676,864			1,778,970			1,695,893
Securities held to maturity		53,142			37,497			38,138			27,168			29,549
Loans held-for-sale		12,549			12,884			16,492			5,172			12,601
Loans receivable		4,826,404			4,789,339			4,851,394			4,798,239			4,828,634
Less: allowance for credit losses on loans		(48,216	)		(51,785	)		(58,165	)		(63,762	)		(63,386	)
Net loans receivable		4,778,188			4,737,554			4,793,229			4,734,477			4,765,248
Premises and equipment		54,067			55,236			56,338			60,360			61,181
Federal Home Loan Bank stock		36,622			36,615			36,615			45,578			45,578
Accrued interest receivable		18,495			19,541			19,362			20,562			19,826
Goodwill		210,895			210,895			210,895			210,895			210,895
Core deposit intangible		3,344			3,524			3,705			3,888			4,151
Bank owned life insurance		286,433			284,871			283,310			281,765			280,235
Deferred income taxes, net		25,709			27,771			29,323			32,230			30,846
Other real estate owned		658			178			178			178			178
Other assets		54,603			51,896			51,431			47,760			49,278
Total assets	$	7,186,223		$	7,183,688		$	7,283,735		$	7,357,994		$	7,335,153

Liabilities
Deposits:
Non-interest-bearing	$	604,805		$	631,344		$	593,718		$	545,746		$	518,828
Interest-bearing		4,849,220			4,763,795			4,891,588			4,828,706			4,793,785
Total deposits		5,454,025			5,395,139			5,485,306			5,374,452			5,312,613
Borrowings		686,105			720,990			685,876			865,763			865,651
Advance payments by borrowers for taxes		16,772			16,222			15,752			15,300			16,100
Other liabilities		33,851			36,914			53,857			38,667			48,448
Total liabilities		6,190,753			6,169,265			6,240,791			6,294,182			6,242,812

Stockholders' Equity
Common stock		735			758			790			820			849
Paid-in capital		587,392			616,894			654,396			691,280			724,389
Retained earnings		431,549			420,701			408,367			397,594			388,376
Unearned ESOP shares		(25,780	)		(26,266	)		(26,753	)		(27,239	)		(27,726	)
Accumulated other comprehensive income		1,574			2,336			6,144			1,357			6,453
Total stockholders' equity		995,470			1,014,423			1,042,944			1,063,812			1,092,341
Total liabilities and stockholders' equity	$	7,186,223		$	7,183,688		$	7,283,735		$	7,357,994		$	7,335,153

Consolidated capital ratios
Equity to assets		13.85	%		14.12	%		14.32	%		14.46	%		14.89	%
Tangible equity to tangible assets ⁽¹⁾		11.21	%		11.48	%		11.72	%		11.89	%		12.32	%

Share data
Outstanding shares		73,453			75,800			78,965			81,943			84,938
Book value per share	$	13.55		$	13.38		$	13.21		$	12.98		$	12.86
Tangible book value per share⁽²⁾	$	10.64		$	10.55		$	10.49		$	10.36		$	10.33

________________________
(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.

	At
Supplemental Balance Sheet Highlights (Dollars in Thousands, Unaudited)	December 31, 2021			September 30, 2021			June 30, 2021			March 31, 2021			December 31, 2020
Loan portfolio composition:
Commercial loans:
Multi-family	$	2,007,431		$	1,978,681		$	2,039,260		$	2,055,396		$	2,076,483
Nonresidential		1,026,447			1,023,391			1,079,444			1,110,765			1,123,695
Commercial business		180,429			169,392			168,951			183,181			202,010
Construction		110,703			112,226			93,804			95,533			90,398
Total commercial loans		3,325,010			3,283,690			3,381,459			3,444,875			3,492,586
One- to four-family residential mortgage loans		1,477,267			1,483,106			1,447,721			1,323,485			1,305,351
Consumer loans:
Home equity loans and lines of credit		43,934			44,912			47,871			59,721			65,298
Other consumer loans		3,040			3,020			3,259			3,445			4,123
Total consumer loans		46,974			47,932			51,130			63,166			69,421
Total loans, excluding yield adjustments		4,849,251			4,814,728			4,880,310			4,831,526			4,867,358
Unaccreted yield adjustments		(22,847	)		(25,389	)		(28,916	)		(33,287	)		(38,724	)
Loans receivable, net of yield adjustments		4,826,404			4,789,339			4,851,394			4,798,239			4,828,634
Less: allowance for credit losses on loans		(48,216	)		(51,785	)		(58,165	)		(63,762	)		(63,386	)
Net loans receivable	$	4,778,188		$	4,737,554		$	4,793,229		$	4,734,477		$	4,765,248

Loan portfolio allocation:
Commercial loans:
Multi-family		41.4	%		41.1	%		41.8	%		42.5	%		42.7	%
Nonresidential		21.2	%		21.3	%		22.1	%		23.0	%		23.1	%
Commercial business		3.7	%		3.5	%		3.5	%		3.8	%		4.2	%
Construction		2.3	%		2.3	%		1.9	%		2.0	%		1.8	%
Total commercial loans		68.6	%		68.2	%		69.3	%		71.3	%		71.8	%
One- to four-family residential mortgage loans		30.5	%		30.8	%		29.7	%		27.4	%		26.8	%
Consumer loans:
Home equity loans and lines of credit		0.9	%		0.9	%		0.9	%		1.2	%		1.3	%
Other consumer loans		0.0	%		0.1	%		0.1	%		0.1	%		0.1	%
Total consumer loans		0.9	%		1.0	%		1.0	%		1.3	%		1.4	%
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		$	-
Nonaccrual loans		72,138			72,945			79,767			71,416			71,472
Total nonperforming loans		72,138			72,945			79,767			71,418			71,472
Other real estate owned		658			178			178			178			178
Total nonperforming assets	$	72,796		$	73,123		$	79,945		$	71,596		$	71,650

Nonperforming loans (% total loans)		1.49	%		1.52	%		1.64	%		1.49	%		1.48	%
Nonperforming assets (% total assets)		1.01	%		1.02	%		1.10	%		0.97	%		0.98	%

Allowance for credit losses on loans (ACL):
ACL to total loans		0.99	%		1.08	%		1.19	%		1.32	%		1.30	%
ACL to nonperforming loans		66.84	%		70.99	%		72.92	%		89.28	%		88.69	%
Net charge offs	$	1,149		$	980		$	656		$	750		$	109
Average net charge off rate (annualized)		0.10	%		0.08	%		0.05	%		0.06	%		0.01	%

	At
Supplemental Balance Sheet Highlights (Dollars in Thousands, Unaudited)	December 31, 2021			September 30, 2021			June 30, 2021			March 31, 2021			December 31, 2020
Funding by type:
Deposits:
Non-interest-bearing deposits	$	604,805		$	631,344		$	593,718		$	545,746		$	518,828
Interest-bearing demand		2,106,693			1,937,661			1,902,478			1,923,184			1,752,699
Savings		1,087,740			1,089,699			1,111,364			1,105,481			1,075,122
Certificates of deposit		1,654,787			1,736,435			1,877,746			1,800,041			1,965,964
Interest-bearing deposits		4,849,220			4,763,795			4,891,588			4,828,706			4,793,785
Total deposits		5,454,025			5,395,139			5,485,306			5,374,452			5,312,613

Borrowings:
Federal Home Loan Bank advances		666,105			665,990			665,876			865,763			865,651
Overnight borrowings		20,000			55,000			20,000			-			-
Total borrowings		686,105			720,990			685,876			865,763			865,651

Total funding	$	6,140,130		$	6,116,129		$	6,171,182		$	6,240,215		$	6,178,264

Loans as a % of deposits		87.8	%		88.1	%		87.7	%		88.2	%		89.9	%
Deposits as a % of total funding		88.8	%		88.2	%		88.9	%		86.1	%		86.0	%
Borrowings as a % of total funding		11.2	%		11.8	%		11.1	%		13.9	%		14.0	%

Funding by source:
Retail deposits:
Non-interest-bearing deposits	$	604,805		$	631,344		$	593,718		$	545,746		$	518,828
Interest-bearing demand		2,106,693			1,937,661			1,902,478			1,923,184			1,752,699
Savings		1,087,740			1,089,699			1,111,364			1,105,481			1,075,122
Certificates of deposit		1,184,530			1,264,016			1,398,808			1,508,494			1,658,277
Total retail deposits		4,983,768			4,922,720			5,006,368			5,082,905			5,004,926

Wholesale funding:
Certificates of deposit (listing service)	$	11,622		$	13,817		$	20,322		$	32,952		$	43,112
Certificates of deposit (brokered)		458,635			458,602			458,616			258,595			264,575
Total wholesale deposits		470,257			472,419			478,938			291,547			307,687
FHLB advances		666,105			665,990			665,876			865,763			865,651
Overnight borrowings		20,000			55,000			20,000			-			-
Total wholesale funding		1,156,362			1,193,409			1,164,814			1,157,310			1,173,338

Total funding	$	6,140,130		$	6,116,129		$	6,171,182		$	6,240,215		$	6,178,264

Retail funding as a % of total funding		81.2	%		80.5	%		81.1	%		81.5	%		81.0	%
Wholesale funding as a % of total funding		18.8	%		19.5	%		18.9	%		18.5	%		19.0	%

Consolidated Statements of Income	Three Months Ended
(Dollars and Shares in Thousands, Except Per Share Data, Unaudited)	December 31, 2021			September 30, 2021			June 30, 2021			March 31, 2021			December 31, 2020
Interest income
Loans ⁽¹⁾	$	47,575		$	48,230		$	48,464		$	50,159		$	50,806
Taxable investment securities		7,595			8,212			8,304			7,891			7,707
Tax-exempt investment securities		327			333			355			410			433
Other interest-earning assets		415			431			549			705			787
Total interest income		55,912			57,206			57,672			59,165			59,733

Interest expense
Deposits		3,663			4,065			5,156			6,670			8,647
Borrowings		3,562			3,551			3,451			4,012			5,193
Total interest expense		7,225			7,616			8,607			10,682			13,840
Net interest income		48,687			49,590			49,065			48,483			45,893
(Reversal of) provision for credit losses		(2,420	)		(5,400	)		(4,941	)		1,126			(1,365	)
Net interest income after (reversal of) provision for credit losses		51,107			54,990			54,006			47,357			47,258

Non-interest income
Fees and service charges ⁽¹⁾		698			607			423			473			556
Gain on sale and call of securities		-			1			313			18			813
Gain on sale of loans		970			1,006			363			943			2,378
Income from bank owned life insurance		1,562			1,561			1,545			1,530			1,596
Electronic banking fees and charges		421			407			452			456			404
Other income		482			218			400			1,194			67
Total non-interest income		4,133			3,800			3,496			4,614			5,814

Non-interest expense
Salaries and employee benefits		18,096			18,617			17,777			16,965			17,081
Net occupancy expense of premises		3,156			4,547			2,998			3,433			3,120
Equipment and systems		3,723			3,825			3,575			3,823			3,902
Advertising and marketing		448			392			581			567			513
Federal deposit insurance premium		721			492			490			488			490
Directors' compensation		649			803			749			748			748
Debt extinguishment expenses		-			-			-			-			796
Other expense		2,877			3,127			5,816			3,792			3,860
Total non-interest expense		29,670			31,803			31,986			29,816			30,510
Income before income taxes		25,570			26,987			25,516			22,155			22,562
Income taxes		6,801			7,272			7,033			5,732			5,614
Net income	$	18,769		$	19,715		$	18,483		$	16,423		$	16,948

Net income per common share (EPS)
Basic	$	0.26		$	0.26		$	0.24		$	0.20		$	0.20
Diluted	$	0.26		$	0.26		$	0.24		$	0.20		$	0.20

Dividends declared
Cash dividends declared per common share	$	0.11		$	0.10		$	0.10		$	0.09		$	0.08
Cash dividends declared	$	7,921		$	7,381		$	7,710		$	7,205		$	6,706
Dividend payout ratio		42.2	%		37.4	%		41.7	%		43.9	%		39.6	%

Weighted average number of common shares outstanding
Basic		72,011			74,537			77,658			80,673			85,120
Diluted		72,037			74,556			77,680			80,690			85,123

________________________

(1)

Effective July 1, 2021, loan prepayment penalty income is recorded as a component of interest income on loans. Previously, loan prepayment penalty income was recorded within non-interest income. Periods prior to September 30, 2021 have been adjusted to reflect this change. Loan prepayment penalty income for the periods ended June 30, 2021, March 31, 2021 and December 31, 2020 was $902,000, $852,000 and $1,340,000, respectively.

	Three Months Ended
Average Balance Sheet Data (Dollars in Thousands, Unaudited)	December 31, 2021			September 30, 2021			June 30, 2021			March 31, 2021			December 31, 2020
Assets
Interest-earning assets:
Loans receivable, including loans held for sale	$	4,822,959		$	4,835,676		$	4,817,980		$	4,816,592		$	4,871,268
Taxable investment securities		1,610,395			1,649,953			1,720,838			1,674,223			1,544,095
Tax-exempt investment securities		57,686			59,115			63,047			73,573			79,044
Other interest-earning assets		77,811			85,749			117,212			169,291			266,114
Total interest-earning assets		6,568,851			6,630,493			6,719,077			6,733,679			6,760,521
Non-interest-earning assets		611,390			616,735			609,762			617,440			632,084
Total assets	$	7,180,241		$	7,247,228		$	7,328,839		$	7,351,119		$	7,392,605

Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Deposits:
Interest-bearing demand	$	2,027,021		$	1,954,271		$	1,930,193		$	1,831,617		$	1,683,222
Savings		1,086,903			1,102,865			1,118,402			1,084,981			1,058,675
Certificates of deposit		1,693,423			1,798,473			1,934,650			1,904,234			1,899,406
Total interest-bearing deposits		4,807,347			4,855,609			4,983,245			4,820,832			4,641,303
Borrowings:
Federal Home Loan Bank advances		666,029			665,915			665,802			865,690			1,057,958
Other borrowings		26,033			28,532			6,670			-			-
Total borrowings		692,062			694,447			672,472			865,690			1,057,958
Total interest-bearing liabilities		5,499,409			5,550,056			5,655,717			5,686,522			5,699,261
Non-interest-bearing liabilities:
Non-interest-bearing deposits		624,200			610,271			566,632			525,018			502,479
Other non-interest-bearing liabilities		50,870			56,893			52,292			57,018			73,683
Total non-interest-bearing liabilities		675,070			667,164			618,924			582,036			576,162
Total liabilities		6,174,479			6,217,220			6,274,641			6,268,558			6,275,423
Stockholders' equity		1,005,762			1,030,008			1,054,198			1,082,561			1,117,182
Total liabilities and stockholders' equity	$	7,180,241		$	7,247,228		$	7,328,839		$	7,351,119		$	7,392,605

Average interest-earning assets to average interest-bearing liabilities		119.45	%		119.47	%		118.80	%		118.41	%		118.62	%

	Three Months Ended
Performance Ratio Highlights	December 31, 2021			September 30, 2021			June 30, 2021			March 31, 2021			December 31, 2020
Average yield on interest-earning assets:
Loans receivable, including loans held for sale ⁽¹⁾		3.95	%		3.99	%		4.02	%		4.17	%		4.17	%
Taxable investment securities		1.89	%		1.99	%		1.93	%		1.89	%		2.00	%
Tax-exempt investment securities ⁽²⁾		2.26	%		2.25	%		2.25	%		2.23	%		2.19	%
Other interest-earning assets		2.13	%		2.01	%		1.87	%		1.67	%		1.18	%
Total interest-earning assets ⁽¹⁾		3.40	%		3.45	%		3.43	%		3.51	%		3.53	%

Average cost of interest-bearing liabilities:
Deposits:
Interest-bearing demand		0.22	%		0.23	%		0.27	%		0.34	%		0.47	%
Savings		0.11	%		0.12	%		0.15	%		0.21	%		0.33	%
Certificates of deposit		0.53	%		0.57	%		0.71	%		0.96	%		1.22	%
Total interest-bearing deposits		0.30	%		0.33	%		0.41	%		0.55	%		0.75	%
Borrowings:
Federal Home Loan Bank advances		2.14	%		2.13	%		2.07	%		1.85	%		1.96	%
Other borrowings		0.09	%		0.10	%		0.07	%		0.00	%		0.00	%
Total borrowings		2.06	%		2.05	%		2.05	%		1.85	%		1.96	%
Total interest-bearing liabilities		0.53	%		0.55	%		0.61	%		0.75	%		0.97	%

Interest rate spread^{(1) (3)}		2.87	%		2.90	%		2.82	%		2.76	%		2.56	%
Net interest margin^{(1) (4)}		2.96	%		2.99	%		2.92	%		2.88	%		2.72	%

Non-interest income to average assets (annualized) ⁽¹⁾		0.23	%		0.21	%		0.19	%		0.25	%		0.31	%
Non-interest expense to average assets (annualized)		1.65	%		1.76	%		1.75	%		1.62	%		1.65	%

Efficiency ratio⁽⁵⁾		56.17	%		59.57	%		60.86	%		56.15	%		59.01	%

Return on average assets (annualized)		1.05	%		1.09	%		1.01	%		0.89	%		0.92	%
Return on average equity (annualized)		7.46	%		7.66	%		7.01	%		6.07	%		6.07	%
Return on average tangible equity (annualized) ⁽⁶⁾		9.49	%		9.67	%		8.81	%		7.57	%		7.52	%

________________________
(1)	Effective July 1, 2021, loan prepayment penalty income is recorded as a component of interest income on loans. Previously, loan prepayment penalty income was recorded within non-interest income. Periods prior to September 30, 2021 have been adjusted to reflect this change. Loan prepayment penalty income for the periods ended June 30, 2021, March 31, 2021 and December 31, 2020 was $902,000, $852,000 and $1,340,000, respectively.
(2)	The yield on tax-exempt investment securities has not been adjusted to reflect their tax-effective yield.
(3)	Interest income divided by average interest-earning assets less interest expense divided by average interest-bearing liabilities.
(4)	Net interest income divided by average interest-earning assets.
(5)	Non-interest expense divided by the sum of net interest income and non-interest income.
(6)	Average tangible equity equals total average stockholders’ equity reduced by average goodwill and average core deposit intangible assets.

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	Three Months Ended
(Dollars and Shares in Thousands, Except Per Share Data, Unaudited)	December 31, 2021			September 30, 2021			June 30, 2021			March 31, 2021			December 31, 2020
Adjusted net income:
Net income (GAAP)	$	18,769		$	19,715		$	18,483		$	16,423		$	16,948
Non-recurring transactions - net of tax:
Branch consolidation expenses and impairment charges		132			1,209			870			264			243
Net effect of sale and call of securities		-			(1	)		(220	)		(13	)		(571	)
Debt extinguishment expenses		-			-			-			-			558
Reversal of income tax valuation allowance		-			-			(12	)		-			(523	)
Net effect of sales of other assets		(251	)		-			(144	)		(587	)		-
Adjusted net income	$	18,650		$	20,923		$	18,977		$	16,087		$	16,655

Calculation of pre-tax, pre-provision net revenue:
Net income (GAAP)	$	18,769		$	19,715		$	18,483		$	16,423		$	16,948
Adjustments to net income (GAAP):
Provision for income taxes		6,801			7,272			7,033			5,732			5,614
(Reversal of) provision for credit losses		(2,420	)		(5,400	)		(4,941	)		1,126			(1,365	)
Pre-tax, pre-provision net revenue (non-GAAP)	$	23,150		$	21,587		$	20,575		$	23,281		$	21,197

Adjusted earnings per share:
Weighted average common shares - basic		72,011			74,537			77,658			80,673			85,120
Weighted average common shares - diluted		72,037			74,556			77,680			80,690			85,123

Earnings per share - basic (GAAP)	$	0.26		$	0.26		$	0.24		$	0.20		$	0.20
Earnings per share - diluted (GAAP)	$	0.26		$	0.26		$	0.24		$	0.20		$	0.20

Adjusted earnings per share - basic (non-GAAP)	$	0.26		$	0.28		$	0.24		$	0.20		$	0.19
Adjusted earnings per share - diluted (non-GAAP)	$	0.26		$	0.28		$	0.24		$	0.20		$	0.20

Adjusted return on average assets:
Total average assets	$	7,180,241		$	7,247,228		$	7,328,839		$	7,351,119		$	7,392,605

Return on average assets (GAAP)		1.05	%		1.09	%		1.01	%		0.89	%		0.92	%
Adjusted return on average assets (non-GAAP)		1.04	%		1.15	%		1.04	%		0.88	%		0.90	%

Adjusted return on average equity:
Total average equity	$	1,005,762		$	1,030,008		$	1,054,198		$	1,082,561		$	1,117,182

Return on average equity (GAAP)		7.46	%		7.66	%		7.01	%		6.07	%		6.07	%
Adjusted return on average equity (non-GAAP)		7.42	%		8.13	%		7.20	%		5.94	%		5.96	%

Reconciliation of GAAP to Non-GAAP	Three Months Ended
(Dollars and Shares in Thousands, Except Per Share Data, Unaudited)	December 31, 2021			September 30, 2021			June 30, 2021			March 31, 2021			December 31, 2020
Adjusted return on average tangible equity:
Total average equity	$	1,005,762		$	1,030,008		$	1,054,198		$	1,082,561		$	1,117,182
Less: average goodwill		(210,895	)		(210,895	)		(210,895	)		(210,895	)		(210,895	)
Less: average other intangible assets		(3,462	)		(3,641	)		(3,825	)		(4,045	)		(4,317	)
	$	791,405		$	815,472		$	839,478		$	867,621		$	901,970
					-			-			-			-
Return on average tangible equity (non-GAAP)		9.49	%		9.67	%		8.81	%		7.57	%		7.52	%
Adjusted return on average tangible equity (non-GAAP)		9.43	%		10.26	%		9.04	%		7.42	%		7.39	%

Adjusted non-interest expense ratio:
Non-interest expense (GAAP)	$	29,670		$	31,803		$	31,986		$	29,816		$	30,510
Non-recurring transactions:
Branch consolidation expenses and impairment charges		(187	)		(1,711	)		(1,239	)		(375	)		(347	)
Debt extinguishment expenses		-			-			-			-			(796	)
Non-interest expense (non-GAAP)	$	29,483		$	30,092		$	30,747		$	29,441		$	29,367

Non-interest expense ratio (GAAP)		1.65	%		1.76	%		1.75	%		1.62	%		1.65	%
Adjusted non-interest expense ratio (non-GAAP)		1.64	%		1.66	%		1.68	%		1.60	%		1.59	%

Adjusted efficiency ratio:
Non-interest expense (non-GAAP)	$	29,483		$	30,092		$	30,747		$	29,441		$	29,367

Net interest income (GAAP)	$	48,687		$	49,590		$	49,065		$	48,483		$	45,893
Total non-interest income (GAAP)		4,133			3,800			3,496			4,614			5,814
Non-recurring transactions:
Net effect of sale and call of securities		-			(1	)		(313	)		(18	)		(813	)
Net effect of sales of other assets		(356	)		-			(205	)		(837	)		-
Total revenue (non-GAAP)	$	52,464		$	53,389		$	52,043		$	52,242		$	50,894

Efficiency ratio (GAAP)		56.17	%		59.57	%		60.86	%		56.15	%		59.01	%
Adjusted efficiency ratio (non-GAAP)		56.20	%		56.36	%		59.08	%		56.36	%		57.70	%

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

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